Karnataka High Court
The Karnataka Industrial Areas ... vs K V Forgings Pvt Ltd on 16 December, 2024
Author: M.G.S. Kamal
Bench: M.G.S. Kamal
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF DECEMBER, 2024
BEFORE
THE HON'BLE Mr. JUSTICE M.G.S. KAMAL
RSA No.1884 OF 2021 (GM-RES)
BETWEEN:
1. THE KARNATAKA INDUSTRIAL
AREAS DEVELOPMENT BOARD
PRESENTLY AT NO.49,
4TH AND 5TH FLOOR,
KHANIJA BHAVAN,
RACE COURSE ROAD,
BENGALURU-560 001
REPRESENTED BY ITS CHIEF
EXECUTIVE OFFICER AND EXECUTIVE MEMBER,
(FORMERLY AT NO.14/3,
2ND FLOOR, RASHTROTHANA PARISHAT
BUILDING, NRUPATHUNGA ROAD
BENGALURU-560 002
REPRESENTED BY ITS EXECUTIVE MEMBER.
2. CHIEF EXECUTIVE OFFICER AND
THE EXECUTIVE MEMBER
KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD NO.49,
4TH AND 5TH FLOOR, KHANIJA BHAVAN,
RACE COURSE ROAD, BENGALURU-560 001.
(FORMERLY THE EXECUTIVE MEMBER,
THE KARNATAKA INDUSTRIAL
AREA DEVELOPMENT BOARD,
NO.14/3, 2ND FLOOR, RASHTROTHANA
PARISHAT BUILDING, NRUPATHUNGA ROAD,
BENGALURU-560 002.
...APPELLANTS
(BY SRI. S.S. NAGANAND SENIOR COUNSEL FOR
SRI. B.B. PATIL, ADVOCATES)
2
AND:
K V FORGINGS PVT LTD.,
A COMPANY REGISTERED
UNDER THE COMPANIES ACT 1956,
HAVING ITS REGISTERED OFFICE
AT NO.198/1, LINK ROAD,
SHESHADRIPURAM, BENGALURU-560 020
REPRESENTED BY ITS MANAGING DIRECTOR,
SRI K. VITTAL RAO, S/O KRISHNAJI RAO,
AGED ABOUT 89 YEARS.
...RESPONDENT
(BY SRI. JEEVAN KUMAR B.S. ADVOCATE FOR C/R)
THIS RSA IS FILED UNDER SECTION 100 OF CPC, AGAINST
THE JUDGMENT AND ORDER DATED 13.01.2021 PASSED IN
RA.NO.31/2009 ON THE FILE OF THE IX ADDITIONAL DISTRICT AND
SESSIONS JUDGE, BENGALURU RURAL DISTRICT, BENGALURU,
ALLOWING THE APPEAL AND SETTING ASIDE THE JUDGMENT AND
DECREE DATED 20.12.2008 PASSED IN O.S.NO.154/2006 (OLD CASE
NO.223/1997) ON THE FILE OF THE CIVIL JUDGE (SR.DN) AND JMFC,
ANEKAL.
THIS APPEAL HAVING BEEN RESERVED FOR JUDGMENT,
COMING ON FOR PRONOUNCEMENT THIS DAY, DELIVERED THE
FOLLOWING:
CORAM: HON'BLE MR JUSTICE M.G.S. KAMAL
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CAV JUDGMENT
This appeal by the defendant Nos.1 and 2 aggrieved by Judgment and order dated 13.01.2021 passed in R.A.No.31/2009 by the learned IX Additional District and Sessions Judge, Bengaluru Rural District, Bengaluru (First Appellate Court) by which the first appellate Court while allowing the appeal filed by the plaintiff, set aside the Judgment and decree dated 20.12.2008 dismissing the suit in O.S.No.154/2006(Old No.223/1997) passed by the learned Senior Civil Judge, Anekal (Trial Court) and consequently decreed the suit declaring that the order dated 13.03.1997 issued by defendant-KIADB determining the lease agreement and resuming the suit property as null and void and further directed defendant-KIADB to execute and register sale deed in respect of the suit property in favour of the plaintiff with further consequential directions.
2. Subject matter of the suit is all that piece and parcel of the plot Nos.10 and 11 in Sy.No.44, 51, 50, 45, 4 49, 64, 63 and 38 situated in Attibele Industrial Area, I phase within the village limits of Balegaranahalli, Attibele Hobli, Anekal Taluk, Bangalore District measuring 48,360 sq. mtrs., with the following boundaries: East by : Plot No.2 and 3
West by : Road North by : Civic Amenity South by : Plot No.9, 9A, 9B and 9C together with two huge industrial sheds, guard rooms, water banks, fuel oil tank and septic tanks.
3. The above suit is filed by the plaintiff contending that;
a) the suit property was originally allotted by the defendant-KIADB in favour of one M/s.K.V.Forgings in the year 1982 and the possession was delivered on 15.07.1982. Subsequently plaintiff company was incorporated accordingly an endorsement was made on the reverse of the possession certificate on 4/10.10.1983 to the effect that the possession was handed over to the plaintiff company. A lease cum sale agreement was 5 executed and registered on 12.10.1983 in favour of the plaintiff company, for a period of eleven years commencing from 12.07.1982 and expiring on 12.07.1993. That as per clause 7(a) of the said agreement at the end of eleven years total amount of rent paid by the plaintiff was to be adjusted towards balance of the value of the suit property that was to be fixed by the defendant No.1-KIADB. Clause 7(b) stipulated that as soon as convenient defendant No.1- KIADB would fix the price of the suit property at which it was to be sold and plaintiff was required to pay any balance amount after adjustment of the lease amount.
b) That the plaintiff as on the date of the lease had paid advance/premium of Rs.1,21,440/-. Plaintiff thereafter has been paying annual rent fixed and if there was any delay defendant No.1-KIADB was levying interest which was also duly and promptly paid by the plaintiff. That as per the statement of account certified by the accounts officer/controller of finance of defendant No.1- KIADB for the period between 12.07.1983 to 12.07.1992 6 the cost of the schedule property had been fixed at Rs.6,04,669/-. That after the adjustment of the annual lease amount paid by the plaintiff, plaintiff was due and liable to pay only Rs.92/- to the defendant together with interest.
c) The defendant No.1-KIADB by its letter dated 20.07.1993 had demanded from the plaintiff sum of Rs.579/- comprising of land cost of Rs.92/- interest at Rs.445/- penal interest at Rs.42/- which was paid by the plaintiff by way of demand draft on 09.07.1994. Defendant No.1-KIADB had issued a receipt dated 16.09.1994. Thus the plaintiff had paid a total sum of Rs.8,31,517/- as against the cost of Rs.6,04,669/-.
d) That the plaintiff after obtaining the lease-cum- sale agreement proceeded to put up construction as per the approved plan and has put up construction of huge industrial sheds on the suit schedule property. The said constructions were completed during October 1985 in 7 compliance with all the provisions of law dealing with prevention/control of noise pollution and environmental protection with high technical specification.
e) As no power and water supply was made available the manufacturing activity commenced only in December 1987. Since the production activities were delayed due to defendant-KIADB not providing water supply and KEB not providing required power supply, the investment of the plaintiff in the project was lying locked without returns.
f) Plaintiff had raised loans from Karnataka State Financial Corporation (KSFC) and had deposited the original lease deed and possession certificate with other documents as collateral security. As the plaintiff was unable to repay the loan, KSFC seized the schedule property under Section 29 of the State Financial Corporation Act. However, plaintiff repaid the entire dues to the KSFC and obtained release of schedule property during February 1996. All this was within the knowledge 8 of the defendants. This financial constraint was on account of defendant No.1 not providing required and continuous power and water supply.
g) Defendants despite being aware of the above aspects started making unilateral and arbitrary demands calling upon plaintiff to pay certain amounts due towards arrears of rent which was denied by the plaintiff which invited the attention of the defendants to the letter dated 20.07.1993 issued by their Controller of Finance and consequential payment of Rs.650/-. Later, defendants alleged violation of terms and conditions of lease agreement for the first time in their letter dated 2/5.08.1994 stating plaintiff had constructed only the factory sheds and there was no production and plaintiff was called upon to furnish the certificate of investment issued by the Chartered Accountant which they had no authority.
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h) Plaintiff by letter dated 16.08.1994 issued a reply refuting the allegations of violation of terms and conditions and stated that it was not possible to furnish any certificate or statement from the Chartered Accountant. Further plaintiff by letter dated 31.08.1994 explained in detail its difficulty and called upon the defendants to execute deed of sale in favour of the plaintiff.
j) Since the plaintiff had already paid cost of the land fixed at Rs.6,04,669/- defendants were only required to execute and register the deed of sale collecting balance amount if any. Plaintiff has always been ready and willing to perform its part of the obligation under the lease agreement and had indeed performed all the legal obligation. Plaintiff was ready and willing to pay stamp duty charges. By letter dated 14.09.1995 plaintiff called upon the defendant to execute the sale deed as it required to raise further funds for rehabilitation and running the unit which was followed by letters dated 22.12.1995, 10 26.03.1996 and 06.09.1996 to which there was no response from the defendant.
k) When things stood thus, plaintiff received a notice dated 6/8.1.1997 wherein referring to clause 2(p)(1)(i) to (iii) of the lease agreement it was alleged that there has been no utilization of certain extent of area in the suit schedule property which amounted to violation of the terms and conditions of the lease-cum-sale agreement and called upon the plaintiff to show cause as to why after the expiry of 90 days from the date of receipt of notice, defendant should not determine the lease in accordance with clause 4 of the agreement. That the said notice was received by the plaintiff only on 14.01.1997 and even before the plaintiff could reply the said notice it received another letter dated 16.01.1997 calling upon the plaintiff to meet defendant No.2 on 23.01.1997. Plaintiff replied to the same by letter dated 16.01.1997 stating that they had already met defendant No.2 on several occasions and there was no further requirement to meet. The plaintiff 11 sent a reply dated 29.01.1997 to show cause notice dated 6/8.1.1997 explaining its difficulties and also regarding all the amounts having been paid and defendant not executing the deed of sale despite several repeated requests by the plaintiff which was acknowledged by the defendant on 03.02.1997.
l) Thereafter on 15.03.1997, plaintiff received an order bearing No.KIADB/3564/19223/1996-97 dated 13.03.1997 wherein defendants without considering the cause shown by the plaintiff had passed the order stating that the lease deed was determined and they were going to resume the land on 01.04.1997 and that if the plaintiff was not present at the schedule property the resumption would be done in their absence.
m) That the said order was illegal, arbitrary and unjust. In any case the defendants were required to take action only after expiry of 90 days from the date of receipt of the said notice which would expire only after 12 14.04.1997. As such the order was illegal and unsustainable.
4. Contending as above, plaintiff sought for the following reliefs:
"(a) declaring that the order bearing No.KIADB/3464/19223/96-97 dated 13.03.1997 issued by the defendants is illegal, without any jurisdiction or authority and is null and void;
(b) direct the defendants by way of specific performance to execute and register the absolute sale deed in respect of the schedule property in favour of the plaintiff at the cost of the plaintiff and upon failure of the defendants to do so, this Hon'ble court be pleased to execute and register the said sale deed in respect of the schedule property in favour of the plaintiff;
(c) consequently to issue an order of permanent injunction, restraining the defendants, their agents, staff, officers or any person claiming through or under them from entering upon the schedule property or otherwise interfering with the plaintiff's peaceful possession and enjoyment of the schedule property;
(d) to award costs and grant such other relief(s) as this Hon'ble court may deems fit and expedient in the circumstances of the case, in the interest of justice and equity."
5. Defendants filed the written statement denying the plaint averments, allegations and contended that;
(a) They have not agreed to sell the suit schedule property at the price of Rs.6,04,669/- and that the 13 agreement dated 12.10.1983 does not state the price at which it was to be sold. That clause 7(b) of the agreement provides the price at which the suit schedule property to be sold would be determined by the defendants. As such, the valuation of the suit under the Karnataka Court Fee and Suit Valuation Act was incorrect. That the actual extent of the land in possession of the plaintiff was not 48360.00 sq. mts., but 52093.00 sq. mtrs.
(b) That mere expiry of period of 11 years would not confer any right on the plaintiff to demand execution of sale deed. That the amount paid by the plaintiff was only tentative cost of the land and not the final price which is evident from clause 7(b) read with letter of allotment dated 13.07.1982.
(c) That during the year 1993 the accounts were thoroughly scrutinized and since the plaintiff had not utilized the extent of 47600 sq. mtrs., of land for the project as per the terms, and had utilized only 17992.86 14 sq. mtrs., as late as on 27.08.1994 contrary to clause 2(p) (2)(i) & (iii) of the agreement, the show cause notice was issued. That though plaintiff had issued a reply dated 14.09.1995 it had pleaded its ignorance of its obligation regarding utilization of the land.
(d) That action was not taken against the plaintiff as the property was taken over by the KSFC as the defendants had permitted the plaintiff to mortgage its right, title and interest therein. Mere expiry of lease period would not entitle the plaintiff for the sale deed.
(e) Unless the plaintiff utilizes the plot as per the representation made, the demands of the plaintiff of execution of the deed of sale cannot be considered. The final price as required under clause 7(b) has never been communicated to the plaintiff. That plaintiff utilized only 3.41% of the total land allotted that too after lapse of 14 years from the date of execution of lease agreement. As such the request of the plaintiff cannot be examined at all. 15
(f) The issuance of notice dated 06/08.1.1997 of clause 4 became necessary as the plaintiff had not utilized the vast extent of valuable industrial land and had kept it idle for more than 14 years. What was sought to be resumed was not the entire plot but only the unutilized portion. As against 52093 sq. mtrs., the area in occupation of the plaintiff only 37120 sq. mtrs., of land was sought to be resumed.
(g) That reply issued by the plaintiff did not give any justification for non-utilization. As such, the order of resumption was passed. The action taken before the expiry of 90 days would not prejudice the case of the plaintiff as it was not humanly possible for the plaintiff to remedy the breach and further from the reply of the plaintiff it was clear that it was not in a position to remedy the breach.
(h) Lands were acquired from the poor farmers and given to the plaintiff at subsidized rates and if they are kept unutilized the same would tantamount to placing 16 premium on default and there are many entrepreneurs waiting for allotment of land, which cannot be permitted.
(j) That the defendants have necessary power to supervise, monitor and promote the growth of industries in the State of Karnataka under the Act and the said power includes resumption of land on failure of compliance of the terms of the said allotment. Hence, sought for dismissal of the suit.
6. Based on the pleadings the trial Court framed the following issues;
"1] Whether the plaintiff proves that the defendants have executed lease-cum-sale agreement dated 12-10-1983 and received the sale price from the plaintiff and delivered possession of the schedule property as alleged?
2] Whether plaintiff further proves that the defendants have illegally and without jurisdiction or authority passed an order dated 13-03-1997 and the same is null and void and not binding on the plaintiff as alleged?
3] Whether the defendants prove that plaintiff has violated the terms and conditions of the lease agreement and liable to be evicted from portion of the schedule property by virtue of the expiry of lease property as alleged?17
4] Whether the suit is not properly valued and the court fee paid is insufficient as alleged by the defendants in para-2 of the written statement?
5] Whether the plaintiff is entitled for the relief of declaration and for permanent injunction against the defendants?
6] Whether the plaintiff is entitled for the relief of specific performance of contract against the defendants as prayed?
7] To what relief if any, the parties are entitled?"
7. The Managing Director of the plaintiff-company has been examined as PW.1 and exhibited 42 documents marked as Ex.P1 to Ex.P42. Two witnesses have been examined on behalf of defendants as DW1 and DW2 and have exhibited 6 documents marked as Ex.D1 to D6(d). The trial Court on appreciation of evidence answered issue No.1, 2, 4 to 6 in the negative and issue No.3 in the affirmative and consequently dismissed the suit.
8. Being aggrieved by the same, plaintiff preferred a regular appeal in R.A.No.31/2009 before the First Appellate Court. The First Appellate Court framed the following points for its consideration; 18
"1. Whether the plaintiff proves that the defendants have executed lease-cum-sale agreement dated 12.10.1983 and delivered possession of the suit schedule property and as per the terms of lease, it has paid entire sale consideration amount to the defendants as contended?
2. Whether the plaintiff further proves that the defendants have illegally and without jurisdiction or authority have passed an order dated 13.03.1997 and the same is null and void and not binding on it as contended?
3. Whether the defendants proves that plaintiff has violated the terms and conditions of lease agreement and as such is liable to be evicted from the schedule property by virtue of the expiry of lease period as contended?
4. Whether the suit is not properly valued and the Court fee paid is insufficient as alleged by the defendants in para-2 of their written statement?
5. Whether the plaintiff is entitled for the relief of specific performance of contract against the defendants and permanent injunction as prayed?
6. Whether the plaintiff has made out a case for appointment of Commissioner?
7. Whether the judgment and decree is suffers from any error or illegality warranting interference of this Court?
8. What Order?"
and on re-appreciation of the evidence answered point Nos.1, 2, 5 and 7 in the affirmative and point Nos.3, 19 4 and 6 in the negative and consequently allowed the appeal and set aside the judgment and decree passed by the trial Court. Being aggrieved by the same defendants are before this Court.
9. This Court by order dated 15.12.2024 admitted this appeal to consider the following substantial questions of law.
"1. Whether the first appellate Court is justified in reversing the Judgment and decree passed by the trial Court and decreeing the suit without adverting to clauses 2(p)(2), 4, 8 and 9 of Ex.P-1 which imposes conditions on the plaintiff to perform his part of the contract enabling him to seek for conveyance of the property?
2. Whether the first appellate Court is justified in construing lease having expired on 12.07.1993 without adverting to provisions of Section 111 of the Transfer of Property Act?
10. Sri. S.S.Naganand, learned Senior counsel appearing for the appellants/defendants submitted that;
(a) Referring to clause 2(b)(p)(1)(i)to(iv) and 2(b)(p)(2)(i)to(iii) and 2(q), 5, 8, 9 of the lease agreement produced at Ex.P1 elaborately submitted that the said 20 clauses of the agreement specifically set out the terms and conditions which are required to be strictly adhered to by the plaintiff which is completely absent in the instant case.
(b) He refers to sketch at Ex.D6 to point out that as against the plot area of 48360.00 sq. mtrs., only 1792.86 sq. mtrs., of plinth area has been utilized by the plaintiff and the rest of the land remained vacant and unutilized.
(c) That the KSFC had taken over the land for default of repayment of loan by the plaintiff and the said land was with KSFC between 15.02.1994 to February, 1996 during which period the land was not utilized. That the KIADB by letter dated 02.08.1994 had called upon the plaintiff to furnish the certificate of investment and had also pointed out that there was violation of terms and conditions of the lease to which plaintiff had issued a reply dated 16.08.1994 seeking time to furnish the documents as sought for and by further reply dated 31.08.1994 had made false allegation. Again by letter dated 14.09.1994 21 had requested for execution of deed of sale. Thus pointing out these documents he submitted that the plaintiff had not denied the violation of the terms of the agreement mentioned which amounts to admission on its part.
(d) All these resulted in defendant-KIADB issuing show cause notice on 06.01.1997. In reply to the said show cause notice issued by the plaintiff on 28.1.1997 as per Ex.P14 plaintiff itself had admitted its inability to expand the industry contrary to its plans. Thus, he submits there was a clear admission on the part of the plaintiff not utilizing the land.
(e) He referred to second schedule to the agreement at Ex.P1 and pointed out that the clause (1) of the said schedule prescribes only the maximum area to be utilized which shall not be more than half of the total area and it does not mention about the minimum area.
(f) Referring to the application filed by the plaintiff for allotment of land as per Ex.D1 dated 15.02.1982 he submitted that even according to the plaintiff it had 22 mentioned the requirement of 2160.00 sq.mts., of land for the purpose of factory building and the area required for putting of office was shown at 880 sq. mtrs., and the area that was required for open space etc., is shown as 281.55 sq.mtrs. He also pointed out the same having been reiterated in the blue print purportedly submitted by the plaintiff.
(g) Referring to project report at Ex.D2 and allotment letter dated 13.07.1982 at Ex.D3 submitted that the allotment letter was issued with a specific time schedule to be adhered to by the plaintiff which was in furtherance to project report submitted by the plaintiff itself.
(h) He pointed out to clause 14 and 15 of the allotment letter and submitted that it was specifically mentioned therein that in the event of land not being put to use for the purpose it was asked for, the Board would re-enter and take possession of whole or that part of the land which was not put to proper use.
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(j) He submitted that letter dated 03.02.1996 at Ex.D4 was issued only in response to the letter dated 14.9.1995 that have been issued by the plaintiff and the same would not amount to waiver of the breaches committed by the plaintiff.
(k) That the DW1 is the Assistant Secretary of the defendant-KIADB. DW2 is the person who had prepared the sketch. Said persons were authorized and their deposition had remained unchallenged.
(l) That the First Appellate Court while reversing the judgment and decree passed by the Trial Court has not adverted to the aforesaid terms and conditions as provided under the agreement of lease and the contents of the aforesaid correspondence and the consequent actions contemplated thereof.
(m) He submits that the First Appellate Court has not appreciated that the plaintiff has not obtained approval of the blue prints within six months from the date of letter 24 of allotment or within two months from the date of lease agreement and has neither commenced nor completed the construction within 24 months from the date of letter of allotment as contemplated under the agreement.
(n) That the First Appellate Court has also not appreciated that the plaintiff had not even commenced the production within 24 months as agreed.
(o)Thus, the defendants under the circumstances had right to resume any portion of the plot which had not been utilized.
(p) That the first notice notifying the violation of the terms of the lease was issued on 15.08.1994 which remained uncomplied. The second show cause notice dated 06.01.1997 also remained uncomplied. That the First Appellate Court without adverting to this aspect of the matter has erroneously held that the letter dated 03.02.1996 produced at Ex.D4 has constituted waiver of 25 all the violation which is contrary to the material placed on record.
(q) The First Appellate Court has wrongly read the contents of the said letter at Ex.D4 which had only specified the question of sale deed would be considered after fixation of price and would not lead to waiver of any violation which had already been pointed out in the first notice dated 15.08.1994.
(r) That the First Appellate Court failed to notice the sketch at Ex.D1 was prepared by the Assistant Engineer who was examined as DW2 and there is no challenge to the same, yet the First Appellate Court erroneously concluded that the said sketch was disputed.
(s) That the First Appellate Court even in the absence of any plea has taken upon itself the question of authorization by the Board to the executive Officer to issue Ex.P12 and Ex.P17 and the reference to Section 32(b) of 26 the KIAD Act was inappropriate to the facts of the present case as the said section was introduced on 25.01.2020.
(t) That the First Appellate Court without appreciating the material evidence on record has reached the erroneous conclusion of plaintiff complying the terms of the lease and being entitled for specific performance.
(u) That the contention regarding issuance of termination letter at Ex.P17 before expiry of period of 90 days was not tenable in view of provision of section 111(g) of the Transfer of Property Act which provides for forfeiture of lease on account of breach.
(v) He relied upon the following judgments in support of his submissions;
1. SMT. NALINI SUNDER VS. G.V.SUNDER reported in ILR 2002 KAR 4734.
2. KAUSHIK NARSINHBHAI PATEL AND OTHERS VS. S.J.R. PRIME CORPORATION PRIVATE LIMITED AND OTHERS reported in 2024 SCC Online SC 1762.
3. RAMA K.T. BARMAN (DIED) THROUGH LRS VS. M.D. MAHIM ALI AND OTHERS in Civil Appeal No.3500/2024.
4. MANISHA MAHENDRA GALA AND OTHERS VS.
SHALINI BHAGWAN AVATRAMANI AND OTHERS reported in (2024) 6 SCC 130.
27
5. HERO VINOTH (MINOR) V/S. SESHAMMAL reported in (2006) 5 SCC 545.
6. SRI. JALEEL V/S MR. SURENDRA NAYAK reported in 2016 SCC Online KAR 1002.
7. MEHBOOB-UR-REHMAN (DEAD) THROUGH LEGAL REPRESENTATIVES V/S. AHSANUL GHAVI reported in (2019) 19 SCC 415.
8. DESH RAJ AND OTHERS V/S. ROHTASH SINGH reported in (2023) 3 SCC 714.
9. SHAH NEWAZ KHAN AND OTHERS V/S. STATE OF NAGALAND AND OTHERS reported in (2023) 11 SCC
376.
10. U.N.KRISHNAMURTHY (since DECEASED) THROUGH LEGAL REPRESENTATIVES V/S. A.M KRISHNAMURTHY reported in (2023) 11 SCC 775.
11. RADHA PRASADH SINGH V/S. GAJADHAR SINGH & ORS 1959 reported in 1959 SCC Online SC 168.
12. T. D. GOPALAN V/S. THE COMMISSIONER OF HINDU RELIGIOUS & CHARITABLE ENDOWMENTS, MADRAS reported in (1972) 2 SCC 329.
13. MADHUSUDAN DAS V/S. SMT. NARAYANI BAI (DECEASED) BY LRS AND OTHERS reported in (1983) 1 SCC 35.
14. DILIP V/S. MOHD. AZIZUL HAQ & ANOTHER reported in (2000) 3 SCC 607.
15. JAGADISH PRASAD PATEL (DEAD) THROUGH LEGAL REPRESENTATIVES & ANOTHER V/S. SHIVNATH AND OTHERS reported in (2019) 6 SCC 82".
11. Sri. Jeevan Kumar B.S, learned counsel appearing for the plaintiff/respondent justifying the 28 impugned Judgment and order of the First Appellate Court submitted that;
(a) at the outset referring to the letter of termination dated 13.03.1997 at Ex.P17 and show cause notice dated 6.1.1997 at Ex.P12 submitted that the said letters have been issued by a person without authority and the same have been signed for Executive Member and not by Executive Member himself.
(b) He referred to letter at Ex.P13 dated 16.1.1997 and submitted that the said document is also signed by Assistant Secretary to KIADB.
(c) Referring to the signatures found on the above said documents he submitted that these communications have been issued by the Assistant Secretary who is not authorized under the Act.
(d) He referred to Section 34(b) of the KIAD Act and submitted that any action has to be taken by the "Board" or any person or officer authorized in this behalf. He referred to Section 6 of the Act regarding constitution of 29 the Board and submitted that there is no evidence of delegation of power in favour of the Assistant Secretary. Thus he submitted that the entire basis of issuance of show cause notice and issuance of order of termination and resumption of land is without authority of law.
(e) He referred to section 14(f) (ii) of the KIAD Act, 1966 and submitted that power to modify or rescind the allotment is to be exercised by the Board and not by the Secretary as done in the instant case.
(f) Referring to Section 6 of the Act, submitted that DW1 and DW2 are not the authorized persons and no resolution delegating the power in their favour is produced. He submitted that the First Appellate Court at paragraph 27 of its judgment has elaborately considered these aspects of the matter which cannot be interfered with.
(g) Referring to the show cause notice dated 16.1.1997 and order dated 13.03.1997 he submitted that period of 90 days prescribed under show cause notice 30 would expire on 6.4.1997 and the action thus taken prior to the expiry of said period of 90 days is illegal.
(h) He referred to clause 2(i) to (iii) and (q) of the agreement and submitted that the plaintiff had indeed taken all measures to comply with the terms of the agreement, as such it had borrowed the loan from the KSFC as seen at Ex.P29 and had even paid the commercial tax and had even started production which was evidenced by Ex.P40 which are the orders issued by the Commercial Tax Department regarding the tax paid on the transaction.
(j) He relied upon the following judgments/citations in support of his submissions;
"1. Prakash Chandra Vs. Angadlal and others reported in (1979) 4 SCC 393.
2. Mansaram Vs. S.P.Pathak and others reported in (1984) 1 SCC 125.
3. M/s. Prakash Dal Mill and others Vs. The Government of Karnataka, by its Secretary, Department of Commerce and Industries and others reported in ILR 2003 KAR.1622.
4. State of Karnataka Vs. B.R.Muralidhar in Civil Appeal No.1966/2013 decided on 28.07.2022.
5. M/s. Distillers Company (P) Ltd., Vs. Karnataka Industrial Area Development Board and others in W.P.No.35948/2010 decided on 09.10.2018. 31
6. M/s.Shrisma Fine Chemicals and Pharmaceuticals Ltd., Vs. State of Karnataka and others in W.P.No.14961/2021 decided on 17.03.2023."
Hence, sought for allowing of the appeal.
12. In reply, learned Senior counsel Sri. S.S.Naganand, submitted that there has been no specific plea in the plaint with regard to authorization to issue notice and pass orders and there is also no plea regarding there being no resolution as now contended during the arguments.
13. Referring to para 19 of the plaint he submitted that the pleading therein are insufficient. He referred to issue No.2 framed by the trial Court and submitted that the trial Court has answered the said issue in the negative taking into consideration the evidence led in by the plaintiff. He submitted that the findings given by the First Appellate Court at pages 46 and 47 of its judgment are contrary to the deposition at page 165. He further referred to the deposition of PW.1 at paragraph 18 and submitted that there is no details regarding the same. Referring to 32 the deposition of DW2 recorded on 28.09.2005 he submitted that there has been no suggestion made to the witness regarding the authorization. He submitted that any amount of evidence without plea is of no avail. He submitted that determination of lease is under Section 111(g) of the Transfer of Property Act, as such the allegation of premature termination is untenable. He referred to judgment of this court in the case of SMT.NALINI SUNDER VS. G.V.SUNDER reported in ILR 2002 Kar. 4734 and submitted that termination prior to the expiry of 90 days is of no consequence.
14. In rejoinder, learned counsel for the respondent submitted that the determination of the lease in the instant case is under Section 106 of the Transfer of Property Act and not under Section 111(g) of the Transfer of Property Act. He referred to the earlier order passed by this Court in RSA No.1789/2009 and pointed out at paragraph 17 of the said order, wherein the submission regarding the order dated 06.01.1997 not having been passed by the executive 33 members have been taken note of. Thus he submitted that despite the said finding by this Court on the earlier occasion no document is produced to show delegation of authority. Hence, sought for dismissal of the appeal.
15. Heard and perused the records.
REG: SUBSTANTIAL QUESTION OF LAW NO.1:
16. There is no dispute with regard to defendant- KIADB allotting the suit schedule property in favour of the plaintiff-company. Ex.P1 is the lease-cum-sale agreement that has been entered into between defendant-KIADB and plaintiff-company on 12.07.1982. The period of lease is 11 years commencing from the date of the agreement and expiring on 12.07.1993. Since the entire dispute between the parties revolves around the performance of terms of the agreement at Ex.P1, appropriate at this juncture to extract relevant clauses of the said agreement which are as under:
2. The lessee with the intent to bind all persons into whatsoever hands the demised premises may come doth hereby covenant with the lessor as follows:34
(p)(1)(i) To submit the blue prints of the plan of the civil construction to the Lessor for prior approval within six months from the date of receipt of letter of allotment or within two months from the date of the agreement whichever is earlier.
(ii)To commence the civil construction works within three months from the date of approval of the blue prints, after obtaining licence from the Chief Inspector of Factories and Boilers of Karnataka State.
(iii) To complete civil construction works and erection of factory within twenty months from the date of letter of allotment that is the 13th day of July one thousand nine hundred and eighty two.
(iv) To commence production within twenty four months from the date of letter of allotment that is the 13th day of July one thousand nine hundred and Eighty two For good and sufficient, reasons, the Lessor may extend the time in writing in any of the cases mentioned in sub clauses (i) to (iv) above, by such period as the Lessor in his discretion deem fit and the Lessee Shall complete the item of works for which extension of the time given within such extended time.
Failure to fulfill any of the conditions (i) to (iv) mentioned above shall result in allotment being cancelled and agreement being terminated under clause 4 and a sum not exceeding 5% of the cost of land as indicated in clause 1 of the lease agreement subject to a maximum of Rs.10.000/- and minimum of Rs.1,000/- and interest due and payable as per clause 1 from the date of taking possession to the date of resumption of the land by the Board shall be forfeited to the lessor.
(2) The Lessor always reserves the right to resume after giving Lessee and the financial institution/banks referred to in clause 2 (q) to whom the lessee has mortgaged his right title and interest not less than 90 (ninety) days notice.
35
(i) the entire plot when the implementation of the project for which the plot is allotted to the Lessee is considered by the Lessor either not satisfactory or not according to the time schedule hereinbefore specified and the decision of the Lessor in this behalf shall be final and binding on the Lessee.
(ii) Such portion of the plot as has not been sufficiently utilised by the Lessee in accordance with the proposals given in application and project report submitted by the Lessee to the Lessor for allotment of plot and the decision of the Lessor in this behalf shall be final and binding on the Lessee.
(iii) Such portion of land which has been allotted to the Lessee for his future expansion but has not been actually utilised by him for that purpose within five years from the date of commencement of production, and the decision of the Lessor in this behalf shall be final and binding on the Lessee.
q) The Lessee shall not alienate the demised premises or any part thereof or the buildings that may be constructed thereon during the period of lease. The Lessor, may, however, permit the mortgage of the right, title and interest of the Lessee in favour of the Government of Karnataka or the Central Government or Corporate Bodies like Life Insurance Corporation of India, Karnataka State Industrial Investment and Development Corporation, Karnataka State Financial Corporation, Industrial Finance Corporation of India, Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Unit Trust of India, Trustees of Debenture stock or Banks to secure moneys advanced by such Governments or bodies for the erection of building, plant and machinery.
3. If and whenever any part of the rent hereby reserved shall be in arrears the same may be recovered from the Lessee as an arrears of land revenue under the provisions of the Karnataka land Revenue Act (No. 12 of 1964).
4. If the said rent hereby reserved shall be in arrears for the space of thirty days whether the same shall have 36 been legally demanded or not if and whenever there shall be breach of any of the covenants by the Lessee herein before/after contained the Lessor may reenter upon any part of the demised premises in the name of the whole and thereupon the term hereby granted and right to any renewal there of shall absolutely cease and determine and in that case a sum not exceeding 5% cost of the land as indicated in clause 1 of this agreement subject to a maximum of Rs. 10,000/- and minimum of Rs. 1,000/- and interest due and payable as per clause 1 from the date of taking possession to the date of resumption of the land by the Board shall be forfeited to the Lessor and in addition no compensation shall be payable to the Lessee on account of the building or improvements built or carried out on demised premises, or claimed by the Lessee on account of the building or improvements built or made, provided always that except for nonpayment of rent as aforesaid the power of re-entry hereinbefore contained shall not be exercised unless and until the Lessor or the Executive Member on behalf of the Lessor shall have given to the Lessee or left on some part of the demised premises a notice in writing of his intention to enter and of the specific breach or breaches of covenants in respect of which the re-entry is intended to be made and default shall have been made by the Lessee in remedying such breach or breaches within three months after the giving or leaving of such notice.
Provided that whenever the Lessor intends to exercise his right of re-entry under this Clause, he shall give 90 (ninety) days prior notice to the financial institutions/banks in whose favour the Lessee has mortgaged his right, title interest under Clause 2 (q) of this agreement.
Notwithstanding any such default as aforesaid, the Lessor may at its discretion extend the period of lease at the cost and expense in every respect of the lessee on payment of the rent mentioned hereinbefore and subject to the same covenants, provisos and stipulations herein contained.
7. (a) At the end of 11 years referred to in Clause I or the extended period, if any, the total amount of rent paid by the Lessee for the period of the Lease shall be adjusted 37 towards the balance of the value of the property (as fixed in the manner herein after appearing).
7. (b) As soon as it may be convenient the Lessor will fix the price of the demised premises at which it will be sold to the Lessee and communicate it to the Lessee and 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 and the total amount of rent paid by the Lessee, within one month from the date of receipt of communication signed by the Executive Member of the Board. On the other hand, if any sum is determined as payable by the Lessor to the Lessee after the adjustment as aforesaid, such sum shall be refunded to the Lessee before the date of execution of the sale deed.
8. If the Lessee has performed all the conditions mentioned herein and committed no breach there of the Lessor shall at the end of 11 years referred to in Clause 1 of the extended period, if any, sell the demised premises to the Lessee and all attendant expenses in connection with such sale such as stamp duty, registration Charges, etc., shall be borne by the Lessee.
9. On complying with the terms and conditions of this agreement in the manner stated above but not otherwise, the Lessor shall be obliged to execute the sale deed in Form 5 appended to the Regulations governing the disposal of lands by the Karnataka Industrial Areas Development Board, 1969 in favour of the Lessee.
17. Perusal of the aforesaid clauses more particularly clause 2(p)(2)(i)(ii)(iii) indicate that;
(a) defendant-KIADB being the lessor had reserved the right to resume the land after giving 90 days notice if in the event of plaintiff-company;
(b) failing to either implement the project on the entire plot for the purpose to which it was allotted or if the implementation of the project was not satisfactory or not 38 in accordance to the time schedule specified under clause p(1)(i)(ii)(iii)(iv).
(c) or such portion of the plot has not been sufficiently utilized by the plaintiff company in accordance with the proposal given in the application and project report submitted by the plaintiff company to the defendant- KIADB for allotment of plot.
(d) that such portion of the land which has been allotted to the plaintiff company for its future expansion but has been not actually utilized by it for that purpose within five years from the date of commencement of production.
18. Further Clause 8 of the agreement as noted above would require the defendant-KIADB to convey the property in favour of the plaintiff company if the plaintiff company had performed all the conditions mentioned and had committed no breach.
19. Clause 9 further reiterates that it is only on complying with the terms and conditions of the agreement in the manner stated thereunder and not otherwise, the defendant-KIADB shall be obliged to execute the sale deed in the prescribed format appended to the regulation governing disposal of the lands by defendant-KIADB.
20. In the application dated 15.02.1982 filed by the plaintiff company seeking allotment of land produced at 39 Ex.D1 marked through PW1 following particulars are given at page No.4:
5(a) Extent of land required in 47600 sq. metres terms of square yards or metres (Plot number if any, in the I plot No.26 Industrial Area which the II or Plot No.25 applicant wishes to be allotted III or Plot No.12 may be given here. Three numbers may be indicated in the order of preference) (A) (B) (C)
(b) Break-up details of the proposed use (in sq. metre/sq For For future Total immediate expansion yards) requirements
(i) Area that will be taken up by 2160 sq. m 1260 sq. m 3420 sq.m the Factory building
(ii) Area that will be actually occupied by the machinery/plant proper
(iii) Area required for putting up of office and other ancillary 880 sq. m 1320 sq. m 2200 sq.m buildings, if any
(iv) Area that will be taken up by open space, garden, lawn or roads 28155 sq. m 4775 sq. m 32930 sq.m
(v) Area for storage of materials 6800 sq. m 6800 sq. m or for godowns if required -
(vi) Area for disposal of effluent, if
500 sq. m - 500 sq. m
any
(vii) Area for experimental
- 300 sq. m 300 sq. m
research, if any
(viii) Area required, if necessary
for
(a) putting up labour colony - - -
(b) for any civic amenity inside
the colony with the details - 500 sq. m 500 sq. m
(ix) Any other purpose - 950 sq. m 950 sq. m
47,600 sq.m
40
21. Thus, from the above, it is clear that plaintiff company had represented its immediate requirement of land for the purpose of factory at 2160 sq. mtrs., and for future expansion at 1260 sq. mtrs., totally 3420 sq. mtrs.
That apart for immediate purpose of putting up of office and other ancillary buildings it had stated that it required 880 sq. mtrs., and for future expansion 1320 sq. mtrs., total 2200 sq. mtrs., and for open space, garden, lawn or roads at 28155 sq. mtrs., as immediate requirement and future expansion at 4775 sq. mtrs., totally 32930 sq. mtrs., and for storage of materials or for godowns 6800 sq. mtrs., and for disposal of effluent 500 sq. mtrs., and future expansion for experimental research 300 sq. mtrs., for civic amenities inside the colony with the details 500 sq. mtrs., and for other purposes 950 sq. mtrs. Thus total extent 47600 sq. mtrs., was sought for.
22. Further the letter of allotment dated 13.07.1982 produced at Ex.D3 marked through PW1 at clause 7 provides the time schedule for utilization and 41 implementation of the project and clause 14 provides for right of defendant-KIADB to re-enter the land in the event of plaintiff company not putting the land into use satisfactorily. The clauses 7 and 14 reads as under:
7. The time schedule given shall be adhered to:-
1. For execution of lease One month from the date of agreement and taking receipt of confirmatory letter of possession of the land: allotment.
2. For getting the approval of Six months from the date of the Board for blue prints: receipt of this letter.
3. For commencement of civil Three months from the date of Engineering works: approval of the blue prints.
4. For completion of works and Twenty months from the date of erection of the factory: this letter.
5. For commencement of Twenty four months from the production: date of this letter.
14. On being satisfied that the land is not put to the use for the purpose for which it was asked for, the Board will be free re-enter upon and take possession of the whole or that part of the land which has not been put to proper use.
23. In the light of the above, terms and conditions enumerated in the lease-cum-sale agreement at Ex.P1, requirement of extent of the plot and undertaking given by the plaintiff company for implementation of the project at Ex.D1 and the terms and conditions imposed in the letter 42 of allotment at Ex.D3 it is to be seen whether the plaintiff company has committed any violation of the said terms.
24. For the first time defendant-KIADB vide letter dated 02.08.1994 as seen at Ex.P5 called upon the plaintiff company to furnish a certificate of investment issued by the financial institution/chartered accountant as on 30.07.1984, 85, 86, 87, 88, 89, 90, 91, 92, 93 and 30.07.1994 on the premise that as per the terms and conditions of the allotment the plaintiff company was expected to implement the project on or before 30.07.1984 and that it was noticed that plaintiff had constructed only a small shed and there was no production.
25. In response thereof, plaintiff had issued a reply dated 16.08.1994 as per Ex.P6 denying the allegation of violation of the terms of letter of allotment. However, it sought time to furnish the certificate of investment from the financial institution (Chartered Accountant) as 43 requisitioned by the defendant-KIADB. Thereafter vide letter dated 31.08.1994 as per Ex.P7 plaintiff contended that after obtaining the plot of land from KIADB, it had availed term loan of Rs.26.84 lakhs from KSFC and implemented the project within the stipulated terms. That the unit went into production during 1987 immediately on receiving the power supply and water. As regards construction of the structures, it is contended that in order to meet the provisions of Environmental and Pollution Act, and explosives and hazardous situation it constructed two sheds measuring 45 meters by 18.5 meters apart from other ancillaries. It had also contended that plant was carrying on production all these years until KSFC seized it a few months ago. It also contended that the plaintiff has been assessed by Income Tax Department, Central Tax (CTO), Central Excise Department and also contended that as per the Income Tax provisions they were preparing the statement of accounts and balance sheet as on 31st March every year and called upon defendant-KIADB to furnish 44 them the logic of it calling upon them to give the information as on 31st July and accordingly sought for withdrawal of the letter.
26. Thereafter by another letter dated 14.09.1995 at Ex.P8 the plaintiff called upon the defendant-KIADB to execute deed of sale by intimating outstanding dues if any. It is further pointed out in the said letter that defendant- KIADB had alleged violation of the terms and conditions of the lease agreement which was repudiated by plaintiff vide letter dated 31.08.1994 and since over one year had elapsed it was presumed that the said allegations were withdrawn. Accordingly, plaintiff company called upon the defendant-KIADB to execute the deed of sale by completing all formalities within 15 days.
27. Said letter is followed by subsequent letters dated 22.12.1995, 26.03.1996, 06.09.1996 as per Exs.P9, P10 and P11 requesting for execution of deed of sale. Defendant-KIADB vide its letter dated 06.01.1997 produced 45 at Ex.P12 contended that as per clause 2(p)(1)(i)(ii)(iii), plaintiff company should utilize the land as per the proposal given in the application for allotment and the project report submitted including future expansion within five years from the date of commencement of the project. That the unit set up by the plaintiff company had been closed and it was not carrying on any production activity and since the lease period expired and the plaintiff failed to utilize the land, there was violation of the terms and conditions of lease- cum-sale agreement. Accordingly, called upon the plaintiff company to show cause why the Board should not enter upon the unutilized portion of the lease premises after expiry of 90 days from the date of receipt of the notice and determining the lease in accordance with clause 4 of the agreement. By a reply dated 29.01.1997 as per Ex.P15 plaintiff submitted the details regarding delay in setting up the industry. Necessary to note the following contents of the said reply:
a. That after allotment of land and entering into agreement on 12.10.1983, plaintiff availed loan of 46 Rs.26.84 lakhs from KSFC and immediately went into production on receipt of power supply and water connection.
b. That during 1994 running unit was seized by KSFC on account of non payment of their dues and after clearance, unit was handed back to the plaintiff.
c. That after the expiry of the lease period plaintiff requested execution of deed of sale and reminded periodically by several letters and there was no response from the KIADB.
d. That after three year, show cause notice was issued repeating the allegations that were made three years ago.
e. That with great difficulty plaintiff set up the industry starting of which was delayed for nearly three years for want of electricity and water connection, subsequent thereto, industry itself could not run due to irregular supply of electricity and frequent cuts. As such, plaintiff could not expand it industry contrary to its plans.
f. Now it has every intention to expand the industry subject to KIADB executing sale deed enabling them to borrow loan from financial institutions.
g. That after expiry of 11 years of lease period plaintiff has become absolute owner and power to issue notice as per clause 4 of agreement of lease- cum-sale was available only till the operation of the lease period upto 12.07.1993 and not thereafter.
28. Defendant-KIADB by order dated 13.03.1997 at Ex.P17 declining to accept the reasons assigned by plaintiff and also stating that only 3.41% of the allotted area was 47 utilized while the large extent of land had remained unutilized and that the Deputy Development Officer had recommended for resumption of an extent of 37120 sq. mtrs., of land as indicated in the sketch, determined the lease agreement dated 12.10.1983 and called upon the plaintiff to be present at the spot on 01.04.1997 to witness resumption of land.
29. The defendant-KIADB had got the subject property inspected through its Assistant Engineer who had submitted the report with regard to implementation of the project as per Ex.D5. In that it is pointed out that;
1. The extent of land occupied by the allottee is 52093.00 sq. mtrs. as against 48360.00 sq. mtrs.
2. Extent of land covered by the buildings;
(1) factory building- 1673.52 sq. mtrs.
(2) office building - 83.19 sq. mtrs.
(dilapidated)
(3) Watchman shed - 19.43 sq. mtrs.
(4) Oil tank - 10.60 sq. mtrs.
(5) Pump House - 6.12 sq. mtrs.
3. That the factory is sick no activity is going on in the premises.
4. The factory shed are as per bye laws except the watchman shed and office block which are in dilapidated condition.
5. The factory has name board of K.V.Forgings Pvt. Ltd., 48
6. There is no borewell at present.
Since the allottee has not utilized very large extent of land same is proposed for resumption as shown in the sketch enclosed with the said report.
30. Sketch enclosed to the said report is produced at Ex.D6 wherein the details of the areas have been given as under:
Area Sital area allotted - 48360.00 sq. mtrs.
Plot area as per actual - 52093.00 sq. mtrs.
Plinth area - 1792.86 sq. mtrs.
31. DW-1 who produced Exs.D5 and D6 report has been cross examined on behalf of the plaintiff on 02.09.2005 and at paragraph 26 suggestions have been made with regard to signatures found on Ex.D5 and the person who prepared Ex.D-6 and in whose presence the said documents were prepared. Witness has pleaded ignorance about the same. He has denied the suggestion of the said documents being created. However, there is no suggestion to the said witness DW1 with regard to the 49 contents of the said documents. In other words there is no denial with regard to the details mentioned in the said documents regarding allotment of the plot, actual extent of the plot in occupation of the plaintiff and the actual extent utilized by the plaintiff.
32. DW2 who prepared Ex.D5 and D6 has been examined on 22.09.2005. In his cross examination conducted on 28.09.2005 except suggesting that Ex.D5 and D6 were prepared for the purpose of the case, which is denied by the witness, nothing has been elicited.
33. Infact as already noted above even according to the plaintiff company in its reply dated 29.01.1997 at Ex.P15 which was given in response to the notice dated 06.01.1997 Ex.P12 issued by defendant-KIADB, wherein defendant-KIADB had specifically mentioned the extent of built up area being 1792.86 sq. mtrs., including oil tank and pump house as against an extent of 48360 sq. mtrs., allotted, plaintiff has neither denied nor given any other 50 information regarding the extent of land utilized other than what is mentioned in Ex.D5 and D6. Infact in its earlier reply dated 31.08.1994 produced at Ex.P7 at paragraph 3 plaintiff itself has given the measurement of two industrial sheds constructed by it measuring 45 mtrs., by 18.5 mtrs., along with other ancillary construction. The measurement of the sheds as given by the plaintiff in Ex.P7 is exactly the same as what is mentioned in the sketch Ex.D6 enclosed to Ex.D5.
34. Thus, there is no denial or rebuttal of the extent of land utilized by the plaintiff company as mentioned in Exs.D5 and D6 vis-à-vis the extent of land the plaintiff company intended to utilize immediately and in its proposed expansion as mentioned in its application at Ex.D1 which is 47600 sq. mtrs., including areas to be utilized for open space, garden, lawns and roads etc. There is no any material produced by the plaintiff company for having formed open space, garden, lawns and roads.
There is also no material produced by the plaintiff with 51 regard to construction of the buildings, structures for its immediate use and for future expansion as represented by it in Ex.D1. Indeed admittedly plaintiff company has closed down its business operation.
35. Necessary also to note that when the defendant- KIADB had called upon the plaintiff to produce the certificate of investment from the Financial Institutions/ Chartered Accountant as per Ex.P5, the plaintiff company by its reply dated 16.08.1994 produced at Ex.P6 had expressed its inability to produce such certificate and by subsequent correspondence questioned the logic of defendant-KIADB, seeking production of such document. The plaintiff company has however produced assessment orders passed by Assistant Commissioner of Commercial Taxes for the years 1989-1990 and 1990-1991 as per Ex.P40 to P42. Except these two returns nothing has been furnished by the plaintiff with regard to its so called production for all these years till filing of the suit. 52
36. The terms and conditions of the lease-cum-sale agreement at Ex.P1 found at Clause 2(p)(1)(i)(ii)(iii)(iv) and 2(2)(i)(ii)(iii) read in the light of the aforesaid undisputed facts of the matter would manifestly make it clear that there has been violation/non-compliance of the said terms by the plaintiff company.
37. Clause 8 and 9 of Ex.P1 would give right to the plaintiff company to seek execution of the deed of sale only if it has complied with the terms and conditions of the agreement mentioned therein and not otherwise.
38. The trial Court having adverted to these aspects of the matter has come to the conclusion that there was non compliance of the terms and conditions of Ex.P1 by plaintiff company and accordingly dismissed the suit. The First Appellate Court however found that the plaintiff company had given explanation in its responses to the notices/correspondences issued by defendant-KIADB and has further proceeded to hold that since the defendant- 53 KIADB had in its letter at Ex.D4 had indicated that it was in the process of ascertaining the cost of the land, the same amounted to waiver of violation of the terms by the plaintiff company if any. Further the First Appellate Court has found that since the KIADB had not raised any objection of violation of terms and conditions of the lease upto the completion of lease period, and had issued document at Ex.D4 dated 03.02.1996 clearly proving that there was no violation of terms and condition atleast upto the said date and any violation would be only after 03.02.1996. It has further opined if at all there was any violation of terms and conditions there was no question of giving intimation to the plaintiff company about process of fixation of final price and execution of sale deed after fixation of final price as per Ex.D4. This in the considered opinion of this Court is incorrect and cannot be sustained.
39. The further conclusion arrived at by the First Appellate Court at paragraph 75 of its Judgment that "the plaintiff has fulfilled almost all the conditions except the 54 condition in respect of utilization of some portion of the land. The plaintiff has given acceptable reason for non- utilization of some portion of land and same has been accepted by defendant-KIADB, as such defendant-KIADB has intimated the plaintiff regarding execution of the sale deed and that the defendants have failed to prove violation of terms and conditions of lease and as such the order of resumption is not in accordance with law" in the considered view of this Court is contrary to the contents of the documents produced by plaintiff company itself as well as by the defendant-KIADB. Thus, suffering from perversity.
40. Further observation made by the First Appellate Court at paragraph 76 that the documents Ex.D8 to D11 would disclose that after expiry of lease period the plaintiff had expressed its intention to perform its contract and that the plaintiff company by investing huge money had constructed two buildings and had paid upto date lease amount, as such, it was not correct to say that the plaintiff 55 shall vacate the schedule premises and that equity was in favour of the plaintiff for grant of relief of specific performance, is also without reference to clause 8 and 9 of the lease-cum-sale agreement produced at Ex.P1.
41. Necessary to note that there has been not even a single correspondence, letter or representation from the plaintiff company to the defendant-KIADB between the date of execution of lease-cum-sale agreement which is 12.10.1983 and 16.08.1994 either intimating/informing the defendant-KIADB with regard to its performance/compliance with the terms of the lease-cum- sale agreement or compliance with the conditions of letter of allotment noted hereinabove. There is also no evidence with regard to plaintiff having implemented the project as represented by it in its application seeking allotment of plot till date. As such the finding arrived at by the First Appellate Court that the plaintiff was always ready and willing to perform its part of the contract and was thus 56 entitled for relief of specific performance cannot be sustained.
42. Apex Court in the case of Hero Vinoth (Minor) Vs Seshammal (supra) at paragraph 13 has held that "
"13. Though as rightly contended by learned counsel for the appellant the scope for interference with concurrent findings of fact while exercising jurisdiction under Section 100 Code of Civil Procedure is very limited, and reappreciation of evidence is not permissible (sic except) where the trial court and/or the first appellate court misdirected themselves in appreciating the question of law or placed the onus on the wrong party certainly there is a scope for interference under Section 100 Code of Civil Procedure after formulating a substantial question of law.
14. As was noted in Yadarao Dajiba Shrawane (dead) by Lrs. v. Nanilal Harakchand Shah (dead) and Ors. if the judgments of the trial Court and the first Appellate Court are based on misinterpretation of the documentary evidence or consideration of inadmissible evidence or ignoring material evidence or on a finding of fact has ignored admissions or concession made by witnesses or parties, the High Court can interfere in appeal.
15. In Neelakantan and Ors. v. Mallika Begum it was held that findings of fact recorded must be set aside where the finding has no basis in any legal evidence on record or is based on a misreading of evidence or suffers from any legal infirmity which materially prejudices the case of one of the parties. (See: Krishna Mohan Kul alias Nani Charan Kul and Another v. Pratima Maity and others."57
43. Thus the re-appreciation of the evidence in the instant case is necessitated in view of reasoning and conclusion arrived at by the First Appellate Court which are contrary to the admissions and the contents of the documents.
44. Whether the First Appellate Court was justified in holding that since the defendant-KIADB had issued letter dated 03.02.1996 at Ex.D4 indicating that it was in the process of ascertaining cost of the land would amount to waiver of violation/breach of terms of agreement?
45. The Co-ordinate Bench of this Court in the case of Jaleel Sab Vs Surendra Nayak dealing with the question of waiver, at paragraphs 8 and 9 has held as under:
"8. In HANEEF SAIT v. SYED ASIF, reported in (2011)1 Kar.L.J. 258, an identical contention was considered by raising the following point for determination:
"8(ii) Whether, the plaintiff waived his right by accepting the amount paid by the defendant along with the reply notice-Ex.P3 and also the amount paid monthly, in the Courts, during the pendency of the matter?"
9. The said point was answered as follows: 58
"11. Waiver is not a pure question of law. Waiver is a question of fact and must be properly pleaded and proved. No plea of waiver can be allowed to be raised unless it is pleaded and factual foundation for it is laid in the pleadings. In the absence of appropriate pleading, there can be no distinct issue. Hence, there can be no adjudication of such issue. Adjudication of a dispute by a Civil Court in a civil suit between the parties are governed by the rules of pleadings. Indisputedly the plea of waiver was not taken by the defendant in his written statement or the additional written statement. There is also no ground regarding waiver, raised in the appeal memorandum. Sri.G.R.Mohan, raised the ground only during the arguments. Thus, Sri.K.Krishna, is justified in objecting for the ground of waiver being raised for determination. Though I find merit in the objection raised by Sri.K.Krishna, still, I would prefer to examine the merit of the contention.
12. In the case of CHOTU MIA, it was held that, acceptance of rent which has accrued due subsequent to the forfeiture and prior to the institution of a suit in ejectment operates as a waiver of the forfeiture."
46. There is no pleading by the plaintiff with regard to waiver or acquiescence by the defendant-KIADB. No issue in this regard is framed either by the trial Court or by the First Appellate Court. The burden of proving waiver and acquiescence is on the person who is intending to avoid the contract imposing terms of performance.
47. In the absence of any pleading or evidence on the issue of waiver, which is mixed question of law and 59 fact, the First Appellate Court has however exonerated the plaintiff company of its short comings on the ground of waiver. Therefore the First Appellate Court was not justified in holding that the issuance of letter by the defendant-KIADB as per Ex.D4 amounted to waiver. In any case a perusal of the said Ex.D4 would not indicate that the defendant-KIADB had even remotely agreed or assured the plaintiff company to execute the deed of sale as contemplated under clause 8 and 9 of the lease-cum- sale agreement. In the absence of any pleading regarding waiver the reasoning assigned by the First Appellate Court is unsustainable.
48. Necessary to note though the plaintiff company has sought relief of declaration declaring the order dated 13.01.1997 to be illegal and unauthorized, essentially the suit is one for specific performance of the agreement of lease at Ex.P1 through which the plaintiff is seeking execution of deed of sale. Clause 8 and 9 of the lease agreement extracted hereinabove specifically provide that 60 the plaintiff company would be entitled for seeking execution of deed of sale at the end of lease period provided it has performed all terms of the agreement particularly clauses 2(p)(1), 2(p)(2) and has committed no breach thereof. Imperative therefore for the plaintiff to have made averments and proved the same that it has performed its part of the terms and conditions of the agreement enumerated hereinabove and it was always ready and willing to perform the same. Perusal of the plaint averments do not indicate compliance of this requirement imposed under Section 16(c) of the Specific Relief Act. Paragraphs 15 and 21 of the plaint though refer to plaintiff claiming that it has always been ready and willing to perform its obligation under the lease-cum-sale agreement and that it has performed all its obligation, there is no further pleading with regard to plaintiff performing the terms of the lease agreement which are extracted hereinabove. On the contrary reply and explanation given by the plaintiff which is also extracted 61 hereinabove would indicate that the plaintiff has neither performed nor willing to perform the terms of the agreement. The Apex Court in the case of Mehaboob Ur Rehman(dead through Lrs) (supra) dealing with Section 16(c) of the Specific Relief Act at paragraph 15 has stated as under:
15. Though, with the amendment of the Specific Relief Act, 1963 by Act No. 18 of 2018, the expression "who fails to aver and prove" is substituted by the expression "who fails to prove" and the expression " must aver"
stands substituted by the expression "must prove" but then, the position on all the material aspects remains the same that, specific performance of a contract cannot be enforced in favour to the person who fails to prove that he has already performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than the terms of which, the performance has been prevented or waived by the other party. As per the law applicable at the relevant time, it was incumbent for the plaintiff to take the specific averment to that effect in the plaint. Of course, it was made clear by this Court in several decisions, that such requirement of taking the necessary averment was not a matter of form and no specific phraseology or language was required to take such a plea. However, and even when mechanical reproduction of the words of statue was not insisted upon, the requirement of such pleading being available in the plaint was neither waived nor even whittled down. In the case of A. Kanthamani v. Nasreen Ahmed, even while approving the decree for specific performance of the agreement on facts, this Court pointed out that the requirement analogous to that contained in Section 16(c) of the Specific Relief Act, 1963 was read in its forerunner i.e., the Specific Relief Act, 1877 even without specific provision to that effect. Having examined the 62 scheme of the Act and the requirements of CPC, this Court said: (SCC p.660, para 22) "22. Therefore, the plaint which seeks the relief of specific performance of the agreement/contract must contain all requirements of Section 16 (c) read with requirements contained in Forms 47 and 48 of Appendix 'A' CPC."
49. Similarly in the case of U.N.Krishnamurthy(since deceased) through Lrs Vs A.M.Krishnamurthy at paragraph 45 has held as under:
"45. It is settled law that for relief of specific performance, the plaintiff has to prove that all along and till the final decision of the suit, he was ready and willing to perform his part of the contract. It is the bounden duty of the plaintiff to prove his readiness and willingness by adducing evidence. This crucial facet has to be determined by considering all circumstances including availability of funds and mere statement or averment in plaint of readiness and willingness, would not suffice."
50. The First Appellate Court has not adverted to the aforesaid legal and factual requirement of the matter while reversing the Judgment and decree passed by the trial Court and decreeing the suit as sought for. Judgment and order of the First Appellate Court is unsustainable even on this count.
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RE: SUBSTANTIAL QUESTION OF LAW No.2:
51. One of the contentions urged by the plaintiff is that the impugned order at Ex.P17 passed by defendant- KIADB is unsustainable as the same was issued even prior to expiry of period of 90 days provided in the notice and that since the termination of lease was under Section 106 of the Transfer of Property Act, the termination of lease would not be valid before the expiry of period mentioned in the notice. As such the notice of termination at Ex.P17 is invalid.
52. Answer to the said contention by the defendant- KIADB is that under the terms of the lease agreement defendant-KIADB reserved its right to re-enter the lease premises in the event of breach of terms of conditions provided under the lease agreement and that determination of lease was in furtherance to the said terms of the lease agreement and is in accordance with Section 111(g) of the Transfer of Property Act.
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53. Section 111(g) of the Transfer of Property Act reads as under:
"Section 111 - Determination of lease:- A lease of immovable property determines -
(g) by forfeiture; that is to say (1) in case the lessee breaks an express condition which provides that; on breach thereof the lessor may re-enter."
54. Clause 4 of the lease agreement provides right of re-entry in the event of breach or breaches of covenants of the lease agreement. Relevant portion of the said clause is as under:
"4. .....
"Provided always that except for non-payment of rent as aforesaid the power of reentry hereinbefore contained shall not be exercised unless and until the lessor or the executive member on behalf of the lessor shall have given to the lessee or left on some part of the demised premises a notice in writing of his intention to enter and of the specific breach or breaches of covenants in respect of which the reentry is intended to be made and default shall have been made by the lessee in remedying such breach and breaches within three months after giving or leaving such notice."
55. The notice determining the lease is found at Ex.P12 dated 06.01.1997. In the said notice defendant- KIADB has specifically referred to clause 2(p)(1)(i)(ii)(iii) 65 of the lease-cum-sale agreement and has further pointed out that the plaintiff company had closed its unit and was not carrying out any production activity and that it had utilized only 1792.86 sq. mtrs., including oil tank and pump house as against an extent of 48360 sq. mtrs., of land and that the lease period stipulated had also expired without plaintiff utilizing the land as per the proposal given by it in its project report and the application. As such, there was total violation of terms and conditions. The notice further called upon the plaintiff to show cause as to why the board shall not enter upon unutilized portion of leased premises after expiry of 90 days from the date of receipt of the notice in accordance with clause 4 of the agreement.
56. In response to the said notice plaintiff company issued a reply dated 29.01.1987 as per Ex.P15 contents of which is already extracted hereinabove in which the plaintiff has admitted to have not utilized the allotted land and expanded its industry as per its application, project 66 report, terms of allotment letter and the lease agreement. There is no indication of plaintiff intending to make good the breach or the violation of terms of the lease-cum-sale agreement.
57. Learned counsel for the defendant-KIADB submitted that requirement of waiting for the expiry of period of 90 days before passing of the order of resumption in exercise of clause 4 and 11 of the lease agreement would be meaningless in view of reply which is issued by the plaintiff as per Ex.P15. He submitted that waiting for the expiry of period of 90 days would be an exercise in futility as there was not even remote intent or possibility of plaintiff complying with the terms of the lease agreement as it had already closed its unit long ago.
58. There is considerable force in the submissions made on behalf of the defendant-KIADB. The notice at Ex.P12 specifically pointed out the violation and breaches committed by the plaintiff company. It had also pointed 67 out Clause 4 of the lease agreement under which defendant-KIADB intended to re-enter and resume the unutilized plot. Plaintiff by its explanation given in the reply as per Ex.P15 has made it more than clear that it was not possible for it to perform its part of agreement unless a deed of sale is executed by defendant-KIADB.
59. The aforesaid events indicate that the determination of lease was under Section 111(g) of the Transfer of Property Act and not under Section 106 as contended by the plaintiff.
60. For the aforesaid reasons and analysis, the reasoning and conclusion arrived at by the First Appellate Court that since the lease expired, there was no question of termination of lease is unjustified and unsustainable.
The substantial questions of law are answered accordingly.
61. The other aspect of the matter is with regard to contention of learned counsel for the plaintiff regarding 68 notice of termination and impugned order at Ex.P12 and Ex.P17 having been issued/signed by the person without authority. Extensive arguments are addressed by learned counsel for the plaintiff company in this regard. Referring to paragraphs 27 and 28 of the order of the First Appellate Court, learned counsel for the plaintiff company submitted that the First Appellate Court has found that the rescission of agreement and resumption of the land was unauthorized. Necessary to note that the First Appellate Court has extensively extracted the pleadings and the submissions made by learned counsel for the parties upto paragraph 41 of its Judgment. The discussions and analysis has started only after paragraph 42 of its Judgment. Therefore, reference made to paragraphs 27 and 28 to contend that the same have been dealt with is incorrect. In any case the trial Court while answering issue No.2 has negated the contention of the plaintiff of the orders passed being unauthorized.
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62. Learned Senior counsel for the defendant-KIADB drawing attention of this Court to Section 34B of the Karnataka Industrial Areas Development Act submitted that by virtue of amendment to the Act, the Board has been vested with the power to resume the possession of the premises in the event of violation of any terms and conditions of the allotment and if the allottee fails to remedying the breach within the time so stipulated. He submitted that exercise of power by the defendant-KIADB is in consonance with the said provisions of law. He further submitted that the said provisions of law have to be read having retrospective effect inasmuch as the said provision partakes the character of "engrafting an enactment upon the existing contract". In this regard he refers to the Judgment of the Division Bench of this Court in the case of Commissioner of Income Tax Vs Gogte Minerals reported in 1995 SCC online Kar 584. At paragraph 6 of the said Judgment the Division Bench of this Court dealing with the operative nature of Rule 34 of Mineral 70 Conservation and Development Rules, 1988 on to the earlier agreements entered into between the Mining operators and the State Government has held as under:
"6. The lease....................However, we may advert to the law in the matter. In a somewhat identical situation in the case of Indramani Vs W.R.Nathu (supra), the law on the matter is stated thus by the Supreme Court while referring to a decision of the Queen's Bench Division wherein Cockburn, C.J. said in Duke of Devonshire Vs Barrow, Haematite Steel Co. Ltd., (1877) 2 QBD 286 that where two persons enter into a contract, and afterwards a statute is passed, it `engrafts an enactment upon existing contracts' and thus operates so as to produce a result which is something quite different from the original intention of the contracting parties, such a statue has, in effect a retrospective operation. Elaborating, the Supreme Court observed that it is clear law that a statute which could validly enact a law with a power to make a rule or frame a bye-law having retrospective operation and that position cannot be disputed. If this were so, the same result."
63. Learned Senior counsel for the defendant-KIADB, referring to paragraph 19 of the plaint further submitted that the plaintiffs have not specifically pleaded that the issuance of notice and the order is bad for want of authority of a person who has issued but it is of a very generic statement of the order being without authority. He also referred to issue No.2 framed by the trial Court and the answer which is given by the trial Court referring to 71 Section 31 of the KIAD Act, 1966 in this regard. He also relied upon the Judgment of the Division Bench of this Court in the case of Nalini Sunder Vs G.V.Sunder reported in ILR 2002 Kar 4734 wherein at page 4741 the Division Bench has held as under:
A party cannot make out a case on the basis of evidence for which he /she has laid no foundation in the pleadings. It is fairly well settled that no amount of evidence can prove a case for a party who has not set up the same in his/her pleadings.
64. He also referred to Judgment of the Apex Court in the case of MANISHA MAHENDRA GALA AND OTHERS VS. SHALINI BHAGWAN AVATRAMANI AND OTHERS reported in (2024) 6 SCC 130 wherein at paragraph 23 the Apex Court has held as under:
"23. In this connection Shri Ahmadi, learned counsel for the appellants, relying upon "Ram Sarup Gupta (Dead) By Lrs. vs. Bishun Narain Inter College & Ors" submitted that the pleadings must be construed liberally and it is not necessary that the precise language or expression used in the statute should be used. The aforesaid decision lays down that pleadings should be liberally construed and need not contain the exact language used in the statutory provision but it does not mean that the pleadings even if fails to plead the essential legal requirement for establishing a right, the same be so construed so as to impliedly include what actually has not been pleaded more particularly when it happens to be an essential ingredient for establishing a right.72
Thus, the aforesaid pleadings cannot be treated to be of sufficient compliance of the statutory requirement. It is settled in law that a fact which is not specifically pleaded cannot be proved by evidence as evidence cannot travel beyond the pleadings."
65. In the light of the aforesaid factual and legal aspect of the matter and in the absence of any specific pleading in this regard, the contention of the plaintiff company that the notices and impugned order were issued by the persons without authority cannot be countenanced.
66. Before parting necessary also to note that by order dated 13.03.1997 at Ex.P17 defendant-KIADB has sought to resume 37120 sq. mtrs., of land as per the sketch enclosed as against total extent of 52093 sq. mtrs., of plot in its occupation. In other words the area which is in occupation of the plaintiff that is 14973 sq. mtrs. (52093-37120 sq. mtrs.) would be left with the possession of the plaintiff. Plaintiff would therefore be entitled to seek necessary conveyance to the extent of the land which is admittedly utilized and in its possession. Resultantly the following:
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ORDER Appeal is allowed. Judgment and order dated 13.01.2021 passed in R.A.No.31/2009 by the First Appellate Court is set aside and Judgment and decree dated 20.12.2008 passed in O.S.No.154/2006 on the file of the trial Court is confirmed.
Sd/-
(M.G.S. KAMAL) JUDGE RU/SBN