Karnataka High Court
Vismay Realtors Private Limited vs The State Of Karnataka on 15 December, 2022
-1-
WP No. 54245 of 2017
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 15TH DAY OF DECEMBER, 2022
BEFORE
THE HON'BLE MR. JUSTICE E.S.INDIRESH
WRIT PETITION NO. 54245 OF 2017 (GM-KIADB)
BETWEEN:
VISMAY REALTORS PRIVATE LIMITED
REGISTERED OFFICE AT NO.41,
VITTAL MALLYA ROAD,
BENGALURU - 560001.
REPRESENTED BY ITS AUTHORIZED SIGNATORY
MR. B S RAVISHANKAR.
...PETITIONER
(BY SRI MADHUSUDHAN R NAIK, SENIOR COUNSEL FOR
SRI MAHESH S & CO.,ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
DEPARTMENT OF INDUSTRIES AND COMMERCE
GOVERNMENT OF KARNATAKA
M S BUILDING
BENGALURU - 560001
REP. BY ITS PRINCIPAL SECRETARY.
Digitally signed by
LAKSHMINARAYAN N
Location: High Court
2. THE CHIEF EXECUTIVE OFFICER &
of Karnataka
EXECUTIVE MEMBER
KARNATAKA INDUSTRIAL AREA
DEVELOPMENT BOARD
NO.49, 4TH FLOOR,
EAST WING KHANIJA BHAVAN
RACE COURSE ROAD
BENGALURU - 560001.
...RESPONDENTS
(BY SMT. SHWETA KRISHNAPPA, AGA FOR R1;
SRI P V CHANDRASHEKAR, ADVOCATE FOR R2)
-2-
WP No. 54245 of 2017
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE IMPUGNED ORDER/COMMUNICATION ISSUED BY THE R-2
KIADB DATED 17.10.2017 IN CANCELLING THE PROJECT OF THE
PETITIONER UNDER ANNEXURE-P; AND ETC.
THIS PETITION, COMING ON FOR FINAL HEARING, THIS
DAY, THE COURT MADE THE FOLLOWING:
ORDER
In this writ petition, petitioner has challenged the order/communication dated 17th October, 2017 issued by the respondent No.2, cancelling the project of the petitioner (Annexure-P) inter alia, sought for writ of mandamus directing the respondent No.2 to restore the allotment of the land in question in favour of the petitioner.
2. The facts leading to filing of the writ petition are that, the petitioner is engaged in the business of construction of several apartments and as such, the petitioner was desirous of constructing "Value Homes for Middle and Lower Income Group". The respondent-Karnataka Industrial Areas Development Board (for brevity hereinafter referred to as 'KIADB') advertised the project to establish the value homes in the Industrial Area and in this regard, the respondent No.1-Government approved the project on 19th June 2010 in its State High Level Clearance Committee (for brevity hereinafter referred to as 'Committee') -3- WP No. 54245 of 2017 under the provisions of the Karnataka Industries Felicitation Act, 2002 (for brevity hereinafter referred to as the 'Act') at Devanahalli Industrial Area, Bengaluru Rural District. The State Government has directed the respondent-KIADB to allot 25 acres of plot to the petitioner with all infrastructure to enable the petitioner to put-up construction in the schedule land. In furtherance of the same, the respondent-Department of Industries and Commerce, by its communication dated 07th July, 2010 communicated the same to the petitioner with regard to approval of the scheme and thereafter, the respondent-KIADB, its by communication dated 11th October, 2010 (Annexure-C), informed the petitioner that, an extent of 25 acres of plot has been allotted in favour of the petitioner and as such, fixed the tentative cost of Rs.1.80 crore per acre. Accordingly, directed petitioner to remit Rs.9.00 crore i.e. 20% of the cost of the land, as initial deposit. Pursuant to same, allotment letter was issued on 31st December, 2012 (Annexure-D) in favour of the petitioner stating that allotment of 11.77 acres of land in Plot No.R-2 is allotted for the purpose of establishing the unit as "Value Homes for Middle and Lower Income Group". It is the case of the petitioner that, no communication was made by the respondent- -4- WP No. 54245 of 2017 KIADB in respect of the nature of the land and the representatives of the petitioner have attended several meetings with the respondents and the petitioner has disclosed to the respondent-KIADB that the petitioner is willing to deposit Rs.16,94,88,000/-. It is the case of the petitioner that, since 2012, though the petitioner has made all efforts to get the registration of the plot, however, by letter dated 05th September, 2017 (Annexure-M), the respondent No.2 raised a demand, without specifying their obligation, inter alia, directed the petitioner to do certain duties, failing which, the letter of cancellation would be issued. Thereafter, the petitioner addressed letter dated 28th September, 2017 requesting the respondent-KIADB with regard to regular formalities to be completed, however, to the surprise of the petitioner, the respondent-KIADB, by letter dated 17th October, 2017 (Annexure-P), cancelled the allotment of 11.77 acres of land in Plot No.R-2 of Bangalore Hardware Park Housing Area for non- payment of balance land cost. Being aggrieved by the same, the petitioner has presented this writ petition.
3. On service of notice, the respondent-KIADB entered appearance and filed detailed objection stating that dispute -5- WP No. 54245 of 2017 between the parties is arising out of contractual obligation and therefore, the writ petition is not maintainable. It is, further stated that the petitioners have not complied with the terms and conditions stipulated in the allotment letter and therefore, sought to justify the impugned order of cancellation of plot. It is specifically averred in the statement of objection that, by letter dated 21st March, 2017, though respondent-KIADB has informed the petitioner to pay balance land cost of Rs.16,94,88,000/- within thirty days from the date of receipt of the letter, however, the petitioner has not complied with the same and therefore, the impugned communication, canceling the allotment of plot, was issued. Accordingly, respondent-Board sought for dismissal of the writ petition.
4. Heard Sri Madhusudan R. Naik, learned Senior Counsel for Sri Mahesh, learned Counsel appearing for the petitioner and Sri P.V. Chandrashekar, learned counsel appearing for respondent-KIADB and Smt. Shweta Krishnappa, for respondent-Government.
5. Sri Madhusudan R. Naik, learned Senior Counsel appearing for the petitioner, invited the attention of the Court to -6- WP No. 54245 of 2017 the letter dated 20th March, 2017 (Annexure-J) and argued that, though the project was initiated in the year 2010, by the said letter dated 20th March, 2017, respondent-KIADB intimated the petitioner that the land is ready and as such, directed the petitioner to take possession of the land subject to payment of balance amount; and the said fact would indicate that the formalities of the acquisition of the land by the respondent- KIADB itself was not completed till 2017 and therefore, there was no land for allotment in favour of the petitioner pursuant to the letter of allotment dated 31st December, 2012 and therefore, taking action by canceling the allotment of plot is incorrect, arbitrary and requires to be set aside in this writ petition. Learned Senior Counsel further argued that, proposal has been made in an extent of 849.22 acres of land was to be acquired for the purpose of the project, small area was reserved for Industrial Plots and 266.25 acres was proposed to be reserved for other social infrastructure with residential plots and other civic amenities and therefore respondent-authorities ought to have given opportunity to the petitioners to obtain necessary permission/approval/clearance etc. for establishment and execution of their project and therefore, he strenuously -7- WP No. 54245 of 2017 contended that ultimately the respondent-KIADB allotted 11.77 acres of plot and therefore, contended that the said allotment of land has been made in terms of the provisions of Act and as such, it is the statutory obligation on the part of the respondent- KIADB to adhere to the provisions of the Act and therefore, denied the contentions raised by the respondent-KIADB that the obligation is of contractual nature and accordingly, sought for interference of this court. Learned Senior Counsel further contended that during the year 2017, land was allotted in favour of the petitioner whereby the acquisition proceedings was completed and therefore, the respondent-KIADB ought to have provided reasonable opportunity for the petitioner to take further action in the matter, as it is evident that even during 2017, there was no basic infrastructure and therefore, sought for interference of this Court. Learned Senior Counsel further emphasised that being an instrumentality under Article 12 of the Constitution of India, the respondent-KIADB has to be fair and reasonable in all its activities and no discrimination be made. Sri Madhusudhan Naik, learned Senior Counsel, further contended that in addition to complying with the statutory provisions under the various Acts, the petitioner has to secure permission under the -8- WP No. 54245 of 2017 provisions of Real Estate Regulatory Authority Act and therefore, he contended that the impugned order requires to be set aside in the matter. In order to buttress his arguments, learned Senior Counsel relied upon the judgment of this Court in Writ Petitions No.63395-399 of 2016 and connected matters, disposed of on 03rd November, 2017; in Writ Petition No.17509 of 2016 disposed of on 23rd January, 2017; and in Writ Petition No.27415 of 2013 disposed of on 27th September, 2013.
6. Per contra, Sri P.V. Chandrashekar, learned counsel appearing for the respondent-KIADB sought to justify the action of the respondent-KIADB and further contended that, the petitioner has not paid the requisite balance of 80% cost of land within the stipulated period of 30 days and as such, sought for dismissal of the petition. He further contended that the writ petition is not maintainable as the contractual obligations between the parties are at stake and therefore, he contended that, the petitioner be directed to approach the Civil Court for appropriate adjudication.
7. In reply, Sri Madhusudhan R Naik, learned Senior counsel invited the attention of the Court to the judgment -9- WP No. 54245 of 2017 passed in the case of M.P. POWER MANAGEMENT COMPANY LIMITED, JABALPUR v. SKY POWER SOUTHEAST SOLAR INDIA LIMITED AND OTHERS reported in 2022 SCC ONLINE SC 1591 and in the case of CITY INDUSTRIAL DEVELOPMENT CORPORATION v. PLATINUM ENTERTAINMENT AND OTHERS reported in 2015 (1) SCC 558 and argued that the writ petition is maintainable under Article 226 of the Constitution of India in respect of arbitrary action on the part of respondent-KIADB in not effectuating the contractual obligations.
8. In the light submission made by the learned counsel appearing for the parties, it is not in dispute that the State Government has approved the project of the petitioner to set up a "Value Homes for the Middle and Lower Income Group" at Devanahalli Industrial Area, Bangalore Rural District, as per Government Order dated 14th July, 2010. The Committee, in its 23rd meeting held on 19th June, 2012 (Annexure-B), has also accorded approval to the project. In furtherance of the same, the respondent-KIADB issued allotment letter dated 31st December, 2012 (Annexure-D), allotting 11.77 acres of land in plot No.R-2 to establish the unit subject to terms and conditions stated in the allotment letter.
- 10 -
WP No. 54245 of 2017
9. In pursuance of the same, petitioner addressed letter dated 24th September, 2016, stating that the petitioner is ready with the funds to pay the balance of 80% of the tentative cost of the land of Rs.16,94,88,000/-. However, there was no response by the respondent-KIADB. Thereafter, the petitioner by letter dated 20th April, 2017 (Annexure-G), requested the respondent- KIADB to clarify certain aspects as set out in the said letter. Petitioner addressed letter dated 07th August, 2017, seeking completion of the formalities with regard to the infrastructure in the vicinity. In response to the same, the respondent-KIADB has issued a letter dated 20th March, 2017, (Annexure-J), directing the petitioner to remit Rs.16,94,88,000/- towards balance 80% of the cost of the land within 30 days from the date of receipt of the letter. It is relevant to extract the recitals in the letter dated 20th March, 2017 (Annexure-J), which reads as under:
"As per terms and conditions of the allotment, you are expected to remit Rs.16,94,88,000/- towards balance 80% cost of land within 30 days from the date of receipt of this letter. Now the land is ready and you can take over possession of land after payment of above said amount."
(emphasis supplied)
- 11 -
WP No. 54245 of 2017
10. On careful examination of said letter, it may be inferred and evident that the respondent-Board has not taken possession of the land till March, 2017 and therefore, I find force in the submission made by the learned Senior counsel appearing for the petitioner that there is no delay nor fault on the part of the petitioner in respect of effectuating the terms and conditions of the allotment letter. It also demonstrates that, unless the possession of the land in question is not handed over to the petitioner, it would be difficult for the petitioner, to comply with the statutory requirements and to complete the project. Therefore, I am of the opinion that the queries raised by the petitioner in the Annexures referred to above relating to pending infrastructure work, supply of potable water, sale of units to employees in the KIADB Industrial Area and non-availability of guidelines etc., ought to have been considered by the respondent-KIADB before issuing the cancellation letter produced at Annexure-P to the writ petition. It is clear from the letters addressed by the respondent-KIADB that the acquisition of the land itself was not completed and same is not even available for development till March, 2017 and therefore, the cancellation of the allotment made in favour of the petitioner is arbitrary and
- 12 -
WP No. 54245 of 2017contrary to Article 14 of the constitution of India as such, requires to be re-considered by the respondent-KIADB. Though, Sri P.V. Chandrashekar, learned Counsel appearing for the respondent-KIADB, contended that interference of this Court, under Article 226 of Constitution of India, is limited and cannot interfere with regard to contractual matters, however, this Court cannot close its eyes if the statutory authorities act arbitrarily and in derogance of settled principles in law. Being an instrumentality of the State, under Article 12 of the Constitution of India, the respondent-KIADB has to conform to the spirit of Article 14 of Constitution of India. In this regard, it is relevant to cite dictum laid down by the Hon'ble Apex Court in the case of M.P. Power Management Company (supra), paragraph 53 and
60.
"53. We may notice that as to what constitutes arbitrariness fell for consideration by this court in a case which involved cancellation of the examination held as part of a recruitment process, in East Coast Railway v. Mahadev Appa Roa. We notice the following passages which are apposite for this case.
"19. Black's Law Dictionary describes the term "arbitrary" in the following words:
"Arbitrary. --1. Depending on individual discretion; specif., determined by a judge
- 13 -WP No. 54245 of 2017
rather than by fixed rules, procedures, or law. 2. (Of a judicial decision) founded on prejudice or preference rather than on reason or fact. This type of decision is often termed arbitrary and capricious."
20. To the same effect is the meaning given to the expression "arbitrary" by Corpus Juris Secundum which explains the term in the following words:
"Arbitrary.--Based alone upon one's will, and not upon any course of reasoning and exercise of judgment; bound by no law; capricious; exercised according to one's own will or caprice and therefore conveying a notion of a tendency to abuse possession of power; fixed or done capriciously or at pleasure, without adequate determining principle, non-rational, or not done or acting according to reason or judgment; not based upon actuality but beyond a reasonable extent; not founded in the nature of things; not governed by any fixed rules or standard; also, in a somewhat different sense, absolute in power, despotic, or tyrannical; harsh and unforbearing. When applied to acts, 'arbitrary' has been held to connote a disregard of evidence or of the proper weight thereof; to express an idea opposed to administrative, executive, judicial, or legislative discretion; and to imply at least an element of bad faith, and has been compared with 'willful'."
xxxxxxxxx
23. Arbitrariness in the making of an order by an authority can manifest itself in different forms. Non-application of mind by the authority making the order is only one of them. Every order passed by a public authority must disclose due and proper application of mind by the person making the order. This may be evident from the order itself or
- 14 -
WP No. 54245 of 2017the record contemporaneously maintained.
Application of mind is best demonstrated by disclosure of mind by the authority making the order. And disclosure is best done by recording the reasons that led the authority to pass the order in question. Absence of reasons either in the order passed by the authority or in the record contemporaneously maintained is clearly suggestive of the order being arbitrary hence legally unsustainable."
54 to 59 XXX XXX XXX
60. We may cull out our conclusions in regard to the points, which we have framed:
i. It is, undoubtedly, true that the writ jurisdiction is a public law remedy. A matter, which lies entirely within a private realm of affairs of public body, may not lend itself for being dealt with under the writ jurisdiction of the Court.
ii. The principle laid down in Bareilly Development Authority (supra) that in the case of a non- statutory contract the rights are governed only by the terms of the contract and the decisions, which are purported to be followed, including Radhakrishna Agarwal (supra), may not continue to hold good, in the light of what has been laid down in ABL (supra) and as followed in the recent judgment in Sudhir Kumar Singh (supra).
iii. The mere fact that relief is sought under a contract which is not statutory, will not entitle the respondent-State in a case by itself to ward-off scrutiny of its action or inaction under the contract, if the complaining party is able to establish that the action/inaction is, per se, arbitrary.
- 15 -WP No. 54245 of 2017
iv. An action will lie, undoubtedly, when the State purports to award any largesse and, undoubtedly, this relates to the stage prior to the contract being entered into [See R.D. Shetty (supra)]. This scrutiny, no doubt, would be undertaken within the nature of the judicial review, which has been declared in the decision in Tata Cellular v. Union of India.
v. After the contract is entered into, there can be a variety of circumstances, which may provide a cause of action to a party to the contract with the State, to seek relief by filing a Writ Petition.
vi. Without intending to be exhaustive, it may include the relief of seeking payment of amounts due to the aggrieved party from the State. The State can, indeed, be called upon to honour its obligations of making payment, unless it be that there is a serious and genuine dispute raised relating to the liability of the State to make the payment. Such dispute, ordinarily, would include the contention that the aggrieved party has not fulfilled its obligations and the Court finds that such a contention by the State is not a mere ruse or a pretence.
vii. The existence of an alternate remedy, is, undoubtedly, a matter to be borne in mind in declining relief in a Writ Petition in a contractual matter. Again, the question as to whether the Writ Petitioner must be told off the gates, would depend upon the nature of the claim and relief sought by the petitioner, the questions, which would have to be decided, and, most importantly, whether there are disputed questions of fact, resolution of which is necessary, as an indispensable prelude to the grant of the relief sought. Undoubtedly, while there is no prohibition, in the Writ Court even deciding disputed questions of fact, particularly when the dispute surrounds demystifying of documents only, the Court may relegate the party to the remedy by way of a civil suit.
- 16 -WP No. 54245 of 2017
viii. The existence of a provision for arbitration, which is a forum intended to quicken the pace of dispute resolution, is viewed as a near bar to the entertainment of a Writ Petition (See in this regard, the view of this Court even in ABL (supra) explaining how it distinguished the decision of this Court in State of U.P. v. Bridge & Roof Co., by its observations in paragraph-14 in ABL (supra)].
ix. The need to deal with disputed questions of fact, cannot be made a smokescreen to guillotine a genuine claim raised in a Writ Petition, when actually the resolution of a disputed question of fact is unnecessary to grant relief to a writ applicant.
x. The reach of Article 14 enables a Writ Court to deal with arbitrary State action even after a contract is entered into by the State. A wide variety of circumstances can generate causes of action for invoking Article 14. The Court's approach in dealing with the same, would be guided by, undoubtedly, the overwhelming need to obviate arbitrary State action, in cases where the Writ remedy provides an effective and fair means of preventing miscarriage of justice arising from palpably unreasonable action by the State.
xi. Termination of contract can again arise in a wide variety of situations. If for instance, a contract is terminated, by a person, who is demonstrated, without any need for any argument, to be the person, who is completely unauthorised to cancel the contract, there may not be any necessity to drive the party to the unnecessary ordeal of a prolix and avoidable round of litigation. The intervention by the High Court, in such a case, where there is no dispute to be resolved, would also be conducive in public interest, apart from ensuring the Fundamental Right of the petitioner under Article 14 of the Constitution of India. When it comes to a challenge to the termination of a contract by the State, which is a non-statutory body, which is acting in purported exercise of the powers/rights under such a contract, it would be over simplifying a complex issue to lay down any
- 17 -WP No. 54245 of 2017
inflexible Rule in favour of the Court turning away the petitioner to alternate Fora. Ordinarily, the cases of termination of contract by the State, acting within its contractual domain, may not lend itself for appropriate redress by the Writ Court. This is, undoubtedly, so if the Court is duty-bound to arrive at findings, which involve untying knots, which are presented by disputed questions of facts. Undoubtedly, in view of ABL Limited (supra), if resolving the dispute, in a case of repudiation of a contract, involves only appreciating the true scope of documentary material in the light of pleadings, the Court may still grant relief to an applicant. We must enter a caveat. The Courts are today reeling under the weight of a docket explosion, which is truly alarming. If a case involves a large body of documents and the Court is called upon to enter upon findings of facts and involves merely the construction of the document, it may not be an unsound discretion to relegate the party to the alternate remedy. This is not to deprive the Court of its constitutional power as laid down in ABL (supra). It all depends upon the facts of each case as to whether, having regard to the scope of the dispute to be resolved, whether the Court will still entertain the petition.
xii. In a case the State is a party to the contract and a breach of a contract is alleged against the State, a civil action in the appropriate Forum is, undoubtedly, maintainable. But this is not the end of the matter. Having regard to the position of the State and its duty to act fairly and to eschew arbitrariness in all its actions, resort to the constitutional remedy on the cause of action, that the action is arbitrary, is permissible (See in this regard Kumari Shrilekha Vidyarthi v. State of U.P.). However, it must be made clear that every case involving breach of contract by the State, cannot be dressed up and disguised as a case of arbitrary State action. While the concept of an arbitrary action or inaction cannot be cribbed or confined to any immutable mantra, and must be laid bare, with reference to the facts of each case, it cannot be a mere allegation of breach of contract that would suffice. What must be involved
- 18 -WP No. 54245 of 2017
in the case must be action/inaction, which must be palpably unreasonable or absolutely irrational and bereft of any principle. An action, which is completely malafide, can hardly be described as a fair action and may, depending on the facts, amount to arbitrary action. The question must be posed and answered by the Court and all we intend to lay down is that there is a discretion available to the Court to grant relief in appropriate cases.
xiii. A lodestar, which may illumine the path of the Court, would be the dimension of public interest subserved by the Court interfering in the matter, rather than relegating the matter to the alternate Forum.
xiv. Another relevant criteria is, if the Court has entertained the matter, then, while it is not tabooed that the Court should not relegate the party at a later stage, ordinarily, it would be a germane consideration, which may persuade the Court to complete what it had started, provided it is otherwise a sound exercise of jurisdiction to decide the matter on merits in the Writ Petition itself.
xv. Violation of natural justice has been recognised as a ground signifying the presence of a public law element and can found a cause of action premised on breach of Article 14. [See Sudhir Kumar Singh (supra)].
11. Following the dictum of the Apex Court stated above, I have also noticed that this Court, in the identical issues raised in the writ petitions, has quashed the cancellation order passed by the respondent-KIADB and directed the respondent-KIADB to re-
consider the grievance of the petitioner therein and pass
- 19 -
WP No. 54245 of 2017appropriate orders. Following the said declaration, I pass the following:
ORDER
i) Writ petition is allowed;
ii) Order/Communication issued by the respondent-
KIADB dated 17th October, 2017 (Annexure-P) canceling the project allotted in favour of the petitioner, is set aside;
iii) Respondent-KIADB is directed to re-consider the issue afresh, after extending fair opportunity to the petitioner, and take decision in the matter in accordance with law.
iv) Petitioner is also permitted to make one more representation to the respondent-KIADB and if such representation is made, the same be considered by the respondent-KIADB in the light of the observation made above and pass appropriate orders within a period of two months from the date of receipt of representation.
Ordered Accordingly.
SD/-
JUDGE LNN/SB