Karnataka High Court
M/S Shrishma Fine Chemicals And vs State Of Karnataka on 17 March, 2023
Author: Krishna S Dixit
Bench: Krishna S Dixit
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WP No. 14961 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 17TH DAY OF MARCH, 2023
BEFORE
THE HON'BLE MR JUSTICE KRISHNA S DIXIT
WRIT PETITION NO. 14961 OF 2021 (GM-KIADB)
BETWEEN:
M/S SHRISHMA FINE CHEMICALS AND
PHARMACEUTICALS (KARNATAKA) LIMITED
A PUBLIC LIMITED COMPANY INCORPORATED
UNDER THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
PLOT NO.30, INDUSTRIAL AREA,
VEERAPURA POST, DODDBALLAPUR,
BENGALURU - 561 203.
REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE
SRI.S VASU.
... PETITIONER
(BY SRI.ASHOK HARANAHALLI, SENIOR COUNSEL A/W
SRI.SAMMITH S, ADVOCATE)
Digitally signed AND:
by SHARADA
VANI B
Location:
1. STATE OF KARNATAKA,
HIGH COURT REPRESENTED BY ITS PRINCIPAL SECRETARY,
OF COMMERCE AND INDUSTIRES DEPARTMENT,
KARNATAKA
M S BUILDING, BENGALURU - 560 001.
2. KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD,
REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER,
#49, 4TH & 5TH FLOOR, EAST WING,
KHANIJA BHAVAN, RACE COURSE ROAD,
BENGALURU - 560 001.
... RESPONDENTS
(BY SRI. SRIDHAR HEGDE, AGA FOR R1;
SRI. B B PATIL, ADVOCATE FOR R2)
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WP No. 14961 of 2021
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO
QUASH THE IMPUGNED ORDER DATED 15.07.2021 VIDE ANNX-
AL PASSED BY THE R2 REJECTING THE REQUEST MADE BY THE
PETITIONER TO EXECUTE THE SALE DEEDS IN FAVOUR OF THE
PETITIONER IN RESPECT OF THE SCHEDULE A,B,C AND D
PROPERTY AND ETC.,
THIS PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDER, THIS DAY, THE COURT PRONOUNCED THE
FOLLOWING:
ORDER
Petitioner, an incorporated Company under the provisions of erstwhile Companies Act, 1956 inter alia carrying on the business of import & export of chemicals, is invoking the writ jurisdiction of this Court for assailing the order dated 15.07.2021 issued by the 2nd Respondent
- KIADB (Annexure-L) whereby, its request for the execution of a full form conveyance in respect of Petition properties, has been negatived and therefore, it has sought for a Writ of Mandamus to the KIADB to execute one, in terms of policy assurance as reflected in KIADB Letter dated 12.06.2001 (Annexure-J).
2. After service of notice, the 1st Respondent- State has entered appearance through the learned AGA; -3- WP No. 14961 of 2021 the 2nd Respondent-KIADB represented by its Sr. Panel Counsel has filed its Statement of Objections resisting the Writ Petition. The Panel Counsel makes vehement submission in justification of the impugned order and opposing the petition claim.
3. FACTS OF THE CASE EMERGING FROM THE RECORDS:
(a) The respondent-KIADB is established under the provisions of Karnataka Industrial Areas Development Act, 1966 inter alia for establishing industrial areas and to facilitate establishment of industries in the State. For that purpose, the State acquires private lands in terms of the scheme envisaged u/ss. 28 & 29 and allots it to the KIADB, this being preceded by declaring certain areas as 'industrial areas' u/s 3 of the Act. Allotment of lands & sites is made to the aspiring entrepreneurs on the remittance of prescribed costs/prices in terms of extant policy & precedent. During the period between 1983-1989, petitioner-Company secured allotment of scheduled -4- WP No. 14961 of 2021 properties in terms of subject Lease-cum-Sale Agreements, one of them being principal instruments dated 29.5.1984 & 18.7.1989.
(b) Petitioner-Company was before the BIFR vide Reference No.152/1988. In Co.P.No.55/1997 & Co.P.No.147/1998, filed by the creditors u/s 433(e) of the erstwhile Companies Act, 1956, it suffered Winding Up Orders at the hands of a Coordinate Bench on 27.7.2006.
In OSA No.34/2006 & OSA No.35/2006 filed by employees of the Company, these orders came to be set at naught by the Division Bench on 4.10.2007 and matter was remanded for consideration afresh. On reconsideration, same orders came to be reiterated on 20.3.2012 by another Coordinate Bench. Subsequently, C.A.Nos.321 of 2010 and 2064 of 2013 filed by the assignee of the secured creditors u/ss. 391 to 394 of the 1956 Act came to be allowed vide order dated 19.11.2013 and approval to the Scheme of Arrangement was accorded. That was followed by filing of Co.P.No.34/2014 that came to be -5- WP No. 14961 of 2021 allowed by reviving the Company vide order dated 23.6.2015 which came to be implemented by the Official Liquidator vide Possession Memo dated 8.7.2015.
(c) Petitioner vide letter dated 1.9.2015 requested the respondents to execute a registered Sale Deed in respect of the scheduled lands. The respondent-KIADB vide reply dated 16.12.2015 asked the petitioner to remit a sum of Rs.4,80,13,080-00/-. Petitioner remitted in all Rs.3,27,79,970/- stating that it is not liable to pay the remainder of the demand i.e., Rs.1,52,33,110/- being the water charges since it was declared to be a SICK industry by the BIFR vide order 7.4.1999 and it was not using any water at all since then. However, it had agreed to remit Rs.24,40,000/- towards the actual water supply charges including interest that had accrued due before the declaration of sickness. This it conveyed to the KIADB vide a long letter dated 2.4.2018 and had sought for execution of the regular Sale Deed, by waiving the untenable demand. The KIADB vide reply dated 23.7.2018 -6- WP No. 14961 of 2021 substantially agreed with the proposal and asked the petitioner to remit only Rs.26,38,831/- which came to be remitted on 23.7.2018 followed by a letter dated 24.7.2018 reiterating the request for execution of the Sale Deed. Nothing happened and therefore, several reminders were sent; again nothing happened. Petitioner moved W.P.Nos.18929-937/2019 and a Coordinate Bench of this Court vide judgment dated 5.9.2019 directed the respondent-KIADB to take a call on the representation of the petitioner within a period of two months.
(d) Petitioner made a detailed representation dated 23.9.2019 again requesting for the execution & registration of the Sale Deed comprising the subject properties with all supportive documents including balance sheets, bank assurances, etc. The respondent-KIADB vide order dated 15.7.2021 rejected the claim, during the pendency of petitioner's W.P.No.9922/2021 which eventually came to be withdrawn with liberty to challenge the said order.
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4. Having heard the learned counsel for the parties and having perused the Petition Papers, this Court is inclined to grant indulgence in the matter as under and for the following reasons:
(A) The subject lands were allotted to the Company by multiple Lease-cum-Sale Deeds during the period between 1983 & 1989. Subsequently, higher amount was extracted than the agreed prices vide letter dated 19.2.2001 inter alia stating that the land owners have got the enhanced compensation and that there were other expenses. In the said letter, it was specifically promised stating '...On your payment of the difference in the land cost, over-due instalment and interest, sale-deed in respect of the land allotted to you will be executed in your favour, provided you have satisfactorily complied with all other terms and conditions of lease and there is no violation of terms of agreement...'. By another letter dated 6.12.2005, the KIADB had stated "After detailed discussions, it was decided to execute sale deed, as per -8- WP No. 14961 of 2021 the terms and conditions of the lease-cum-sale agreement, subject to the following:
1. The final price of the Industrial Area should have been fixed and dues should be settled to the Board. 2. The lease period should have been expired. 3. The project should have been implemented and the land should have been utilized to an extent of 50% effectively, as per the terms of the lease agreement."
(B) The Executive Engineer of the KIADB vide report dated 28.4.2001 had specifically stated as under:
"With reference to the above, the above said plots were visited on 20/4/2001 and the details of utilization is as follows:
(i) The extent of land occupied by the allottee is 79445 Sq Mtrs (in plot no.30, 31, & 40) plus 92,069 sq. (in S.U.C bearing Sy. No. 54P, 58(P), 103, 105 & 106(P) of Majira Hosahalli) and a total extent of 1,71,514 Sq Mtrs which is in accordance with the possession certificate issued.
(ii) The extent of land covered by buildings & flagging works out to 11,277.82 Sq Mtrs i.e., 6.58% utility.
(iii) The extent of land covered by roads, drains, sop etc., works out to 9150 SQM i.e.,
5.33% utility.
(iv) The extent of land covered by Eucalyptus Plantation used for let out of treated waste water and treated liquid wastes works out to 92069 Sq Mtrs i.e., 53.68%.
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(v) The total percentage of utilization, considering eucalyptus plantation works out to 65.58%.
(vi) The line of activity is manufacturing of bulk drugs & intermediates.
(vii) The unit is running under the name "M/s Shrishma Fine Chemicals & Pharmaceuticals (Karnataka) Ltd".
(viii) The unit is not discharging any effluent outside the premises.
(ix) There is a water supply arrears of Rs. 24,46,508 as on 31st March 2001. The allottee has dug a borewell in his plot for which permission has been obtained same had to be verified in the original file.
For kind perusal & further needful action." (C) There is force in the submission of learned Sr. Advocate appearing of the petitioner that the version of the KIADB that presently, there are no constructed buildings nor there is any industrial activity nor any ETP Plant was set up, is unsustainable as a reason for denying execution of the Sale Deed. It hardly needs to be stated that on the lands being granted by the KIADB, the same was utilized admittedly to the extent of 65.58% as is reflected in the report dated 24.4.2001 submitted by the jurisdictional Executive Engineer of the KIADB itself with all break-ups namely 6.5% for building; 5.33% for road,
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WP No. 14961 of 2021sewage works etc; and 53.68% for discharge of treated liquid waste water to the eucalyptus plantation. The question of setting up ETP thus would not arise.
(D) There is a grave error apparent on the face of the record inasmuch as what the KIADB has to look into is the position that existed as on the date it had promised to execute the Sale Deed and not what happened after the Company became a sick industry followed by winding up orders, there being set aside in appeal of the workmen, the approval to the Scheme of Arrangement & revival of the Company followed by the Possession Memo issued by the Official Liquidator, at the long last. Thus, during a long dysfunctional period spanning between March 1997 & July 2015 i.e., for about 17 years or so, the industrial empire of the Company had collapsed and later, it was resurrected as the phoenix, of course, initially at the intervention of the BIFR and later, of the Company Court. The fact remains vouched that earlier to all this, the industry was
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WP No. 14961 of 2021functioning in order with no complaint whatsoever as to non-compliance.
(E) In fact, the KIADB had also moved the Company Court in C.A.No.497/2013 in Co.P.No.55/1997 seeking permission to resume the subject lands. The Coordinate Bench vide order dated 23.6.2015 negatived the prayer whilst granting approval to the Scheme of Arrangement facilitating revival of the Company and directing the Official Liquidator to restore plant, machinery, registers & property. The contention of learned Panel Counsel appearing for the KIADB that clause 10 of the Scheme of Arrangement concerning the allotment of subject lands was eschewed by the Company Court, would not make any difference to the right of petitioner to have the execution of Sale Deeds, since KIADB had agreed to execute ones even post revival of the Company, having got remittance of crores of rupees from the petitioner that too after waiving a part of the demand as well. The impugned action of the respondent-KIADB is liable to be
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WP No. 14961 of 2021faltered on the ground of estoppel u/s 115 of the Indian Evidence Act, 1872.
(F) All through, respondent-KIADB which is a statutory authority by acts, deeds & written words had agreed to execute the Sale Deed in furtherance of the limited conveyances earlier done. Even at paragraph 27 of the impugned order, the KIADB policy is specifically stated as "However, in the cases of sick units, the KIAD Board in its meeting held on 06-12-2005 had taken a decision with a liberal view to execute sale deeds in favour of sick units where 50% land has been utilized and project was implemented...". Going by the very report of the KIADB Engineer, the industry was established, structures were put up and 65.58% of the land was utilized. During the long drawn legal battle of winding up proceedings, plant & machinery became dysfunctional and the structures too dilapidated, is admitted by the KIADB at para 29 of the very impugned order.
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WP No. 14961 of 2021(G) On what basis the government unilaterally could have declined the request for execution of the Sale Deed remains to be a riddle wrapped in enigma. In fact, it was the KIADB which should take a decision on its own and not under the dictation of the government which can issue general directions and not in species. The Apex Court in BAR COUNCIL OF DELHI vs. SURJEET SINGH, AIR 1980 SC 1612, has faltered actions of the statutory authorities done at the dictation of the other agencies, when the scheme of the Act does not assign role to them. It hardly needs to be stated that the governmental functionaries also happen to be the constituent members of the KIAD Board. Therefore, the other reason namely intervention of the government in the matter on which the impugned order is structured cannot be legally sustained.
(H) Petitioner-Company on being eschewed from liquidation, has secured acceptance of its proposal for sanction of a term loan of Rs.2,00,00,000/- at the hands of Federal Bank for the purpose of warehousing project
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WP No. 14961 of 2021subject to the condition of vouching absolute title to the property. A series of representations were made by the petitioner post revival of the Company as well, seeking execution & registration of the Sale Deeds specifically pointing out the remittance of amounts made, as directed. The stony silence of the KIADB drove the petitioner to move the Writ Court twice earlier, the one at hands makes it thrice. The stand of the KIADB militates against the 'doctrine of promissory estoppel' vide Apex Court decision in M/S MOTILAL PADAMPAT SUGAR MILLS CO. (P.) LTD. vs. STATE OF UTTAR PRADESH 1979 SCR (2) 641, wherein at para 5, it is observed as under:
"5. The true principle of promissory estoppel is that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relationship effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective whether
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there is any pre-existing relationship between the parties or not. Equity will in a given case where justice and fairness demand, prevent a person from insisting on strict legal rights even where they arise, not under any contract, but on his own title deeds or under statute..."
The observations come to the aid of the Petitoenr more than otherwise since his rights are structured on the basis of pre-existing legal arrangement giving raise to justiciable rights.
(I) Learned Sr. Counsel appearing for the petitioner is more than justified in highlighting the 'doctrine of promissory estoppel' by placing reliance on UNION OF INDIA vs INDO AFGHAN AGENCIES, AIR 1968 SC 718. Enormity of importance that our system attaches to this doctrine, can be seen by the stand taken by India in Bhopal Gas Tragedy Case that was launched in the District Court of New York i.e., "Un IN RE: UNION CARBIDE CORPORATION GAS LEAK DISASTER AT BHOPAL, INDIA, IN DECEMBER 1984". The tort-feasor company was pressing for adjudication of the claims of injured Indians
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WP No. 14961 of 2021only in the American Court alleging that Indian Courts were inadequate to handle a case of the kind. A great jurist of yester decades Mr. N.A. Palkhivala in his personal Affidavit dated 18.12.1985 filed in the said court extolled the efficacy & greatness of our Judiciary, inter alia referring to 'doctrine of promissory estoppel' as under:
"In Motilal Padampat Sagar Mills v. Uttar Pradesh (AIR 1979 SC 621) the Supreme Court took the doctrine of Promissory estoppel (which estops the government from pleading executive necessity and going back on its earlier promise) an important step further, and held that it was not merely available as a defence but could supply a cause of action for institution of legal proceedings."
("Mass Disasters and Multinational Liability" by Prof. Upendra Baxi and Thomas Paul, Indian Law Institute, pages 223-225) In the above circumstances, this Writ Petition succeeds; a Writ of Certiorari issues quashing the impugned order; a Writ of Mandamus issues directing the respondent-KIADB to execute & register Sale Deeds in favour of & at the cost of petitioner, within an outer limit of eight weeks, failing which, the present CEO of the
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WP No. 14961 of 2021KIADB shall personally pay to the petitioner a sum of Rs.10,000/- for delay of each day for the first thirty days and Rs.25,000/- for the days next following.
Now, reluctantly costs are made easy.
Sd/-
JUDGE Bsv