Gujarat High Court
Cambay Sez Hotels Pvt Ltd vs Board Of Approval For Special Economic ... on 20 April, 2020
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
C/SCA/10376/2018 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10376 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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CAMBAY SEZ HOTELS PVT LTD
Versus
BOARD OF APPROVAL FOR SPECIAL ECONOMIC ZONE
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Appearance:
MR RAVISH D BHATT(5867) for the Petitioner(s) No. 1
MR KAMAL TRIVEDI, SENIOR ADVOCATE WITH MR ABHISHEK M
MEHTA(3469) for the Respondent(s) No. 4
MR DEVANG VYAS(2794),ASSISTANT SOLICITOR GENERAL for the
Respondent(s) No. 2
MR RITURAJ M MEENA(3224) for the Respondent(s) No. 3
NOTICE SERVED BY DS(5) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 20/04/2020
CAV JUDGMENT
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C/SCA/10376/2018 CAV JUDGMENT
1. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs :
"23 A. Quash and set aside the decision on Proposal No. II under Item No. 82.9 taken by the Respondent No.1 in 82nd Meeting held on 04.04.2018, in the ends of justice ;
B. Pending admission, hearing and final disposal of the present Application, stay the execution, implementation and operation of the impugned decision on Proposal No. II under Item No.82.9 by the Respondent No.1 in 82nd Meeting held on 04.04.2018, in the ends of justice.
C. Grant ad-interim relief in terms of Paragraph No.23(b) D. Pass such other and further orders as may be deemed just, fit and proper looking to the facts and circumstances of the case in the ends of justice.
And for this act of kindness and justice, the Applicant, as in duty bound, shall pray for ever."
2. The brief facts giving rise to this petition are as under :
2.1 The petitioner which is a Company incorporated under the provisions of the Companies Act, 1956 is filed through its director.
2.2 The respondent No.3- Dahej SEZ Ltd. was Page 2 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT granted formal approval for development of Special Economic Zone (for short"SEZ") in Dahej area pursuant to Notification No. F-2/9/2003-EPZ, dated 20.12.2006 for setting up multi product Special Economic Zone at Village Dahej, Taluka: Vagra, District : Bharuch under the provisions of the Special Economic Zones Act, 2005 (for short 'the SEZ Act').
2.3 In the year 2009, the petitioner made an application before the respondent No.1-
the Board of Approval for Special Economic Zone under the provisions of the SEZ Act to become a Co-developer in Dahej Special Economic Zone along with the respondent No.3-Dahej SEZ Ltd. The respondent No.1 granted formal approval vide Letter of Approval dated 21.08.2009.
2.4 The respondent No.3, pursuant to the aforesaid approval, executed the Co- developer agreement with the petitioner for development, operation and maintenance of the hospitality project and for providing services in the Page 3 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT hospitality sector to the units/residents/ other establishment in Dahej SEZ and provide services of administrative buildings/commercial complex etc. 2.5 A License Agreement dated 07.04.2010 was executed between the Dahej SEZ Ltd. with the petitioner, whereby the Dahej SEZ Ltd. agreed to grant to the petitioner the license and authority to enter as a Co-developer as per letter of approval dated 21.08.2009 for Plot No. Z/4/1 in non-processing area of Dahej SEZ.
2.6 On payment of Rs.2,89,32,871/- by the petitioner towards allotment price of the aforesaid plot, land allotment letter dated 03.02.2010 was issued by the Dahej SEZ Ltd.
2.7 It is the case of the petitioner that after allotment of the land, the petitioner completed other necessary activities like fencing the boundary wall of the Plot No. Z/4/1 demarcated by the respondent no.3 Dahej SEZ Ltd., obtaining approval of the development Page 4 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT plan for the project in the said plot from SEZ Development Committee, obtaining necessary statutory clearances/approvals, which were required including environmental clearance from the Gujarat Pollution Control Board. The petitioner also obtained eligibility certificate from the Industries Commissioner as Co- developer to avail exemption of State Taxes.
2.8 Thereafter, the sub lease deed was entered into between the petitioner and Dahej SEZ Ltd. on 27.05.2011. The petitioner also availed financial assistance from the SIDBI, Ahmedabad for the project and developed the hospitality project on the said plot having a book value of Rs.51 Crore and market value of more than Rs.90 Crore. The petitioner availed financial assistance of Rs. 12 Crore from SIDBI and rest was invested by promoters as equity and loan from the Group Companies.
2.9 However, the petitioner defaulted in Page 5 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT repayment of loan amount and proceedings under the Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the "Securitisation Act") were initiated by the SIDBI against the petitioner. The petitioner therefore, filed Securitisation Application being SA No.84 of 2014 under Section 17 of the Securitisation Act before the Debt Recovery Tribunal-I, Ahmedabad. The respondent no.3- Dahej SEZ Ltd. also preferred an application for joining party seeking certain clarifications, which was disposed of by the Debt Recovery Tribunal vide order dated 20.02.2018. Pursuant to the Notice under Section 13(2) dated 06.04.2014 and Notice under Section 13(4) dated 18.06.2014, issued by the SIDBI under Secularization Act, seeking recovery of an amount of Rs.13,31,88,723.70/- from the petitioner, the SIDBI proceeded to take possession of the property of the petitioner in the SEZ by addressing a letter dated 18.06.2014, to The respondent no.3- Dahej SEZ Ltd. The SIDBI took the symbolic possession of Page 6 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT the property of the petitioner on 26.02.2014 and thereafter, started proceeding to auction the same as per the provisions of the Securitisation Act. It appears that the SIDBI moved the Collector, Bharuch for taking physical possession of the property in question under Section 14 of the Securitisation Act. On 02.03.2016, the Collector Bharuch passed an order under Section 14 of the Securitisation Act and on 07.10.2016, the SIDBI informed The respondent no.3- Dahej SEZ Ltd. that the physical possession of the property was taken. Thereafter, in the month of November, 2016, SIDBI proceeded with the auction proceedings by issuing advertisement for auction on 19.11.2016.
2.10 The petitioner by letter dated 23.12.2016, addressed to the respondent no.3- Dahej SEZ Ltd. stated that the lease deed was liable to be cancelled, since the possession of the plot/property was taken over by the SIDBI and the petitioner was dispossessed and the property was auctioned by the SIDBI. Thereafter in Page 7 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT January, 2017, auction took place and respondent No.4 was declared as successful bidder.
2.11 It appears that the respondent No.4 on issuance of the sale certificate by SIDBI by letter dated 14.02.2017, requested the respondent no.3- Dahej SEZ Ltd. to grant status of Co-developer in place of the petitioner. Thereafter, in its 39th Meeting of the Board of Directors of Dahej SEZ Ltd., on 24.04.2017 decided to give in-principle approval to the respondent No.4 subject to clear all the outstanding dues of the respondent no.3- Dahej SEZ Ltd.. payable by the petitioner. It was also resolved to grant approval for signing co- developer agreement with the respondent No.4, on receipt of all the outstanding dues. Thereafter, a provisional approval was accorded to the respondent No.4 on 10.05.2017 for granting Co- developer status by the respondent no.3- Dahej SEZ Ltd. and the respondent No.4 was asked to pay Rs.1,20,92,672/- towards the outstanding dues of the petitioner.
Page 8 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT2.12 It appears that the petitioner addressed a letter dated 21.08.2017, to the Principal Secretary, Industries & Mines Department, complaining about transfer of the Plot No.Z/4/1 to the Dahej SEZ Ltd. Such letter was also addressed to the respondent No.3. The Respondent No.3 by letter dated 02.11.2017, replied to the petitioner as well as the Industries and Mines Department and informed that the petitioner failed to pay service charges from 01.04.2014 and interest and penalty charges were also not paid. Moreover, group Companies of the petitioner also did not pay service charges from 01.04.2012.
2.13 It appears from the record that thereafter, co-developer agreement was executed on 23rd March 2018 between the respondent no.3- Dahej SEZ Ltd. and the respondent No. who was successful bidder in the auction held by SIDBI.
2.14 It appears that the respondent No.1- Board, thereafter, granted approval of Page 9 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT co-developer status to the respondent No.4 on 06.04.2018 subject to certain conditions, which included submissions of formal amendment to the sale certificate issued by SIDBI to the Zonal Development Commissioner and cancellation of Co-developer agreement with the petitioner.
2.15 The petitioner being aggrieved and dissatisfied has challenged the approval granted by the respondent No.1-Board to the proposal to grant co-developer status to the respondent No.4 in the SEZ at Dahej.
2.16 It appears that thereafter, the necessary follow up actions are taken by the respondent Nos.3 and 4 and sale certificate was amended to incorporate the stipulated conditions in the resolution of the Board of Approval.
3. Heard Mr.Ravish D. Bhatt, the learned advocate for the petitioner, Mr.Kamal Trivedi, the learned senior advocate assisted by Mr.Abhishek M. Mehta, the learned advocate for the respondent No.4, Mr.Rituraj M. Meena, the Page 10 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT learned advocate for the respondent No.3 and Mr.Devang Vyas, the learned Assistant Solicitor General, appearing for the respondent No.2.
4. Mr. Bhatt, the learned advocate for the petitioner submitted that the impugned decision taken on the Proposal No.(ii) Item No.82.9 taken by the respondent No.1 in 82nd meeting of the Board of Approval for SEZ held on 4th April, 2018, is not a speaking decision/order. It was submitted that the decision of the respondent No.1 is without giving any opportunity of hearing to the petitioner prior to granting of approval of co-developer status to the respondent No.4.
4.1 Learned advocate for the petitioner, thereafter, relied upon the provisions of Section 10 (1) of the SEZ Act, to submit that while taking impugned decision by the respondent No.1, the provisions of Section 10 of the SEZ Act which provides for suspension of the co-developer agreement is violated as no such ground is reflected in the impugned order of approval of co-developer status in favour of the respondent No.4. It was further submitted that similarly Page 11 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT Section 10(1) and 10(9) of the SEZ Act are also not considered prior to the impugned decision because the co- developer agreement could not have been cancelled in absence of any breach on the part of the petitioner.
4.2 Thereafter, the learned advocate for the petitioner referred to the definitions of 'Unit' as per Section 2(zc), 'Developer' Section 2(g) of and 'co- developer' as per Section 2(f) of SEZ Act. According to Mr. Bhatt Section 16 of the SEZ Act provides for cancellation of letter of approval to entrepreneur of 'Unit' whereas Section 10 provides for suspension and transfer of letter of approval for 'Developer' and 'Co- developer'. It was therefore submitted that the show cause notice ought to have been issued to the petitioner to provide an opportunity of hearing by the competent authority before suspension and transfer of letter of approval. Reliance was also placed on Rule 2(s) of the SEZ Rules,2006 (for short the 'Rules') which defines 'infrastructure' to submit that the co-developer Page 12 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT agreement with the petitioner was for development of infrastructure in the SEZ and as such impugned decision of the respondent no.1 is in violation of Section 10 of the SEZ Act read with the Rule 2(s) of the Rules.
4.3 Learned advocate for the petitioner, thereafter, referred to Section 13 of the SEZ Act to submit that constitution of approval committee and powers of approval committee as per section 14 of the approval committee do not lay down any procedure for cancellation of letter of approval. It was therefore submitted that in view of the information given by the respondent No.3 that revised co- developer agreement with the respondent No.4 mentions about the transfer of assets and liabilities of the petitioner to the new co-developer and the co- developer agreement with the petitioner, which was required to be cancelled is contrary to the provisions of the Act and the Rules as no agreement could have been entered between the respondent Nos. 3 and 4 prior to the suspension of transfer/cancellation of the letter of Page 13 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT approval by the respondent No.1 issued in favour of the petitioner.
4.4 It was submitted that when the matter with regard to the legality of the sale certificate issued by SIDBI was sub- judice before the Debt Recovery Tribunal, then, the respondent No.1 was not justified in stipulating a condition for amendment in the sale certificate.
It was further submitted that
cancellation of Co-developer agreement
with the petitioner could not have been decided in view of an action under the provisions of Securitisation Act so as to legalize such action as no auction under Securitisation Act could have been effected in favour of the respondent No.4 as the petitioner had only sub leasehold rights, which is clear from the Clause No.6.5 of the Sub Lease Deed between the petitioner and the respondent no.3-Dahej SEZ Ltd.
4.5 Learned advocate for the petitioner submitted that the respondent No.1- Board of Approval has failed to consider the amendment in the sale certificate, Page 14 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT which would be equivalent to alteration of the condition of sale as prescribed in the Auction Notice, which would vitiate the entire process of sale. It was also submitted that as the Debt Recovery Tribunal was having jurisdiction over the confirmation of sale etc., the Board of Approval could not have placed any reliance on the order passed under the Securitisation Act, which is not envisaged under the SEZ Act, for suspension/transfer/cancellation of the letter of allotment.
4.6 Learned advocate for the petitioner also submitted that the provisions of the Securitisation Act cannot override the provisions of SEZ Act as no sale of property falling under Special Economic Zone Act could be conducted by any one contrary to the provisions of SEZ Act. Reliance was also placed on Section 51 of the SEZ Act, which starts with non- obstante clause. It was therefore, contended that the proceedings under the Securitisation Act cannot be raised for taking the impugned decision taken by Page 15 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT the Board of Approval as it ought to have been guided by the provisions of SEZ Act and the principles of natural justice.
4.7 Learned advocate for the petitioner also submitted that at the time of placing bid in December, 2016, the respondent No.4 was not even in existence and sale certificate issued on 07.01.2017 was in favour of four individuals, who purportedly promoted respondent No.4-Company. It was submitted that the respondent No.4 came into existence only on 16.01.2017, making it impossible to have co- developer agreement on the basis of the sale certificate dated 07.01.2017. It was therefore, submitted that the respondent No.1 approved the illegal action of respondent No.3 by prescribing the condition for grant of approval of co-developer status for amended sale certificate in favour of the respondent No.4 without following procedure as prescribed under Section 10 of the SEZ Act.
Page 16 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT4.8 It was further pointed out that the amended certificate issued by the SIDBI on 20th January 2017 in favour of the respondent No.4 is set aside by Debt Recovery Tribunal-1, Ahmedabad vide order dated 15.07.2019. It was therefore, submitted that as on today, only the certificate dated 07.01.2017 is in existence and therefore, the respondent No.4 has failed to comply with the condition prescribed in the impugned order.
4.9 Learned advocate for the petitioner submitted that before entering into any agreement of Co-developer with the respondent No.4, the respondent No.3- Dahej SEZ Ltd. was required to first to suspend the petitioner as a co-developer and thereafter, was required to cancel the co-developer agreement after affording opportunity of being heard to the petitioner as per provision of Section 10 of the SEZ Act. It was therefore, contended that the co- developer agreement dated 02.08.2017 executed between the respondent Nos. 3 and 4, which is anterior in point of Page 17 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT time could be valid only if it is preceded in point of time by the decision of the Board of Approval in conformity with the provisions of SEZ Act.
5. Per contra, Mr.Kamal Trivedi, the learned senior advocate assisted by Mr. Abhishek M. Mehta appearing for the respondent No.4 submitted that the petitioner has no locus to prefer this petition in view of the fact that the possession of the plot in question was already taken by the SIDBI and thereafter, the auction was held by SIDBI under the provisions of the Securitisation Act. It was therefore, submitted that the present petition is not maintainable.
5.1 Mr. Trivedi, the learned senior advocate submitted that the impugned decision by the respondent No.1 in its meeting held on 04.04.2018 is nothing but ratification of the co-developer agreement executed by the respondent No.3 in favour of the respondent No.4 so as to make the original Co-developer agreement with petitioner as redundant. Accordingly, it was decided by the Board of Approval to cancel the co-
Page 18 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENTdeveloper agreement with the petitioner in view of the sale certificate dated 07.01.2017 issued by SIDBI, which is a statutory document issued under Rules 6, 7, 8 and 9 of the Security Interest (Enforcement) Rules, 2002.
5.2 It was therefore submitted that the decision of the Board of Approval taken in its 82nd meetings held on 04.04.2018 cannot be said to be an order but it is a decision granting approval of co-developer status to the respondent No.4. It was further submitted that in view of the decision taken by the Board of Approval, there was no need to take any action under Section 10 of the SEZ Act.
5.3 It was submitted that the petitioner had full opportunity to take action in accordance with law as the respondent No.3 had informed the petitioner of each and every action taken by it by addressing various letters as well as making an application before the Debt Recovery Tribunal for clarification. It was therefore, contended that the submission made by the petitioner, stating that the Page 19 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT petitioner had no opportunity of hearing is without any basis.
5.4 Learned senior advocate further relied upon the Section 8, 9(1) and 9(2) of the SEZ Act to submit that the action taken by the respondent Nos.1 and 3 are in accordance with the provisions of law. Attention of the Court was also invited to the provisions of Section 35 of the Securitisation Act to canvass that action taken under the Securitisation Act are final and binding upon the respondent No.3. It was therefore, submitted that in view of proceedings under Securitisation Act by SIDBI, there was legitimate transfer of assets, which has not been set aside by any competent forum.
5.5 The learned senior advocate would submit that the decision of the respondent No.1- Board, is just legal and proper as it is for the purpose of granting approval to the respondent No.4 as co-developer and not for cancellation of agreement between the petitioner and respondent No.3. The approval of co-developer status in favour of the respondent No.4 relates to co-
Page 20 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENTdeveloper agreement between the respondent No.3 and the respondent No.4 which is not challenged by the petitioner. Therefore, only to challenge the decision of the Board of Approval to grant status of co- developer to the respondent no.4 is nothing but an abuse of process of law.
5.6 It was further submitted that the co-
developer agreement executed earlier between the petitioner and the respondent No.3 had become redundant/ superseded in view of the subsequent co-developer agreement with the respondent No.4 in view of sale of property in question by SIDBI. It was further submitted that the respondent No.4 has already been granted electricity connection in its name as it was transferred from the name of the petitioner and water connection is also granted by the GIDC. By letter dated 03.08.2018, the respondent No.3 also confirmed that both the conditions stipulated in the approval granted by the respondent No.1 are fulfilled.
5.7 The learned Senior advocate further submitted that looking to the provisions Page 21 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT of the SEZ Act and as the respondent No.4 has purchased the subject property together with attached rights in the auction proceeding under the Securitisation Act, the petitioner no more remained the co-developer and its right as co-developer got extinguished and transferred in favour of the respondent No.4, resulting into extinguishment and supersession of the co-developer agreement between the petitioner and the respondent No.3 as it became redundant and no more binding to the parties. Referring to the definition of 'Co-developer' under Section 2(f) of and definition of 'developer' under Section 2(g) of the SEZ Act, it was submitted that both the definitions refers to two separate entities and therefore, no reliance could have been placed on Section 10 of the SEZ Act by the petitioner. It was submitted that the petitioner was a defaulter and was not in a position to continue with the operations due to the action taken by the SIDBI or under the provisions of Securitisation Act as the possession of the property in question was taken over by the SIDBI and as a rights of Co-developer of any unit in SEZ is Page 22 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT attached with the property and as the petitioner was divested of the property due to operation of law, the petitioner ceased to be a co-developer. It was also pointed out that the petitioner failed to make payment of the outstanding dues of the respondent No.3 from 2013 onwards which was cleared by the respondent No.4. Respondent No.3 was therefore, required to execute co-developer agreement with the respondent No.4 as the project cannot be permitted to be inordinately delayed in the SEZ and it was necessary expedient that resources be used at the earliest and by not allowing to be used would be against the scheme of the SEZ Act.
6. Having heard the learned advocate for the respective parties and having gone through the materials on record in order to consider the issues raised by both the sides relating to SEZ Act as well as the Securitisation Act, it would be germane to refer to the relevant provisions of both the Acts.
(i) Section 2(f), (g), (zc) and Section 3, 10, 13,14, 16 and 51 of the SEZ Act reads thus :
"Section 2. In this Act, unless the context Page 23 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT otherwise requires,-
(f) "Co-Developer" means a person who, or a State Government which, has been granted by the Central Government a letter of approval under sub-section (12) of section 3;
(g) "Developer" means a person who, or a State Government which, has been granted by the Central Government a letteDRT actr of approval under sub-section (10) of section 3 and includes an Authority and a Co-
Developer;
(zc) "Unit" means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after commencement of this Act;
3. Procedure for making proposal to establish Special Economic Zone.- (1) A Special Economic Zone may be established under this Act, either jointly or severally by the Central Government, State Government, or any person for manufacture of goods or rendering services or for both or as a Free Trade and Warehousing Zone.
Page 24 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENTSection 10. Suspension of letter of approval and transfer of Special Economic Zone in certain cases.-10. (1) If at any time the Board is of the opinion that a Developer -
(a) is unable to discharge the functions or perform the duties imposed on him by or under the provisions of this Act or rules made there under; or
(b) has persistently defaulted in complying with any direction given by the Board under this Act; or
(c) has violated the terms and conditions of the letter of approval; or
(d) whose financial position is such that he is unable to fully and efficiently discharge the duties and obligations imposed on him by the letter of approval, and the circumstances exist which render it necessary for it in public interest so to do, the Board may, on application, or with the consent of the Developer, or otherwise, for reasons to be recorded in writing, suspend the letter of approval, granted to the Developer for a whole or part of his area established as Special Economic Zone, for a period not exceeding one year and appoint an Administrator to discharge the functions of the Developer in accordance with the terms and conditions of the letter of approval Page 25 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT and manage the Special Economic Zone accordingly.
(2) Consequent upon appointment of an Administrator, the management of the Special Economic Zone of the Developer referred to in sub-section (1) shall vest in the Administrator.
(3) No letter of approval shall be suspended under sub-section (1) unless the Board has given to the Developer not less than three months' notice, in writing, stating the grounds on which it proposes to suspend the letter of approval, and has considered any cause shown by the Developer within the period of that notice, against the proposed suspension.
(4) The Board may, instead of suspending the letter of approval under sub-section (1), permit it to remain in force subject to such further terms and conditions as it thinks fit to impose, and any further terms or conditions so imposed shall be binding upon and be complied with by the Developer and shall be of like force and effect as if they were contained in the letter of approval.
(5) In case the Board suspends a letter of approval under this section, it shall serve a notice of suspension upon the Developer and fix a date on which the suspension shall take effect.
Page 26 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT(6) Upon suspension of the letter of approval under sub-section (1), the Special Economic Zone of the Developer referred to in sub-section (5) shall vest in the Administrator under sub-section (2) for a period not exceeding one year or up to the date on which his letter of approval for such Special Economic Zone is transferred, whichever is earlier, in accordance with the provisions contained in sub-sections (7) and (9), as the case may be.
(7) Where the Board has given notice for suspension of letter of approval under sub- section (5), the Developer may, after prior approval of the Board, transfer his letter of approval to any person who is found eligible by the Board for grant of such approval.
(8) If at any time, it appears to the Board that the purpose of the order appointing the Administrator has been fulfilled or that for any reason it is undesirable that the order of appointment should remain in force, the Board may cancel the order and thereupon the Administrator shall be divested of the management of the Special Economic Zone which shall, unless otherwise directed by the Board, again vest in the person, being the Developer, in whom it was vested immediately prior to the date of appointment of the Administrator.
(9) Where the Board suspends the letter of approval, under this section, in respect of any Developer, the following provisions shall apply, Page 27 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT namely:-
(a) the Board shall invite applications for transferring the letter of approval of the Developer, whose approval has been suspended and select the person or persons, in accordance with the procedure as may be prescribed, to whom the letter of approval of the Developer in the Special Economic Zone may be transferred;
(b) upon selection of person or persons under sub-section (a), the Board may, by notice in writing, require the Developer to transfer his letter of approval in a Special Economic Zone to the person or the persons so selected and thereupon the Developer shall transfer his interests, rights and liabilities in the Special Economic Zone (hereafter in this section referred to as the "transferee") who has been selected by the Board on such terms and conditions and consideration as may be agreed upon between the Developer and the transferee;
(c) all the rights, duties,
obligations and liabilities of the
Developer, on and from the date of
suspension of letter of approval or on and from the date, if earlier, on which his letter of approval in the Special Economic Zone of the Developer has been transferred to the transferee, shall cease absolutely Page 28 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT except for any liabilities which have accrued prior to that date;
(d) the Board may make such
interim arrangements in regard to the
operation of the Special Economic Zone as may be considered appropriate;
(e) the Administrator shall
exercise such powers and discharge such
functions as the Board may direct.
(10) The Board may, in order to promote exports or to protect the interest of Units or in the public interest, issue such directions or formulate such scheme as it may consider necessary for operation of the Special Economic Zone.
13. Constitution of Approval Committee.-(1) The Central Government shall,-
(a) in the case of existing Special Economic Zones, within six months from the date of commencement of this Act;
(b) in case of other Special Economic Zones established after the commencement of this Act, within six months from the date of establishment of such Special Economic Zone, by notification, constitute a Committee for Page 29 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT every Special Economic Zone, to be called the Approval Committee to exercise the powers and perform the functions specified in section 14.
14. Powers and functions of Approval Committee. (1) Every Approval Committee may discharge the functions and exercise the powers in respect of the following matters, namely:-
(a) approve the import or procurement of goods from the Domestic Tariff Area, in the Special Economic Zone for carrying on the authorised operations by a Developer;
(b) approve the providing of services by a service provider, from outside India, or from the Domestic Tariff Area, for carrying on the authorised operations by the Developer, in the Special Economic Zone;
(c) monitor the utilisation of goods or services or warehousing or trading in the Special Economic Zone;
(d) approve, modify or reject proposals for setting up Units for manufacturing or rendering services or warehousing or trading in the Special Economic Zone [other than the grant of licence under clause (e) of sub-section (2) of section 9] in accordance with the provisions of sub-section (8) of section 15;
Provided that where the Approval Committee is unable to decide whether a particular process constitutes manufacture or not, it shall refer the same to the Board of Approval for a decision.
(e) allow, on receipt of approval under clause
(c) of sub-section (2) of section 9, foreign collaborations and foreign
16. Cancellation of letter of approval to Page 30 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT entrepreneur.-(1) The Approval Committee may, at any time, if it has any reason or cause to believe that the entrepreneur has persistently contravened any of the terms and conditions or its obligations subject to which the letter of approval was granted to the entrepreneur, cancel the letter of approval:
Provided that no such letter of approval shall be cancelled unless the entrepreneur has been afforded a reasonable opportunity of being heard.
(2) Where the letter of approval has been cancelled under sub-section (1), the Unit shall not from the date of such cancellation, be entitled to any exemption, concession, benefit or deduction available to it, being a Unit, under this Act.
(3) Without prejudice to the provisions of this Act, the entrepreneur whose letter of approval has been cancelled under sub-section (1), shall remit, the exemption, concession, drawback and any other benefit availed by him in respect of the capital goods, finished goods lying in stock and unutilised raw materials relatable to his Unit, in such manner as may be prescribed.
(4) Any person aggrieved by an order of the Approval Committee made under sub-section (1), may prefer an appeal to the Board within such time as may be prescribed.
(5) No appeal shall be admitted if it is Page 31 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT preferred after the expiry of the time prescribed therefor:
Provided that an appeal may be admitted after the expiry of the period prescribed therefor if the appellant satisfies the Board that he had sufficient cause for not preferring the appeal within the prescribed time.
(6) Every appeal made under sub-section (4) shall be in such form and shall be accompanied by a copy of the order appealed against and by such fees as may be prescribed.
(7) The procedure for disposing of an appeal shall be such as may be prescribed:
Provided that before disposing of an appeal, the appellant shall be given a reasonable opportunity of being heard.
51. Act to have overriding effect.-(1) The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act."
(ii) Rule 2(s) of the SEZ Rules, 2006 reads thus :
2. Definitions.- (1) In these rules, unless the context otherwise requires,--
(s) "infrastructure" means facilities needed for development, operation and maintenance of a Special Economic Zone and includes industrial, business and social amenities like development Page 32 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT of land, roads, buildings, sewerage and effluent treatment facilities, solid waste management facilities, port, including jetties, single point moorings, storage tanks and interconnecting pipelines for liquids and gases, Inland Container Depot or Container Freight Station, warehouses, airports, railways, transport system, generation and distribution of power, gas and other forms of energy, telecommunication, data transmission network, information technology network, hospitals, hotels, educational institutions, leisure, recreational and entertainment facilities, residential and business complex, water supply, including desalination plant, sanitation facility;
(iii) Section 35 of the Securitisation Act reads thus:
"35. The provisions of this Act to override other laws.-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law."
7.The facts of the case are not in dispute, the petitioner after committing default in Page 33 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT payment of the loan taken from SIDBI, actions were taken under the provisions of Securitisation Act by the SIDBI to recover the loan accordingly, the SIDBI issued Notice under Sections 13(2) and 13(4) of the Securitisation Act. After obtaining the order under Section 14 of the Securitisation Act from the Collector Bharuch, the physical possession of plot No. Z/4/1, which was allotted to the petitioner, was also taken by the SIDBI.
8. Though the petitioner was granted approval of co-developer and a co-developer agreement was executed between the petitioner and the respondent No.3, who is a developer.the petitioner did not pay the due outstanding service charges from 2013 onwards. Moreover, thereafter plot allotted to the petitioner was sold in auction and sale certificate was issued in favour of the four persons, who are directors of the respondent No.4-Company. The Board of Approval- respondent No.1 was justified in taking the decision to approve the status of co-developer to the respondent No.4 who was handed over the possession by the SIDBI after the auction sale. Therefore, as per Section 2(f) of the SEZ Act, which Page 34 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT defines 'Co-developer' means a person who, or a State Government which, has been granted a letter of Approval under sub-section (12) of section 3 by the Central Government. Therefore contentions raised by the petitioner that provision of Section 10 would be applicable for the suspension and transfer of letter of Approval as a co-developer would not be applicable in the facts of the case as the petitioner has lost the status of co- developer pursuant to the transfer of plot in question to the respondent No.4 in the auction held by the SIDBI under the provisions of the Securitisation Act.
9. At this juncture, it would be necessary to refer to the provisions of Section 35 of the Act, which provides for finality of the actions taken under the Securitisation Act.
10. Moreover, reference to Rule 2(s) of the Rules which prescribes the procedure for the purpose of suspension and transfer of letter of approval as provided in Section 10 of SEZ Act would also be of no assistance to the petitioner as no action is required to be taken under the provisions of Section 10 of the SEZ Act as the same would not be Page 35 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT applicable. The contentions raised on behalf of the petitioner, relying upon Section 10 of the SEZ Act read with Section 2(s) is without any basis. In the facts of the case as the respondent No.3 has only given effect to the auction sale conducted under the provisions of the Securitisation Act by the SIDBI, no show cause notice as required to be issued to the petitioner by invoking Section 10 of the SEZ Act was required because the petitioner was very much aware about the proceedings initiated under the Securitisation Act by the SIDBI. As the petitioner had challenged the action under Securitisation Act before the Debt Recovery Tribunal, and having failed in such action of challenge to get any interim order or final order, the petitioner cannot now challenge the action of the respondent No.1 granting request of approval status of co-developer in favour of the respondent No.4.
11. The contentions raised on behalf of the petitioner are therefore required to be rejected as it was only last attempt to see that the auction sale effected in favour of the respondent No.4 is not being given effect to by the respondent Nos.1 and 3. Though Page 36 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENT prima facie arguments canvassed on behalf of the petitioner look attractive but considering the facts of the case as well as the provisions of the Securitisation Act and SEZ Act, the same are required to be rejected.
12. As no action is required to be taken under the provisions of the SEZ Act for suspension or transfer or cancellation of letter of Approval in favour of the petitioner which has become redundant and extinguished in view of auction sale by the SIDBI, analyzing and/or applying the provisions of Section 10, 13 and 51 of the Act would be an academic exercise.
13. It emerges from the materials on record, the respondent Nos. 1 and 3 have only given effect to the actions taken by the SIDBI under the Securitisation Act to grant the request for approval of co-developer status to respondent No.4 subject to the conditions specified in the decision dated 04.04.2018 of the respondent No.1.
14. In view of the foregoing reasons, the petition fails and is accordingly dismissed.
Page 37 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021 C/SCA/10376/2018 CAV JUDGMENTRule is discharged with no order as to costs.
(BHARGAV D. KARIA, J) ALOK Page 38 of 38 Downloaded on : Tue Feb 16 05:34:56 IST 2021