Karnataka High Court
Srinidhi Cottons (P) Limited vs The Government Of India And Ors on 4 July, 2024
-1-
NC: 2024:KHC-K:5078
WP No. 204639 of 2016
IN THE HIGH COURT OF KARNATAKA,
KALABURAGI BENCH
DATED THIS THE 4TH DAY OF JULY, 2024
BEFORE
THE HON'BLE MR. JUSTICE R.NATARAJ
WRIT PETITION NO. 204639 OF 2016 (GM-RES)
BETWEEN:
SRINIDHI COTTONS (P) LIMITED.
10/80, RAJENDRA GUNJ, RAICHUR
BY ITS POWER OF ATTORNEY HOLDER
SRI. PAVAN HOSSALLI
S/O. KRISHNA HOSALLI,
AGED ABOUT 30 YEARS, OCC:ADMINISTRATION IN
SRINIDHI COTTON (P) LTD., RAICHUR - 584101.
...PETITIONER
(BY SRI. SHIVAKUMAR KALLOOR, ADVOCATE)
AND:
1. THE GOVERNMENT OF INDIA
Digitally signed DEPARTMENT OF AGRICULTURE AND COOPERATION,
by RENUKA KRISHI BHAVAN, DR.RAJENDRA PRASAD ROAD,
Location: High NEW DELHI - 110001.
Court Of REPRESENTED BY ITS SECRETARY
Karnataka
2. NATIONAL BANK FOR AGRICULTURE AND
RURAL DEVELOPMENT, KARNATAKA REGIONAL
OFFICE, NABARD TOWERS, 46, KEMPE GOUDA
ROAD, BANGALORE - 560009.
REPRESENTED BY ITS DEPUTY GENERAL MANAGER,
3. STATE BANK OF INDIA, RAICHUR BRANCH
BY ITS CHIEF MANAGER,
12-11-8,9,10, GARALDINNI COMPLEX, SATH
KACHERI ROAD, OPP.NEELAKHANTESHWAR
-2-
NC: 2024:KHC-K:5078
WP No. 204639 of 2016
THEATER, RAICHUR - 584101
4. THE REGIONAL MANAGER,
STATE BANK OF INDIA, REGIONAL BANKING OFFICE,
1ST FLOOR, STATION ROAD, HOSPET-583401.
5. NATIONAL BANK FOR AGRICULTURE
AND RURAL DEVELOPMENT,
H.NO.1-9-50, AZAD NAGAR, OPP:NOOR BHAG
FUNCTION HALL, RAICHUR REPRESENTED BY AGM,
DDM N.NARAYAN RAJU - 584101
...RESPONDENTS
(BY SRI. SANJEEVKUMAR C.PATIL, ADVOCATE FOR R1;
SRI. R.S.PAPPU AND MALLANNA REDDY, ADVOCATE FOR
R2 AND R5;
SRI. MANVENDRA REDDY, ADVOCATE FOR R3;
SRI. GOURISH S.KHASHAMPUR, ADVOCATE FOR R4)
THIS PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT
OF CERTIORARI QUASHING IMPUGNED ORDER/ LETTER
ANNEXURE-J IN NO:KARO/DOR/AMIGS/3892/AMI Corresp.292-
A/2014-15 DATED:13.1.2015 ISSUED BY RESPONDENT NO.2
AND ETC.,
THIS PETITION, COMING ON FOR PRELIMINARY HEARING
IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioner has challenged the impugned communication bearing No.NB.KARO/DOR/AMIGS/3892/AMI. -3-
NC: 2024:KHC-K:5078 WP No. 204639 of 2016 Corresp.292/A/2014/2015 dated 13.01.2015, addressed by the respondent No.2, by which, the claim of the petitioners for subsidy under a scheme, was rejected. The petitioner has also sought for a writ in the nature of mandamus directing the respondents to pay the subsidy amount of Rs.50,00,000/- with interest at 16% per annum as per the scheme named, "Development/Strengthening of the Agricultural Marketing Infrastructure Grading and Standardization Scheme".
2. The petitioner contends that in order to establish a cotton ginning and pressing unit, it applied for a term loan of Rs. 3,00,00,000/- with the respondent No.3. A term loan of Rs.2,50,00,000/- was sanctioned on 09.09.2008. The unit so established, was eligible for certain benefits under a scheme rolled out by the Central Government named "Development /strengthening of Agricultural Marketing Infrastructure Grading and Standardization." Under the scheme, units were entitled to financial subsidy from the respondent No.2. As per the scheme, once loan was availed from a financial institution by units covered under the scheme, the subsidy had to be routed through the financing bank. The subsidy had to be claimed by the financing bank and thereafter adjusted against the loan -4- NC: 2024:KHC-K:5078 WP No. 204639 of 2016 payable by the borrower. The subsidy had to be released in two installments of 50% each, the first at the time of commissioning the unit and last, at the time of clearing off the loan availed from the bank.
3. This subsidy was to encourage industrial units to generate employment and also to contribute to the growth of the sector. The petitioner contends that after unit was established in all respects, it submitted an application to the respondent No.3 on 01.06.2011 claiming subsidy of Rs.50,00,000/- which was forwarded to the respondent No.2. The respondent No.2 did not consider the request and did not release 50% of the subsidy. The petitioner thereafter addressed a letter dated 24.08.2012 to the respondent No.2 and intimated that the project was complete in all respects on 12.01.2009 and requested it to release the subsidy. Along with the letter, the petitioner had furnished all the requisite documents. The respondents inspected the unit of the petitioner on 27.09.2012 and were of the opinion that the project was complete in all respects. The respondent No.1 by letter dated 04.10.2012 addressed to the respondent No.3 had recommended to apply for one time subsidy, consequent thereto, the respondent No.3 -5- NC: 2024:KHC-K:5078 WP No. 204639 of 2016 requested the respondent No.2 to release a one time final subsidy to the petitioner. In the meanwhile, the petitioner promptly paid the loan installments and cleared off the entire term loan payable to the respondent No.3 on 27.08.2013.
4. Later, the respondent No.3 addressed a letter to the Assistant Agriculture Marketing Advisor Director of Marketing and Inspection, APMC, Bengaluru seeking for the status of the subsidy. Despite these efforts, the respondent No.2 did not take any positive measures to release final subsidy to the petitioner. This was followed by a letter of the respondent No.3 dated 25.08.2014, addressed to the respondent No.2 stating that all the requirement of sanction of final subsidy were complied as per the letter dated 28.09.2010 and the term loan was also closed on 27.08.2013 and despite that, the subsidy amount was not released. In response to this letter, the respondent No.2, replied on 13.01.2015 that "as per the instructions of the Government of India, the subsidy is back end in nature, which has to be adjusted towards last few installments of the loan. Since the loan account has been closed, the subsidy cannot be adjusted towards loan account; no further action can be taken on the claim made by the bank". -6-
NC: 2024:KHC-K:5078 WP No. 204639 of 2016 It further held that the respondent No.3 had furnished many documents in piecemeal up to 25.08.2014 and that the respondent No.3 had still not furnished: (i) copies of approval/permission taken, (ii) Completion Certificate, (iii) Expenditure Statement, (iv) Affidavit, (v) Controlling office letter and recommendations. The petitioner was then advised to file a suit and accordingly O.S.No.142/2015 was filed but due to the bar against suits in NABARD Act, the plaint was returned on 15.07.2015. The petitioner is therefore before this Court questioning the rejection of its entitlement for the subsidy.
5. The learned counsel for the petitioner submits that the joint inspection conducted by the respondent Nos.2 and 3 disclosed that the unit was installed in all respects and commercial operations had began. He contends that a joint inspection was conducted and a report was submitted by respondent No.2 stating that the petitioner is entitled for the subsidy. The joint inspection committee had recommended that the petitioner is entitled for subsidy amount Rs.50,00,000/-. Though the petitioner had furnished all the required documents to the respondent No.3 on 21.03.2013, to claim the final -7- NC: 2024:KHC-K:5078 WP No. 204639 of 2016 subsidy and though the respondent No.3 had requested the respondent No.2 to release the final subsidy as all the requirements were complied with, nothing was heard from the respondent No.2. He further contends that the respondent No.2 being the agency, under a scheme rolled out by the Central Government, is bound to release the subsidy amount. He further contends that all the required documents were furnished to the respondent No.3 and the same were forwarded to the respondent No.2 from time to time and the respondent No.2 is sitting over the request of the petitioner. He submits that the loan raised by the petitioner from the respondent No.3 was cleared in the year 2013 itself, which made it more than evident that unit was functioning profitably and hence, the respondent No.2 should not have further procrastinated the matter by requiring the respondent No.3 to furnish the documents. Thus, he contends that the respondent no.2 has acted arbitrarily, unfairly, in denying the subsidy amount. He further contends that mere closure of the loan account by the petitioner, cannot result in denying the benefit of subsidy and this conduct of the respondent No.2 is utterly arbitrary and deserves to be deprecated.
-8-
NC: 2024:KHC-K:5078 WP No. 204639 of 2016
6. Per contra, the learned counsel for the respondent No.2 submitted that as per the terms of the scheme, the subsidy amount had to be released only upon furnishing certain documents and the respondent No.3 had failed to furnish the said documents and therefore the respondent No.2 could not process it. He further submits that as per the terms of the scheme, the subsidy amount had to be utilized for clearing off the loan payable to the bank. While in the present case, the petitioner had already cleared off the loan payable to the respondent No.3. Therefore, he contends that the respondent No.2 was justified in not releasing the final subsidy.
7. The learned counsel for the respondent No.1 submitted that as per the scheme, the final subsidy had to be adjusted against the bank loan advanced by the bank and since in the present case, the loan was repaid by the petitioner, there was no occasion for the respondent No.2 to release the final subsidy.
8. I have considered the submissions of the learned counsel for the petitioner and the learned counsel for the respondent Nos.1 and 2.
-9-
NC: 2024:KHC-K:5078 WP No. 204639 of 2016
9. A copy of the scheme for Development/Strengthening of the Agriculture Marketing Infrastructure Grading and Standardization, produced by the respondent No.1 along with the statement of objections shows that the objective of the scheme was, inter-alia "(i) to strengthen existing agricultural marketing infrastructure, to enhance efficiency, (ii) to provide infrastructure facilities for grading, standardization and quality certification of agricultural produce so as to ensure price to the farmers commensurate with the quality of the produce, (iii) to promote grading, standardization and quality certification system for giving a major thrust for promotion of pledge financing and marketing, credit introduction of negotiable warehousing receipt system and promotion of forward and future markets so as to stabilize market system and to increase farmers' income (iv) to promote direct integration of processing units with producers.
10. The salient features of the scheme provided for a back-ended subsidy on the capital cost of general or commodity specific infrastructure for marketing of agricultural commodities
- 10 -
NC: 2024:KHC-K:5078 WP No. 204639 of 2016 and for strengthening and modernization of existing agricultural markets.
11. The subsidy was 25% of the capital cost of the project and maximum subsidy was restricted to Rs.50,00,000/- for each project. The subsidy had to be released through the respondent No.2 for projects financed by Commercial Banks, Cooperative and Regional Small Banks, Agricultural Development Finance Companies, Scheduled Primary Cooperative Banks etc., The scheme was to be implemented under XI Plan period with a Central Assistance of Rs.681.40 crore, for marketing infrastructure projects apart from a central allocation of Rs.15 crore for strengthening Agmark laboratory network and general awareness and training programs and studies etc. Out of the subsidy amount, 50% had to be released to the respondent No.2 by the Department of Agriculture and Co-operation in advance and the respondent No.2 would in turn release to the participating banks in advance for keeping the same in a Subsidy Reserve Fund Account of the concerned borrowers to be adjusted finally against loan amount of the bank on completion of the project. The remaining 50% had to be disbursed to the financing bank by the respondent No.2
- 11 -
NC: 2024:KHC-K:5078 WP No. 204639 of 2016 after a Joint Inspection Committee conducts an inspection. The procedure to be followed for sanctioning of project and release of subsidy is as follows:
9. PROCEDURE TO BE FOLLOWED FOR SANCTIONING OF PROJECT AND RELEASE OF SUBSIDY A. Projects financed through banks/NABARD
(i) An interested promoter will submit the project proposal for term loan and subsidy to the bank on an application form as prescribed by the concerned bank along with project report and other documents for appraisal and sanction of loan. A copy of the proposal shall also be endorsed by the promoter to Suboffice/Regional Office of DMI as per list at Annexure VIII.
(ii) Bank after appraisal and sanctioning of project and disbursal of first installment of loan will furnish a brief project profile-cum-claim form for advance subsidy in the prescribed form given in Annexure I along with a copy of bank's sanction letter to RO, NABARD with a copy to the Sub-Office/Regional Office of DMI as per list at Annexure VII.
(iii) NABARD on receipt of project profile-cum-claim form from the participating bank, will sanction and release 50% advance subsidy to the participating bank for keeping the same in the Subsidy Reserve Fund
- 12 -
NC: 2024:KHC-K:5078 WP No. 204639 of 2016 Account (Borrower-wise). NABARD will forward a copy of the sanction and project profile as indicated in Annexure I to the Head Office of DMI project-wise for replenishment or adjustment against advance subsidy provided by DMI to NABARD. The reel ase of subsidy by NABARD will be subject to availability of funds from DMI.
(iv) When the project is nearing completion, the promoter will inform the bank who will initiate action for an inspection by a Joint Inspection Committee consisting of officials of bank, NABARD and DMI to ensure that the executed project conforms to technical and financial parameters. No Joint Inspection shall be required, where the TFO of the project sanctioned by the Bank is less than Rs.10.00 lakh. For such projects, the inspection will be conducted by the officer of the financing bank. After joint inspection/inspection is conducted, the bank will submit the claim for final subsidy in the prescribed format given in Annexure II to NABARD, in triplicate, with a copy to concerned Regional Office/Sub-Office of DMI. The inspection report (Annexure-VI) of the Joint Inspection Committee/ Financing bank and completion certificate should be enclosed with the claim form for final subsidy. NABARD shall release the final subsidy to banks, which will be replenished by DMI or adjusted against the subsidy amount provided to NABARD in advance."
- 13 -
NC: 2024:KHC-K:5078 WP No. 204639 of 2016
12. It is not in dispute that the petitioner was entitled to subsidy of Rs.50,00,000/- under the Central Government scheme referred above. It is also not in dispute that 50% initial subsidy was not released to the respondent No.3 by the respondent No.2 to be kept in the account of the borrower. It is also not in dispute that an inspection was conducted by the respondent Nos.2 and 3 on 26.02.2013 and the Joint Inspection Committee had recommended that "the unit is functional at the time of joint inspection and the Joint Managing Committee has verified the records and found them to be in order". It further recommended that "The borrower is entitled to claim one time subsidy of Rs.50,00,000/- subject to furnishing satisfactory compliance by the borrower and duly verified and certified by the financing bank and also subject to furnishing all necessary documents, certificates by the borrower as required under the scheme". Following this, the petitioner submitted documents to the respondent No.2 on 21.03.2013, which was forwarded by the respondent No.3 to the respondent No.2 on 16.07.2013. The respondent No.2 thereafter addressed a letter dated 05.11.2013 to the respondent No.3 calling upon it to produce,
(i) Copy of bank loan sanction letter dated 09.09.2008,
- 14 -
NC: 2024:KHC-K:5078 WP No. 204639 of 2016
(ii) Copy of project report submitted by the promoter, (iii) Copy of layout plan, civil drawings with necessary approvals. The respondent No.2 in terms of its letter dated 25.08.2014, informed the respondent No.3 that all the documents were furnished with as per the letter dated 28.09.2010. The respondent No.2, has now after a long gap of six years, addressed the impugned communication stating that since the petitioner had cleared off the loan and as the subsidy was back- end in nature which had to be adjusted towards the last few installments, no further action can be taken to release the final subsidy. It also claimed that the respondent No.2 had not furnished; (1) Copies of Approval/Permissions taken (2) Completion Certificate (3) Expenditure Statement (4) Affidavit (5) Controlling Office Letter and Recommendations.
13. The way in which the respondent No.2 had dealt with the petitioner, shows the regressive attitude on the part of the respondent No.2 in not passing on the benefits that were intended under the scheme rolled out under the Central Government scheme. This act of the respondent No.2 is a disincentive to an industrialist who has established a unit in a backward area and this conduct of the respondent No.2 is not
- 15 -
NC: 2024:KHC-K:5078 WP No. 204639 of 2016 in the best interest of promoting industrial growth and to generate industrial employment. The fact that the respondent No.3 has continuously corresponded with the respondent No.2 and has produced all the required documents, makes the case of the petitioner all the more strong to claim the final subsidy amount. The fact that the petitioner has established a unit which is functioning and the fact that the petitioner has already cleared off the loan payable to the respondent No.3, shows that the unit established by the petitioner is commercially solvent and obviously must be generating sufficient employment in the locality. There is no reason why the petitioner should be deprived of the benefit of the subsidy amount payable to it under the scheme. Consequently, the impugned communication addressed by the respondent No.2 to the respondent No.3 is liable to be quashed.
14. Consequently, this writ petition is allowed. The impugned communication dated 13.01.2015 issued by the respondent No.2 to the respondent No.3 is quashed. The respondent No.2 is directed to forthwith release a sum of Rs.50,00,000/- payable to the petitioner by crediting it into the petitioner's account at the respondent No.3. This shall be
- 16 -
NC: 2024:KHC-K:5078 WP No. 204639 of 2016 complied within a period of three months from the date of receipt of a copy of this order, failing which the respondent No.2 shall pay interest @ 12% per annum from the date of this order till payment and recover it from the concerned official responsible for the delay.
Sd/-
JUDGE HJ List No.: 1 Sl No.: 27