Karnataka High Court
Mr. Tejraj Gulecha vs Karnataka Industrial Areas ... on 30 October, 2024
Author: Hemant Chandangoudar
Bench: Hemant Chandangoudar
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WP No. 25857 of 2024
C/W WP No. 25851 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF OCTOBER, 2024
BEFORE
THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
WRIT PETITION NO. 25857 OF 2024 (GM-KIADB)
C/W
WRIT PETITION NO. 25851 OF 2024 (GM-KIADB)
IN WP No. 25857/2024
BETWEEN:
MR. TEJRAJ GULECHA
AGED ABOUT 67 YEARS
SON OF MR. PUKHRAJ GULECHA
RESIDING AT NO.1101, EKKA
11TH FLOOR, PLATINUM ANANDA
CHAMARAJPET, BENGALURU - 560 018.
...PETITIONER
(BY SRI. C K NANDAKUMAR, SENIOR COUNSEL FOR
SRI. MANU PRABHAKAR KULKARNI., ADVOCATE)
AND:
1. KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD
Digitally signed by B
K STATUTORY BODY UNDER THE KARNATAKA
MAHENDRAKUMAR
Location: HIGH
INDUSTRIAL AREAS DEVELOPMENT ACT, 1966,
COURT OF
KARNATAKA
HAVING ITS OFFICE AT NO.49, 4TH AND 5TH FLOORS
EAST WING', KHANIJA BHAVAN RACE COURSE ROAD
BENGALURU - 560 001
REPRESENTED BY ITS
CHIEF EXECUTIVE OFFICER AND
EXECUTIVE MEMBER.
2. EMBASSY EAST LIMITED BUSINESS PARK
PRIVATE LIMITED
(FORMERLY KNOWN AS CONCORD INDIA PRIVATE
LIMITED AND PREVIOUSLY, STEYR INDIA LIMITED)
A COMPANY WITHIN THE MEANING OF
COMPANIES ACT, 2013,
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HAVING ITS REGISTERED OFFICE AT
EMBASSY POINT, 1ST FLOOR 150, INFANTRY ROAD
BENGALURU - 560 001, REPRESENTED BY ITS
MANAGING DIRECTOR.
3. IDBI TRUSTEESHIP SERVICES LIMITED
A COMPANY WITHIN THE MEANING OF
COMPANIES ACT, 2013,
HAVING ITS REGISTERED OFFICE AT ASIAN BUILDING,
GROUND FLOOR, 17, R. KAMANI MARG BALLARD
ESTATE, MUMBAI 400 001
MAHARASHTRA, REPRESENTED BY ITS
MANAGING DIRECTOR.
4. SAMMAAN CAPITAL LIMITED
(FORMERLY KNOWN AS INDIABULLS HOUSING
FINANCE LIMITED) A COMPANY WITHIN
THE MEANING OF COMPANIES ACT, 2013,
HAVING ITS REGISTERED OFFICE AT 5TH FLOOR,
BUILDING NO. 27. CONNAUGHT PLACE,
NEW DELHI-110 001, REPRESENTED BY ITS
MANAGING DIRECTOR.
5. EMBASSY INN PRIVATE LIMITED
A COMPANY WITHIN THE MEANING OF
COMPANIES ACT, 2013,
HAVING ITS REGISTERED OFFICE AT
I FLOOR, EMBASSY POINT, 150, INFANTRY ROAD,
BENGALURU - 560 001, KARNATAKA
REPRESENTED BY ITS MANAGING DIRECTOR.
6. EMBASSY PROPERTY DEVELOPMENTS PRIVATE
LIMITED, A COMPANY WITHIN THE MEANING
OF COMPANIES ACT, 2013,
HAVING ITS REGISTERED OFFICE AT 1 FLOOR,
EMBASSY POINT, 150, INFANTRY ROAD,
BENGALURU-560 001, KARNATAKA
REPRESENTED BY ITS MANAGING DIRECTOR.
7. EMBASSY SERVICES PRIVATE LIMITED
A COMPANY WITHIN THE MEANING
OF COMPANIES ACT, 2013,
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WP No. 25857 of 2024
C/W WP No. 25851 of 2024
HAVING ITS REGISTERED OFFICE AT
I FLOOR, EMBASSY POINT, 150, INFANTRY ROAD,
BENGALURU KARNATAKA 560 001
REPRESENTED BY ITS MANAGING DIRECTOR
...RESPONDENTS
(BY SRI. K SHASHIKUMAR SHETTY, SENIOR COUNSEL A/W
SRI. B B PATIL., ADVOCATE FOR R1;
SRI. K G RAGHAVAN, SENIOR COUNSEL A/W
SRI. AJESH KUMAR S, ADVOCATE FOR C/R2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DTD
03.09.2024 BEARING NO. KIADB/40/ALLOT/AS-143-VOL
VII/10301/2024-25 PASSED BY R-1 IN THE MATTER OF M/S
EMBASSY EAST BUSINESS PARK PVT. LTD. (M/S CONCORD INDIA
PVT.LTD) AS AT ANNEXURE-A.
IN WP No. 25851/2024
BETWEEN:
1. MR. REDDY VEERANNA
S/O R SANJEEVAPPA,
AGED ABOUT 68 YEARS,
R/AT NO.109, 10TH MAIN,
7TH CROSS, RMV EXTENSION,
SADASHIVA NAGAR,
BENGALURU-560 080.
...PETITIONER
(BY SRI. SAJJAN POVAYYA, SENIOR COUNSEL FOR
SRI. MANU PRABHAKAR KULKARNI., ADVOCATE)
AND:
1. KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD
A STATUTORY BODY UNDER THE KARNATAKA
INDUSTRIAL AREAS DEVELOPMENT ACT, 1966,
HAVING ITS OFFICE AT NO.49,
4TH AND 5TH FLOORS, EAST WING,
KHANIJA BHAVANA, RACE COURSE ROAD,
BENGALURU-560 001
REPRESENTED BY ITS
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NC: 2024:KHC:43995
WP No. 25857 of 2024
C/W WP No. 25851 of 2024
CHIEF EXECUTIVE OFFICER
AND EXECUTIVE MEMBER.
2. EMBASSY EAST BUSINESS PARK PRIVATE LIMITED
(FORMERLY KNOWN AS CONCORD INDIA PRIVATE
LIMITED AND PREVIOUSLY, STEYR INDIA LIMITED)
A COMPANY WITHIN THE MEANING OF COMPANIES
ACT 2013
HAVING ITS REGISTERED OFFICE AT
EMBASSY POINT, IST FLOOR, 150,
INFANTRY ROAD, BENGALURU-560 001
REPRESENTED BY ITS MANAGING DIRECTOR.
3. NSL RENEWABLE POWER PRIVATE LIMITED
A COMPANY WITHIN THE MEANING
OF COMPANIES ACT 2013,
HAVING ITS REGISTERED OFFICE AT NSL ICON,
4TH FLOOR, ROAD NO.12, BANJARA HILLS,
HYDERABAD-500034, TELANGANA,
REPRESENTED BY ITS MANAGING DIRECTOR.
4. MANDAVA HOLDINGS PRIVATE LIMITED
A COMPANY WITHIN THE MEANING OF
COMPANIES ACT 2013
HAVING ITS REGISTERED OFFICE AT NSL ICON,
4TH FLOOR, ROAD NO.12, BANJARA HILLS,
HYDERABAD-500034, TELANGANA,
REPRESENTED BY ITS MANAGING DIRECTOR.
5. IDBI TRUSTEESHIP SERVICES LIMITED
A COMPANY WITHING THE MEANING
OF COMPANIES ACT 2013
HAVING ITS REGISTERED OFFICE
AT ASIAN BUILDING, GROUND FLOOR,
17, R. KAMANI MARG, BALLARD ESTATE,
MUMBAI-400 001, MAHARASHTRA,
REPRESENTED BY ITS MANAGING DIRECTOR.
6. SAMMAAN CAPITAL LIMITED
(FORMERLY KNOWN AS INDIABULLS HOUSING
FINANCE LIMITED)
A COMPANY WITHIN THE MEANING
OF COMPANIES ACT 2013
HAVING ITS REGISTERED OFFICE AT
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WP No. 25857 of 2024
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5TH FLOOR, BUILDING NO.27,
CONNAUGHT PLACE, NEW DELHI-110 001
REPRESENTED BY ITS MANAGING DIRECTOR.
7. EMBASSY INN PRIVATE LIMITED
A COMPANY WITHIN THE MEANING
OF COMPANIES ACT 2013
HAVING ITS REGISTERED OFFICE AT I FLOOR,
EMBASSY POINT, 150, INFANTRY ROAD,
BENGALURU-560001, KARNATAKA,
REPRESENTED BY ITS MANAGING DIRECTOR.
8. EMBASSY PROPERTY DEVELOMENT PRIVATE LIMITED
A COMPANY WITHIN THE MEANING
OF COMPANIES ACT 2013
HAVING ITS REGISTERED OFFICE AT I FLOOR,
EMBASSY POINT, 150 INFANTRY ROAD,
BENGALURU-560001, KARNATAKA,
REPRESENTED BY ITS MANAGING DIRECTOR.
9. EMBASSY SERVICES PRIVATE LIMITED
A COMPANY WITHIN THE MEANING
OF COMPANIES ACT 2013
HAVING ITS REGISTERED OFFICE AT I FLOOR,
EMBASSY POINT, 150, INFANTRY ROAD,
BENGALURU-560 001, KARNATAKA,
REPRESENTED BY ITS MANAGING DIRECTOR.
...RESPONDENTS
(BY SRI. K SHASHIKIRAN SHETTY, SENIOR COUNSEL A/W
SRI. B B PATIL., ADVOCATE FOR R1;
SRI. K G RAGHAVAN, SENIOR COUNSEL A/W
SRI. AJESH KUMAR S, ADVOCATE FOR C/R2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DTD
03.09.2024 PASSED BY R-1 IN THE MATTER OF M/S EMBASSY
EAST BUSINESS PARK PVT. LTD. (M/S CONCORD INDIA PVT.LTD)
AS AT ANNEXURE-A AND ETC.
THESE PETITIONS, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
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WP No. 25857 of 2024
C/W WP No. 25851 of 2024
ORAL ORDER
The petitioners are before this Court seeking a writ in the nature of Certiorari to quash the order No. KIADB/HO/Allot/AS-143- Vol. VII/10301/2024-25, dated 03.09.2024, issued by respondent No.1 - Karnataka Industrial Areas Development Board (KIADB) under Section 34-B(3) of the Karnataka Industrial Areas Development Act, 1966 ("KIAD Act"). Through this order, the time for implementing the infrastructural project on the scheduled property, allotted to respondent No. 2 under a Lease-cum-Sale Deed dated 07.06.2007, was extended by two years from the date of approval of the sanctioned plan.
2. The petitioners contend to be 50% shareholders of Concord India Private Limited ('CIPL'), the predecessor entity of respondent No. 2, M/s. Embassy East Business Parks Pvt. Ltd. ('Allottee'). The petitioners assert that they acquired shareholding rights by making a payment of INR 9,25,00,000/- with the objective of jointly developing the scheduled property as a marquee asset. The agreement between the petitioners and respondent No. 2 is subject to ongoing disputes and is currently contested before appropriate forums.
2.1. The scheduled property described below was allotted to respondent No. 2 on a Lease-cum-Sale basis, with an initial lease period of 11 years for establishing infrastructure facilities for MNTC IT & ITES companies. On 21.01.2008, respondent No. 1 - KIADB, -7- NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 executed a Rectification Deed extending the lease period from 11 to 20 years.
2.2. Subsequently, upon the request of respondent No. 2, a Supplementary Agreement dated 15.01.2021 extended the lease term by an additional 11 years, from 07.06.2018 to 06.06.2029.
The scheduled property is "all that piece and parcel of Plot No.6, Kadugodi Industrial Area, comprised in Sy. No. 1, Block 73, within the village limits of Kadugodi Plantation, Bidarahalli Hobli, Bengaluru East Taluk, Bengaluru, measuring 78 acres and 2219 sq.mtrs., bounded:
East - Agricultural Land
West - Herbert India Ltd. and KIADB
Road
North - Agricultural Land and Part of
Sy. No. 1
South - Bangalore-Whitefield Main
Road."
3. Upon execution of the Lease-cum-Sale Agreement on 16.04.2008, certain proceedings were initiated by the State, asserting that the scheduled property constituted forest land. This contention, however, became the subject of litigation before this Court in W.P. No. 7200/2008, wherein a coordinate Bench rejected the State's claim, vide order dated 25.05.2012. This decision was reaffirmed in W.A. No. 4283/2012, dated 23.07.2019, and the -8- NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 matter ultimately concluded in 2020 with the dismissal of the Special Leave Petition (SLP) filed by the State before the Apex Court.
4. Subsequently, the present petitioners again approached this Court in W.P. No. 18986/2021, connected with W.P. No. 18952/2021, dated 16.05.2023, challenging the creation of nine charges over the scheduled property by respondent No. 2 - Allottee from 07.06.2007 until the dismissal of the SLP, without obtaining consent from respondent No. 1 - KIADB. The petitioners sought a Writ of Mandamus, directing KIADB to take appropriate action against the Allottee for violating the terms of the Lease-cum-Sale Agreement dated 07.06.2007, including initiating proceedings under Sections 34 and 38 of the KIAD Act, 1966.
5. The coordinate Bench, vide order dated 16.05.2023, observed that respondent No. 2 - Allottee had indeed violated the terms of the Lease-cum-Sale Agreement dated 07.06.2007 by creating nine charges over the scheduled property without the consent of the KIADB. Taking cognizance of the submissions of the respondent No. 1-KIADB, to take appropriate action in accordance with law for the violation of the Agreement, and recognizing that the petitioners had highlighted KIADB's inaction regarding the misuse of the allotted public property, the Single Bench allowed the petition, permitting the petitioners to participate in the proceedings to be initiated by respondent No. 1 - KIADB under Section 34 and 38 of the KIAD Act , 1966.
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6. Aggrieved by this order, respondent No. 2 - Allottee and others filed an appeal in W.A. No. 686/2023, connected with W.A. No. 689/2023, dated 26.07.2023, against the petitioners and respondent No. 1 - KIADB. The Division Bench of this Court modified the Single Bench's order, stating that, given the specific undertaking by KIADB to investigate the alleged violations independently, a Mandamus was unnecessary. The Division Bench further opined that "no need and necessity" existed for the petitioners to participate in the KIADB's inquiry proceedings and directed that the said inquiry be concluded within four months.
The Division Bench also noted that respondent No. 1 - KIADB was at liberty to issue appropriate orders according to law to protect its interests, uninfluenced by the findings and observations of the Single Bench.
7. Pursuant to the order dated 26.07.2023 passed by the Division Bench, respondent No. 1 conducted an inquiry and issued an order dated 03.09.2024 under Section 34-B(3) of the KIAD Act, 1966, extending the timeline for implementing the infrastructural project on the scheduled property by two years from the date of approval of the sanctioned plan.
8. Aggrieved by this development, the petitioners are before this Court, seeking to quash the impugned order on the grounds
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 that it is vitiated by malice, lacks reasonable or probable cause, and is, therefore, ultra vires Section 34-B of the KIAD Act, 1966.
9. Learned Senior Counsel, Sri S. Poovayya, representing counsel for the petitioner, Sri Manu Prabhakar Kulkarni in W.P. No. 25851/2023, and Shri C.K. Nandakumar, representing counsel for the petitioner, Sri Manu Prabhakar Kulkarni in W.P. No. 25857/2023, have argued that despite a finding by the Single Bench vide order dated 16.05.2023 that Respondent No. 2 - Allottee had violated the terms of the Lease-cum-Sale Agreement dated 07.06.2007 by creating nine charges over the scheduled property without the consent of Respondent-KIADB, and despite the specific submission by KIADB before the Division Bench in W.A. No. 686/2023 and connected matters to investigate the alleged violations and pass appropriate orders in accordance with law, Respondent-KIADB has made an inexplicable volte-face. It has issued the impugned order, extending the continuing leasehold rights over the scheduled property while overlooking the violations of the Lease Agreement dated 07.06.2007.
9.1 The learned Senior Counsels primarily contended that the impugned order issued by Respondent-KIADB was exercised based on extraneous and irrelevant considerations. The order granting continued leasehold to Respondent No. 2 - Allottee neither provides adequate explanations or clarifications from the Allottee regarding the charges created over the scheduled property nor offers any undertaking or corrective action to remedy the
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 breaches of the Lease-cum-Sale Agreement dated 07.06.2007. The learned Senior Counsels further brought to the Court's attention a discrepancy in the dates within the impugned order-- appearing as 10.09.2024 at the start and as 03.09.2024 in the operative portion--and contended that this inconsistency indicates an improper and irregular exercise of statutory authority.
9.2 Furthermore, the learned Senior Counsels argued that the scope of the present petitions is limited to protecting the inchoate right of the petitioners concerning their 50% shareholding interest in Respondent No. 2 - Allottee, which is currently under consideration before the appropriate forum. The learned Counsels further submit that these petitions were filed to prevent the Allottee from dissipating the scheduled property to the detriment of the petitioners, as has previously occurred through mortgage/creation of charges over the property by the Allottee in favour of third parties, without the consent of KIADB and in violation of the Lease- cum-Sale Agreement dated 07.06.2007. Therefore, the extension of continued leasehold rights to the Allottee in respect of the scheduled property leaves the petitioners' inchoate rights unprotected. Consequently, the impugned order is arbitrary, unreasonable, and liable to be quashed.
In support, reliance is placed upon the following:
(An order passed by a quasi-judicial authority must be supported by adequate and cogent reasoning)
1. A.K. Kraipak v. Union of India, (1969) 2 SCC 262 -
para 13
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024
2. Union of India v. Mohan Lal Capoor, (1973) 2 SCC 836 - para 28
3. Siemens Engg. & Mfg. Co. of India Lts. v. Union of India, (1976) 2 SCC 981- para 6
4. Indian National Congress (I) v. Institute of Social Welfare, (2002) 5 SCC 685 - paras 21 to 28
5. Kranti Associates (P) Ltd. v. Masood Ahmed Khan, (2010) 9 SCC 496 - para 47
6. State of Gujarat v. Gujarat Revenue Tribunal Bar Assn., (2012) 10 SCC 353- para 18 (The words "as it seems fit" must be read in context of the provision and not in isolation)
7. Raja Ram Mahadev Paranjype v. ABA Maruti Mali, 1962 Supp (1) SCR 739- para 14
8. Reserve Bank of India v. Peerless General Finance & Investment Co. Ltd., (1987) 1 SCC 424- para 33
9. Balasinor Nagrik Coop. Bank Ltd. v. Babubhai Shankerlal Pandya, (1987) 1 SCC 606- para (Instrumentalities of State must act fairly and without ill will or malice)
10. Kalabharati Advertising v. Hemant Vimalnath Narichania, (2010) 9 SCC 437 - para 25 (Unreasonableness is akin to violation of natural justice)
11. National Buildings Construction Corpn. v. S. Raghunathan, (1998) 7 SCC 66 para 18
12. NOIDA Entrepreneurs Assn. v. NOIDA, (2011) 6 SCC 508- paras 39 to 41 (The Petitioner is a person aggrieved by the impugned order and has locus standi to file this Writ Petition)
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13. Gadde Venkateswara Rao v. Govt. of A.P., 1965 SCC OnLine SC 25- para 8
14. Pamidimarri Chenchulakshamma v. Estates Abolition Tribunal Nellore 1970 SCC OnLine AP 79- para 17
15. Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed, (1976) 1 SCC 671- paras 34, 35
16. Fertilizer Corpn. Kamgar Union v. Union of India, (1981) 1 SCC 568- para 48
17. Shivajirao Nilangekar Patil V. Mahesh Madhav Gosavi, (1987) 1 SCC 227- para 36
18. Indian Banks' Assn. v. Devkala Consultancy Service (2004) 11 SCC 1- para 34
19. Bangalore Medical Trust v. B.S. Muddappa, (1991) 4 SCC 54- para 35
20. Hari Krishna Kanoi v. Appropriate Authority, (1994) 207 ITR 743- paras 48, 49, 50, 60, 61 and 62
21. Ghulam Qadir v. Special Tribunal, (2002) 1 SCC 33- para 38
22. Bannari Amman Sugars Ltd. v. CTO, (2005) 1 SCC 625- para 8
23. Arjunappa vs. State of Karnataka and others, Writ Petition No. 49958 of 2019- para 14
24. Reddy Veeranna vs. Jitendra Virwani and others, Commercial Appeal No. 325 of 2022- para 13
25. D.D. Basu, Commentary on the Constitution of India, Eighth Edn., pg. 8086 to 8088
10. Sri Sashikiran Shetty, learned Senior Counsel appearing for Respondent No.1 - KIADB, argued that the impugned order was passed in pursuance of the order dated 26.07.2023 in W.A. No. 686/2023 and connected matters, and is in consonance with the provisions of Section 34-B of the KIADB Act, 1966. He further
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 contended that the impugned order was issued after due deliberation and is a reasoned order. Therefore, given the settled principles of judicial review and the limited scope of supervisory jurisdiction under Article 226, this Court cannot assume appellate jurisdiction and issue a writ of Certiorari unless the impugned order is shown to be arbitrary and irrational, or if the findings of the Board were vitiated by a lack of substantial evidence.
10.1. Further rebutting the contentions of the petitioners, the learned Senior Counsel submitted that the impugned order was passed on 03.09.2024 and that this order was provided under an RTI application filed by the petitioner, with an endorsement dated 10.09.2024. He contended that there is no issue of irregularity or impropriety in passing the order due to any purported discrepancy in its dates.
11. Learned Senior Counsel, Sri K.G. Raghavan, representing the counsel for Respondent No.2 and others, Sri Ajesh Kumar, argued that the petitioners lack locus standi to bring forth these petitions due to the order dated 26.07.2023 in W.A. No. 686/2023 and connected matters, where the Division Bench modified the observations of the Single Bench and held that the petitioners were not necessary parties to the inquiry and investigation into alleged violations of the Lease-cum-Sale Agreement by KIADB.
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 11.1. He further submitted that the petitioners' claim to be aggrieved due to prejudice caused to their inchoate right of a 50% shareholding in the Allottee entity is without merit, as it is settled law that a shareholder cannot assert any right over the assets of a company based on a purported interest in those assets.
11.2. Nevertheless, he submitted that the impugned order is to the petitioners' benefit, subject to the outcome of the commercial suit for declaration and injunction of their inchoate rights, pending before the Commercial Court, Bengaluru, in O.S. No. 234/2022.
11.3. Therefore, he contended that the petitioners lack the locus standi to seek a writ of certiorari against the order passed by Respondent No.1 - KIADB under Section 34-B(3) of the KIADB Act, 1966.
In support, he places reliance upon the following:
1. Nagar Rice and Flour Mills and Ors. v. N. Teekappa Gowda & Bros. and Ors. (1970) 1 SCC 575
2. Bacha F. Guzdar, Bombay v. Commissioner of Income Tax, Bombay (1955) 1 SCR 876
3. Ayaaubkhan Noorkhan Pathan v. State of Maharashtra (2013) 4 SCC 465
4. Ravi Yashwant Bhoir v. District Collector, Raigad and Ors.
(2012) 4 SCC 407
13. After carefully considering the submissions of the learned counsels, and a close review of the materials on record and the Division Bench's order dated 26.07.2023, it appears that the
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 primary issue for consideration is whether the petitioners have the locus standi to file the present petitions challenging the order dated 03.09.2024 issued by Respondent No.1, alleging it to be ultra vires of the KIAD Act, 1966.
14. The facts leading up to the issuance of the impugned order are sufficiently detailed in the previous paragraphs and need not be repeated. It is necessary, however, to examine the substance and reasoning behind the impugned order to assess the petitioners' standing in the matter.
15. In compliance with this Court's order in W.A. No. 686/2023, connected with W.A. No. 689/2023, dated 26.07.2023, Respondent No.1 - KIADB had issued a comprehensive notice under Section 34-B(1), directing Respondent No.2 - Allottee to remedy the breaches identified by the Single Bench and to provide the necessary explanation and information.
16. The impugned order dated 03.09.2024, passed under Section 34-B(3) of the KIAD Act, 1966, outlines the clarifications, explanations, and commitments provided by Respondent No.2 - Allottee. The order, specifically in paragraph nos. (27) and (28), details the grounds that led KIADB to grant the Allottee a two-year period from the date of plan sanction to implement the Project development. A summary of the key points are as follows:
i. The first mortgage/charge on the scheduled property, created on 06.06.2007 in favour of HDFC Bank Ltd.,
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 was against a loan of INR 39,26,47,727, which was the amount paid for the property allotment. The Allottee obtained the required NOC from Respondent No.1 - KIADB.
ii. A mortgage/charge dated 22.07.2021 was created on the scheduled property in favour of Indiabulls Housing Finance (the successor to the lender, M/s. Samman Capital, is arrayed herein as Respondent No.6 in W.P. No. 25851/2024 and Respondent No.4 in W.P. No. 25857/2024), against a loan of INR 840 crores, used as a payment to M/s. NAM Estates Pvt. Ltd. as part of the Allottee's liability for project development. If the project does not proceed after obtaining plan sanction, M/s. NAM Estates is liable to repay the loan to the Allottee.
iii. The Allottee has provided an undertaking that all funds borrowed against the scheduled property will be used exclusively for the sanctioned project.
iv. The Allottee requested that KIADB approve the plan in line with their latest letter dated 12.12.2023, and committed to begin construction within one year of receiving plan approval.
v. Pre-construction activities have commenced, including debris clearing, securing necessary permits, and awarding a turnkey contract for civil
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 works and machinery supply to M/s. NAM Estates Pvt. Ltd.
vi. Since 2008, the Allottee has defended KIADB's title to the scheduled property against claims by the Forest Department, concluding on 19.11.2020.
vii. KIADB executed a Rectification Deed dated 21.01.2008 and a Supplementary Agreement dated 15.01.2021, extending the Allottee's leasehold rights over the property until June 2029.
15. Given the above facts, it is necessary to address the issue of the petitioners' locus standi.
16. The petitioners are shareholders of Respondent No.2 -
Allottee, a fact under dispute and currently under review by the lower courts. Through these petitions, they seek limited relief to protect their 'inchoate rights' in the scheduled property and prevent any dissipation of the property, which could harm their interests through creation of further charges on the property.
17. The petitioners contend that the continued grant of leasehold and ownership of the scheduled property by the KIADB to Respondent No.2 - Allottee as reflected in the impugned order, undermines their rights. They argue that this grant was issued despite a finding by the Single Bench on 16.05.2023 that the Allottee violated the terms of the Lease-cum-Sale Agreement dated
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 07.06.2007, and despite the KIADB's commitment to take appropriate action if there were any violations. The petitioners assert that their rights in the scheduled property remain unprotected and at risk, especially in light of past incidents where charges were created over the property without the knowledge of KIADB, in violation of the Agreement dated 07.06.2007.
18. Consequently, the petitioners argue that the impugned order of 03.09.2024, passed by Respondent No.1-KIADB under Section 34-B(3) of the KIAD Act, 1966, which extends the time for implementing the Project development on the scheduled property by two years from the date of approval of the sanctioned plan is arbitrary, illegal, and unreasonable. Thus, they seek to quash this order and revoke the allotment made in favour of Respondent No.2.
19. It is noteworthy that the observation in the Single Bench's order dated 16.05.2023, which stated that 'the question of locus standi of a party bringing an instance of State inaction regarding a breach of the Lease-cum-Sale Agreement by an allottee of a public property is secondary to the issue of illegality presented before the Court,' was diluted and modified by the Division Bench in W.A. No. 686/2023 connected with W.A. No. 689/2023, D.D. 26.07.2023. In that order, the Division Bench clarified that the petitioners were not necessary parties to the KIADB's inquiry proceedings and permitted the KIADB to take appropriate actions without being influenced by the Single Judge's
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 findings and observations. Accordingly, the petitioners' locus standi, if any, was negated by the Division Bench's order dated 26.07.2023.
20. Additionally, records show that the petitioners have filed a commercial suit, O.S. No. 234/2022, against Respondent No.2 and others before the Commercial Court, Bengaluru, seeking a declaration of their 50% equity shareholding in Respondent No.2
- Allottee and a permanent injunction to prevent the Allottee and others from creating third-party rights or charges over the scheduled property, in respect of their 50% claimed interest. In essence, the relief sought by the petitioners in O.S. No. 234/2022 contradicts the relief sought in the present petitions. Thus, the impugned order granting continued leasehold rights to Respondent No.2 over the scheduled property appears to benefit the petitioners, as revoking the allotment would render their suit for declaration and injunction meaningless and likely dismissed as infructuous. Furthermore, as previously noted, the KIADB extended the Allottee's leasehold rights in view of the Allottee's categorical undertaking that all borrowings secured against the scheduled property would be used for the sanctioned Project development.
21. In light of the petitioners' contentions in a prior round of litigation before this Court, and a combined reading of their prayer in the commercial suit and the present petitions, it may be reasonably inferred, absent evidence to the contrary that the petitioners are attempting to gain an unfair advantage over
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 Respondent No.2 - Allotee in their ongoing business negotiations by filing these petitions.
22. The petitioners have sought to place reliance upon a catena of decisions buttressing their contention of being an aggrieved person and therefore, possessing adequate locus to assail the order impugned herein. However, the order of the Division Bench dated 26.07.2023 and the relief sought for by the petitioners in the commercial suit in O.S. 234/2022 shall render any reference to the precedents relied upon by the petitioners, irrelevant and inconsequential in the adjudication of the present petitions.
23. It is a settled principle of law that only an aggrieved person can invoke the extraordinary writ jurisdiction of High Courts under Article 226 of the Constitution of India. An aggrieved person as opined in by the English Court of Appeal in the case of Re Sidebothem (1880) 14 Ch D 458 : 42 LT 783 does not mean any individual who is "disappointed of a benefit which he might have received if some other order had been made" but a person who has suffered a legal grievance so as to constitute wrongful deprivation of an enforceable legal right.
24. The jurisprudence regarding the locus standi of the petitioners in seeking a writ of Certiorari is well settled. It was held by the English Court of Appeal in the case of R. v. Paddington Valuation Officer, ex. p., Peachey Properties Corporation
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 (1966) 1 QB 380, at 401, that Courts "would not listen of course to a mere busybody who was interfering in things which did not concern him". In R. v. Thames Magistrates Courts, ex. P., Greenbaum, (1957) 55 LGR 129, the Court of Appeal had held that Courts retained the discretion to refuse any such application if the conduct was such as to disentitle the petitioner to relief, despite the petitioner having established any of the recognised grounds for quashing.
25. Pertinently, it was held by the High Court of Australia in the case of Permanent Trustee Co. of New South Wales v. Campbelltown Corpn., (1960) 105 CLR 401, that Courts would hardly ever exercise its discretion in favour of an applicant who had himself instituted the proceedings or benefitted from the order impugned in the petition.
26. In addition to the negation of the locus of the petitioners herein by the order of the Division Bench dated 26.07.2023, the Hon'ble Apex Court has held in the case of Bacha F. Guzdar, Bombay v. Commissioner of Income Tax, Bombay (1955) 1 SCR 876, that the rights of the shareholders in the company does not amount to more than a right to participate in the profits of the company and that it does not stretch to having any share in the property of the company. The Court further held that a company is a juristic person and is distinct from the shareholders. Therefore, it is a settled law that a shareholder does not possess a right to over the assets of the company as a whole.
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024
27. The Hon'ble Supreme Court as far back as in the case of State of Orissa v. Ram Chandra Dev (1964) 5 SCR 811 has held that before a writ or an appropriate order can be issued under Article 226 of the Constitution, it must be established that the party has a right and the said right is "illegally invaded or threatened. The existence of a right is thus the foundation of a petition under Article
226."
28. Furthermore, it has been held in the case of Jasbhai Motibhai Desai v. Roshan Kumar (1976) 1 SCC 671 by the Hon'ble Supreme Court that where a person has not sustained an injury to any legally protected interest and has not been subjected any legal wrong or has suffered wrongfully any legal grievance, such person is not a 'person aggrieved' to invoke the extraordinary jurisdiction of a writ Court. It further observed that however, in exceptional cases where an act or omission of an authority prejudicially affected a stranger or a person who was not a party to the proceedings before the authority, but had a substantial or genuine interest in the subject matter of the proceedings, Courts may allow applications under Article 226 to avoid miscarriage of justice.
29. It was further observed by the Hon'ble Apex Court in the case of Ghulam Quadir v. Special Tribunal, (2002) 1 SCC 33, that rights under Article 226 of the India Constitution can be
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 enforced only by an aggrieved person except in the case of where writ prayed for is habeas corpus and quo warranto.
30. Furthermore, the Apex Court has opined in the case of the Ayaayubkhan Noorkhan Pathna v. State of Maharashtra & Ors. (2013) 4 SCC 465 that existence of the legal right sought to be enforced is a condition precedent for invoking the writ jurisdiction of the courts. It further upheld the ratio enunciated in the case of Ravi Yashwant Bhoir v. District Collector, Raigad & Ors. (2012) 4 SCC 407, that "under the garb of being a necessary party, a person cannot be permitted to make a case as that of general public interest. A person having remote interest cannot be permitted to become a party in the lis, as the person who wants to become a party in a case, has to establish that he has a proprietary right which has been or is threatened to be violated, for the reason that a legal injury creates a remedial right in the injured person."
31. In conclusion, where the locus of the petitioners herein (who are the disputed shareholders of Allottee) before the proceedings of the KIADB against the Allottee in respect of the violations of the Lease Agreement dated 07.06.2007 was negated by virtue of the order dated 26.07.2023 passed by the Division Bench of this Court, the petitioners herein do not have the locus standi to lay a challenge to an order passed in pursuance of the order dated 26.07.2023, under the garb of espousing public interest by calling attention to State inaction qua unjust enrichment.
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NC: 2024:KHC:43995 WP No. 25857 of 2024 C/W WP No. 25851 of 2024 Furthermore, it is well settled that interested persons are not entitled to file public interest litigations.
32. A bare perusal of the order impugned herein, which grants an extension of a period of two years from the date of obtaining of plan sanction to implement the Project development over the scheduled property, reveals that it enures to benefit of the petitioners herein, provided they succeed in the pending litigations. It may thus, be reasonably inferred that the instant petitions have been preferred by the disputed shareholders of the Allottee entity solely to gain unfair advantage, settle personal scores and coerce the Allottee to arrive at a settlement in respect of their dispute, which is currently pending consideration before the Trial Court below. Therefore, the petitioners cannot contend to have suffered any legal injury and be allowed to seek a writ in the nature of Certiorari to quash the order impugned herein.
Accordingly, the petitions stand dismissed on the sole ground of lack of locus standi.
Sd/-
(HEMANT CHANDANGOUDAR) JUDGE BKM