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Fortune Pai Software Private Limited, Bangalore & Another v/s Karnataka Industrial Area Development Board, Bangalore & Another


Company & Directors' Information:- R S SOFTWARE (INDIA) LTD. [Active] CIN = L72200WB1987PLC043375

Company & Directors' Information:- C K SOFTWARE PRIVATE LIMITED [Active] CIN = U72501DL2000PTC106184

Company & Directors' Information:- K K SOFTWARE PRIVATE LIMITED [Active] CIN = U72900DL2009PTC193030

Company & Directors' Information:- A K C SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC128462

Company & Directors' Information:- P AND P SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL1994PTC057212

Company & Directors' Information:- SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72200GJ1995PTC025791

Company & Directors' Information:- N. D. SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG1998PTC029778

Company & Directors' Information:- T AND H SOFTWARE PRIVATE LIMITED [Active] CIN = U72200UP2000PTC025638

Company & Directors' Information:- M S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC133997

Company & Directors' Information:- FORTUNE PAI SOFTWARE PRIVATE LIMITED [Active] CIN = U72200KA2005PTC037231

Company & Directors' Information:- G A S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC127546

Company & Directors' Information:- B B SOFTWARE LTD [Strike Off] CIN = L30009WB1995PLC072361

Company & Directors' Information:- H K SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200WB2001PTC093967

Company & Directors' Information:- J SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TZ2000PTC009229

Company & Directors' Information:- K S M SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC128463

Company & Directors' Information:- R B SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC140322

Company & Directors' Information:- SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72200RJ1995PTC010577

Company & Directors' Information:- R J SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC133815

Company & Directors' Information:- BOARD SOFTWARE (INDIA) PRIVATE LIMITED [Active] CIN = U72200MH2007PTC176146

Company & Directors' Information:- I & I SOFTWARE INDIA PRIVATE LIMITED [Strike Off] CIN = U72200TN2005PTC056262

Company & Directors' Information:- D F SOFTWARE INDIA PRIVATE LIMITED [Strike Off] CIN = U72200TZ2003PTC010629

Company & Directors' Information:- E. C. SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72900TN2007PTC063486

Company & Directors' Information:- Q 3 INDIA SOFTWARE PRIVATE LIMITED [Active] CIN = U72900TN2007PTC065786

Company & Directors' Information:- FORTUNE INDIA PRIVATE LIMITED [Strike Off] CIN = U29302DL2002PTC114932

Company & Directors' Information:- K Y SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC136072

Company & Directors' Information:- T M I SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200KA2005PTC036299

Company & Directors' Information:- H K FORTUNE PRIVATE LIMITED [Strike Off] CIN = U52391DL2000PTC108889

Company & Directors' Information:- KARNATAKA INDUSTRIAL PRIVATE LIMITED [Strike Off] CIN = U29222KA1974PTC002711

Company & Directors' Information:- B C L SOFTWARE (INDIA) PRIVATE LIMITED [Strike Off] CIN = U30007MH1999PTC117922

Company & Directors' Information:- M I S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TN2008PTC068694

Company & Directors' Information:- A. T. SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TG1996PTC023841

Company & Directors' Information:- J A K SOFTWARE PVT LTD [Active] CIN = U72200DL2001PTC111929

Company & Directors' Information:- R R SOFTWARE PVT LTD [Under Process of Striking Off] CIN = U72200KL1991PTC006051

Company & Directors' Information:- A M H SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC132410

Company & Directors' Information:- P D A SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900DL2003PTC123465

Company & Directors' Information:- K C SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL1989PTC036923

Company & Directors' Information:- I SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72300MH2012PTC225903

Company & Directors' Information:- V M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900PN2010PTC136847

Company & Directors' Information:- H M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200HP2011PTC031756

Company & Directors' Information:- S N R SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900DL2012PTC243073

Company & Directors' Information:- C M S SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL2005PTC142352

Company & Directors' Information:- S M I T SOFTWARE COMPANY PRIVATE LIMITED [Strike Off] CIN = U74899DL2006PTC144816

Company & Directors' Information:- A D SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200KA2002PTC030722

Company & Directors' Information:- H. A. N. R. E. J SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG2008PTC062044

Company & Directors' Information:- KARNATAKA INDUSTRIAL COMPANY LIMITED [Strike Off] CIN = U33130KA1916PLC000063

Company & Directors' Information:- INDUSTRIAL DEVELOPMENT COMPANY LIMITED [Strike Off] CIN = U99999KA1938PLC000231

    Writ Petition No. 25420 of 2011 (GM-KIADB)

    Decided On, 05 October 2018

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE R. DEVDAS

    For the Petitioners: G.L. Vishwanath, Advocate. For the Respondents: R1, Basavaraj V. Sabarad, R2, Anandita Srinivasan, C.M. Poonacha, Advocates.



Judgment Text


(Oral)

1. The 1st petitioner is a company incorporated under Companies Act, 1956 and the 2nd petitioner is a shareholder and Director of the company. The petitioners are before this Court raising a challenge to Annexures-V and Y which are communications issued by the respondent-Karnataka Industrial Areas Development Board (for short, 'KIADB') calling upon the petitioners to pay a sum of Rs. 9,63,46,100/- towards difference in costs of land and EMD, in respect of 24,368 square mtrs. of land in Plot Nos. 29-PI and 30 of Electronic City, 2nd Phase Industrial area. The petitioners have also called in question a portion of approval letter dated 15-3-2010 issued by the Karnataka Udyog Mithra, which is respondent 2 herein.

2. The brief facts of the case are as follows:

The Company by name M/s. SJK Hisoft India Limited (for short, 'SJK') was allotted with the above mentioned industrial site in the year 2004. Pursuant to the allotment, SJK made payment to the KIADB amounting to a total sum of Rs. 2,40,85,775/- and possession of the site was handed over to SJK on 31-3-2005, along with possession certificate. A lease-cum-sale agreement was entered into between the KIADB and SJK on 3-8-2005. Since SJK was not in a position to go ahead with the project, a requisition was made for transfer of leasehold rights in favour of M/s. Fortune Pai Software Private Limited, i.e., 1st petitioner herein. After completing the formalities, KIADB agreed to transfer leasehold rights in favour of the 1st petitioner vide letter dated 5-1-2006. Subsequently, a fresh lease-cum-sale agreement was entered into between the 1st petitioner and KIADB on 12-6-2006. The 1st petitioner was called upon to pay 10% of difference in costs of land payable after effecting forfeiture as per Rules and 10% transfer charges and such other charges which amounted to Rs. 49,04,256/-. The said amount was paid by the 1st petitioner on 6-1-2006.

3. In terms of the conditions stipulated in the agreement, the 1st petitioner was to obtain sanction for putting up construction from KIADB after securing approval for the project from Karnataka Udyog Mithra (for short, KUM ). It is stated in the petition that there was High Tension electricity lines running over the site in question and therefore, the petitioners had sought for shifting of the said High Tension electricity lines. It is also averred that there was delay in implementing the project because of non-shifting of High Tension electricity lines and delay in securing approval from the KUM.

4. In the meanwhile, KIADB seems to have initiated action for resumption of the land in question, since the petitioners failed to implement the project within the stipulated time. After several communications between the petitioners and KIADB, the action which was sought to be taken by the KIADB for resumption of land was given up. Subsequently, the High Tension electricity lines were shifted and applications made by the petitioners before the KUM were considered and project was approved by the KUM and the same was communicated by letter dated 15-3-2010 to the 1st petitioner herein. In the said approval at Annexure-T, which is also said to be questioned by the petitioners, KUM has approved the project proposal for establishment of a "Software Park" with a cost of Rs. 40.00 crores subject to the condition that the Company should pay the present cost of land. Following the communication and approval issued by the KUM, the 1st respondent-KIADB issued a letter dated 22-5-2010 at Annexure-V, calling upon the 1st petitioner to pay a sum of Rs. 9,63,46,100/- which is the difference in cost and EMD payable. Being aggrieved by the same, the petitioners are before this Court calling in question the communications issued by KIADB and KUM.

5. Sri G.L. Vishwanath, learned Counsel for the petitioners submits that the Karnataka Udyog Mitra, has no authority of law in directing the KIADB to impose a condition that the petitioner-Company should pay the present cost of land. The learned Counsel further submits that the agreement entered into between the parties does not permit the KIADB to claim the present cost of land. The learned Counsel submits that the impugned communications, whereby the petitioners were called upon to pay the difference in cost of land and EMD by stipulating the prevailing rate of cost of land is arbitrary and irrational. It is also pointed out that the impugned communications suffer from the vice of denial of natural justice to the petitioners, inasmuch as the petitioners were not heard before the impugned communications were made to the petitioners.

6. The learned Counsel hastens to add that even on equity, the respondents should have taken note of the fact that the petitioners have invested huge sums of money and at present, the skeletal structure of four storeys are put up on the land in question. It was also submitted that the reason for delay may not be completely held against the petitioners, since the High Tension power lines that were running across the land in question had to be shifted and it was indeed, the responsibility of KIADB to shift the power lines. The delay, according to the learned Counsel, was also because the initial project had to be given up and a fresh proposal had to be made before the KUM and after having made the application seeking approval on 8-12-2008, the approval was granted by the State Level Single Window Clearance Committee on 25-2-2010 and communicated to the petitioners on 15-3-2010. It is therefore contended that the delay is not attributable only to the petitioners. Even otherwise, it was submitted that as per Clause 22 of the agreement dated 12-6-2006, the KIADB was to fix the price of the said premises and communicate to the lessee at the earliest after the agreement was entered into. The learned Counsel submits that similar conditions imposed by KIADB on the allottees were called in question before this Court in the case of Prakash Dal Mill and Others v. Government of Karnataka and Others ILR 2003 Kar. 1622 (DB).

7. Attention of this Court is drawn to paragraph 19 of the judgment in Prakash Dal Mill's case (supra) which reads as under:

"19. Even assuming that the Board has power to alter or change the sital value according to its convenience, it is under an obligation to explain and satisfy the Court that its action of enhancing the price is reasonable and fair. In that regard, what the Division Bench of this Court observed in the case of E.R. Manjaiah and Others v. Bangalore Development Authority and Others, is quite apposite and it reads:

"The escalation of the prices of the land, the enhancement of compensation, the payment of development charges and other expenses incurred by the, authority may justify the alteration/revision of the sital value. The schemes initiated by the respondent-authority are welfare schemes and cannot be used to their disadvantage. This does not however mean that the authority has right to alter the sital value according to its convenience or whims without furnishing any explanation. The authority is under an obligation to explain and to satisfy the Court regarding its action of enhancing the prices. This Court can examine whether the decision making process for enhancing the sital value was reasonable or rational and not arbitrary being violative of Article 14 of Constitution of India. Once it is prima facie established that the procedure adopted by the authority was against the mandate of Article 14, the Court has authority to intervene and protect the rights of the affected allotees.""

8. The learned Counsel places reliance on another judgment of this Court in the case of Vijendra Kamath v. State of Karnataka, ILR 1998 Kar. 1661, wherein the right to seek escalation by fixing final cost by the Bangalore Development Authority ('BDA') was called in question. This Court held that BDA has tried to use the sleight of hand method in arriving at the final cost. This Court frowned upon the manner in which BDA sought to use the right to seek escalation and fix final cost to short change the allottees by making an excessive claim and that too nearly a decade after the first increase under the guise of fixing the final cost. It was further held that where escalation is permissible the allottees are liable to pay the escalation based on actual cost and BDA is not entitled to introduce the elements of market price by adding percentages over actual cost or by otherwise bloating the cost. In fact, these observations were al so taken note of in the case of Prakash Dal (supra).

9. The learned Counsel further submits that the first respondent-KIADB took up the matter before the Hon'ble Apex Court and in a reported judgment in the case of Karnataka Industrial Areas Development Board and Another v. M/s. Prakash Dal Mill and Others, (2011)6 SCC 714, the Hon'ble Apex Court upheld the judgment of the Division Bench of this Court while quashing the similar communication issued by the KIADB seeking payment of the escalation of final cost.

10. Sri Basavaraj V. Sabarad, learned Counsel appearing for the 1st respondent-KIADB submits that the decision in Prakash Dal's case (supra) is not applicable to the facts of the present case. The learned Counsel submits that in the case on hand, the KIADB was directed by the KUM, while granting approval, that the petitioners shall be liable to pay the present cost of the land and therefore at the instance of the KUM, KIADB was duty-bound to call upon the petitioners to pay the present cost of land and therefore, the case on hand, does not stand on the same footing as Prakash Dal's case (supra).

11. The learned Counsel further submits that when the KUM communicated to the petitioners by letter dated 15-3-2010 that the project proposal was approved subject to the condition that the Company paying the present cost of land, the petitioners did not question the decision of the KUM and therefore the decision of the KUM has attained finality. The learned Counsel further submits that KIADB could not be accused of causing delay in the petitioners' implementing the project. The learned Counsel submits that it was for the petitioners to make an application to the concerned authorities to get the High Tension power line shifted and it was not the responsibility of the KIADB. It was also pointed out that since the petitioners failed to implement the project, KIADB proceeded to take action in accordance with law and resumed the land back from the petitioners. In fact, it was pointed out that after the petitioners submitted the plan for construction, within three days KIADB has approved the building plan and there cannot be any sort of attribution on the part of KIADB for the delay caused.

12. Learned Counsel Ms. Anandita Srinivas, appearing for the KUM was called upon to point out the power or authority of the KUM in directing or imposing a condition on the petitioners to pay the present cost of the land. The learned Counsel fairly submits that under the Karnataka Industries (Facilitation) Act, 2002 ('Facilitation Act, 2002' for short) and Rules thereunder, there was no specific provision that would empower the KUM to impose such a condition while granting its approval. However, the learned Counsel submits that the condition imposed by the KUM in its letter dated 15-3-2010 was in fact not a condition imposed by the KUM, but was the condition imposed by the State Level Single Window Clearance Committee in its 56th meeting held on 25-2-2010 while granting its approval and the same was communicated by letter dated 15-3-2010.

13. To a pointed question as to whether the State Level Single Window Clearance Committee at all had such a power, the learned Counsel points out to Section 8 of the Facilitation Act, 2002. Section 8 of the Facilitation Act, 2002, reads as follows:

"8. Powers of the Committee. - The State Level Single Window Clearance Committee shall be the final authority in granting approvals for the projects placed before it. The approvals given by the Committee shall be binding on the departments or authorities concerned and such departments or authorities shall issue the required clearance within the stipulated time subject to compliances by the entrepreneurs with the provisions of the applicable Central or State Acts or rules made thereunder."

14. Having heard the learned Counsels and on perusing the pleadings and records placed before the Court, what emerges is that neither KUM nor the State Level Single Window Agency Clearance Committee could impose such a condition directing the KIADB to collect the present cost of land from the project opponent. Section 8 of the Facilitation Act, 2002, provides that the decision of the Committee shall be binding on the Departments or authorities concerned and such Departments or authorities shall issue the required clearance within the stipulated time subject to compliances by the entrepreneurs with the provisions of applicable Central or State Acts or Rules made thereunder.

15. In other words, the decision of the Committee with respect to grant or rejection of approval was final and binding on all the Departments concerned. This provision does not empower the Committee to impose a condition that the project could be approved on a condition that the present cost of land should be collected. Even otherwise, the conditions imposed in the agreement between the KIADB and the allottees or the lessess regarding payment of the final cost and the power of the KIADB to fix such a final cost is the only provision under which the KIADB could fix the final cost. Since the relevant provision was considered in the case of Prakash Dal and Others (supra), the decision in Prakash Dal Mill's case is binding on KIADB and has been rightly relied upon by the learned Counsel for the petitioners. While considering Clause 7(b) of the lease-cum-sale agreement, the Hon'ble Apex Court has held that the aforesaid clause would not permit the Board to arbitrarily or irrationally fix the final price of the site. The power of price fixation under Clause 7 being statutory in nature, it would have to be exercised in accordance with the statutory provision and it cannot be permitted to be exercised arbitrarily.

16. Clause 7(b) that is considered in Karnataka Industrial Areas Development Board and Another v. Prakash Dal Mill's case is extracted hereunder:

"7. (b) As soon as it may be convenient the lessor will fix the price of the demised premises at which it will be sold to the lessee and communicate it to the lessee and the decision of the lessor in this regard will be final and binding on the lessee. The lessee shall pay the balance of the value of the property, if any, after adjusting the premium and the total amount of rent paid by the lessee, and earnest money deposit within one month from the date of receipt of communication signed by the Executive member of the Board. On the other hand, if any sum is determined as payable by the lessor to the lessee after the adjustment as aforesaid, such sum shall be refunded to the lessee before the date of execution of the sale deed."

17. Since the basis for impugned demands in the case of Prakash Dal Mill and in the case on hand are one and the same, the impugned demands pursuant to Annexures-V and Y, dated 22-5-2010 and 16-12-2010 respectively deserve to be quashed. Since this Court has held that the KUM had no authority to direct the KIADB to impose such a condition while granting its approval, the conditions imposed by the KUM at Annexure-T to the extent of imposing the condition on the petitioner-Company to pay the present cost of land also deserves to be set aside.

18. The petitioners have made a prayer seeking a writ of mandamus or any appropriate writ or direction to the 1st respondent-KIADB to duly consider the petitioners representation dated 14-6-2011 and extend the lease-cum-sale agreement. At this juncture, the learned Counsel for the petitioners points out to the proceedings dated 22-8-2017 before the KIADB, wherein during the course of these proceedings, inspections of the land in question were held by KIADB and it was recommended by the Members of the Board that the petitioner-Company has taken all effective steps to implement the project and also produced an investment certificate to the tu

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ne of Rs. 19,22,08,077/-. It was also noted that due to the delay in shifting of 66 KV High Tension line passing through the plot Nos. 29-PI and 30, the Company could not implement the project in time. Hence, it was recommended that the petitioner-Company deserves all co-operation and support including considering their requests for granting extension of time for speedy implementation of the project. 19. The learned Counsel therefore submits that due regard should be had to the latest position and the prayer may be moulded accordingly. 20. In the light of the subsequent developments and having regard to the fact that KIADB itself has considered appropriate to extend co-operation to the petitioner-Company to implement the project at the earliest, this Court deems it appropriate to direct the 1st respondent-KIADB and the KUM to extend the time for implementation of the project for a reasonable time. It is also open to the KIADB to reconsider its decision in fixing the final price in terms of Clause 22 of the agreement, in the light of the observations of the Hon'ble Apex Court in Prakash Dal Mill's case (supra). 21. In the light of the observations made by this Court and the Hon'ble Supreme Court in the case of Prakash Dal Mill, this decision shall be placed before KUM for consideration of extension of time for the implementation of the project and the KUM shall pass orders within a period of six weeks from the date of certified copy of this order. 22. The petition is accordingly allowed and the impugned Annexures-V and Y, dated 22-5-2010 and 16-12-2010 are quashed and set aside. That portion of communication dated 15-3-2010, at Annexure-T, imposing a condition that the present cost of land showed be paid, is also quashed and set aside. No order as to costs.
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