IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No. 14715 OF 2006 Date of Decision: March 17, 2008 Vardhman Polytex Limited ...Petitioner Versus State of Punjab and another …Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE T.P.S. MANN Present: Mr. J.R. Mittal, Senior Advocate, with Mr. Nandan Jindal, Advocate, for the petitioner. Ms. Charu Tuli, Sr. DAG, Punjab, for the respondents. M.M.KUMAR, J. The petitioner Vardhman Polytex Limited (formerly M/s Punjab Mohta Polytex Limited) has filed the instant petition under Article 226 of the Constitution for quashing Memo. dated 20.2.2004 (P-3), issued by the Director, Department of Industries and Commerce, Punjab-respondent No. 2, conveying the decision of the Government dated 18.3.2002. According to the decision no subsidy on enhanced cost of land is admissible as there is no provision to that effect under Rule 11-A of the Industrial Policy 1978 (for brevity, ‘the policy’). The petitioner has also prayed for quashing letter dated 4.1.2006 (P-5), declining to release the enhanced subsidy on the same C.W.P. No. 14715 of 2006 ground. Brief facts necessary for disposal of the controversy raised in the instant petition are that the respondent State issued a policy vide notification dated 21.3.1979, which incorporated a number of rules for grant of incentives aiming to attract setting up of industry in Punjab. Accordingly, the policy was implemented by acquiring huge piece of land in village Bhatinda, Tehsil and District Bathinda for a public purpose, namely, for setting up a Spinning Mill there. The Land Acquisition Collector determined the rate of compensation payable to the land owners, vide award dated 4.2.1983. Consequently, the State Government took possession of the acquired land after paying compensation to the land owners. A track of land measuring 265 bighas 11 biswas was allotted by the respondents to the petitioner. The petitioner has claimed that on the promise given in the policy that 75% subsidy on the cost of land would be given, it had purchased the land and had established the Spinning Mill on the allotted land by investing huge amount and as per the policy, the petitioner paid the cost of the land in accordance with the award dated 4.2.1983. Subsequently, on a reference made under Section 18 of the Land Acquisition Act, 1894, the Additional District Judge, Bathinda, modified the award announced by the Collector by giving additional 12% market value, solatium @ 30% instead of 15% and interest. On appeal to this Court, the compensation on the acquired land was further enhanced to Rs. 1,20,000/- per acre. However, on further appeal before the Letters Patent Bench, the view of the learned 2 C.W.P. No. 14715 of 2006 Single Judge was not accepted and the Letters Patent Bench determined the compensation at Rs. 72,000/- per acre, vide judgment dated 1.7.1998. The order of the Letters Patent Bench was upheld as the SLP against the aforementioned order was dismissed. As a result, the petitioner end up by paying enhanced compensation amounting to Rs. 23,46,110/-. On 4.10.2002, the petitioner applied to the respondents through the General Manager, District Industries Centre, Bathinda, for payment of 75% of subsidy on the enhanced compensation, amounting to Rs. 17,59,441/- (P-2). On 20.2.2004, respondent No. 2 intimated that no additional subsidy could be granted to the petitioner as its case fell under rule 11-A (developed land) of the policy and, therefore, it was not eligible for subsidy. However, the petitioner claimed vide its letter dated 21.5.2004 (P-4) that its case fell under rule 11-B (undeveloped land) of the policy and, therefore, was eligible for subsidy. The aforementioned letter was replied back by the respondents by taking the same stand that after thorough secrutinising of the case even under rule 11-B of the policy, no subsidy on enhanced cost of land was payable. The stand of the respondents in the written statement is that the petitioner has been sanctioned land subsidy amounting to Rs. 11,84,400/- under the policy, vide order dated 12.12.1985 and further an amount of Rs. 1,27,338/- was released to the petitioner vide order dated 14.2.1986 (R-1 & R-2). It has been represented that under the notification dated 2.12.1985, rule 11-B of the policy has been interpreted by the Principal Secretary to Government Punjab, 3 C.W.P. No. 14715 of 2006 Department of Industries and Commerce, who is competent and final authority to interpret the rules. According to the interpretation, land subsidy on enhanced cost of land is inadmissible as there is no such provision in rule 11-B of the policy (R-3). Accordingly, the petitioner has been informed vide order dated 20.2.2004 (P-3) and letter dated 4.1.2006 (P-5), which are subject matter of challenge in this petition. It has further been represented that the claim of the petitioner stems from total misreading and wrong interpretation of the relevant terms of the policy. In the preliminary submissions it has been emphasised that the spirit of providing subsidy was to reduce the financial burden on an entrepreneur in setting up of an industrial unit, which is significant in the initial stages when financial assistance is very important to help the unit to stand on its own feet. Once the unit is able to grow by ploughing its own profits then it achieves financial stability due to creation of reserves and surpluses. Following the aforementioned policy, no subsidy on enhanced compensation has been made admissible. The question which arises for consideration of this Court is as to whether the petitioner would be entitled to incentives under any of the Rules 11A or 11B of the policy. The relevant extract of rules 11-A and 11-B of the policy reads as under:- “11. Land Subsidy – 11-A Developed plots in Focal Points. 11-A(1) Subsidy shall be allowed to a unit in respect of developed plot allotted to it in a Focal Point Industrial Area, Industrial Estate or Industrial Colony developed by or under the authority of the State Government to the 4 C.W.P. No. 14715 of 2006 extent given thereinafter on transaction of sale effected on or after the 1st April, 1978: Provided that the plot in question has not been purchased in auction or tender or any other mode of competition: Provided further that if the plot in question has been purchased in auction or tender or any other mode of compensation, the price to be taken into account for this purpose shall be the reserve price as approved by the Director. 11-A(2) The amount of subsidy shall be 75% of the portion of price of plots in excess of ceiling price payable by the allottees at the rate of Rs. 12 per sq. yard for group 1, Rs. 10 per sq. yard for group II and Rs. 8 per sq. yard groups II and IV. The balance 25% of the excess price over these rates shall be borne by the units in addition to the ceiling price. xxx xxx xxx xxx xxx 11B. Undeveloped Land. 11B(1) Subsidy shall be allowed to a unit in respect of undeveloped land acquired for or sold to it by the State Govt. under the land acquisition act or the land purchased by the unit by allotment from a Local Body including village Panchayat, Municipal Committee or Improvement Trust or any other Department of the State or Central Govt: 5 C.W.P. No. 14715 of 2006 Provided where the land in question has been purchased in auction or tender or any other mode of competition from one of the above-mentioned bodies, the reserve price shall be taken into account for the purpose of calculating subsidy: Provided further that area less than 10 acres shall not ordinarily be acquired and provided further that the Director shall be the competent authority to determine the suitability of land for the purpose. 11B(2) The amount of subsidy shall be 75% of the price of land above the ceiling price payable by the unit which would be Rs. 3/- per square yard for group I and II and Rs. 2/- per square yard for groups III and IV: Provided that the balance 25% of the excess price of land above the ceiling price shall be payable by the unit from its own sources alongwith the amount of ceiling price. xxx xxx xxx xxx xxx” The aforementioned provisions are required to be interpreted, by virtue of rule 19 of the policy, by the Secretary to Government Punjab, Department of Industries, and the decision taken by him has to be considered as final. Rule 19 was added to the policy on 2.12.1985 by issuing a notification incorporating amendment in the policy (R-3). Placing reliance on the aforementioned power of interpretation, the respondents have passed the impugned order holding that in pursuance to decision of the Government taken on 6 C.W.P. No. 14715 of 2006 18.3.2002, the case of the petitioner is not covered under rule 11A of the policy and no land subsidy on enhanced compensation could be sanctioned. The decision of the Government, dated 18.3.2002, has been taken on record as Mark ‘A’ and the same reads as under:- “2. Under Rule 11-A of Industrial Policy-1978, land subsidy is granted on developed plots in Focal Points. The issue, whether land subsidy can be granted on the enhanced cost of land has been examined at the level of the Government. Principal Secretary to Government Punjab, Department of Industries & Commerce in accordance with powers granted vide Notification No. 9/22/85-2IBI-85/13609, dated 2.12.85 has interpreted Rule 11(A) of Industrial Policy to the effect that “land subsidy on enhanced cost of land is inadmissible as there is no provision to this effect under the said rule”. This interpretation may be kept in view while examining all pending/fresh cases in your districts.” Keeping in view the aforementioned interpretation placed on rule 11-A, similar interpretation was put on rule 11-B of the policy. It became evident from the record that such interpretation was adopted when the case of the petitioner was examined. The note put up by the office of Industries Department shows the same stand as has been taken by the respondents in the preliminary submissions of the written statement. The note suggests that if entrepreneur like the petitioner who have access to various sources of finance continue to lay claim to subsidies on enhanced value of their assets/land then 7 C.W.P. No. 14715 of 2006 other deserving units, especially small scale industries, which are struggling to stand on their feet, would be denied their due share as the funds available with the Government are meager. Such a grant of land subsidy would create a bad precedent resulting into opening of flood gates for similar requests from units from all over the State. It has further been pointed out that there is already backlog of outstanding dues of subsidy touching to Rs. 500 crores and any additional burden would be impossible to sustain. Last two paras of the note are worthwhile to notice as the last para was approved for rejecting the claim of the petitioner and the same reads as under:- “ It is clear from the above that the spirit behind rule 11 of Industrial Policy 1978 was not such as to give unending benefits on the same piece of land for eternity. It is also mentioned that as in the case of interpretation made of rule 11A in the case of rule 11(B) also there is no explicit provision in the industrial policy 1978 to grant land subsidy of enhanced cost of land. It is, therefore, proposed to interpret rule 11 (B) of Industrial Policy 1978 to the effect that land subsidy on enhanced cost of land is in-admissible as there is no provision under Rule 11(B) for grant of land subsidy on the ‘enhanced cost of land’. PSIC is the Competent Authority under Rule 19 of Industrial Policy 1978 to interpret the Rules. PSIC is therefore requested to interpret Rule 11(A) as proposed above please.” The interpretation adopted by the respondents is 8 C.W.P. No. 14715 of 2006 inherently supported by the language of the rule. In the case of undeveloped land purchased in auction or tender or any other mode of competition from local bodies or any other department of the State or Central Government then for the purposes of calculating subsidy, the reserve price alone has to be taken into account. Therefore, any amount paid over and above the reserve price would not qualify for calculating land subsidy. The principle of interpretation, known as ejusdem generis would fully apply to the instant case. According to the principle, the preceding words must take their meaning from the succeeding words. Therefore, it can be concluded that the land subsidy as a policy of the Government is given only at the initial stage and is restricted to help the entrepreneur to set up the industry and once that is done then the necessity of any further land subsidy would become insignificant. It is well settled that the policies of the Government, especially in the matter of finances, should not be interfered with by the Courts. In State of Jharkhand v. Ambay Cements, (2005) 1 SCC 368, Hon’ble the Supreme Court was considering the question of exemption under the Industrial Policy 1995 issued by the State of Jharkhand. It has been held by Hon’ble the Supreme Court that the conditions prescribed by the authorities for grant of exemption were mandatory for availing exemption and that the High Court in exercise of jurisdiction under Article 226 of the Constitution should not have issued directions for grant of exemption in favour of the writ petitioner overlooking the statutory conditions. Their Lordships’ held as under:- 9 C.W.P. No. 14715 of 2006 “23. Mr Bharuka further submitted that in taxing stat- utes, provision of concessional rate of tax should be lib- erally construed and in respect of the above submission, he cited the judgment of this Court in CST v. Industrial Coal Enterprises [(1999) 2 SCC 607] and in the case of Bajaj Tempo Ltd. v. CIT [(1992) 3 SCC 78]. We are un- able to countenance the above submission. In our view, the provisions of exemption clause should be strictly construed and if the condition under which the exemp- tion was granted stood changed on account of any subse- quent event the exemption would not operate. 24. In our view, an exception or an exempting provi - sion in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions pre- scribed in the industrial policy and the exemption notifi- cations. 25. In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rule must be strictly observed, substantial compliance might suffice in the case of a directory rule. 26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of interpretation that 10 C.W.P. No. 14715 of 2006 where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein. 27. For the foregoing reasons, we hold that the High Court has erred in allowing the writ petition filed by the respondent herein and directing the grant of exemption in favour of the respondent. We, therefore, have no hesitation in setting aside the judgment and order passed by the High Court and allowing this appeal.” (Emphasis added) Similar observations have been made by Hon’ble the Supreme Court in the case of A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala, (2007) 2 SCC 725. It is also well settled that consession, exemption and incentives given by the Government are part of the Government policy and such policies unless shown to be contrary to law or inconsistent with the provisions of the Constitution, cannot be subjected to judicial review. For the aforementioned view, we place reliance on para 23 of the judgment of Hon’ble the Supreme Court in the case of Sidheshwar Sahakari Sakhar Karkhana Ltd. v. Union of India, (2005) 3 SCC 369, which 11 C.W.P. No. 14715 of 2006 reads as under:- “23. We are also of the view that grant of rebate, exemption or concession is in the nature of policy of the Government. Normally in such policy matters, a court of law will not interfere unless the policy is shown to be contrary to law, inconsistent with the provisions of the Constitution or otherwise arbitrary or unreasonable. Since the policy decision as reflected in para 3 of Notification No. 132/82 cannot be said to be arbitrary, unreasonable or inconsistent with statutory provisions, a person claiming the protection under the said notification has to comply with the conditions laid down in the notification. As the appellant has been granted benefit of rebate in excise duty as per para 3 of the notification, the action cannot be held unlawful and the appellant Society has no reason to make grievance against the action of the Revenue.” When we examine the facts of the present case, it becomes evident that there is no provision made for including the element of enhanced compensation under rule 11B of the policy for the purposes of calculation of land subsidy. In the absence of any express provision made in the rules it cannot by process of interpretation be implied. Moreover, the object of public policy of granting incentive at the initial stage stand achieved, which is to support the industry in the beginning as it needs huge finances. The interpretation of rule 11A and 11B, given by the Principal Secretary 12 C.W.P. No. 14715 of 2006 to Government, Department of Industries and Commerce, is just and reasonable and deserves to be upheld and the writ petition is liable to be dismissed. For the reasons aforementioned, this petition fails and the same is dismissed. (M.M.KUMAR) JUDGE (T.P.S. MANN) March 17, 2008 JUDGE Pkapoor FIT FOR INDEXING 13