IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 5180 of 1994 WITH SPECIAL CIVIL APPLICAITON NO. 2792 OF 1995 For Approval and Signature: Hon'ble MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- UNITED SAL LWORKS & INDUSTRIES LTD Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 5180 of 1994 MR RS SANJANWALA for Petitioner No. 1-2 MR RM CHAUHAN AGP for Respondent No. 1-3 MR KS JHAVERI for Respondent No. 4 MR DS VASAVADA for Respondent No. 5 MR JT TRIVEDI for Respondent No. 6 1. Special Civil Application No. 2792 of 1995 MR RS SANJANWALA for Petitioner No. 1 MR SR BRAHMBHATT for Respondent No. 1 MR DS VASAVADA for Respondent No. 2 MR JT TRIVEDI for Respondent No. 3 MR HIMANSHU TRIVEDI for Respondent No. 3 NOTICE NOT RECD BACK for Respondent No. 4 -------------------------------------------------------------- CORAM : MR.JUSTICE KUNDAN SINGH Date of decision: 07-09/05/2003 COMMON ORAL JUDGEMENT 1. In both these petitions filed by one and the same petitioner, and identical and similar questions are involved and hence these petitions are being disposed of by this common judgment. 2. By means of Spl.C.A. No. 2792 of 1995, the petitioner has sought for quashing and setting aside the orders bearing Nos. LW/PL/1714-VII/908 to 912 all dated 1-7-1994 passed by the respondent Kandla Port Trust. Whereby lease of plots commenced on 10-4-1974 have been cancelled and determined with effect from 9-4-1995 while in Spl. C.A. No. 5180 of 1994, the petitioner has sought for quashing and aside the orders of the Collector dated 10-3-1994 wherein lease of agreement extended on 19-3-1976 have been revoked and the application dated 29-10-1994 of the petitioner has been rejected and that of the Secretary (Appeals) dated 4-4-1994 and for a direction to the respondents to extend the lease for further 20 years and also for a directions to the respondents no.1 and 2; State of Gujarat and the Collector, Kutch respectively to renew the lease of the land in question for further period of 20 years on the same terms and conditions and also for restraining the respondents no. 1 and 2, their servants, agents, contractors etc. not to dispossess the petitioner from the land in question or otherwise interfere with the possession and enjoyment of the petitioner's suit land except by following due process of law. 3. In Spl. C.A. No. 2792 of 1995, it is alleged that the petitioner is one of the oldest salt works in the country with a glorious history. It is the first public limited company in the erstwhile State of Kutch. The petitioner's firm was granted lease of 560 Acres of land on 1o-4-1934 by the then State of Kutch. After making development Production of salt started in the year 1941. Even during the period of second world war, the petitioner was successful in producing High Class fine white salt. Lease of additional land was also granted to the petitioner in the year 1948 and thus the petitioner had total area of about 1400 Acres of land. Development of Kandla was to be undertaken by disturbing the works in question. Production of salt by the petitioner was increased in the year 1948-49 and hence additional land admeasuring 1385 acres was also given to the petitioner by Kandla Port Trust. Thus, the petitioner Company has 2708 Acres of land for producing the salt. Amenities for the employees were also provided. The quarters were also provided for the contract, seasonal and casual labourers. The petitioner company installed 12 storage tanks at different sites for providing potable water to the employees. Thus, the petitioner company has given substantial facilities i.e. primary schools, dispensary, recreation and sports to the persons/employees concerned by making development. The petitioner company also erected rail network and was running locomotives for internal transfer of salt. Due to natural calamities, the production of salt was reduced. The petitioner was one of the largest exporters of salt to many countries including Japan and the quality of salt manufactured in Kandla was adjudged to be containing greater percentage of NaCL, due to the locational advantage and natural reasons. The petitioner company required additional land. Additional storage capacity was required to store the sea water so as to increase the salinity by evaporation of the water contents, as the vacant lands were available from the respondent no. 1 which were adjoining to the original piece of land, leased out to the company by the Maharao of Kutch and then the same was renewed by the Government of Gujarat, the petitioner company took the same land on lease in the decade of 1950s and the lease deeds were executed in the year 1963. Details of land area and lease are given as under : A. Area of land : Acres 38850. Date of possession by the petitioner company 9.2.1953 for the period, 9-2-1953 to 9-4-1974. B. Area of land : Acres 25.574 Date of possession by the petitioner company : 17-8-1962. First lease deed made on : 10-4-1964 for the period, 17-8-1962 to 9-4-1974. Lease renewed for the period till 9-4-2004 vide lease deed dated 7-4-1979. C. Area of land : Acres 1335.54 Date of possession by the petitioner company : 9-2-1959 First lease deed made on : 10-4-1963 for the period : 9-2-1989 to 9-4-1974. Lease renewed for the period till : 9-4-2004 vide lease deed dated 7-4-1979. Remaining two plots of land admeasuring Acres 27.924 and Acres 2.400 respectively were also leased out and lease was renewed till 9-4-2004 for a period of 30 years from 9-4-1974. In the past the respondent Kandla Port Trust has not been fair in their dealing with the petitioner in respect of the leases . When the lease came up for renewal effective from 10-4-1974, the respondent no.1 Kandla Port Trust created various obstacles in the way of renewing the leases and the petitioner was pressurized to surrender 117 acres of land developed at the considerable costs of the petitioner, to the IFFCO without any compensation and the renewal was granted only thereafter and lease deed was finalized as late as in the year 1979. The salt work suffered gradually due to heavy damage to the ground work and other damage caused by exceptionally heavy rains and very high tides in two to three seasons the management tried to restart the operations on a reasonable scale in the year 1986, after entering into compromise with the Labour unions. The petitioner wanted to restart the activity of salt manufacturing on a larger scale and tried its level best to get the necessary finance. However, due to reasons beyond the control of the management, the operations could not be restarted. Hence, the petitioner had no option but to approach the Board for Industrial and Financial Reconstruction, New Delhi ("BIFR" for short). The application for that purpose was made by the petitioner on 1-1-1988. The reference of the petitioner's company was not held to be maintainable by BIFR in terms of the order passe don 28-2-1990 and the matter was considered as being outside the purview of SICA. Appeal No. 18 of 1990 was filed before the Appellate Authority and that appeal was allowed on 11-10-1990 holding that Reference u/s 15 of the SICA was maintainable and the matter was referred back to the BIFR by the appellate authority. BIFR passed the order on 26-2-1991 holding that the petitioner Company to be a sick industrial unit u/s 3 (1) (o) of the SICA and Bank of India (respondent no. 3) was appointed as an operating agency u/s 17 (3) of the SICA and was asked to submit a report on viability of the petitioner and also a feasible rehabilitation scheme. The respondent no. 3 - Bank of India submitted its report dated 22-10-1991 wherein the petitioner company was considered to be viable unit and a draft report on the techno-economic viability and rehabilitation of the unit was submitted to BIFR. Owing to change in parameters concerning the sick units, in regard to the promoters' contribution, the operating agency submitted a revised draft report to BIFR vide its letter dated 24-4-1992. As Bank of India and IRBI expressed unwillingness to advance funds, the rehabilitation scheme was required certain changes. Later on, the promoters deposited the amount of Rs.50/- lacs in Bank of India. Revised scheme of rehabilitation was required to be implemented. The respondent no. 1 had leased out 5 separate plots of lands for the purpose of manufacturing salt etc. But due to natural calamities which were beyond control of the petitioner, the petitioner was not in a position to carry out its activities in the year 1994. The respondent no. 1 vide its letter dated 1-7-1994, informed the petitioner that the respondent no. 1 has cancelled and determined the lease of land granted to the petitioner by the respondent no. 1 on the ground that the petitioner has failed to use the land for the purpose for which it was allotted and that land in question was lying idle and was not used for manufacturing salt. Kandla Port trust authorised Assistant Estate Manager under Clause 4 of the Lease Deed to reenter the promises and take over the possession of the plot on 10-4-1995 at 13-00 hours. The petitioner company was directed to remain physically present on the site of the land on the date and time fixed to hand over peaceful possession of the land. In absence of the petitioner, the possession of the land will be taken over and after drawing the panchnama as the lease has already been determined and vacant possession is required to be taken over. The petitioner replied vide letter dated 29-9-1994 stating that the petitioner had sent to the respondent no. 1 Bank Draft for Rs.5,15,491/- for payment of outstanding dues of the land towards ground rent and interest thereon for the period ending 31-3-1994 by a registered letter dated 26-10-1994. That letter along with the Bank Draft was acknowledged by the respondent no. 1, but they have returned the Bank Draft to the petitioner under cover of letter dated 13-1-1995 after the period of two months. Thus, the respondent no.1 had refused to accept payment of past dues amounting to a large sum. The respondent no. 1 is a Port Trust constituted under the provisions of the Major Port Trust Act, 1963 and the respondent no. 1 is a State within the meaning of Article 12 of the Constitution of India and hence the respondent no. 1 is not entitled to take such arbitrary action which is without any authority of law. The respondent no. 1 could have taken such action after following due process of law under the provisions of Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The petitioner has taken all necessary steps for renewal of its unit and restraining the production of iodisede salt and hence the respondent no. 1 was not entitled to retake possession of the premises. Hence, the action threatened by the respondent no. 1 in the aforesaid letter is without any authority of law. The action threatened by the respondent no.1 is in violation of the provisions of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. Even if the respondent no. 1 has got such right of retaking the possession, it should be in accordance with the provisions of the aforesaid Eviction Act, 1971 subject to other appellate provisions provided in the said Act. The impugned orders passed by the respondent no. 1 are arbitrary, inequitable, improper, unjust, illegal and violative of Articles 14, 19(1) (g) and 21 of the Constitution of India. The action of the respondent no. 1 is against the principles of natural justice and without giving any opportunity of hearing to the petitioner. Even no notice for determining the lease has been issued to the petitioner by respondent no. 1. No proceedings can be initiated when the petitioner has been declared to be a sick industrial unit by the BIFR. operating agency u/s 17 (3) of the SICA. The amount of Rs.50 lacs has been deposited in non-interest bearing no lien account with the Bank of India. Hence, the impugned orders passed by the respondent no. 1 are not sustainable in the eye of law. There was no breach of Clause - 2 (iv) of the Lease Agreement. Non-affording of an opportunity of hearing resulted in violation of the principles of natural justice. The petitioner has moved an application dated 17-4-1982 for renewal of the licence and that was renewed upto 30-6-1987 for unit no. 3. The licence for manufacturing salt could not be renewed, as validity of the same runs concurrently with the tenure of the lease. Before determining the lease, the notice ought to have been given to the respondent no. 3 - Bank of India which is an operating agency. It is also asserted that about 1000 labourers who were working, have been provided residential accommodation on the plots of the land as part of service condition. In case, the possession of the land is taken, the families of 1000 labourers would be rendered homeless which could cause enormous hardships to those persons. Hence, it is necessary to restrain the respondent no. 1 from taking possession. BIFR has also issued notice to the respondent no. 1 to attend hearing of the proceedings of BIFR scheduled to be held on 27-3-1995. But the same was not attended any representative of the respondent no. 1 4. The respondent no. 1 Kandla Port Trust has filed an affidavit-in-reply. The petitioner has also filed further affidavits. In the counter affidavit, it is stated that this writ petition is not maintainable in the eye of law inasmuch as that there is no violation of fundamental right as the petitioner being a company is juristic person and this petition is for enforcement of contractual obligation for which no reliefs can be granted under Article 226 of the Constitution. The respondent no. 1 required 117 Acres of land for expansion of existing installation and port facilities. After litigation the respondent could be able to get that piece of land for is own use from the petitioner. The petitioner has been defaulted in paying lease rent even after litigations. As per Clause-7 of the lease deed it was clearly stipulated and agreed that during the lease term the lessee shall have requisite licence issued by the Government of India otherwise before expiry of term of lease, lease granted shall be deemed to have been determined automatically. The petitioner company's licence has not been renewed after 30-6-1987 as per letter dated 20-8-1990 issued by Dy. Salt Commissioner The respondent no. 1 issued notice dated 27-5-1991 duly acknowledged by the petitioner to remedy the breaches. Even after three years the petitioner failed to remedy the breaches, hence lease stands automatically determined. Though the respondent no.1 tried to help the petitioner even in issuing no objection certificate and granted permission for transfer the part of the land to some other company for Rs.22 lacs. The respondent no. 1 was not impleaded as party in the proceedings before BIFR nor the petitioner was informed about the proceedings which were instituted and pending before BIFR, as such unilateral proceedings are not binding on the respondent no. 1 and are void ab initio. The respondent no. 1 got a notice of BIFR dated 19-1-1995 for next date of hearing on 27-3-1995, then the respondent informed the BIFR about all the facts of the case. The respondent no. 1 has required the lease land of the petitioner for future development of the Port Trust and wants to retain this valuable land for its own use. It was also pointed out that only 200 workers were working and not 1000as stated in the petition. 5. Heard the learned counsel for the parties at length and perused relevant papers on record. 6. The contention of the learned counsel for the petitioner is that the notice dated 27-5-1991 was given by the Kandla Port Trust - respondent no. 1 to remedy the breaches. Second notice of determination of lease was given without any prior notice or without affording any opportunity of hearing to the petitioner. As, the respondent no. 1 itself had permitted the petitioner to remedy the breaches and hence second notice is malafide and it was issued when the respondent no. 1 found that the promoters have been inducted as it appears from the letter 14-6-1994 addressed by the respondent no. 1 to the petitioner wherein it is stated that MoU executed on 3-2-1994 sent to the respondent no. 1 by the Chartered Accountant of the petitioner is signed and executed without the notice and permission of Kandla Port and on its back. Such a unilateral act being illegal and unreasonable is illegal, void ab-initio and is not binding /acceptable to Kandla Port Trust. That MoU was also not binding on the respondent no. 1 and that was rejected. Promoter is nothing but share holder of the Company and he is not substitute of the lessee. Thus, the main contentions of the petitioners are as follows : (i) Second notice determining the lease is illegal, void ab-initio and is without giving any opportunity of hearing to the petitioner by the respondent no. 1 and violative of principle of natural justice. (ii) The provisions of Section 22 (4) (a) of SICA require suspension or stay of any proceedings pending before the authority concerned which were initiated for enforcement of any right, obligation or liability if industrial unit or undertaking has been declared as sick under the provisions of SICA and all the proceedings for determination of lease of the petitioner's unit are barred by statutory provisions of Section 22 (1) of SICA, hence determination of lease of the petitioner's company which has been sick unit are illegal and void ab initio. (iii) The very object of SICA is only to revive or rehabilitate the sick company. The petitioner's company was sick and the proceedings for revival or rehabilitation have been started, hence the petitioner's company cannot be destroyed on the pretext of violation or breaches of the terms and conditions of the lease, as such all proceedings for determination of lease of the petitioner's company are illegal and not sustainable in the eye of law. (iv) The respondent no.1 required the petitioner to remedy breaches stated in the notice itself. For that purpose, the petitioner has taken substantial steps. The promoter had deposited an amount of Rs.50.00 lacs for rehabilitation of the petitioner's unit and the amount was deposited with the operating agency appointed by BIFR and the process was at the verge of completion. The petitioner and the respondent no. 1 waited for three years for that purpose. As soon as the respondent no. 1 came to know about induction of the promoters, the lease was determined without giving any opportunity of hearing. The learned counsel for the petitioner requested the Court to give one more opportunity of rehabilitation of the petitioner's unit in the interest of justice as the petitioner is still in possession of the land. (v) The respondent no. 1 comes within the meaning of State and it is not expected from the respondent no. 1 to deal with the petitioner in determining lease in arbitrary manner. (vi) The action of the respondent no. 1 in closing the manufacturing process of salt by determining the lease is arbitrary, mala fide and against the doctrine of fair play and public policy. 7. Learned counsel for the respondent no. 1 raised following legal aspects with regard to maintainability of writ petition : A. Writ petition by a Company is not entertainable for enforcement of fundamental right provided under Article 19 of the Constitution of India. The petitioner Company is a juristic person and is not a citizen. Hence the petitioner Company cannot enforce fundamental right under Article 19 (1) (g) of the Constitution of India. He has relied on the following decisions : (i) Decision of the Supreme Court in the case of The Divisional Forest Officer V. Bishwanath Tea Co. Ltd., reported in AIR 1981 SC 1368, wherein it has been held as under : "The respondent not being citizen was not entitled to complain of breach or violation of fundamental right under Art. 19 (1)(g0 (See State Trading Corporation of India Ltd. V. The Commercial Tax Officer Vishakhapatnam (1964) 4 SCR 99 : (AIR 1963 SC 1811) and Tata Engineering and Locomotive Co. V. State of Bihar 950 SCR 869 (AIR 1951 SC 41 or (1964) 6 SCR 885 : AIR 1965 SC 40?). However, the shareholders of a company can complain of infringement of their fundamental rights (See Bennett Coleman and Co. V. Union of India, (1973) 2 SCR 757 : (AIR 1973 SC 106). Such is not the case pleaded. Therefore, the writ petition on the allegation of infringement of fundamental right under Art. 19 (1) (g) at the instance of respondent company alone was not maintainable." (ii) Decision of Constitutional Bench of the Supreme Court in the case of State Trading Corporation of India Vs. The Commercial Tax Officer and others, reported in AIR 1963 SC 1811, wherein it is held as under : "The State Trading Corporation, a company registered under the Indian Companies Act, 1956 is not a citizen within the meaning of Art. 19 of the Constitution and cannot ask for the enforcement of fundamental rights granted to citizens under the said Article. (iii) In another decision of the Constitutional Bench of the Supreme Court in the case of The Tata Engineering and Locomotive Co. Ltd. Vs. State of Bihar and others reported in AIR 1965 SC 40, wherein it has been observed as under : "The Corporation in law is equal to a natural person and has a legal entity of its own. The entity of the Corporation is entirely separate from that of its share-holders, it bears its own name and has a seal of its own; its assets are separate and distinct from those of its members, it can sue and be sued exclusively for its own purpose, its creditors cannot obtain satisfaction from the assets of its members, the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the Corporation. If the Corporations and companies are not citizens, it means that the Constitution intended that they should not get the benefit of Art. 19. The effect of confining Art. 19 to citizens as distinguished from persons to whom other Articles like 14 apply, clearly must be that it is only citizens to whom the rights under Art. 19 are guaranteed. The doctrine of lifting of the veil postulates the existence of dualism between the corporation or company on the one hand and its members or shareholders on the other." B. Contracts between statutory body and private individuals are not enforceable under writ jurisdiction. Second contention of the learned counsel for the respondent is that the matter arises out of the lease agreement between Kandla Port Trust and the petitioner and hence it becomes a private contract. Therefore, it cannot be enforced by invoking the writ jurisdiction. For that purpose, alternative remedy may be exhausted by way of civil suit and / or dispute can be resolved by an arbitrator and private dispute cannot be resolved under the writ jurisdiction even that contract has been made by a state authority or statutory body. In support of submissions, he has relied on the