: T •°iM^'..VS''EwiS»g^^S-SK!^'rf' ft-Fi^ hgH L^UyK^ Ur ^HNA^T il^UAK.H A i ^ILA^sri?UK r'^^ft^ Mon'oie Siii'i unHCisri Bnalsa, Acta. C.J. & U.nrs?^a<i •S'i-ira 'S'-i^^'k ^f A^ta-i; h.?*i*s'S S i: iWt h.yS.Vu. ^ifi, f^ L w'^&tUB B S '•i.g "^-^f^ Ss^li^!;.; S y 'W'9 •^- < '••Y-.' Writ Pe'tition {CsNo. 622s of 288'i" Pusrso SteeS a NlniriH jpvt; LtcS.a another State oi Chhattisaarh ana others, it-K i"UK UUNSiUtHA ! iU."i! Hon'&ie the Actsna Chref Jystice Sd/- SatishK-Agnihotn Judge Sd/- aUI ijs^fc;ia& /o nfficys Sd/- Satish K. Agnihotri Judge /^1i2008 HIGH COURT OF CHHATTISGARH: BiLASPUR Writ Petition (0 No. 6228 of 2007 Coram: Hpn'bleShri JagdishBhalla, Acting Chief Justice & Hon'bie Shri Satish K. Agnihotri, J. ,;v PETIT10NERS ^ RESPONDENTS -.^. 1) 2) 1) 2) Pushp Steel & Mining (Pvt.) Ltd. A Company Constituted & Incorporated Under Indian Companies Act, 1956, RegisteredOffice at 751-Kundewalan Street - Ajmeri Gate, New Delhi-6 through its Director Atul Jain son of Shri Sulesh Chandra Jain, aged about 39 years. Atu! Jain sonof Shri Sulesh Chandra Jain, aged about 39 years, Director, Pushp Steel & Mining (Pvt.) Ltd., Resident of 39 Arihant Nagar, Punjabi Bagh, West New Delhi 110026. Versus State of Chhattisgarh, thrpugh Secretary Commerce and Industries, D.K.S.Bhawan, Raipur (CG). State Investment Promotion Board, through - Secretary/Convener Adjoining Mantralaya, Renuka Dwar, Shashri Chowk, Raipur (CG). 3) Additional Commerce Department, Chief Secretary, and Industries D.K.S.Bhavan Mantralaya, Raipur (CG). "<, OA/rit Petition under Article 226 ofthe Gonstitution of India) Present: Shri Rajat Sharma, Sr. counsel with Shri Dheeraj Malhotra, Gautam Bhaduri and Shri S.K. Tiwari learned Advocate for the petitioners. Shri Vinay Harit, Deputy Advocate General for the State. 2 . ^ f ORDER (Passedon /ow-1-2008) Thefollowing orderwas passed by Shri Satish K. Agnihotri, J. The petitioners impugn the validity ofthe orderdated 29-09-2007 (Annexure P/1), whereby the Memorandum of Understanding (hereinafter referred to as "the MOU") between the Government of Chhattisgarhand the petitioner No.1 - M/s. Pushp Steel & Mining (Pvt.) Ltd., (for short, "PSML") exeeuted on 7-1-2005, was terminated with immediateeffect. 2) The indisputablefacts.inbrief, arethatthe petitioners entered into the MOUwith Governmentof Chhattisgarh on 7-1-2005 forsettingupthe manufacturing facilities in the State of ChhatSisgarh wlth proposed investment of Rs.380 crores as under: <? It was agreed between the petitioner No.1 - PSML and the respondent No.1 Goyemment of Chhattisgarh to execute the MOU on the terms, assurances and commitments, mtera/fa, as under: »:i -Sr. No. Piant/Facility Annyal capacity/ Unit Project Cost (Rs. Crore) T Sponge Iron Plant (350 TPDx3) "315000 TPA "80.00 " -2. Captive Power Plant (8 x 3) -24MW- -75.06T 3. Low Pollution (Euro IV & Euro V) Compiaint automotive parts made out ofcaptive materials. "225.00— T' —~ -t—-...— —-„ Total 380.00 '<$• "A. Actions by PSML: A.1 It is agreedto by the parties that PSML wiil set up the aforesaid projects in the State of Chhattisgarh for which the State Government and its agencies wili extend all necessaryassistance and fuliest cooperation for successful implementation of the projects. A.2 PSML wil! earmark separate funds for environmental upgradation and social upliftment of surrounding areas/villages ete., to maintain the ecological balance. A.3 PSML will facilitate setting up of ancilliary industries promoted by the Industries Department or any State Government agency. A.4 PSML will provide employment to local people as per the policy of Stete Government. . A.5 PSML will make provisions as per law for utiiization and disposal of fly ash generated in their power project and other Industriai activity. A.6 PSML wili initiate all necessary steps to implement the projects mentioned herein above with a view to contribute to the industrial development and the economic growth of Chhattisgarh State within the time limit set out herein below. A.7 PSML will commence implementation of the project as early as possible, but not tater than 2 years from the date of signing of this MOU. If project implementation does not commence within two years, this MOU shail cease to exist." << 3} The MOU was for the promotion of industrial investment in the State under the provisions of Chhattisgarh Industria! Promotion Act, 2002 (hereinafter referred to "the Act, 2002"). Under the provisions of Section 3 of the Act, 2002, District Investment Promotion Committees were constituted. Section 5 of the Act 2002 provides for functioning of the said committees. Under the provisions of Section 9 ofthe Act, 2002, State Investment Promotion Board (for short, "SIPB") was constituted, Section 11 of the Act, 2002prescribes for functions of District Investment Promotion Committees and SIPB. '-^s^^^s -y^^ssss^^^i^i^s^^!^^ ^SffSesSSWi^^^SSiy v < B lit 4) A lease deed dated 19-1-2005 (Annexure P/3) was executed between the petitioners and the respondent No.2, whereby 11.421 hectares of land situated in the village Rasmada, Tehsil Durg, District Durg, the respondent No.2 to grant the lease of 11.421 hectares of land for aperiod of 99 years in favour ofthe petitioners. Pursuanttothesaid lease deed, the petitioners made the payment of Rs. 61,67.340/- fo the Chhattisgarh State Industrial Development Corporation (for short, " the CSIDC") and further a bank guarantee of Rs. 45,68,400/- dated 17-1-2005 was also submittedto the CSIDC. Possession of the said land was thereafter taken over bythe petitioners andan advance of Rs.5,02,524/- towards lease rent, maintenance charges and street iights charges were also paidtothe CS!DC. The petitioners further made payment of a sum of Rs.5,68,768/- towards lease registration charges on 20-1-2005. The State Government recommended the Centrai Government for grant of Prospecting License and Mining Lease on 5-5-2005 (Annexure P/6). 5) It is submitted by iearned counsel appearing for the petitioners that on 5-4-2006 Ministry of Environment & Forests (FC Division), Government of India granted clearance for prospecting of iroh ore over 705.33 hectares of forest land in Compartments No. 366, 369, 370, 371, 372, 373, 374and 375 in favour of the petitioners (Annexure P/13). On 4-6-2005, the CSIDC informed the petitioners that the petitioners had not taken any effective step for establishing the plant on the lease site after having taken over possession ofthe land on 24-1-2005. Ori 13-6-2005 the petitioners informed to the CS!DC that the size ofthe allottedland is a constraint for the petitioners though the consultant MECON was already working on the side development pian for the project. The ^l^- _^" fe petitionersextended the bankguarantee till 16-1-2TO7. Annual charges as demandedby the CSIDCwere also paid by the petitioners on 22-3-2006. According to the petitioners, civilwork contract for civil work construction was also awarded to M/s, Gayatri Constryctions on 14-3-2006. The petitioners placed the order for machines ete., to Michael Group Corporation Ltd. The petitioners received the offer letter dated 7-3-2006 from Michael Group Corporation Ltd., (Annexure P/11) for manufacturing, Shipping, Erection and commissioning on turn key basis for "Kiln & Cooler for 1X500 TPD" Sponge Iron Plant at Borai, Durg, Chhattisgarh, for USD 39,44,000 CIF, Sea Port, with thecondition that delivery would be in eighteen months from date of receipt of the advance. The petitioners thereafter on 10-3-2006confirmed the order for manufacturing, Shipping, Erection and commissioning on turn key basis for "Kiln & Cooler for 1X500 TPD" Sponge Iron Plant at Borai, Durg, Chhattisgarh for USD 50000 and undertook to remit USD within ten days as per the guidelines of Reserve Bank of India. The same was remitted thereafter. Despite approval of grant of prospecting lieense, the Department of Ministry of Mineral Resources, Sate of Chhattisgarh has not granted prospecting license till date. The petitioners made an application to the Chhattisgarh Environment Conservation Board, Raipur on 6-10-2006 (Annexure P/16) for grant of No Objection Certificate (for short, NQC") to establish the mine so that the application for environmental clearance to the Department of Environment, Ministry of Environment and Forests, Government of india, would be made as grant of NOC is a pre-requisite. 6) The petitioners received a notice dated 14-9-2007 (Annexure P/32) from CSIDC to remove the deficiencies within sixty days. On ^- •SK :KK"^:- :;':':i:SMgSS!.S<!aiBigK!%i'a>-. iS::._3.3a:s.£S^S^^^SSyy"i''' 4 y'>* •^' /•: 29-9-2007 the MOU wasterminated. The impugned order dated 29-9-2007 was passed on the basis of decision taken in the meeting of SIPB held on 17-9-2007 (Annexure R/1). Prior to the meeiing dated 17-9-2007, a meeting presided over by the State Minister of industry, was hetd on 13th & 14th September, 2007 (Annexure R/2), whereinitwas decided that eighteen investors inciuding the petitioners, who haye not commenced the implementation of the project within the prescribed period or within three years, be recommended for termination of the MOU. Hence, this petition seeking quashing of thedecisiondated 17-9-2007 taken in the meeting of the SIPB and consequential order dated 29-9-2007 was filed. Byorder 26-11-2007, further the petitioners amended the petition and have sought a writ/direction to set aside the show cause notice dated 14-9-2007 (Annexure P/32) issued by the CSIDC, subseqyent order dated 3-10-2007 (Annexure P/35) passed by the State Government, show cause notice dated 11-10-2007 (Annexure P/36) issued by the State Govemment and consequential relief to give the necessary ciearances for. execution of the Project in pursuance to the MOU dated 7-1-2005 7) Shri RajatSharma, learned Sr. counsel with Shri Dheeraj Malhotra, Gautam Bhaduri and Shri S.K. Tiwari, learned Advocates appearing for the petitioners would submitthat the decision dated 17-9-2007 taken by the SIPB, the impugned order dated 29-09-2007, terminating the MOU dated 7-1-2005 issued by the CSIDC to the petitioner No.1 and theorder dated 3-10-2007 passed by the State Government, are illegal and bad-in-law on the ground thatthe impugned termination order and consequential orders are violative of the doctrine of Promissory Estoppel. The powers ofSIPB under the provisions of ^^^ .-.^' ,^a WSi Section 11 of the Act. 2002 are ultra vires under Article 14 of the ConsSitution ofindia. The-impugned decisions and orders are violative of fhe p.i'-isiples of natural justice as no opportunity of hearing was afforded to the petitioners before the impugned orders were passed. The impugned orders are also arbitrary, unreasonable and having been passed without proper application of mind. The orders are also violative ofthe legitimate expectation ofthe petitioners. 8) Learned counsel appearing for the petitioners did not press all the grounds (supra), except that the decisions/orders are yiolative of principles of natura! justice, thatof Promissory Estoppel and vioiativeof the legitimate expectation of the petitioners. Learned counsel would submit that the SIPB in its meeting preslded over by theState Minister of Industry, held on 13th & 14th September, 2007 (Annexure R/2) did not consider the case of the petitioners specifically and no opportunity of hearing was given to the petitioners to put forward their cases before the decision was taken to recommend the name ofthe petitioners along with se^enteen other MOUs fortermination to the next Board's meeting. In the Minutes of Meeting, it was clearly stated that at Ciause 5 (A) that the application for consent to establish the project is pending consideration before the Chhattisgarh Environment Cpnservation Board on the ground that the State level committee could not be constituted. Despite the fact that the petitioners could not have made an application for establishment of the project/factory without obtaining consent to establishthe project from the Chhattisgarh Environment Consen/ation Board, it was observed that the petitioners had not taken any steps to commence the implementation ofthe project as early as possible, but not later than IA/O years from the date 6f signing of theMOU. !n the ^'r;:''c;s'"ssas^^ J.^iSiaB-sslfiS^^MeSS.12*' .8 ^fe ^ 8%i subsequent meeting of the SIPB presidedover by the Chief Minister, held on 17-9-2007 again, without affording opportunity of hearing to the petitioners, the recommendations made in the early meeting held on 13th and 14th September, 2007 (Annexure R/3) were accepted. It was decided to terminate the MOU of the petitioners along with seventeen other investors. Thus, the petitioners were not afforded any opportunity of hearing before the decision was taken. On the basis of the decision dated 17-9-2007, the impugned order terminating the MOU was passed on 29-9-2007 (Annexure P/1). After the impugned order dated 29-9-2007 (Annexure P/1) was passed, The State Governmenl by order dated 3-10-2007 (Annexure P/35) cancelled the concessions granted for stamp duty for registration ofthe land. The petitioners thereafter were issued notioe dated 11-10-2007 (Annexure P/36) which was received on 16-10-2007 caliing upon the petitioners to submit repiy on or before 15-11-2007 as to why the application for grant of mining iease was not cancelled. 9) Per contra, Shri Vinay Harit, learned Deputy Advocate General apDearina for the respondents/State woyld submit that there was no necessity to issue show cause notice to the petitioners. Thereafter, the counsei improved his submission and submitted that the petitioners had already been given proper opportunity of hearing as theywere present in the meeting dated 13th and 14th September, 2007 (Annexure R/3) of the SIPB. The petitioners did not raise any objection. The petitioners have not made any application under the provisions of the Factories Act to establishthe Sponge Iron Plant. Learned counsel relying on Clause (A) of the h40L) would submit that sincethe petitioners havefailed to commence the implementation of the project within a period Qftwo years, v ^ /^: w' r1 the MOU ceases to exist. All the concessions .provided for, implementation ofthe project were withdrawn subsequently. 10) Having heard tearned cdunsel for the parties, perusedthe pleadings and records appended thereto, it is evident that the petitioners were not afforded any opportunity of hearing. Thestand of the respondents/State in the return dated 2-11-2007 was as under: "!t is respectful!y submitted that since MOU is not a contract by itself it does not provide for any clause requiring adherence to principles of natura! justice because the party concerned i.e., the investor concerned is award of his positionand the requirements which he has to meet within a period of 2 years. Since the investor is aware of his obligation/commitments there was no occasion to make a provision for any opportunity of hearing to the investor before cancellation of MOU. It isfurther submitted thatthe State ofChhattisgarh has entered into MOUs with large number of investors from time to time and any such investor who has not \ commenced implementation of the project within 2 years of signing the MOU has been dealt with uniformly and equally and the IVIOU entered with them has been cancelled. 1 It is respectfully submitted that prior to the meeting of SIPB held on 17-9-2007, the represehtatives of the investors who have executed MOU with the State Government were invited for making review of the progress of the investments made by them in furtherance of the MOU. Though no Show Cause Notices were issued but since the representative of the petitioner was present in the review meeting held on 13 and 14 September, 2007". ^lteJI§tt _«<: ' !v-c' •-y' <£i- p^ 10 11) On perusal of the Minutes 6f the Meeting of the SIPB, it is clear that no discussion with regard to the progress ofthe petitioners' project in acGordance with the MOU had taken place. The decision was taken in a casual manner, wherein eighteen MOUs of eighteen investors including the petitioners were recommended fortermination oftheMOU. It was acknowledged in the meeting that the application for consent to establish the projectwas pending consideration before the Chhattisgarh Environment Conservation Board as no State level committee could be constituted. Therefore, the petitioners cannot be held liable for not initiating any stepsto establish the project. 12) !t is well established that theprineiples of naturai justice is meant to prevent miscarriage of justice. Audi alteram partem is one of the basic pillars of naturaljustice which means no one should be condemned unheard. 13) In the matter of Smt. Maneka Gandhi Vs. Union of India and another, the SupFeme Court observed asunder: "The law must, therefore, now be taken to be we!l settled that even in an administrative proceeding, which involves civil consequences, the doetrine of natural justice must be held to be applicable." 14) When by reason of an action on the partof a statutory authority, civilorevil consequences ensue, principles ofnatural justice are required to be followed. In such an event, although no express provision is laid down in that behalf, compliance with principles of naturaljustice would 'AIR 1978 SC 597 kl't: S8SSS- II '^ia. T'^.< '"^ssss^.^ -^-3,Ba&i^' ^\ k^..-—. r6: ;Raju. f^\z be implicit. In case of denial of principles of natural justice in a statue. the same may also be held ultra vires under Article 14 of the Constitution (Rajesh Kumar andothers Vs. Dy. CIT and others). 15) Applying well settled principles of natural justice tothe facts of the present case, it is crystal clear that the impugned order, which entails civil or evjt consequences, was passed without following the principles of natural justice and fair play in-action. Thus, the impugned order is bad and desewes to be quashed. 16) In view of foregoing premises, it is not necessary fo examine the ground of violative of doctrine of promissory estoppel and that of iegitimate expectation ofthe petitioners. 17) For the reasons mentioned hereinabove, the impugned order dated 29-9-2007 (Annexure P/1), and the order dated 17-9-2007 (Annexure R/1) show cause notice dated 14-8-2007 (Annexure P/32) in respectof the petitioners are quashed. The consequential orders dated 3-10-2007 (Annexure P/35) and show cause notice dated 11-10-2007 (Annexure P/36) are also quashed. 18) The petition isaccordingly allowed. No order asto costs. Sd/- Ag. Chief Justice Sd/- SatishK-Agnihotn Judge 2 (200752SCC181para26 -ff ,ii;^;^S*^ ^r: yB-