IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE A.K.BASHEER & THE HONOURABLE MR. JUSTICE P.Q.BARKATH ALI WEDNESDAY, THE 11TH AUGUST 2010 / 20TH SRAVANA 1932 Co.Appeal.No. 34 of 2007() -------------------------- AGAINST THE ORDER IN CP.34/1998 Dated 10/04/2007 .................... APPELLANT/APPLICANT ----------------------------- ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED (APIIC) A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT PARISRAMA BHAVANAM 5-9-58/B FATEH MAIDAN ROAD, HYDERABAD-500004 (AP) REP. BY ITS MANAGER (LAW) BY ADV. SRI.J.V.SURYA NARAYANA, SENIOR ADVOCATE SRI.N.MANI (VAIKOM) SMT.K.A.RATHI RESPONDENT(S): RESPONDENTS -------------------------- 1. THE OFFICIAL LIQUIDATOR, HIGH COURT OF KERALA CARVEL BUILDINGS, BANERJI ROAD, ERNAKULAM, COCHIN-18. 2. M/S.LAXMI STARCH LTD, (IN LIQUIDATION) REP. BY THE OFFICIAL LIQUIDATOR, HIGH COURT OF KERALA COCHIN-18. 3. INDIAN BANK , MUMBAI, (INDIAN BANK, CIRCLE OFFICE, ERNAKULAM) 4. DEENA BANK, A BOADY CORPORATE COSNTITUTED UNDER BANKING COMPANY'S ACT, HAVING IT S HEAD OFFICE AT MAKER TOWER-B,BOMBAY AND ITS INDUSTRIAL FINANCE BRANCH AS MAKER TOWER-B, CUTTEE PARADE MUMBAI-400 005. COA.NO.34/2007 5. C.M.DAVA, EX-DIRECTOR OF M/S. LAXMI STARCHS LTD., (INLIQUIDATION) 6. PRANLAL BHOGILAL, S/O. LATE BHOGILAL HARGOBINDLAL, AGED ABOUT 66 YEARS,R/O. DASKOT, WALKESHWAR ROAD, MUMBAI, EX-CHAIRMAN,M/S. LAXMI STARCH LIMITED, NACHARAM, HYDERABAD IN LIQUIDATION) ADV. SRI.K.MONI,OFFICIAL LIQUIDATOR SRI.S.EASWARAN FOR R3 SRI.E.K.NANDAKUMAR FOR R.4 SRI.A.K.JAYASANKAR NAMBIAR FOR R.4 SRI.K.JOHN MATHAI FOR R.4 SRI.JIJO PAUL FOR ADDL.R7 THIS COMPANY APPEAL HAVING COME UP FOR ADMISSION ON 11/08/2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: A.K.BASHEER & P.Q.BARKATH ALI, JJ. - - - - - - - - - - - - - - - - - - - - - Company Appeal No.34 OF 2007 - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 11th day of August, 2010 JUDGMENT Basheer, J. The short question that arises for consideration in this appeal filed under sec.483 of the Companies Act read with sec.5 of the Kerala High Court Act is, whether the appellant - M/s.Andhra Pradesh Industrial Infrastructure Corporation Ltd. is entitled to be granted leave to resume the land having an extent of 40 acres now standing in the possession of M/s. Lakshmi Starch Ltd. (in liquidation) invoking the power under the provisions contained in Andhra Pradesh Public Premises (Eviction of Unauthorised Occupants) Act, 1968. The learned Single Judge exercising in original jurisdiction under the Companies Act, answered the above question in the negative. Hence this appeal. 2. The relevant facts which are essential for deciding the above question, may be briefly noticed: It is not in controversy that in the year 1967 the Government of Andhra Pradesh initially allotted an extent of 30 acres of land in favour Co.Appeal No.34/2007 2 of M/s. Lakshmi Starch Ltd. (hereinafter referred to as the “Company in liquidation”). Pursuant to the above allotment, a registered sale deed was executed by the Government through the Governor of Andhra Pradesh in favour of the company, as is revealed from Ext.P1 sale deed dated December 22, 1967. Shortly thereafter, Ext.P2 sale deed dated June 4, 1968 in respect of 10 acres of land was also executed by the Government of Andhra Pradesh in favour of the company. Thus by virtue of the two sale deeds referred to above, the company came into possession of a total extent of 40 acres. This land was admittedly utilised by the company for the purpose of establishing a starch factory. It is beyond controversy that the company had put up buildings and other structures in the land in question and commenced manufacturing activities. 3. In 1973 the Government of Andhra Pradesh issued Ext.P4 order, which is extracted hereunder for easy reference: “INDUSTRIES & COMMERCE (ID) DEPARMENT G.O.Ms No.1162 I & C. Dated: the 4 th Dec. 1973 1. G.O.Ms No.831, Ind. & Com. Dated 10.9.1973. 2. From the Director of Industries, letter No.1274. Co.Appeal No.34/2007 3 Dek.IOC/1973-2, dated 23.10.1973. ****** ORDER: In pursuance of the orders issued in para 6 of the Government Orders first cited, the Government direct the transfer of all the Industrial Estates and Development Areas mentioned in the Annexure to this order to the Andhra Pradesh Industrial Infrastructure Corporation Limited, Hyderabad with effect from 1.1.1974.” 4. Appellant, which is the beneficiary of Ext.P4 order, claimed that they had stepped into the shoes of the Government and become the absolute owners of the properties shown in the Annexure to Ext.P4 order. Item No.2 in the Annexure is stated to be the subject matter of this case. 5. It may be noticed that the company went into liquidation as per order dated June 8, 1999 in CP No.34 of 1998 on the file of this Court. In the application filed by the appellant before the Company Court under Section 446 of the Companies Act 1956, the appellant contended that it had become the “successor body to Government of Andhra Pradesh” and therefore it is entitled to deal with the industrial Co.Appeal No.34/2007 4 areas, plots, sheds etc. situated in the property which were in the possession of the company (in liquidation). The appellant further alleged that the company had been keeping 40 acres of land idle and that the appellant had requested the Official Liquidator to grant permission for conversion of the above land to commercial-cum- residential use. The said request could not be considered by the Liquidator for the obvious reason that proceedings were pending before the Company Court. The appellant further stated that it had already taken a policy decision not to issue 'No Objection Certificate' for conversion of industrial land to nonindustrial purposes. According to the appellant, no purpose would be served by keeping the land idle and it may ultimately retard the industrialisation of the area in question. 6. It was in the above circumstances that the appellant prayed for leave to take steps for cancellation of allotment of land to the Company and for determination of sale deeds and to resume the land having an extent of 40 acres by invoking the provisions contained under the Andhra Pradesh Public Premises (Eviction of Unauthorised Occupants) Act, 1968. Co.Appeal No.34/2007 5 7. The above prayer was stoutly resisted not only by a former Director and Chairman of the Company ( respondent Nos. 5 & 6), but by the two nationlised banks viz. M/s. Dena Bank and M/s. Indian Bank also contending inter alia that the contentions raised by the appellant are ex facie untenable and without any locus standi. 8. The official liquidator in his counter affidavit contended that winding up orders were passed by this court after all efforts made by BIFR for revival of the sick company had failed. The Official Liquidator assumed charge of the assets of the company thereafter. But by that time, the land in question had already been taken over by the Court Receiver appointed by the Bombay High Court pursuant to the order passed in a suit filed by some secured creditors. However, pursuant to the order passed in the winding up proceedings, the assets were handed over to the official liquidator in January 2000. The official liquidator thereafter convened a meeting of secured creditors of the company for chalking out urgent measures for early disposal of the assets in order to pay off the creditors. It was further pointed out by the official liquidator that if the prayer made by the appellant-Corporation Co.Appeal No.34/2007 6 is allowed, the official liquidator will find it difficult to settle the huge liabilities of the company, not only to the secured creditors but also to several others. 9. The two nationalised banks referred to above, contended before the learned Single Judge that the company had obtained loans from them after mortgaging the land in question. The banks have already approached the Debt Recovery Tribunal in Bombay for recovery of the huge liability of the company (in liquidation). 10. Respondent Nos.5 and 6 contended before the learned Single Judge that Ext.P4 did not give any authority or power to the Corporation to resume the land in as much as Exts.P1 and P2 sale deeds were in the nature of absolute transfer of all right, title and interest of the subject matter in favour of the company. It was further pointed out by these respondents that the company had already established the starch factory within the time stipulated in the agreement which preceded the sale deeds. It may be true that the company ran into heavy debt at a later stage and it was consequently declared as sick. The company was wound up later through the Co.Appeal No.34/2007 7 intervention of this court, since by that time the liability of the company had mounted to disproportionate heights. But according to these the prayer made by the appellant-Corporation was wholly untenable. In short, all the respondents in the application opposed the plea made by the appellant in the application. 11. As mentioned earlier, the short question to be considered is whether the appellant can be permitted to resume the land from the the company (in liquidation) on the strength of Ext.P4 order referred to above. Exts.P1 and P2 are admittedly the assignment deeds executed by the Government of Andra Pradesh in favour of the company. While Ext.P1 related to an extent of 30 acres, the other sale deed was in respect of 10 acres. A perusal of Exts.P1 and P2 will unambiguously show that these documents conveyed absolute right, title and interest of the assignor (Government of Andhra Pradesh) in favour of the assignee (company). As has been noticed already, both these assignment deeds were preceded by letters of allotment which contained a stipulation that the allottee shall utilise the industrial land in question for the purpose of setting up an industry as undertaken by the allottee. A perusal of Co.Appeal No.34/2007 8 Ext.P1 sale deed will show that the assignor had handed over possession of the land (30 acres) covered under the said document to the company on November 1, 1966. It is further revealed from Ext.P2 that the company had commenced construction of factory and other buildings in the land for manufacture of starch and related products that the construction of those buildings was nearing completion by the time. Ext.P2 sale deed was executed on June 4, 1968. 12. Sri.J.V.Surya Narayana, learned Senior counsel who appears for the appellant, contends that the two assignment deeds (Exts.P1 and P2) are governed by the conditions stipulated in the agreement which preceded those documents. Since the company had stopped using the land covered under Exts.P1 and P2 for the purpose for which it was allotted to them, the appellant is well within its powers to resume the land. Learned Senior counsel points out that the company cannot seek shelter under the so called “vesting of absolute right title interest over the lands” on the strength of Exts.P1 and P2 for the simple reason that the very assignment is entirely governed by the terms and conditions of allotment. In this context, learned Senior Co.Appeal No.34/2007 9 counsel places heavy reliance on a decision of their lordships of the Supreme Court in Indu Kakkar v. Haryana State Industrial Development Corporation Ltd. and Another (1999 (2) SCC 37) . We will refer to the above decision in detail a little later. 13. In this context, it may be profitable to refer to Ext.R3 which is stated to be the agreement for allotment which preceded Ext.P2. (The other agreement for allotment has not been made available in this case. However, it is admitted by both parties that the agreement which preceded Ext.P1 was also on identical terms). Ext.P2, sale deed, as mentioned earlier, was executed between the Government of Andhra Pradesh and the company in relation to 10 acres on June 4, 1968. Ext.R3 agreement for allotment which preceded Ext.P2, came into existence on May 28, 1968. In this context, it may at once be noticed that while the time lag between the relevant agreement for allotment and Ext.P1 was more than one year, the time lag between Exts.R3 and P2 was hardly one week. 14. As has been noticed already, the company had commenced construction of the factory buildings immediately after allotment was Co.Appeal No.34/2007 10 ordered and possession was handed over to it in November 1966 as is revealed from Ext.P1 sale deed itself. It is on record that the company had sought for allotment of a further extent of land and the Government had agreed to do so. It was thereafter that Ext.R3 agreement was executed between the parties for an additional allotment of 10 acres. The agreement was executed on May 28, 1968 and Ext.P2 assignment deed was executed on June 4, 1968 barely one week after the execution of the agreement. 15. Learned senior counsel has laid heavy emphasis on Clause 5 contained in Ext.R3 agreement particularly to Sub Clause (d) thereof. For the sake of convenience, Clause 5 is extracted hereunder : “ (5) The terms upon which the said land shall be held by the company are : (a) that the company shall use the said land for the aforesaid purpose of putting up a factory or factories duly permitted by the competent authority and also the Director of Industries and for no other purpose. The Company agrees that it shall not put up any structure or building other than a factory building or buildings without prior permission in Co.Appeal No.34/2007 11 writing of the Director of Industries. The general lay-out of all buildings, structures and installations in the plot should be subject to prior approval of the Director of Industries apart from the appropriate authorities. (b) that the company shall within six months of being put in possession of the said land commence construction of the factory buildings after securing necessary clearance from the appropriate authorities including the Director of Industries and complete them in not later than two years. ( c) that the company shall at all times hereafter employ labourers to the extent required for the manufacturing etc., in accordance with the laws now in force or which may hereafter be made; (d) that as and when the said land is no longer required by the company for the aforesaid purpose the company shall forthwith relinquish and restore the land in favour of the Government and the compensation paid by the company for the land, less 15% solatium or its market value whichever is lower as determined by the competent authority shall be refunded to the company.” Co.Appeal No.34/2007 12 16. Clause 5 refers to the terms upon which lands shall be held by the company. Sub Clause (a) stipulates that the company shall use the said land for the purpose of putting up a factory or factories duly permitted by the competent authority and also the Director of Industries and for no other purpose. It further stipulates that the company shall not put up any structure or building other than a factory building or buildings without prior permission in writing of the Director of Industries. Sub Clause (d) stipulates that as and when the said land is no longer required by the company for the aforesaid purpose, the company shall forthwith relinquish and restore the land to the Government. According to learned senior counsel, the appellant- Corporation is entitled to resume the land since the land in question is not being used by the company for the purpose for which it was alloted to it. 17. For this purpose, appellant seeks the aid of Ext.P4 on the basis of which it has stepped into the shoes of the assignor namely the Government of Andhra Pradesh. It is the contention of the learned senior counsel that the admitted fact being that the company has been Co.Appeal No.34/2007 13 wound up for all practical purposes, it can no more be contended or assumed that the company is going to use the said land for any industrial purpose. 18. It is pertinent to note that the Corporation does not have a case that the company had violated any of the conditions of allotment. To put it differently, the Corporation does not have a case that the Company had not put the land to the use for which purpose it was alloted to it. Similarly, it cannot be said that the company had not put up buildings for the purpose of the factory and other allied purposes. It is on record that the company had conducted its business of manufacture of starch for nearly three decades before it got wound up. Whatever may be the reason for winding up, it cannot be said that the company had violated any of the Sub Clauses in Clause 5. Keeping in view all the above admitted facts and circumstances, we are afraid the contention raised by the learned senior counsel relying on Clause 5(d) of Ext.R3 agreement, is wholly misconceived. 19. It is in this context that the learned senior counsel has placed heavy reliance on Indu Kakkar (supra). In that case before the Co.Appeal No.34/2007 14 Apex Court, Smt.Indu Kakkar had purchased the entire rights of the allottee of a small plot of industrial land during the pendency of a civil suit instituted by the latter for a declaration that the order of resumption issued by the Haryana State Industrial Development Corporation was illegal and void and also for some other consequential reliefs. Admittedly, the allottee ( M/s. York Printers) had failed to start the industrial unit as undertaken by it before the Corporation. Therefore, the Corporation had resumed the plot. It was at that stage that the allottee had instituted the civil suit. Smt.Indu Kakkar after getting assignment of the so called rights of M/s. York Printers prosecuted the suit. 20. The Trial court decreed the suit and granted a declaration that the resumption order was manifestly illegal and without jurisdiction. But the First Appellate Court reversed the decree and dismissed the suit holding that the Corporation was well within its powers to resume and that the resumption was made in accordance with the terms of allotment. The First Appellate Court further held that the petitioner, Smt.Indu Kakkar had no locus standi as the sale in her Co.Appeal No.34/2007 15 favour was hit by Section 52 of the Transfer of Property Act. The matter was further carried before the High Court of Punjab and Haryana in second appeal. The High Court confirmed the decree and judgment passed by the First Appellate Court and held that there was no privity of contract between Smt.Indu Kakkar and the Corporation. It was noticed by the High Court that the contract was between the allottee and the corporation and the same was subject to fulfilment of certain terms and conditions by the allottee. Since the allottee failed to abide by the terms and conditions of allottment, the plot was rightly resumed by the corporation. The High Court further concluded that on resumption of the plot it became the absolute property of the corporation and the allottee had been left with no right, title or interest in the property which he could transfer to Smt.Indu Kakkar. 21. The Apex Court after adverting to Sections 11 , 52 and 55 of the Transfer of Property Act and also to a decision of the Apex Court in Khardah Co. Ltd v. Raymon and Co.(India)(P)Ltd ( AIR 1962 SC 1810) agreed with the view taken by the High Court. Their Lordships held that the allottee ( M/s York Printers) having failed to Co.Appeal No.34/2007 16 comply with the conditions of allotment and having failed to start construction of the building for setting up the industry within the period of six months and complete the same within two years from the date of issue of allotment, the Corporation was justified in resuming the land. The court observed that if the allottee evacuated from the scene after inducting someone else into the plot without the consent of the Corporation, it was not legally permissible for the inductee to compel the Corporation to recognise him as the allottee. 22. We are afraid the above decision, on which heavy reliance has been placed by the learned senior counsel, will not come to his aid at all. The issue that came up before the Apex Court in the above case related to post-resumption scenario. Petitioner in that case ( Smt.Indu Kakkar) had come into the picture after the land had already been resumed by the Corporation. The significant aspect available in that case was that the allottee had admittedly failed to comply with the primary condition of setting up of the factory for which purpose the land was allotted to it. The defaulter-allottee had vanished from the scene after assigning away whatever right it had ( infact there was Co.Appeal No.34/2007 17 none) in the subject matter in favour of Smt.Indu Kakkar and that too after the issue had become fait accompli. As rightly observed by their Lordships, Smt.Indu Kakkar had “virtually purchased a litigation “ knowing fully well that there was no privity of contract between her and the Corporation, to which the property admittedly belonged. 23. In the case on hand, the fact scenario is totally different. At the risk of repetition, it may yet again be stated that the appellant which claims to have stepped into the shoes of the Government to which the land belonged, has no case that the allottee had not utilised the land for the purpose for which it was allotted to it. The allottee had run the factory for nearly three decades after putting up factory and other allied buildings on the land allotted to it. It may be true that the company ran into troubled waters and ended up being wound up a few years later. But the fact remains that the company had complied with the terms and conditions agreed upon between it and the Government. Ext.P4 came into existence much later by which time the company had been in operation. More importantly, under Exts.P1 and P2, the assignor ( Govt. of Andhra Pradesh) conveyed its right, title and interest in Co.Appeal No.34/2007 18 absolute and no uncertain terms in favour of the company. There were no conditionalities and no “ifs and buts” as regards the right conveyed under these two documents in favour of the company. 24. In that view of the matter, we have no hesitation to hold that the appellant cannot fall back upon Ext.P4 and seek right of resumption of the land, which had already been conveyed by the assignor in favour of the company. We find no illegality in the order passed by the learned Single Judge. 25. As regards the claims made by the two Nationalised Banks, we make it clear that we have not considered the merit of their contentions based on their status as Secured Creditors. Sri.A.M.Shaffique, learned senior counsel who appears for respondents 5 and 6, submits that the two Banks cannot have the status of secured creditors. We refrain from making any comment or observation on this aspect since admittedly the issue is pending consideration before the Debt Recovery Tribunal, Bombay. 26. Learned counsel for the Official Liquidator submits that the proposal for sale of land as industrial plots has been hampered because Co.Appeal No.34/2007 19 of the pendency of this appeal. We make it clear that it will be open to the parties to work out their remedies before the appropriate authority. 27. We have only dealt with the claims made by the appellant for resumption of the land. No other issue has been considered by us. 28. The question posed for consideration is answered in the negative. The appeal fails and it is accordingly dismissed. In the peculiar facts and circumstances, parties are directed to bear their respective costs. A.K.BASHEER, JUDGE P.Q.BARKATH ALI, JUDGE mt/jes/sv. Co.Appeal No.34/2007 20