LPA No.602 of 2011 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 12.07.2011 LPA No. 602 of 2011 JCT Electronics Ltd. ...Appellant Versus State of Punjab and others ...Respondents CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE VIJENDER SINGH MALIK Present: Mr. Arshad Hidayatullah, Sr. Advocate, with M/s P.K.Ram and Amrinder Singh Sidhu, Advocates, for the appellant. Mr. D.S.Brar, Addl. AG, Punjab, for respondent No.1. Mr. T.S.Dhindsa, Advocate, for respondent No.2. HEMANT GUPTA, J. The order dated 06.12.2010 passed by the learned Single Judge in a writ petition filed by the appellant is the subject matter of challenge in the present appeal filed under Clause X of Letters Patent. Vide the aforesaid order, the writ petition filed by the appellant seeking quashing of the orders dated 14.06.2010 (Annexure P-25); 26.02.2009 (Annexure P-20) as well as letter dated 29.12.2008 (Annexure P-13), was dismissed. The appellant, a Company incorporated under the Companies Act, 1956, was allotted plot No.A-32 measuring 31 acres in ELTOP Complex, SAS Nagar (Mohali), Punjab (adjacent to Union Territory of 1 LPA No.602 of 2011 Chandigarh) on lease for 99 years for setting up an industrial project for the manufacture of Colour Picture Tubes. The tentative price of the plot was Rs.1,20,03,200/-, whereas the annual lease was Rs.1/- per 1000 sq. yards. Subsequently, on 16.07.1987 a lease deed containing the terms and conditions of the lease for a period of 99 years was reduced into writing. It is also come on record on 06.09.1991, respondent No.2 claimed a sum of Rs.5,55,148/- as enhanced amount of compensation on account of acquisition of Land. The said amount has been challenged by the appellant in the writ petition (CWP No.9782 of 1993). In the said petition, the interim order was passed in the same terms as in CWP No.2903 of 1993. In CWP No.2903 of 1993, the interim order was stay of recovery of enhanced amount. It may be noticed that the record of the aforesaid case has been called. A perusal thereof shows that such writ petition and other connected petitions have been decided on 20.01.2000 with direction to the Corporation to furnish the details of the calculations and giving liberty to the petitioners to file representations. However, it appears that the writ petition filed by the appellant has not been listed for hearing. The appellant has attached communication dated 04.02.2009, as Annexure P-18, wherein an amount of Rs.1,12,95,535/- is claimed on account of interest upto 15.02.2009 on delayed payment of enhanced compensation. The appellant invoked the jurisdiction of the Board for Industrial & Financial Reconstruction (BIFR) (for short ‘the Board’) constituted under the Sick Industrial Companies (Special Provisions) Act, 1985 in the year 2002 on the basis of audited balance sheet as on 31st March, 2002 that its net worth has eroded. The appellant was declared as a sick unit by the Board vide an order dated 12.03.2007, a copy of which has 2 LPA No.602 of 2011 been appended as Annexure P-8. A perusal thereof, inter alia, shows that the unit of the appellant at Mohali is lying closed since May 2001. One of the conditions of the rehabilitation scheme approved by the Board is shifting of the plant & machinery from Mohali to Vadodara on its own cost by the appellant. The appellant was permitted to sell its entire land at Mohali together with the buildings, structures thereon and other redundant/unserviceable fixed assets through an Assets Sale Committee. Against the said order passed by the BIFR on 12.03.2007, many appeals were filed. However, in respect of the plot in question, the Appellate Authority for Industrial & Financial Reconstruction (AAIFR) in its order dated 29.09.2008 observed as under: “17. What, therefore, is of critical importance as far as this appeal and the scheme are concerned is the position of the State Government as it emerges from its submissions made before us. The land at Mohali has been given on lease to the company; the land is the property of the State and not of the company. The State Government’s position is that it is totally against the sale and wants the Mohali unit be revived also. xxx xxx xxx 19. in the light of the aforestated facts, we direct that the Government of Punjab should consider the application filed by JCTEL for conversion of leasehold land to freehold land in accordance with the existing policy. In the event the Government of Punjab permits conversion of the lease hold land to free hold land and its sale alongwith change in land use, if applied for, a fresh valuation of the land should be conducted and, thereafter, the sale should take place through the Asset Sale Committee constituted by BIFR. If the sale of land fetches a price higher than Rs.119 crores, BIFR should modify the scheme to provide for a dispensation for distribution of the excess amount towards payment of crystallized workers dues and upfront OTS payment to secured creditors. Alternatively, Government of Punjab should consider permitting sale of lease hold land and conversion of end use of land subject to payment of 50% of the unearned increase that may accrue to the lessee in accordance with the lease deed. In this case, the means of finance will be required to be modified since the scheme is 3 LPA No.602 of 2011 predicated on receipt of Rs.110 crores from the sale of land. Therefore, any shortfall will have to be financed by way of promoters contribution or by sale of other surplus assets.” Before the said order was passed, the Company is said to have requested on 17.02.2006 (Annexure P-4) conveying its intention to convert the lease hold land into free hold land. The appellant wanted to know the procedure to be followed and the formalities required to be completed in that regard. Such request was reiterated on 06.03.2006 (Annexure P-5), 18.04.2006 (Annexure P-6), 11.09.2007 (Annexure P-7) and 18.12.2008 (Annexure P-12). It was in pursuance of the orders passed by AAIFR, the appellant was informed by respondent No.2 that the Punjab Government’s Empowered Committee in its meeting held on 25.11.2008 has decided that the plot allotted to the appellant on lease hold basis may be allowed to be transferred on payment of 50% unearned increase in accordance with the terms and conditions contained in the lease deed executed between the Corporation and the company. Thereafter, the appellant submitted representations to the Hon’ble Chief Minister of Punjab and the Managing Director of the Corporation on 12.01.2009 (Annexure P-14) and 16.01.2009 (Annexure P-15) respectively. In pursuance of such representations and various other communications, the Managing Director passed an order on 14.06.2010, a copy of which has been appended as Annexure P-25. In the said order, inter alia, it is observed as under: “i. The contention of JCTEL that refusal of conversion of the plot in dispute from leasehold basis to freehold basis on payment of conversion charges is wholly illegal, arbitrary and not sustainable in law, is absolutely without any force of law or merit in view of the facts and circumstances explained hereinbefoRs. It was/is made clear to JCTEL that conversion of plot in dispute from leasehold basis to freehold basis shall be made on payment of conversion charges to freehold basis shall be made on payment 4 LPA No.602 of 2011 of conversion charges as also on payment of 50% of the unearned increase to PICTL as per the terms and conditions of the Lease Deed. j. The contention that the action of PICTL in rejecting the request of JCTEL for conversion of the plot in dispute is also discriminatory inasmuch as other allottees have been permitted to convert their plots from leasehold basis to freehold basis is also without any force. In the instant case, as per the scheme sanctioned by BIFR, the land and building of JCTEL at Mohali are to be sold and the plant and machinery installed at Mohali are to be shifted to Vadodara, meaning thereby that JCTEL is closing its unit at Mohali and has virtually wounded up its operations. This is not the case with other allottees, which were in operations and did not seek permission to sell the land.” The appellant has also relied upon documents Annexure P-28 i.e. communication dated 08.8.2000 by respondent No.2 addressed to the President, Mohali Industries Association, Mohali, in respect of conversion policy from leasehold to freehold as also on circular of Mohali Industries Association dated 10.01.1992 to its members in respect of communication dated 02.01.1992 received from the Punjab Small Industries & Export Corporation, communicating the decision taken by the Board of Directors in its 165th meeting held on 04.11.1991. While hearing arguments in the present appeal on 11.07.2011, Mr. T.S.Dhindsa, learned counsel representing respondent No.2 sought some time to place on record Resolution No.165 dated 04.11.1991 resolving to convert leasehold rights into freehold rights. Mr. Hidayatullah, learned counsel representing the appellant produced information disclosed under the Right to Information Act in respect of Resolution No.165.29 considered by Punjab Small Industries and Export Corporation. Today, Mr. Dhindsa has 5 LPA No.602 of 2011 produced the agenda circulated for the consideration of the Board of Directors for 165th meeting fixed for 04.11.1991. The said agenda as well as the decision thereon reads as under: Agenda “Item No.41 Abolition of lease hold system and its conversion into free hold basis, industrial plot at various focal point in the State of Punjab, where full payment of the plot has been made by the allottee to the PSIEC and the unit has gone in production. *** The matter regarding abolition of lease hold system regarding industrial plots of various focal points in the State of Punjab and its conversion into free hold basis was placed before the Board of Directors in its 150th meeting held on 03.11.1988 for consideration. The Board of Directors decided in the said meeting as under: “The item was discussed in detail. The board was of the view that before abolishing lease hold system in the matter of industrial plots at various focal points in the State of Punjab and conversion of all the existing industrial plots allotted on 99 years lease hold basis to free hold plots, it was necessary to examine in detail the reasons for earlier policy of allotment on lease hold basis and the implications of converting the same to free hold plots, particularly regarding enforcement of allotment conditions against the allottees. Thereafter, it was considered appropriate to have the legal advice from LA of the Corporation. The Legal Advisor advised in matter and his opinion is reproduced below: “It would be in the interest of the Corporation to allot the plots on lease hold basis instead of adopting the free hold basis. In the case of lease hold basis the Corporation can always resume the sites under the Public Premises Act, whereas once the plot sold on free hold basis then the Corporation loses its entire control of lien on the said plots and the allottees can then misuse the plots allotted. 6 LPA No.602 of 2011 In this view of the matter, I am of the opinion that the plots should be allotted on lease hold basis only.” On the basis of the above advice of Legal Advisor, the matter was again placed before BOD in its 151st meeting held on 1/2.3.1989, wherein it was decided that conversion of lease hold industrial plots into free hold plots shall not be allowed. However, it may be mentioned that there is a persistent demand from various Industrial Associations of Industrial Plot holders in the State at various forums that lease hold system may be abolished and existing plots should be converted into free hold plots especially, where full payments have been made by the allottees and the unit has gone in production. On one of the representation the then Honourable Governor of Punjab observed as under:- “What is the problem about making it free hold? Has this matter been examined?” Sd/- O.P.Malhotra Governor 6.6.91 It is felt that if the full payment has been received from allottee and the unit has gone in production the purpose of allotting the plot on lease hold basis is achieved and there seems to be no objection to such plots being declared as free hold basis. At present we are charging Rs.1/- per 1000 sq. yards per year as lease money for 99 years, which is very negligible amount. Thus, loss of revenue by conversion of said plots in free hold basis will be very minor. However, the BODs may consider for levying small conversion fee of Rs.5/- per sq. yards in case of popular industrial focal point namely SAS Nagar, Dhandhari Kalan, Jalandhar including SSGC and Amritsar and Rs.2.50 per sq. yards for unpopulated focal points in State. However, transfer of said converted free hold plots shall be allowed as per policy of the Corporation. The above proposal will fullfil long standing demand of various Industrial Associations in the State, and will help the allottees in getting financial assistance such as loan etc. from various financial institutions for further extension of the unit. 7 LPA No.602 of 2011 Accordingly, the matter is placed before the BODs for kind consideration and approval.” Decision “Conversion of lease hold plots into free hold plots where full payment of the plot has been made by the allottee and the unit has gone in production is approved. Conversion fee of Rs.5/- per sq. yard in all focal points will be charged. Transfer of converted free hold plots shall, however, be allowed as per the existing policy of the Corporation only.” Learned Single Judge considered the various arguments raised by the appellant and dismissed the writ petition, inter alia, holding that the industrial unit of the petitioner is admittedly lying closed and is not in production since the date it applied for conversion of the plot from leasehold to freehold and that the policy decision of the State Government is to promote industrialization and offers incentives like allotment of industrial plots on concessional rates, uninterrupted supply of electricity, infrastructural facilities and creation of any easy market for the end products etc. are meant to general ‘revenue’ for the State and ‘employment’ for the public and are not to be construed to bestow State’s largesse to the rich and influential people, who want to be richer by thriving upon the State’s concessions promised on reciprocal basis only. Before this Court, learned counsel for the appellant has vehemently argued that the lease deed executed by the appellant with respondent No.2 deals with transfer of leasehold rights and on payment of unearned profit. The said condition of deposit of unearned profit is not applicable at this stage, as it is not seeking to transfer of leasehold rights under the lease deed, but has sought conversion of leasehold rights to 8 LPA No.602 of 2011 freehold rights in terms of a separate policy of the Corporation, which is applicable to all industrial units in the area. It is contended that in the Industrial Area, about 30 units have been given permission to convert leasehold rights into freehold rights even though many of such units were not working on the date, when they applied for conversion. Therefore, the respondents cannot be permitted to discriminate the similarly situated industrial units and in the same industrial area. It is also contended that the policy of conversion of the leasehold rights into freehold rights is a continuing policy and, therefore, the appellant, who satisfies the twin conditions of full payment and of unit going to production, cannot be denied the benefit of such policy. It is pointed out that the entire sale consideration to be received from the sale of the plot is to be utilized for payment to the secured creditors or the workers. Therefore, it is in the interest of the company, secured creditors and the workman that the request of the appellant for conversion of the leasehold rights into freehold rights is allowed. On the other hand, Mr. Dhindsa, learned counsel representing respondent No.2 has pointed out that the appellant admittedly stopped the manufacturing activities since May 2001 and that thereafter on the basis of balance-sheet ending 31.03.2002 approached the Board for rehabilitation of the sick company. It is also pointed out that the enhanced amount of compensation has not been deposited by the appellant. The appellant was required to deposit the amount claimed, if it was to seek benefit of policy. The interim order of this court does not set aside the claim but only keeps such demand in abeyance. Thus, it is contended that neither the appellant has paid the entire amount nor is carrying industrial production activity on 9 LPA No.602 of 2011 the day, when it submitted application for conversion and has decided to shut its manufacturing activities at Mohali. In fact, the unit is not working for the last 10 years. In these circumstances, the action of the appellant to seek conversion of the large plot of 31 acres is actuated only by a motive to show promising balance sheet and is not to advance the purpose of industrialization or of ‘employment’ and ‘revenue’ generation for the State. The large public interest is not even intended to be served by such conversion. The purpose of policy of industrialization of the State is not achieved if the plot is converted to freehold property. It is also argued that though the policy is in circulation from the year 1991, but the appellant choose to apply for conversion only in the year 2008. The earlier communications of the years 2006 & 2007 are to find out the procedure for conversion conveying its intention to do so, but that cannot be termed as a request for conversion. Therefore, the writ petition filed by the appellant has been rightly dismissed by the learned Single Judge. Having heard learned counsel for the parties at some length, we do not find that any interference is called for in the impugned order passed by the learned Single Judge. Clause X of the lease deed dated 16.07.1987 permits the appellant to transfer its rights in the site subject to condition that 50% of the unearned increase that may accrue to the lessee shall be paid to the Corporation. Such transfer is permissible after 15 years from the date of allotment. In view of such condition, there is no embargo on the appellant to transfer its leasehold rights to any other person, but such transfer is permissible on deposit of 50% of the unearned increase. The order impugned in the writ petition recognizes such fact. 10 LPA No.602 of 2011 The grievance of the appellant is in respect of non-conversion of leasehold rights into freehold rights. Such right is based upon the resolution reproduced above. It appears that the resolution reproduced above is that of Punjab Small Industries & Export Corporation, a separate juristic entity, but the fact remains that such resolution has been adopted by respondent No.2 in its meeting held on 30.12.1994, a copy of which has been appended by the appellant as Annexure P-13. Still further, vide another resolution dated 24.09.2004, respondent No.2 has decided that the charges for conversion of industrial land be charged @ Rs.10 per square yard as proposed by Punjab Small Industries & Export Corporation. The question to be considered is; whether the appellant has right to seek conversion of leasehold rights into freehold rights in terms of the resolution of the Punjab Small Industries & Export Corporation dated 04.11.1991 or that of respondent No.2 dated 30.12.1994. The said resolution provides a lessee to seek conversion of the leasehold rights on satisfaction of two conditions i.e. (i) that the full payment of the plot has been made; and (ii) the unit has gone into production. In our view, both the conditions are not satisfied by the appellant. In respect of payment of plot, the demand for Rs.5,55,148/- was raised vide communication dated 06.09.1991. Though there is an order of recovery of enhanced amount in the writ petition filed by the appellant, as in CWP No.2903 of 1993, but the said petition was pending at that time. A perusal of the record of the aforesaid writ petition shows that it stands disposed of on 20.01.2000. From the said fact, it is apparent that though the recovery is stayed, but the demand is still subsisting and over Rs.1 crore is due and payable, which is apparent from communication Annexure 11 LPA No.602 of 2011 P-13 appended by the appellant itself. The interim order passed by this Court does not wipe off the demand, but keeps the demand in abeyance and prohibits the respondents from taking any coercive steps to realize such amount. This is the view taken by the Hon’ble Supreme Court in Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras 1992 (3) SCC 1, wherein it has been held to the following effect: “10. ….While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. ….” Later in Style (Dress Land) Vs. Union Territory, Chandigarh and another 1999 (7) SCC 89, it has been held to be following effect: “15. …..It is settled principle of law that as and when a party applies and obtains a stay from the Court of law, it is always at the risk and responsibility of the party applying. Mere passing of an order of stay cannot be presumed to be the conferment of any additional right upon the litigating party. This Court in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn., 1992(3) SCC 1 held that the said portion of order by the Court mean only that such order would not be operative from the date of its passing. The order would not mean that the order stayed had been wiped out from existence. The order of stay granted pending disposal of a case comes to an end with the dismissal of substantive proceeding and it is the duty of the Court in such cases to put the parties in the some position they would have been but for the interim orders of the Court. Again in Kanoria Chemicals and Industries Ltd. v. U.P. State Electricity Board, 1997(5) SCC 772 the Court held that the grant of stay had not the effect of relieving the litigants of their obligation to pay late payment with interest on the amount withheld by them when the writ petition was 12 LPA No.602 of 2011 dismissed ultimately. Holding otherwise would be against public policy and the interests of justice. In case law Kashyap Zip Industries v. Union of India, (1993) 64 ELT 161, interest was awarded to Revenue for the duration of stay under court's order, since the petitioners therein were found to have the benefit of keeping back the payment of duty under orders of the Court.” Therefore, mere fact that the writ petition challenging the claim of enhanced amount of compensation is pending before this Court, where there is interim order, it cannot be said that the full payment has been made by the allottee as required by the policy. We are conscious of the fact that such was not the reason taken by the authority in the order, but the fact remains that the appellant is seeking writ of certiorari for quashing of the order passed by the Managing Director