CWP No.5858 of 2010 -: 1 :- IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.5858 of 2010 Date of decision: October 13, 2011. Haryana State Industrial & Infrastructure Development Corporation, Panchkula ... Petitioner v. Board for Industrial & Financial Reconstruction & Ors. ... Respondent(s) CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE G.S. SANDHAWALIA Present: Shri Kamal Sehgal, Advocate, for the petitioner. Shri Sanjiv Sharma, Senior Advocate with Shri Shekhar Verma, Advocate for respondent No.2. Shri Aalok Jagga, Advocate for respondent No.4. Shri R.S. Manhas, Advocate for respondent No.5. Shri Munish Jain, Advocate for respondent No.7. Hemant Gupta , J. The challenge in the present writ petition is to an order passed by the Board for Industrial and Financial Reconstruction (for short BIFR), dated 24.6.2009, Annexure P-12, constituted under the Sick Industries (Special Provisions) Companies, Act, 1985 (SICA) and the order in appeal passed by the Appellate Authority Industrial and Financial Reconstruction, New Delhi, Annexure P-13, dated 21.10.2009, under the aforesaid Act. The brief facts leading to the present writ petition are that respondent No.2, a Company incorporated under the Companies Act, 1956, CWP No.5858 of 2010 -: 2 :- applied for the allotment of a plot at Bawal, District Rewari. A Regular Letter of Allotment was issued on 13.9.2000. As per the conditions of allotment, the allottee was required to set up the unit within a period of three years from the date of physical possession, which was delivered on 8.12.2010. It is averred that physical possession of re-oriented plot was handed over to the allottee on 9.4.2001. One of the conditions in the letter of allotment is that any additional price of the plot as a consequence of enhancement of compensation awarded by the Court, shall be payable by the allottee in lump sum within 30 days from the date of demand notice, failing which a penal interest @ 18% per annum shall be charged from the date of notice. The letter of allotment contained a further condition that if such enhanced compensation is not paid within the stipulated period of 30 days, the plot shall be liable to be resumed. There was default on behalf of the Company in making the payment of the installments of the original price as well. The petitioner was informed by the Company that they have filed a reference before BIFR vide Reference No.146 of 2000 and that Draft Rehabilitation Scheme has been prepared by the operating agency. Such scheme was supported by the secured creditors, but in respect of the claim of the petitioner, a re- scheduled sum of Rs.94.50 lacs, against the cost of land, was to be paid over a period of six years commencing from 1.10.2005 and to waive off all penalties, interest, and damages. The relevant clause of the rehabilitation scheme, Annexure P-2, reads as under:- “E. RELIEFS, CONCESSIONS AND SACRIFICES xxxx xxxx xxxx xxxx HARYANA GOVT. & HSIDC CWP No.5858 of 2010 -: 3 :- (i)To grant reliefs as per policy of the Haryana Government. (ii) HSIDC to re-schedule the payment of Rs.94.50 lakhs against payment of fund, which is to be paid over a period of six years from October 1, 2005 and waive of all penalties/interest/damages etc.” The petitioner challenged the said scheme before the Appellate Authority, i.e., AAIFR, primarily on the ground that no draft scheme was sent to the petitioner and the petitioner was never asked to submit objections. The appeal filed by the petitioner was dismissed as barred by limitation on 5.1.2007. The petitioner challenged the said order in CWP No.8199 of 2009. The said writ petition along with CWP No.4778 of 2007, filed by the Company, was decided on 30.7.2007. The operative part of the order reads as under:- “Therefore, in view of the facts and circumstances of the case and in view of the specific order passed by the BIFR to consider re-schedulement of payment of Rs.94.50 lakhs, which was proposed to be paid over a period of six years from 1.4.2005, and the payment having been made in one go pursuant to the order passed by this Court, the respondent- HSIDC cannot insist for levy of penalties, interest, extension fee etc. against the direction passed by the BIFR as contained in clause (6) reproduced above. Respondent-HSIDC cannot act to defeat the object of rehabilitation of company. Even the incorporation of SICA was on account of industrial sickness faced in the country and for those who wanted to rehabilitate the company. The special act was enacted by the Parliament to CWP No.5858 of 2010 -: 4 :- help rehabilitation by having a package so as to remove the industrial sickness and to generate economic growth in the country. Consequently CWP No.4778 of 2007 is allowed and CWP No.8199 of 2007 is dismissed. The conveyance deed be executed immediately in favour of the petitioner by the respondent-HSIDC, preferably within three weeks from today.” The Special Leave Petition filed by the petitioner against the said order has been dismissed. On 21.11.2008, the petitioner communicated to the company to pay the amount of enhanced compensation @ Rs.304.06 per square meter along with interest @ 11% per annum from 1.10.2007. The petitioner sought either the payment of compensation or an undertaking to pay the said amount before the request of the Company for execution of the conveyance deed in terms of the order of this Court can be considered. The company submitted a letter dated 29.11.2008 submitting an undertaking for payment of full price of the plot as and when demanded by the Corporation on account of enhancement of compensation. It was also undertaken that in case company failes to make payment of the full price within a period specified by the Corporation, it will entitle the Corporation to take action in the matter as per the terms and conditions of the letter of allotment. Thereafter, conveyance deed was executed on 27.3.2009 wherein, it was specifically mentioned that the company shall pay to the petitioner any additional price of the aforesaid plot in the event of enhancement of the compensation. Thereafter, the petitioner has even issued No Objection Certificate to create mortgage of the property subject to CWP No.5858 of 2010 -: 5 :- the conditions mentioned therein. In the meantime, a comprehensive report was placed before the BIFR and in a meeting of 24th June, 2009, during the course of consideration of the said report, representative of the petitioner pointed out that though the company has paid Rs.94.50 lacs as per the sanctioned scheme but an amount of Rs.63.84 lacs is payable by the company on account of enhanced compensation. The BIFR in its order Annexure P-12, dated 24.6.2009, noticed the fact that the net worth of the company was expected to turn positive by 31.3.2005 and the entire accumulated losses were expected to be wiped out by 31.3.2007. It is not disputed that in terms of the sanctioned scheme, net worth of the company has since turned positive. The BIFR, considering the claim of the petitioner, observed as under:- “11. The representative of HSIDC stated that company has paid Rs.94.50 lakhs and further an amount of Approx Rs.63.84 lakhs is due from the company on accont of enhanced rate for the land.” Thereafter, the Bench issued the following directions:- “12. b) With regard to dues pointed out by HSIDC towards enhanced rate of land, the company submitted that as per para E-II(i) and (ii) on page 9 of SS-04, the company has paid Rs.94.50 lakhs before due date and there is no provision for payment of enhanced rate of land in the sanctioned scheme. The Bench observed that as the company has made payment as per scheme, the demand of HSIDC is not justified.” Aggrieved against the observations of the BIFR, the petitioner filed an appeal before the AAIFR. The AAIFR dismissed the appeal by observing as under:- “5. We have perused the sanctioned scheme. In the sanctioned CWP No.5858 of 2010 -: 6 :- scheme nothing has been mentioned about the payment of enhanced rate of land. No such objection was raised by the HSIDC in the scheme either at the time of the sanction of the shceme and no such application for enhanced rate of land was filed. Therefore, it appears that the BIFR was justified in recording such a finding. Since the BIFR has discharged the appellant company from the purview of SICA, as its net wroth has turned positive, we ceases to have any jurisdiction to look into the question of payment of enhanced rate of land at this stage. Therefore, we do not find any case to interfere at this stage in this appeal.” Learned counsel for the petitioner has vehemently argued that the claim of the petitioner for enhanced compensation is one of the conditions of letter of allotment and such contractual conditions could not be commented upon by the BIFR. The liability to pay enhanced compensation arises on account of compensation determined on account of acquisition of land under the Land Acquisition Act, 1984. Therefore, such compensation is to be deposited by the allottee. Such was condition not only in the letter of allotment but in the conveyance deed as also the undertaking of the company. Keeping in view the said facts, the finding of the BIFR that demand of the petitioner is not justified, is wholly illegal and untenable. The AAIFR on the other hand has even noticed that the net worth of the company has turned positive, therefore, the Appellate Tribunal ceased to have any jurisdiction to look into the question of payment of enhanced rate of land but on the other hand observed that BIFR was justified in recording such a finding. It is contended that since the net worth of the company has turned positive, the BIFR could not observe in respect CWP No.5858 of 2010 -: 7 :- of demand of the petitioner, being unjustified, as such a demand arises out of independent transaction which is not subject matter of scheme before BIFR. It is further contended that the order of the Appellate Authority is contrary in nature. On the one hand, it records that it has no jurisdiction but still affirms the finding of the BIFR. Therefore, in terms of the conditions of letter of allotment, conveyance deed and the undertaking, the company is bound to pay enhanced amount of compensation. On the other hand, Shri Sanjiv Sharma, learned Senior Counsel for the company, has argued that the claim of the petitioner is barred by constructive res judicata as the claim of enhanced compensation was available to the petitioner during the pendency of the proceedings before the Hon'ble Supreme Court. But no grievance was raised in the Special Leave Petition filed against the order passed by this Court. It is further contended that BIFR had no jurisdiction in respect of enhanced compensation but it is the petitioner who invited such order from the BIFR. Therefore, the petitioner cannot make a grievance against the order passed, in the present writ petition. The scheme contemplated waiver of interest, penalty and damages payable to the petitioner but there is no condition nor could be one that the enhanced compensation on account of acquisition of land out of which plot of land has been allotted to the company is not to be paid by the company. Therefore, in terms of the conditions of letter of allotment and conveyance deed, as also the undertaking, the company is bound to make payment of enhanced compensation. The order passed by the BIFR holding that the claim of the petitioner is not justified, is not only misreading of the scheme but also CWP No.5858 of 2010 -: 8 :- wholly arbitrary. At the time of sanction of the scheme, the petitioner has not claimed enhanced amount of compensation. Therefore, such amount of enhanced compensation was not even considered at the time of finalization of the scheme, which is apparent from the clause of the scheme reproduced above. Still further, the net worth of the company has turned positive and as rightly observed by AAIFR, the authorities under the Act could not comment upon further independent liability arising against the company. Therefore, the order of the BIFR holding that such amount is unjustified,is wholly unwarranted, illegal, arbitrary and perverse, much beyond the sanctioned scheme. Though the AAIFR was correct in law that the Appellate Authority ceases to have jurisdiction but having said so, it could not hold that BIFR was justified in recording such finding. Once the authorities under the SICA have no jurisdiction, such authorities could not observe with regard to legality and validity of an independent demand. In view of such facts, we find that the order of the BIFR (Annexure P-12) as also the order of the Appellate Authority (Annexure P- 13) as against the petitioner are wholly unjustified, illegal and untenable and are consequently set aside. The present petition is accordingly allowed. [ Hemant Gupta ] Judge [ G.S. Sandhawalia ] October 13, 2011. Judge kadyan