IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN WEDNESDAY, THE 11TH FEBRUARY 2009 / 22ND MAGHA 1930 OP.No. 25314 of 2002(L) ----------------------- PETITIONER(S): --------------- P.KUNHIPATHU, W/O. M.AHAMMADKUTTY HAJI, MALIYEKKAL HOUSE, VENGARA, MALAPPURAM DISTRICT. BY ADV. SRI.A.P.CHANDRASEKHARAN, SENIOR ADVOCATE SRI.PUSHPARAJAN KODOTH SRI.M.KRISHNAKUMAR SRI.K.JAYESH MOHANKUMAR RESPONDENT(S): --------------- 1. KERALA SMALL INDUSTRIES DEVELOPMENT CORPORATION LTD., REPRESENTED BY THE MANAGING DIRECTOR, SHANTHI NAGAR, THIRUVANANTHAPURAM. 2. THE GENERAL MANAGER, DISTRICT INDUSTRIES CENTRE, MALAPPURAM. 3. THE STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY, SECRETARIATE, THIRUVANANTHAPURAM. GOVERNMENT PLEADER SMT.SMITHA SUKUMAR FOR R2 & 3 SRI.M.A.MANHU, SC, SIDCO FOR R1 SRI.R.T.PRADEEP FOR R1 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 11/02/2009, THE COURT ON 11/02/2009 DELIVERED THE FOLLOWING: O.P.No. 25314/2002. APPENDIX PETITIONER(S)' EXHIBITS P1. COPY OF THE AGREEMENT DTD.4.1.92. P2. COPY OF THE LETTER DTD.F31.1.92 BY R1. P3. COPY OF THE SANCTION ORDER DTD.13.2.92 BY R1. P4. COPY OF THE ORDER DTD.5.1.95 BY R1. P5. COPY OF THE COVERING LETTER DTD.4.2.95 TO R1. P6. COPY OF THE APPLICATION DTD.5.6.2000 TO R1. P7. COPY OF THE ORDER DTD.24.8.01 BY R1. P8. COPY OF THE ORDER DTD.13.9.02 BY R2. P9. COPY OF THE ORDER DTD.12.11.01 BY R1. P10. COPY OF THE 1975 RULES FOR ALLOTMENT OF VACANT LAND. P11. COPY OF THE 1996 OUT-RIGHT PURCHASE RULES. Sdk+ ///True copy/// P.A. to Judge S.SIRI JAGAN, J. ================== O.P.No. 25314 of 2002 ================== Dated this the 11th day of February, 2009 J U D G M E N T The issue raised by the petitioner in this original petition is regarding the demands made by the 1st respondent for payment of additional amounts for constitution of a firm in order to start an industry in the plot allotted to the petitioner in the industrial estate in Oorakam in Malappuram district. The 1st respondent developed an industrial estate in Oorakam in Malappuram district. Three sheds thereof viz., shed Nos.6, 7 and 8 were purchased by one Abdulla. The petitioner purchased the three sheds from the said Abdulla as per Ext.P1 agreement, pursuant to which, as directed by the 1st respondent, the petitioner entered into Ext.P2 agreement with the 1st respondent in respect of those sheds. Subsequently, the petitioner sought allotment of 3.3 more cents of land for the purpose of starting an industry. That was alloted. The petitioner paid an amount of Rs.16,500/- towards the value of the said land as per Ext.P5. That was on 4.2.1995. Allegedly, since the petitioner did not have enough capital for starting the industry, the petitioner decided to bring in more capital by inducting five partners. The petitioner filed Ext.P6 request before the 1st respondent for approval of the said action of the petitioner to constitute a firm for starting the industry in the plot o.p.25314/02 2 alloted to him. As a condition for approval, the 1st respondent, by Ext.P7, directed the petitioner to pay the difference in cost of the plot, viz., the difference between the cost at which the allotment was made and the present cost if the proposed inductions are not within the relationship of husband, wife, children, brothers, sisters, father and mother with reference to the allottee, which is a condition as per the rules applicable. By Ext.P7, the petitioner was also directed to register the industry as an SSI unit. By Ext.P9, the petitioner was directed to pay an amount of Rs.5,56,733/- payable by the petitioner as the difference between the original cost and the present cost of the plot. The petitioner is challenging Exts.P7, P8 and P9 in this original petition. 2. According to the petitioner, the question of payment of difference in cost would arise only if the petitioner transfers the land allotted to a third party. Here the petitioner is not alienating the property to anybodyelse, but is only seeking to start a partnership firm with the petitioner also as a partner, which does not amount to alienation of the property at all. The petitioner challenges clause (i) of Rule 3 of Ext.P11 which are the rules applicable, viz., the Corporation's Rules of Allotment of Sheds/Land in Industrial Estates, Kerala on Out Right Purchase Basis, 1996. According to the petitioner, the rules in existence at the time of purchase by the petitioner was Ext.P11, in o.p.25314/02 3 which the word, “alienation” did not include converting a proprietary firm into the partnership firm. In Ext.P11 rules the term “alienation” has been amended to include reconstitution of firm also. According to the petitioner, the 1st respondent cannot make rules against the laws of the land, which are Transfer of Property Act and Indian Partnership Act, as per which, the conversion of a proprietary firm into a partnership firm does not amount to alienation. Therefore, according to the petitioner, the said rule is arbitrary and discriminatory. 3. A counter affidavit has been filed by the 1st respondent, wherein the contentions of the petitioners are controverted. According to them, there are instances of persons being brought in as partners after taking money from the partners and thereafter original allottee quietly retiring from the partnership without payment of any amounts to the 1st respondent, which is due as per the rules. It is in order to prevent such mischief that the expression “alienation” has been defined to include reconstitution of the firm as well. According to the 1st respondent, there is nothing arbitrary or discriminatory in the rule. 4. I have considered the rival contentions in detail. 5. Admittedly, the petitioner entered into an agreement with the 1st respondent undertaking to abide by the rules applicable for allotment of land in the industrial estate as amended from time to time. The scheme for such allotment has been framed by the 1st o.p.25314/02 4 respondent in order to promote industries in Kerala. Such allotment is not after taking the market value of the property allotted, but for a far less amount. That is why the rules specifically provide for stringent conditions against transfer of plots and sheds allotted to entrepreneurs. These rules have been framed with that object in mind. The petitioner has been made aware of those rules in advance. The petitioner had undertaken to abide by those rules as amended from time to time also. After having undertaken to abide by those rules, the petitioner cannot now turn around and question the validity of those rules themselves. 6. I am of opinion that the law relating to the transfer of property and partnership cannot be imported into such rules. The allotment of plots and sheds as per the rules is not in accordance with either the Transfer of Property Act or the Indian Partnership Act. That being so, it is not necessary that those rules should conform to the Transfer of Property Act and the Indian Partnership Act. The validity of the rules framed by the 1st respondent cannot also be tested in the light of those legislations. In paragraph 9 of the counter affidavit filed by the 1st respondent, it is stated thus: “9. Respondents 1 and 2 submit that the contention that constitution of the firm does not involve transfer of ownership is totally incorrect. When a business run by a proprietary concern with its immovable properties proposed to be run by constituting a firm there is transfer of ownership of the petitioner over three o.p.25314/02 5 sheds to the partners of the firm and each one of them will have ownership over the assets of the firm. It may be noted that when there are restrictions in transfer of ownership of the sheds, the allottees resort to dubious methods to circumvent the provisions of the rules by constituting or reconstituting an existing firm and thereafter the original allottee in collusion with the newly inducted person or persons retire and take exorbitant amount from the continuing partners and thereby cause huge loss to the Corporation. It is to prevent such dubious transfers the definition alienation has been enlarged including reconstitution of the firm and if the amendment to the Rules are to be viewed in the above background it can be seen that there is no arbitrariness or discrimination in the amendments brought to the relevant rules.” 7. I am satisfied that that is a very plausible reason for inclusion of “reconstitution of firm” also within the purview of the expression “alienation”. As such, I do not find that the definition of “alienation” in clause (i) of Rule 3 of the Rules is in any way arbitrary or discriminatory. In the above circumstances, I do not find any merit in the original petition and accordingly, the same is dismissed. Sd/- sdk+ S.SIRI JAGAN, JUDGE ///True copy/// P.A. to Judge o.p.25314/02 6 S.SIRI JAGAN, J. ================== O.P.No. 25314 of 2002-L ================== J U D G M E N T 11th February, 2009