Phatu Rochiram Mulchandani vs Kar.Indusl.Area Devt.Board & Ors

3. In this appeal the appellant has assailed the judgment and order dated 11.2.2010 passed by the High Court of Karnataka in Company Appeal which was preferred by the appellant herein against the orders dated 3.9.2009 by the Company Judge of the said court. Respondent No. 2 namely M/s. Relectronics Ltd. (hereinafter referred to as the 'Company') is ordered to be wound up and liquidation proceedings are pending before the Company Court. Respondent No. 1 i.e. Karnataka Industrial Areas Development Board (hereinafter referred to as the 'Board') had allotted an industrial plots to the Company on lease-cum-sale basis for a period of 11 years. The Board terminated the lease. The Company Judge, on application filed by the Board, had directed the liquidator to release the said land to the Board and the appeal by the appellant against this order has been dismissed by the Division Bench of the High Court, not on merits but for want of locus standi of the appellant to question the orders. The appellant herein is questioning the veracity of the orders on the ground that it was the property of the Company which could not have been released in favour of the Board.

4. Before we mention about the credentials and locus standi of the appellant, we deem it appropriate to cull-out the seminal facts from the record leading to the passing of the impugned order. The Board had leased 13,657 sq. mtrs. of land in Plot No. 19 (A+B) of Sadramangala Industrial Area to the Company under the Lease Agreement dated 21.12.1984, on certain terms and conditions, for the purpose of establishing an industry for manufacture of AH/ FM Radio, Audio Tape Recorder in combination with radio. The Board executed lease-cum-Sale agreement (“Agreement”) in favour of the Company in respect of Plot No. 19 (A+B), measuring 13,657 sq. m. (3.5. acres) situated in Sadarmangala Industrial Area, Krishnarajapuram, Bangalore South. The consideration paid by the Company towards the same was Rs. 3,07,102/- as initial deposit/premium and the lease rentals @ Rs. 6,921/- per annum were to be paid for a period of 11 years.

6. As mentioned above, the Board had allotted the aforesaid plots of lands to the Company for the purpose of establishing a factory to manufacture radio and TV sets. As per the appellant, though the Company started the construction of the factory sometime in the year 1989-1990 but could not complete the same due to the ill health of the Managing Director Mr. T.R. Mulchandani. The Company was also unable to pay debts of its various creditors as it was running in losses. One of the secured creditors namely M/s. Sanmar Financial Limited filed a petition seeking winding up of the Company which was registered as Company Petition No. 18 of 1994. Industrial Development Bank of India (IDBI), another creditor also joined as supporting creditor. Vide orders dated 15.11.1996, the High Court of Karnataka ordered the winding up of the Company. All the assets and liabilities were got transferred to Official Liquidator (OL) who took charge thereof.

27. The Company submitted its reply/ detailed representation dated 4.7.1992 in response to the above. Thereafter, the Board also asked the Company to furnish the proof of investment and in response thereto the Company submitted certificate issued by the Chartered Accountant. After considering the replies the Board was not satisfied and, therefore, issued another resumption order in respect of first plot dated 22.3.1993 stating that the possession will be taken on 21.8.1993 for failure to implement the project in time. At this moment, Writ Petition was filed by the Company against this order in which the interim order was passed staying the resumption proceedings because of which the Board could not take possession of the said plot. While these proceedings were pending, winding up petition was filed against the Company by one of its creditors in the year 1994 and winding up orders were passed in the said Company petition on 15.11.1996.

For good and sufficient reasons, the Lessor may extend the time in writing in any of the cases mentioned in sub clauses (i) to

(iv) above, by such period as the Lessor. In his discretion deem fit and the Lessee shall complete the item of works for which extension of the time given within such extended time.

Failure to fulfill any of the conditions (I) to (IV) mentioned above shall result in allotment begin cancelled and agreement being terminated under clause 4 and a sum not exceeding 5% of the cost of land as indicted in Clause 1 of the lease agreement subject to a maximum of Rs.10,000/- and minimum of Rs.1000/- and interest due and payable as per clause 1 from the date of taking possession to the date of resumption of the land by the Board shall be forfeited to the Lessor.”

In the present case, an order of cancellation of the lease- cum-sale agreement is passed by the applicant Corporation, after presentation of the Company Petition and after passing the winding up order, but without the leave of the Court, and in our opinion, any such action is void. A void order cannot be regularised and, therefore, rightly the learned Company Judge has not acceded to the request made by the applicant Corporation. We do not see any error in the order passed by the learned Company Judge and, therefore, no interference with the said order is called for. Accordingly, appeal requires to be rejected and is rejected. No order as to costs. Ordered accordingly.”

39. We thus, hold that no prior permission was required by the Board for cancelling the lease.

41. In view of our elaborate discussion above, we do not find action of the Board to be illegal or blemished. The land was allotted to the Company for specified project which the Company failed to establish. Let us examine the Scheme of the KIAD Act at this point of time, KIAD Act is enacted to make special provisions for securing the establishment of industrial areas in the State and generally to promote the establishment and orderly development of industries therein, and for that purpose, to establish an Industrial Areas, Development Board, and for purposes connected with such matters. Chapter II deals with the declaration and alteration of Industrial Areas. Chapter III deals with establishment and constitution of the Board. Chapter IV deals with functions and powers of the Board and Chapter V deals with Finance, Accounts and Audit of the Board. Chapter VI deals with application of Public Premises Act and non-application of Karnataka Rent Control Act, 1961 to the premises of the Board. Chapter VII deals with Acquisition and disposal of land. Chapter VIII contains the supplementary and miscellaneous provisions. Section 13 in Chapter IV defines the functions of the Board as generally to promote and assist in the rapid and orderly establishment, growth and development of industries in industrial areas; and in particular, to develop industrial areas declared by the State Government and make them available for undertakings, to establish themselves; to establish, maintain, develop and manage industrial estates within industrial areas; and to undertake such schemes of programmes of works for the furtherance of the purposes for which the Board is established and for all purposes connected therewith.

44. We, further find that the Company is now in liquidation. Till date there is no validly propounded scheme of rehabilitation under Section 391 to 394 of the Companies Act. Some obscure proposals, without concrete Scheme as required under the Act, cannot be made a sheet anchor to come in the way of the rights of the Board which still remains the owners of these plots. It, therefore, cannot even be said that the land in question is required by the Company. The O.L. could claim rights over this land only if it had become the property of the Company and the ownership was vested in it. Even that is not so (whether cost of construction should be reimbursed to Company).

46. As a result this appeal is dismissed with costs. Consequently, the appeals arising out of S.L.P.(Civil) .......CC 14177-14180/2011 are also dismissed.