State Of Karnataka & Anr vs All India Manufacturers Organization & ...

A brief statement regarding the Project: Bangalore is the capital of the State of Karnataka and a rapidly developing city, which is projected to be the IT boom town in the country. As a result of the pressures of urbanisation and industrialisation, the infrastructure in and around Bangalore was found to be inadequate. The traffic situation in Bangalore and on the roads leading into and out of the city was found to be chaotic and hardly conducive to the important role that the city is expected to play in the near future. The Government of Karnataka, realising the importance of rapidly developing the city of Bangalore, and also for developing its transport and communication systems, conceived of the Project. The Project had twin objectives: firstly, to provide for an express highway linking Bangalore with Mysore, the former capital of the erstwhile State of Mysore, which is now coming up as an industrial town, and for developing infrastructure along the corridor and in and around Bangalore city. The Project is a massive undertaking, which requires design, construction, maintenance and operation of an Express Highway between Bangalore and Mysore. Equally, the Project is to also develop infrastructure around the periphery of Bangalore and all along the Bangalore-Mysore Express Highway, which is about hundred years old and has become incapable of handling the heavy volume of vehicular traffic.

On 28.9.1988, the State of Karnataka invited tenders for implementation of such an Express Highway. There was no satisfactory response to the tenders called for. There was only one tenderer and the tenderer insisted on certain conditions which were not acceptable to the Government of Karnataka. Thus, the bid of the tenderer was not accepted. A survey was conducted by the Asian Development Bank and its report pointed out that the projected population of Bangalore city would be about 8.2 million by the year 2011 and, therefore, there was an urgent need for improvement of the Bangalore-Mysore Corridor. It was also suggested that the State Government bear 20% of the project cost, along with the cost of land acquisition, if such a project was to be implemented. The State Government did not have sufficient means and had to look for other alternative ways for implementing this project. The State Government then decided to take up the project on a Build-Own-Operate-Transfer (hereinafter "BOOT") basis with any consortium. The consortium was to carry out the development of the project from its own resources and recoup its investment by collection of tolls along the Express Highway.

On 20.2.1995, a Memorandum of Understanding (hereinafter "MOU") was entered into between the State Government and the Consortium of Vanasse Hangen Brustlin Inc. USA (hereinafter "VHB"), Kalyani Group of Companies (hereinafter "Kalyani") and SAB Engineering and Construction Inc. USA (hereinafter "SAB"). The Governor of the State of Massachusetts, U.S.A., Mr. William Weld, and Mr. H.D. Deve Gowda, the then Chief Minister of the State of Karnataka were present and appended their signatures thereto. It was agreed that the State Government would extend support for the development of the Bangalore-Mysore Expressway, provided commercial viability, competitiveness and feasibility of the project was established to the satisfaction of the State Government. The Consortium submitted a Project Report for review by the State Government.

The three members of the ConsortiumVHB, Kalyani and SAB entered into a "Consent and Acknowledgement Agreement" (hereinafter "the CAA") dated 9.9.1996, specially assigning their respective rights under the Government Order (dated 20.11.1995) and the MOU with regard to the Project, in favour of Nandi Infrastructure Corridor Enterprises Ltd. (hereinafter "Nandi"). Nandi had been registered on 16.1.1996 as a company under the Companies Act, 1956, to serve as a corporate vehicle for the development and implementation of the Project. On 21.12.1996, the CAA was forwarded to the State Government for necessary action. The State Government was advised by its Law Department (through Opinion No. 182 OPN II/97 dated 3/4.3.1997) that since the Government was finalising a separate agreement with Nandi, there was no need to specifically consent to the CAA. Consequently, the State Government took no further action except noting it.

Under Clause 4.1.1 of the FWA, the State Government set up an "Empowered Committee" headed by the Chief Secretary of the State to oversee the Project and its implementation keeping in mind the importance of timely completion. The Empowered Committee included technical experts and held about ten meetings from time to time, the last one being on 24.7.2004. The main task of the Empowered Committee was to remove administrative bottlenecks and to ensure the smooth execution of the Project. The Empowered Committee was the State's agent of coordination and carried out the State Government's obligations under the FWA.

The Present Litigation Although the writ petition in Somashekar Reddy (supra) was dismissed by the High Court by its judgment dated 21.9.1998, it is of relevance to notice that between November 1997, when this writ petition was filed, and when the petition was dismissed, the work of implementing the Project was going on in view of the stand of the State Government and Nandi. Accordingly, a number of notifications were issued for acquisition of the land required under the FWA. Many landowners challenged the acquisition of their lands before the High Court. Although the issue of the landowners will be dealt with in the second part of our judgment, it will be useful to note that the Government supported the stand of Nandi before the Single Judge, who partially allowed the land owners' petitions. It was during the writ appeal stage that the Government reversed its stance and opposed Nandi.

Even while the said writ appeals filed in the land acquisition matters were pending before the High Court, a second round of writ petitions challenging the Project itself was filed before the High Court. Despite the High Court's go-ahead for the Project in 1997, and after seven years of implementation, suddenly in the year 2004, these petitions were filed against it in so-called "public interest" by two Members of the Legislative Assembly (hereinafter "MLAs") and a "social worker" (i.e. Mr. J.C. Madhuswamy and others). This petition prayed for a CBI enquiry and to restrain the State Government from continuing with the Project or acquiring any further land thereunder. Perhaps inspired by Mr. J.C. Madhuswamy and others, and also in the so-called "public interest", All India Manufacturer's Organisation, as well as two ex-Mayors of Mysore (Mr. Dakshinamurthy and another), moved the High Court for a direction to the State Government to implement the Project according to the FWA.

The Division Bench disposed of all the writ petitions by a common judgment by which it dismissed Writ Petition No. 45386/04 filed by Mr. J.C. Madhuswamy and others with costs. Writ Petition Nos. 45334/04 and 48981/04 were allowed by the Division Bench directing the State of Karnataka and all its instrumentalities, including the KIAD Board, to execute the Project as conceived originally and to implement the FWA in "letter and spirit". The High Court also directed the prosecution of K.K. Misra, Chief Secretary of the Government of Karnataka and M. Shivalingaswamy, Under Secretary, Department of Industries and Commerce, as envisaged by Section 340 of the Code of Criminal Procedure, 1973, for certain offences which came to its notice as a result of the affidavits filed by them. K.K. Misra and M. Shivalingaswamy have filed separate appeals with regard to the direction of their prosecution with which we are not concerned at present.

The High Court has also totally disbelieved the affidavits of the Chief Secretary, K.K. Misra, and the Under Secretary, M. Shivalingaswamy on this issue. We have refrained from commenting on the merits of their affidavits since their appeals against prosecution for perjury are pending separately. We may, however, point out that both the affidavits of the two senior bureaucrats are on the issue that certain facts which had been suppressed from the Government had come to light after the judgment in Somashekar Reddy (supra) and that these indicated fraud and misrepresentation on the part of Nandi. Indeed, this was the central argument put forward for impugning the FWA.

The FWA was executed on 3.4.1997 and implemented by the parties for at least seven years. Several obligations under the FWA were carried out by the State Government and its instrumentalities and also by Nandi, which had invested a large amount of money in the Project. These included monies for payment of compensation to landowners whose lands were being acquired for the Project. Soon after the FWA was entered into, some interested parties had raised the issue in "public interest" that the FWA was a fraud and was nothing but a charade for a lucrative real estate business on the part of Nandi. The Government through the then Minister for Public Works vigilantly defended the Project against all these allegations both inside and outside the Legislature.

Sometime in August 2004, when the writ appeals came up for hearing before the Division Bench of the High Court, the State Government and the KIAD Board withdrew their appeals, because by then, as we have already discussed, the State Government appeared to have second thoughts about the Project and felt that the land acquisitions were far in excess of the Project's requirements. Even though they were also respondents under the writ appeal filed by Nandi, they did not contest the claim and addressed no arguments before the Division Bench of the High Court. Those appeals were disposed of by an order dated 28.2.2005. The appeals filed by Nandi and the Indian Machine Tools Manufacturers Association (hereinafter "the IMTMA") were allowed, whereas those filed by the landowners were dismissed, and the order of the learned Single Judge was set aside and the entire acquisition was upheld.

In these circumstances, we find no reason to interfere with the said directions of the High Court. In the future also, we make it clear that while the State Government and its instrumentalities are entitled to exercise their contractual rights under the FWA, they must do so fairly, reasonably and without mala fides; in the event that they do not do so, the Court will be entitled to interfere with the same.

Writ Petition No. 45386/04 (Mr. J.C. Madhuswamy and others) was rightly dismissed as raising the very same issues which had been concluded by the decision in Somashekar Reddy (supra). Writ Petition Nos. 45334/04 and 48981/04 were rightly allowed and the order to implement the Project in its letter and spirit had been made in exercise of the writ jurisdiction of the High Court. We refrain from dealing with the third relief granted, namely directing the prosecution of K.K. Misra and M. Shivalingaswamy, as their appeals shall be independently dealt with by this Court.

The Land Acquisition Matters (Civil Appeal Nos. 3848-3884/2005, 3889-4127/2005, 4128-4366/2005, 4575-4576/2005, 5399-5401/2005, 5402/2005, 5746-5747/2005, 5759/2005, 5797-5799/2005, 6098/2005, 6099/2005, 5092-5093/2005, 7024-7040/2005, 7591/2005, 7592/2005, 61/2006, 73/2006, 74-76/2006, SLP 1562-63/2006).

Although other contentions have also been raised, we will not deal with them here as they have already been dealt with in the first part of our judgment.

Civil Appeal No. 7024-25/05 As regards these appeals, the impugned judgment of the High Court (vide Paragraph 32) specifically records that the appellants did not have any right or interest in the land in question on the date that they filed the writ petitions before the High Court. The counsel too admitted the same before the High Court. The High Court accordingly found that the writ petitions were not maintainable. Since the writ petition proceeded on this footing, we cannot permit the appellants to take a different stand before us, contrary to what had been stated before the High Court. Since we have not been convinced otherwise, the writ petitions were not maintainable and the High Court was justified in the view that it took.

The Final Orders In the result, we find that the judgment of the High Court (dated 3.5.2005) impugned before us in the Main Matter, is not liable to be interfered with. There is no merit in the appeals and they are hereby dismissed. Considering the frivolous arguments and the mala fides with which the State of Karnataka and its instrumentalities have conducted this litigation before the High Court and us, it shall pay Nandi costs quantified at Rupees Five Lakhs, within four weeks of this order.

Appellants in C.A. No. 3497/2005 (J.C. Madhuswamy and others), in addition to the costs already ordered by the High Court, shall pay to the Supreme Court Legal Services Authority costs quantified at Rupees Fifty Thousand within four weeks of this order. A copy of this order be sent to the Member-Secretary of the Supreme Court Legal Services Authority for his/her information.

In the Land Acquisition Matters, the appeals challenging the judgments of the High Court dated 28.2.2005, 29.6.2005 and 18.11.2005 are dismissed as without substance. However, in the circumstances, there shall be no order as to costs.