KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION LTD. versus KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
[2023] 12 S.C.R. 775, Supreme Court of India, 2023
Outcome: Appeal(s) allowed (Granted)
Segment: Issues
CASE DETAILS
KARNATAKA STATE ELECTRONICS DEVELOPMENT 
CORPORATION LTD.
v.
KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
(Civil Appeal No. 8073 of 2022)
OCTOBER 05, 2023
[VIKRAM NATH AND AHSANUDDIN AMANULLAH, JJ.]
HEADNOTES
Issue for consideration: Matter pertains to the demand raised by the 
State Undertaking from the allottee towards the charges for conversion of 
nature of use from IT Sector to Hospitality Sector.
Land laws – Conversion of nature of use – Payment of conversion 
charges – Allotment of plot by State undertaking to the respondent-
allottee for setting up Information Technology-IT industry on lease cum 
sale basis, but the allottee later sought conversion of nature of use from 
IT Sector to Hospitality Sector – Permission of change of use granted 
on payment of charges for change of activity, however a year later an 
audit objection raised that permission of change of use was granted 
at a much lower rate – Demand raised by the Undertaking towards 
conversion of usage charges – Allottee did not pay the same and ﬁ led writ 
petition seeking execution of sale deed by the Undertaking – Allowed by 
the Single Judge of the High Court which was upheld by the Division 
Bench – Correctness:
Held: Any loss suﬀ ered by the appellant being a fully owned State 
Undertaking would be a loss to the public exchequer – Allottee shifted its 
purpose of setting up an IT related industry to a hospitality sector to set up 
a hotel – If the amount for such conversion of usage is
not legally recovered 
from the allottee, loss being suﬀ ered by the Undertaking would not be in 
public interest – Also all other similarly situated allottees have paid the 
rate determined in the Board Meeting of the Undertaking – Allottee got 
undue advantage merely because the clerical staﬀ  and the oﬃ  cer signing the 
[2023] 12 S.C.R. 775 : 2023 INSC 871
775
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
776
demand notice applied the lower rate – Neither of them competent to override 
or deviate from the decision taken in the Board Meeting – Furthermore, the 
Board Meeting took place prior to the allottee applied for change of use and 
issuance of the demand notice for conversion, thus, no justiﬁ cation for not 
adhering to the decision taken in the Board Meeting – Bona ﬁ de mistake 
could always be corrected – Allotment letter as also the lease agreement 
clear that the rate was tentative and the ﬁ nal rate was to be determined later, 
which would be binding on the allottee – Once the ﬁ nal rate is determined 
by the Board, being the prevailing rate of the Collector, would be binding on 
the allottee – Division Bench failed to exercise its discretion vested under 
the law in condoning the delay, thereby resulting into serious prejudice and 
ﬁ nancial loss to the Undertaking-public entity – Thus, demand notice does 
not suﬀ er from any inﬁ rmity and allottee liable to pay the same – Judgments 
passed by the Division Bench and the Single Judge set aside – Constitution 
of India – Art. 136. [Para 22, 21, 24, 25, 28]
LIST OF CITATIONS AND OTHER REFERENCES
Karnataka Industrial Development Board Anr. vs. M/s Prakash Dal 
Mill and Ors. (2011) 6 SCC 714 : [2011] 5 SCR 26 – distinguished.
M. Nagabhushana v. State of Karnataka (2011) 3 SCC 408 : [2011] 2 
SCR 435; Dnyandeo Sabaji Naik v. Pradnya Prakash Khadekar (2017) 5 
SCC 496 : [2017] 2 SCR
95; Vinod Kapoor v. State of Goa (2012) 12 SCC 
378 : [2012] 8 SCR 1089; Sandhya Educational Society v. Union of India 
(2014) 7 SCC 701; Union of India vs. West Coast Paper Mill (2004) 3 SCC 
458 : [2004] 2 SCR 642 – held not applicable.
Neeraj Jhanji v. Commr. of Customs & Central Excise (2015) 12 SCC 
695; Haryana State Coop L&C Federation Ltd. v. Unique Coop L&C Coop 
Society Ltd. (2018) 14 SCC 248 – referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED 
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8073 of 2022.
From the Judgment and Order dated 28.07.2017 of the High Court of 
Karnataka at Bengaluru in WA No.175 of 2017.
777
Appearances:
Ms. Aakriti Priya, Balaji Srinivasan, Devamshu Behl, Rohan Dewan, 
Advs. for the Appellant.
Gautam S. Bharadwaj, Ashwin Kumar D. S., Ms. Anagha Sharma, 
Ms. Surbhi Mehta, Advs. for the Respondent.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
VIKRAM NATH, J.
1. This appeal is directed against the judgment and order dated 
28.07.2017 passed by the Division Bench of the High Court of Karnataka 
in Writ Appeal No. 175 of 2017 titled “Karnataka State Electronics 
Development Corporation Ltd. Vs. Kumaon Entertainment and 
Hospitalities Private Limited”, whereby the appeal of the appellant 
was dismissed, thereby confirming the judgment of the learned Single 
Judge dated 03.09.2015 and 14.11.2016, allowing the Writ Petition 
No.1605 of 2015 of the respondent and dismissing the review petition 
respectively.
2. The State of Karnataka came up with a policy decision for the 
purposes of promoting and developing industries related to Electronic & 
Information Technology within the State. It established Karnataka State 
Electronic Development Corporation Ltd.1 as a Non-Proﬁ t Organisation 
for the aforesaid purpose across the State including the Electronic City in 
Bangalore. Acquisition of land in large amount was made in Bangalore city 
for setting up an area known as Electronic City. 
3. The appellant, vide its 133rd Board Resolution came up with a new 
selection process for allotment of land in the Electronic City. Vide allotment 
letter dated 25.01.2006, the
appellant allotted plot admeasuring 0.25 acres to 
the respondent for development of such land to be used in industry relating 
to Information Technology & Electronic Development Sector (Animation 
& Multi Media Services). The tentative price ﬁ xed of the allotted land was 
1 
 In short known as “appellant”
KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION 
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
778
Rs. 1 Crore per acre. The respondent was required to commence the project 
at the earliest. 
4. The allotment was made on lease cum sale basis for a period of 
ten years. It was further stipulated that upon completion of ten years or 
on completion of the project, the lease would convert to a sale, subject to 
fulﬁ lment of all the terms & conditions of allotment and payment of price 
of land in full as may be ﬁ nally determined by the appellant. It was also 
clearly mentioned in the allotment letter that the price of land indicated 
was only tentative (Rs. 1 Crore per acre). The ﬁ nal price of the allotted 
land would be communicated later, which would be dependent upon other 
factors being ﬁ nalized in the meantime. Possession of the land was given 
to the respondent on 09.05.2006. 
5. A lease cum sale agreement was executed between the appellant and 
the respondent on 30.10.2006. The terms of the lease cum sale agreement 
would be dealt in detail at a later stage. 
6. The respondent, which was originally a partnership ﬁ rm, applied 
for it being converted into a private limited company in 2007. The appellant 
issued no objection certiﬁ cate in that regard on 18.05.2007.
7. In the 141st Board meeting of the appellant dated 19.07.2007, the 
Board resolved that the price for allotment would be as per the guidance 
value ﬁ xed by the Government, which was Rs. 800/- per sq. ft. It would 
work out to Rs. 3.2 Crores per acre. The said
value was duly adopted based 
upon the guidance value determined by the Government.
8. On 23.07.2007, the respondent applied to the appellant for conversion 
of nature of use from Information Technology sector to Hospitality sector. 
As per the terms of allotment and the lease agreement, change in nature of 
use could be granted, subject to the payment of additional charges at the 
prevailing rate. On 24.09.2007, communication was issued by the appellant 
granting permission for the change in the nature of activity, subject to 
payment of Rs. 20 lacs per acre. The respondent thereafter paid an amount of 
Rs. 5 lacs as the allotted land was only one quarter of an acre. On 15.10.2007, 
the respondent also applied for approval of its plan for construction.
9. On 06.11.2008, an audit objection was raised stating that the 
prevailing rate of plot at the time of change of use was Rs. 3.2 Crores per
779
acre, whereas permission of change of use was granted at a much lower rate. 
The appellant had, therefore, suﬀ ered a loss of Rs. 46.25 lacs. Further, as 
the rate of Rs. 3.2 Crores per acre was applicable for residential purposes, 
but this being used for commercial purpose, the rate would be higher by 40 
per cent and, therefore, the loss would be additional Rs. 32 lacs.
10. On 31.10.2011, the respondent requested the appellant for 
execution of the sale deed. Thereafter he also gave a show cause 
notice on 05.06.2012 for execution of the sale deed. The appellant 
sent a reply in response to the notice on 25.07.2012, calling upon the 
respondent to pay Rs. 83.25 lacs for execution of the sale deed in view 
of the prevailing rate being Rs. 3.2 Crores per acre for residential 
purposes and for commercial use would be Rs.4.48 Crores being 
enhanced by 40%. 
11. The respondent challenged the reply dated 25.07.2012 by way 
of Writ Petition No. 10338 of 2013. The said petition was disposed of 
by order dated 14.08.2014 with a direction to the respondent to submit a 
representation and a further direction to the appellant to decide the said 
representation within two months. 
12. The representation submitted by the respondent was rejected by 
the appellant. The respondent thereafter preferred Writ Petition No. 1605 of 
2015, praying for a direction to the appellant to execute the sale deed in their 
favour, as according to them, they had fulﬁ lled all the formalities. Before
the High Court, the respondent also ﬁ led a communication which took place 
between the appellant and the audit department, wherein the appellant sent 
a response to the audit objection justifying that the prevailing rate was Rs. 
1 Crore per acre and not Rs. 3.2 Crore per acre. 
13. The learned Single Judge, vide judgment dated 03.09.2015, relying 
on the said audit objection and its response by the appellant, allowed the Writ 
Petition No.1605 of 2015. Appropriate directions were issued to appellant to 
execute the sale deed. Subsequent thereto the appellant ﬁ led an intra Court 
appeal and also ﬁ led a review. Further, after dismissal of review, appellant 
ﬁ led another intra Court appeal and also ﬁ led a review before the Division 
Bench. Finally, came the judgement of the Division Bench dated 28.07.2017. 
Same is impugned in this appeal. The fact remains that the Writ Petition 
ﬁ led by the respondent was allowed by the Single Judge and the intra court 
KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION 
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
[VIKRAM NATH, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
780
appeal ﬁ led by the appellant was dismissed by the Division Bench. This 
gave rise to the ﬁ ling of the present appeal.
14. We have heard learned counsel for the parties and perused the 
material on record.
15. The submissions advanced by learned counsel for the appellant 
are summarized as hereunder:
(a) The Division Bench committed an error in dismissing the appeal 
primarily on the ground of delay of 459 days, which was not 
satisfactorily explained. The Division Bench failed to take into 
consideration the time spent by the appellant in taking recourse 
to other legal measures permissible under the law before a valid 
forum. The appellant was entitled to beneﬁ t of section 5 of the 
Limitation Act, 19632. Reliance has been placed on the judgment 
of this Court in the case of Union of India vs. West Coast Paper 
Mill3.
(b) The Single Judge and the Division Bench erred in relying 
upon the communication or the correspondence with respect 
to the objections raised in the audit report merely because the 
appellant was trying to justify the demand of Rs. 5 Lakhs, the 
said justiﬁ cation being on a wrong premise, cannot deprive the 
appellant, which is a Public Sector Undertaking, from recovering 
the valid dues payable by the respondent which is a commercial 
entity. The respondent cannot take undue advantage of the internal 
communication. The same was not supported by the decision 
taken in the Board meeting which alone would be
binding on the 
appellant.
(c) It was very clearly mentioned in the agreement of sale cum 
lease that the rate of Rs.1 Crore was tentative rate. It was further 
stipulated in clear terms that at the time of ﬁ nal execution of sale 
cum lease deed, the prevailing rate would be charged as would 
be ﬁ nalised in due course of time depending upon other attending 
2 
 The Limitation Act
3 
(2004) 3 SCC 458
781
charges which may be liable to be paid by the appellant. Under the 
decision of the 141st Board meeting, the prevailing rate in 2007 
at the time when change in nature of use was sought was Rs.3.2 
Crores per acre and further addition of 40% was liable to be paid 
for the change in nature as the use was for commercial purposes. 
(d) The Single Judge and the Division Bench failed to appreciate that 
all other entities, list of which was provided, had been charged 
at the ﬁ nal rate determined as per the 141st Board resolution. In 
case the respondent is allowed to pay at the tentative rate only, 
all other similarly placed entities who have paid at the ﬁ nal rate 
would start claiming refund from the appellant causing immense 
loss of public revenue. 
(e) The communication based on ignorance of a Board decision, 
demanding only Rs. 5 lakhs could not be said to be the decision of 
the appellant. It was a mistake committed by the staﬀ  apparently 
because the Board resolution had been passed about two months 
earlier. It may not have come to the knowledge of the staﬀ  dealing 
with the request made by the respondent for execution of sale-
cum-lease deed after change of nature of the use. 
(f) The Single Judge and the Division Bench of the High Court 
fell in error in not appreciating that any loss to the appellant 
would amount to loss to the public exchequer. The appellant is a 
Public Sector Undertaking working under the aegis of the State 
of Karnataka. It is a non-proﬁ
t organisation, established for the 
growth and promotion of Information Technology and Electronics 
sector in the State of Karnataka. It had been established to help 
the IT industries to ﬂ ourish in the State of Karnataka. Hundred 
per cent shares of the appellant company are held by the State of 
Karnataka. 
(g) The impugned order passed by the Division Bench deserves to 
be set aside, the appeal deserves to be allowed and as a result the 
writ petition preferred by the respondent is liable to be dismissed. 
16. The submissions advanced by the learned counsel for the 
respondent are brieﬂ y summarised as under:
KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION 
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
[VIKRAM NATH, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
782
(a) The price of land reﬂ ected in the Letter of Allotment could be 
done only on two counts namely towards development work or 
ﬁ nalization of court of awards. The respondent has already paid 
an additional amount of Rs.3,75,000/- towards land development 
cost for which a separate demand had been raised as such no 
further demand could be raised on the basis of revision of prices. 
Any change in the price reﬂ ected in the Letter of Allotment ought 
to have been done at the earliest in view of the expressions used 
“as soon as it may be” in clause 13 (b) of the Lease cum Sale 
Agreement dated 30.10.2006. Reliance has been placed upon 
a judgment of this Court in the case of Karnataka Industrial 
Development Board Anr. vs. M/s Prakash Dal Mill and Ors.4.
(b) The respondent has already paid the demand raised vide letter 
dated 24.09.2007 for an amount of Rs.5 Lakhs with respect to the 
charges for change in activity. After much delay further demand 
of more than Rs.83 Lakhs has been made based on some audit 
objection. The same has rightly been held to be illegal by the 
Single Judge as also the Division Bench of the High Court. 
(c) The demand raised on the basis of the rates determined in the 
141st Board meeting of the appellant was not applicable to the 
respondent inasmuch as the said ﬁ xation was for fresh allotment 
of stray plots.
(d) The appellant had themselves admitted in response to the audit 
objections that the
prevailing rate was Rs.1 Crore per acre and 
not Rs.3.2 Crores per acre and, therefore, they cannot keep on 
changing their stand from time to time in order to extract more 
money from the respondent who has always been compliant to 
their previous demands.
(e) It was only when the respondent repeatedly requested the appellant 
to execute the ﬁ nal lease cum sale deed and was compelled to 
issue a legal notice that an additional demand of Rs.83 Lakhs was 
raised vide communication dated 25.07.2012. The said conduct 
4 
 (2011) 6 SCC 714
783
of the appellant was wholly unjustiﬁ ed and has been rightly 
disapproved by the High Court. The repeated ﬁ ling of reviews 
and appeals by the appellant also shows their malicious conduct 
in somehow or the other stalling the execution of the lease cum 
sale deed and to somehow or the other extract unwarranted 
amount from the respondent which was otherwise not payable. 
Reliance was placed upon the following four judgments:
• M. Nagabhushana v. State of Karnataka5, paras 12, 13, 
18 & 22;
• Dnyandeo Sabaji Naik v. Pradnya Prakash Khadekar6
– para 14;
• Vinod Kapoor v. State of Goa7, paras 11to 13;
• Sandhya Educational Society v. Union of India8, paras 
13, 16 to 18.
(f) Beneﬁ t of the Limitation Act was not admissible to the appellant 
in as much as the entire exercise and the time spent in ﬁ ling 
reviews and appeals repeatedly was in itself an abuse of process 
of law. Reliance was placed upon the following two judgments:
• Neeraj Jhanji v. Commr. Of Customs & Central Excise9, 
paras 2-3;
• Haryana State Coop L&C Federation Ltd. v. Unique 
Coop L&C Coop Society Ltd.10, at paras 11-15.
The appeal lacks merit and is liable to be dismissed based on the 
above submissions.
17. Before proceeding to analyze the arguments advanced by the 
learned counsel for the parties, at the outset, it would be relevant to refer to 
5 
 (2011) 3 SCC 408
6 
 (2017) 5 SCC 496
7 
 (2012) 12 SCC 378
8 
 (2014) 7 SCC 701
9 
 (2015) 12 SCC 695
10  (2018) 14 SCC 248
KARNATAKA STATE ELECTRONICS
DEVELOPMENT CORPORATION 
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
[VIKRAM NATH, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
784
the terms of the allotment letter, terms of the agreement between the parties 
as also the resolutions passed from time to time. 
(a) A copy of letter of intent/allotment dated 25.01.2006 is ﬁ led as 
Annexure – P1. According to it, the respondent which was earlier 
known as “M/s Kumaon Associates & Technology”, at the time 
of allotment, was allotted 0.25 acres of land in Plot No.56 within 
Survey No.66 of Doddathougur Village at Electronic City for 
setting up of IT related service activities. 
(b) Paragraph 1 of the said allotment letter provided that the lease 
shall be converted into a sale subject to fulﬁ lment of all terms 
and conditions of allotment and payment of price of land in full 
as ﬁ nally ﬁ xed, subject to adjustment of amount already paid 
towards premium and rent. 
(c) Paragraph 2 mentions that the price of land would be determined 
by the appellant and intimated in due course to the respondent. It 
was only for the purposes of allotment that the tentative price of 
the land was ﬁ xed at Rs.1 Crore per acre. 
(d) Paragraph 9 of the allotment letter provided that the appellant 
reserves its rights to increase the tentative price of land indicated 
in the said letter after completion of all development works and 
ﬁ nalization of court awards, if any. 
(e) Paragraphs 1, 2 and 9 of the allotment letter are reproduced 
hereunder:
“1. The allotment of land is on lease cum sale basis for a period 
of 10 year. At the
end of 10 years or completion of the project 
for which land is allotted whichever is early, the lease shall be 
converted into a sale subject to fulﬁ llment of all the terms and 
conditions of allotment and payment of price of land in full 
as ﬁ nally ﬁ xed subject to adjustment of amounts paid by you 
towards premium and rents. The conversion of lease into a sale 
shall also be subject to the utilization of minimum 50% of the 
extent handed over as determined by KEONICS on the merits 
of each case. The decision of KEONICS in this behalf is ﬁ nal 
and binding on you.
785
2. The price of the land shall be determined by KEONICS 
and intimated to the applicant in due course. However, for the 
purposes of this allotment the tentative price of the land per acre 
has been ﬁ xed at Rs.1 Crore per acre.
……. 
…….. ……..
9. KEONICS reserves its right to increase the tentative price of 
the land indicated in this letter of intent after completion of all 
development works and ﬁ nalization of Court Awards, if any.”
(f) The Lease cum Sale Agreement (Annexure -P2) dated 30.10.2006 
executed between the parties also contains similar clauses which 
are brieﬂ y referred to hereunder. 
(g) Paragraph 6 of the said agreement states that the parties have 
agreed to the price of land being tentatively ﬁ xed at Rs.25 Lakhs. 
The said paragraph is reproduced hereunder:
“6. And whereas the LESSOR and the LESSEE having agreed 
that the price of the land tentatively to be Rs. 25,00,000/- (Rupees 
Twenty Five Lakhs Only) and the LESSOR having received 
Rs.25,00,000/- (Rupees Twenty Five Lakhs Only) from the 
Lessee towards the ﬁ nal consideration, the receipt of which the 
LESSOR hereby acknowledges.”
(h) Under the terms and conditions of the agreement, clause (3) lays 
down several conditions. Relevant for our purposes are clauses 
3r(i) and (ii). Clause r(i) provides that lessee (respondent) would 
not change the constitution status of its ﬁ rm/company without 
previous written consent of the lessor and clause r(ii) thereof 
provides that the lessee (respondent)
would not change the name/
product as mentioned in the application again without the previous 
written consent of the lessor (appellant). For such change the 
lessee would have to pay prevailing rate of the plot. The said two 
clauses are reproduced hereunder:
“r(i) The lessee shall not change the constitution/status of its ﬁ rm/
company (proprietary or partnership (registered or un-registered) 
or private limited company or unlimited Company) without 
KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION 
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
[VIKRAM NATH, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
786
the previous written consent of the lessor or any other oﬃ  cer 
authorized by the lessor and such consent shall be granted by the 
lessor subject to the condition that the original applicant/ partners/
promoters/Directors/shareholders should continue to hold a 
minimum 51% of the interest/shares in the newly constituted 
ﬁ rm/company. And in the event of the lessee’s death, the person 
to whom the title shall be transferred as heir or otherwise shall 
cause notice thereof to be given to the lessor within three months 
from such death.
ii) The lessee shall not change the name/product (as mentioned 
in the application) without the previous written consent of the 
lessor or any oﬃ  cer authorized by the lessor and such consent 
shall be granted by the lessor subject to the condition that the 
lessee has to pay prevailing rate of the plot.”
(i) The next relevant clause is clause 13(b) which provides that the 
lessor (appellant) would ﬁ x the price as soon as it is convenient 
and the same would be communicated to the lessee so that the 
sale could be aﬀ ected. It further records that the decision of the 
lessor would be ﬁ nal and binding on the lessee. 
(j) Clause 13(c) provides that the allotment would be for a period of 
ten years and at the expiry of the ten years or completion of the 
project for which land was allotted whichever is earlier, the lease 
would be converted into a sale subject to fulﬁ llment of the terms 
and
conditions of allotment and payment of price of land in full 
as ﬁ nally ﬁ xed. It further records that the decision of the lessor 
in the said behalf would be ﬁ nal and binding. Clauses 13(b) and 
13(c) are reproduced hereunder:
“13(b). As soon as it may be convenient the LESSOR shall ﬁ x 
the price of the demised premises in the allotment letter and at 
which it will be sold to the LESSEE and communicate it to the 
LESSEE and the decision of the LESSOR in this regard will be 
ﬁ nal and binding on the LESSEE. The LESSEE should pay the 
balance of the value of the property, if any after adjusting the 
premium and the total amount of the rent paid by the LESSEE 
and earnest money deposit within one month from the date of
787
receipt of communication from LESSOR. On the other hand, if 
any sum is determined as payable by the LESSOR to the LESSEE 
after the adjustment as aforesaid, such sum shall be refunded to 
the LESSEE before the date of execution of the sale deed.
(c) The allotment of land is on lease cum sale basis for a period 
of ten year. At the end of ten years or completion of the project 
for which land is allotted whichever is early, the lease shall be 
converted into a sale subject to fulﬁ llment of all the terms and 
conditions of allotment and payment of price of land in full 
as ﬁ nally ﬁ xed subject to adjustment of amounts paid by you 
towards premium and rents. The conversion of lease into a sale 
shall be subject to the utilization of minimum 50% of the extent 
handed over as determined by LESSOR on merits of each case. 
The decision of LESSOR in this behalf is ﬁ nal and binding on 
you.”
18. The request of the respondent for change of name and status 
was permitted by issuing a No Objection Certiﬁ cate on 18.05.2007 from 
Partnership to Private Limited Company. The request for change of activity 
from IT sector to Hospitality sector was permitted vide communication dated 
24.09.2007 subject to payment of charges for change of activity i.e.Rs.5 
lakhs at that time. 
19. The Government Audit Party, while auditing the records of the 
appellant, raised an objection at Audit Enquiry No.27 vide communication 
dated 06.11.2008 that the appellant was suﬀ ering a loss of at least
Rs.78.25 
lakhs in as much as the change in activity from IT related sector to hospitality 
sector would amount to a fresh transaction and, therefore, the rate prevailing 
at the time of seeking change in activity should have been applied treating it 
to be a fresh transfer. The objection also noted that the land was originally 
allotted for promoting Information Technology and related industry in the 
Electronic City but the allottee had completely changed usage of the said 
land by wanting to set up a hotel which fell in the hospitality sector. The 
objection of the Audit Party is reproduced hereunder: 
“6. The allotment of land in January 2006 was inﬂ uenced by the 
objective of setting up of IT related industry. However, in contravention 
the Allottee proposed (June/July 2007) to construct the Hotel. 
KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION 
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
[VIKRAM NATH, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
788
Therefore, the consent should have been accorded by charging the 
prevailing rate of plot (Rs.3.2 Crores per acre) in terms of clause 3(4)
(ii) of the Land cum Sale Agreement. Failure to do so, that caused loss 
to the Company to extent of Rs.46.25 lakhs. Further, the rate of Rs.3.20 
Crore per acre was applicable to residential purpose and the rate has 
to be increased by 40 percent for commercial purpose. Considering 
this loss would further increase by Rs.32 lakhs.”
20. It is true that initially the appellant tried to justify the demand of 
change in activity of Rs.5 lakhs calculated at the rate being Rs.1 Crore per 
acre but later on it realized that the audit objection was correct and, therefore, 
the appellant was entitled to demand the revised ﬁ nal rate as determined by 
the 141st Board meeting. It would be relevant to reproduce the Resolution 
of Board of Directors passed in its 141st meeting:
“EXTRACT OF THE RESOLUTION PASSED AT THE 141ST
MEETING OF THE BOARD OF DIRECTORS OF M/S. KARNATAKA 
STATE ELECTRONICS DEVELOPMENT CORPORATION 
LIMITED HELD ON THURSDAY, THE 19TH DAY OF JULY, 2007 
AT 03.00 PM AT THE REGISTERED OFFICE, 29/1, RACE COURSE 
ROAD, BANGALORE – 560 001
ADDITIONAL SUBJECT:
Additional Subject No.2:- Fixation of Land Cost for stray plots in 
Electronics City, Bangalore.
Identiﬁ cation and availability of some stray sites due to 
(a) Resurveying and ﬁ xation of boundaries to various allotees,
(b) Reclaiming of
some plots due to court decision.
(c) Result of lifting of green belt in the present CDP plan by BDA was 
noted by the Board.
The Board further noted about the huge demand for land by the 
industries to set up IT Parks and IT related activities in Electronics 
City, and ﬁ xation of guidance value by the Government in Electronics 
City at Rs.800/- per sq. ft., which works out to around Rs.3.2 Crores 
per acre.
789
The Directors suggested to adopt the guidance value of Rs.3.2 Crores 
per acre ﬁ xed by the Government, which will enable the Corporation to 
maximize its returns, hence, to ﬁ x, the price of Rs.3.2 Crores per acre.
Thereafter the Board resolved to approve for adopting the guidance 
value of Rs.3.2 Crores ﬁ xed by the Government as allotment rate for 
the stray and other sites available in the Electronics city. And further 
authorized the Managing Director for taking necessary actions in this 
regard.
For KARNATAKA STATE ELECTRONICS DEVELOPMENT 
CORPORATION LIMITED.”
21. There is no denying the fact that the appellant is a fully owned 
Undertaking/ Corporation of the State of Karnataka. Any loss suﬀ ered by it 
would be a loss to the Public Exchequer. The respondent, on the other hand, 
has shifted its purpose of setting up an IT related industry to a Hospitality 
sector to set up a hotel. If the amount for such conversion of usage is not 
legally recovered from the respondent, as a result, loss being suﬀ ered by 
the appellant, would not be in public interest. It is also not disputed that all 
other similarly situate allottees have paid at the rate determined in the 141st
Board Meeting of the appellant. 
22. The respondent seems to be getting undue advantage merely 
because the clerical staﬀ  and the oﬃ  cer signing the demand notice for 
conversion charges applied the tentative rate of Rs. 1 Crore per acre instead 
of the prevailing rate of Rs.3.2 Crores per acre and
in addition, additional 
40 percent for use as commercial as the rate of Rs.3.2 Crores per acre being 
that for residential purposes. Neither the clerical staﬀ  nor an oﬃ  cer of the 
appellant would be competent to override or deviate from the decision of 
the Board of Directors taken in the 141st Board Meeting. The 141st Board 
Meeting has taken place prior to the respondent applying for change of 
use and issuing of the demand notice for conversion, there could be no 
justiﬁ cation for not adhering to the decision taken in the 141st Board Meeting. 
A bona ﬁ de mistake could always be corrected.
23. The arguments advanced by the respondent and strongly relied 
upon by the learned Single Judge as also the Division Bench regarding 
the stand taken by the appellant in ﬁ ling its objections to the audit report 
KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION 
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
[VIKRAM NATH, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
790
regarding the ﬁ nancial loss, also cannot be of any help to the respondent. 
The said objections being contrary to the 141st Board Meeting decision, 
would again be a mistake at the hands of the clerical staﬀ  and some oﬃ  cers 
of the appellant Corporation. The audit objection is based upon correct 
appreciation of the decisions taken in the Board Meeting, in particular, 
141st Board Meeting as also based upon the terms and conditions laid down 
in the Letter of Allotment and the Lease Agreement. We have no reason 
to ﬁ nd any fault with the audit objections. 
24. The relevant clauses of the allotment letter as also the lease 
agreement have already been reproduced in the earlier part of this order. 
They are very clear that the rate of Rs.1 Crore per acre was tentative rate 
and the ﬁ nal rate was to be determined later on which would be binding 
on the lessee i.e. the respondent. The respondent cannot, in any manner, 
go against the terms and conditions given under the Letter of Allotment as 
also the Lease Agreement. Once the respondent is bound by the terms and 
conditions, the ﬁ nal rate determined by the Board in its 141st meeting, being 
the prevailing rate of the Collector, would be binding on the respondent. 
25. It is true that the appellant had ﬁ led repeated review applications 
both before the learned Single Judge as also the Division Bench, which 
had resulted into delay in ﬁ ling the appeal before the Division
Bench. 
The Division Bench ought not to have taken into consideration the delay 
of 459 days to be without any satisfactory explanation in dismissing the 
appeal of the appellant. As a matter of fact, the Division Bench failed 
to exercise its discretion vested under the law in condoning the delay 
in order to advance justice inter se parties thereby resulting into serious 
prejudice and ﬁ nancial loss to the appellant Corporation which is a public 
entity. Four judgments relied upon by the respondent regarding ﬁ ling of 
review petitions have no application on facts to the present case. In the 
case of M.Naghabhushana (supra), the party had reagitated the issue 
before the High Court after having lost upto this Court. The principle 
of res judicata was applied. The case of Dnyandeo Sabaji Naik (supra) 
was regarding ﬁ ling of frivolous and groundless ﬁ ling of applications/
petitions, which is not the case in hand, as we have already held that the 
orders passed by the Single Judge and the Division Bench are not tenable 
in law. The case of Vinod Kapoor (supra) related to ﬁ ling of a second
791
S.L.P. after withdrawal of the ﬁ rst without liberty to ﬁ le a fresh one. The 
case of Sandhya Educational Society (supra) also has no application as 
it related to maintainability of the S.L.P. only against the order passed in 
the Review by the High Court, without challenging the main order. The 
other two judgments relied upon by the respondent regarding applicability 
of Section 14 of the Limitation Act also are of no assistance as we are 
not extending any beneﬁ t under Section 14 of the Limitation Act to the 
appellant. In our considered view, the delay in ﬁ ling the appeal before the 
Division Bench had been satisfactorily explained and as such it ought to 
have been condoned under Section 5 of the Limitation Act.
26. Another argument advanced on behalf of the respondent that the 
ﬁ nal rate ought to have been determined at the earliest i.e. soon after the 
Letter of Allotment and there being suﬃ  cient delay in determining the 
ﬁ nal rate, the respondent should be allowed to get the sale deed executed 
at the tentative rate. Reference has been made to the phrase ‘as soon as 
it may be’ in Clause 13(b). Further reliance has been placed upon the 
judgment in the case of Prakash Dal Mill (supra) This argument has no 
legs to stand prior to the request for execution of the sale deed, the ﬁ nal 
rate had already been determined in the 141st Board Meeting and, therefore, 
the respondent would be bound to and abide by the same. The judgment 
in the case of Prakash Dal
Mill (supra) is of no help to the respondent. 
In the said case, for the same land the ﬁ nal rate was ﬁ xed belatedly. In 
the present case, the respondent itself had applied for change of use to 
hospitality on 23.07.2007 whereas in the Board meeting of 19.07.2007 
the ﬁ nal rates applicable had been ﬁ xed.
27. Another argument advanced was with respect to the rate of 
Rs.3.2 Crores per acre being applicable to for a stray site available in the 
Electronic City being not applicable to the respondent is also without any 
merit. Once the respondent had made a request for change of use of the 
allotted plot from an IT sector industry to a Hospitality sector, it would 
amount to a fresh transaction and, therefore, the rate determined in the 
141st Meeting would be fully applicable. 
28. For all the reasons recorded above, we ﬁ nd that the demand raised 
by the notice dated 25.07.2012 does not suﬀ er from any inﬁ rmity. The 
respondent is liable to pay the demand as per the said notice. Accordingly, 
KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION 
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
[VIKRAM NATH, J.]

SUPREME COURT REPORTS 
[2023] 12 S.C.R.
792
the appeal is allowed. The impugned judgments passed by the Division 
Bench and the Single Judge are set aside and the writ petition ﬁ led by the 
respondent stands dismissed. 
Headnotes prepared by: 
 Appeal allowed.
Nidhi Jain