Supreme Court of India
BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY & ORS. versus AMIT KUMAR & ORS. on 22 October 2019
BIHAR INDUSTRIAL AREA DEVELOPMENTAUTHORITY & ORS.
v.
AMIT KUMAR & ORS.
(Civil Appeal No. 8219 of 2019)
OCTOBER 22, 2019
[DEEPAK GUPTA AND ANIRUDDHA BOSE JJ.]
Industrial Development – Recovery of unearned increase –Entitlement to – An allotment was made to the allottee of a land forindustrial purposes – A lease deed was entered into between theState of Bihar (rights were later transferred to Bihar Industrial AreaDevelopment Authority (BIADA)) and the allottee – A committee wasconstituted by the Government of Bihar to lay down the modalitiesand fees for transfer of industrial estates from allottees to someother persons – Pursuant thereto, BIADA fixed the cost of the landon the basis of the circle rate applicable for further transfer – HighCourt held that when the allottee of land further transferred landto some other entity, the BIADA was only entitled to recover theunearned increase on the basis of cost of land and developmentand not on the basis of the market value of the land or the circlerate of the land – Propriety of – Held: Not proper – The land wasgiven to the original allottee at a price fixed by BIADA – Whenallottee transfers and get something more for the land or the marketvalue as reflected in the circle rate is much more than the price atwhich the land was allotted to the allottee, there is no reason whythe allottee should pocket all the unearned increase and BIADA,which was the original owner of the land should be deprived of areasonable portion of the unearned increase from the value of theland – Therefore, fixing the cost of land on basis of the circle rateapplicable by BIADA was legal and valid.
Disposing of the appeal, the Court
HELD: 1. It is standard practice throughout this country,specially at the time when these leases were executed to set upindustrial estates wherein lands were given at very low price and
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Asometimes at subsidized rates to help in the setting up ofindustrial estates in the State. It was expected that establishmentof these industrial estates with flourishing industries wouldgenerate a lot of employment and would also generate revenueboth in the nature of direct and indirect taxes. The issue is whetherwhen the allottee transfers the land for commercial reasons whyBshould the Authority not get a reasonable portion of the unearnedincome earned by the allottee of the plot just by transferring theplot in question. The premium on the unearned increase is beingcharged only on the value of the land and not on the value of thetransaction. Once an industry is set up it may have variousCcomponents including the value of the immovable assets, thevalue of the machinery etc. and also the value of the goodwillwhich the company has generated. On the other hand there arecompanies which are loss making units where debts and liabilitiesdue to employees and sundry creditors will have to be factoredinto while calculating the value of the total assets of the unit.DThose are not to be taken into consideration while assessing theunearned increase of the cost of the land. [Para 10] [5-F-H;6-A-B]
2. The land was given to the original allottee at a pricefixed by BIADA. When the allottee transfers and gets somethingEmore for the land or the market value as reflected in the circlerate is much more than the price at which the land was allotted tothe allottee, there is no reason why the allottee should pocket allthis unearned increase and BIADA, which was the original ownerof the land should be deprived of a reasonable portion of theFunearned increase from the value of the land. Therefore, thisCourt is not in agreement with the High Court that the unearnedincrease can be charged only on the basis of the BIADA valueplus development charges and in opinion of this Court the policyof the BIADA fixing the cost of the land on the basis of the circlerate applicable is legal and valid. [Para 11] [6-C-D]GCIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8219of 2019.
From the Judgment and Order 11.05.2015 of the High Court ofJudicature at Patna in LPA No. 68 of 2008 in CWJC No. 9696 of 2005.
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BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY v.AMIT KUMAR
With
C.A. Nos. 8220/2019, 8221/2019, 8222/2019.
Gaurav Agrawal, Ms. Anisha Upadhyay, Rajiv Tyagi, NeerajShekhar, Animesh Kumar, Sumit Kumar, Ashutosh Thakur, Ms. EktaBharati, Advs. for the appearing parties.
The Judgment of the Court was delivered by DEEPAK GUPTA, J. (ORAL)
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1. Leave granted.
2. The legal issue involved in these appeals is whether thePatna High Court was right in holding that when the allottee of land,allotted for industrial purposes, further transferred the land to someother entity, the Bihar Industrial Area Development Authority (BIADA)was only entitled to recover the unearned increase on the basis ofcost of land and development charges and not on the basis of themarket value of the land or the circle rate of the land.
3. In view of the decision that we intend to take in these fourcases before us, it is not necessary to give the facts of each case indetail. However, for the purposes of decision of these set ofappeals, we may refer to the facts in C.A. No.8222/2019 (arising outof SLP(C) No.5251/2017). Clause 4(i) of the Lease Deed enteredinto between the State of Bihar and M/s. Orient Beverages Ltd. to whichthe land was granted on lease for a period of 99 years for a sum ofRs.42,000/- plus rent of Rs.87.50 per year, reads as follows:
“Clause 4(i):-
That the lessee will not assign, mortgage, underlet or part withthe possession over the land or any right or interest therein or inrespect thereto without the previous consent of the lessor or itsnominee.”
4. Clause 4(ii) of the Lease Deed provided that no transferof lease shall take place unless specifically permitted by the State.The said clause reads as follows:
“Clause 4(ii):-
No change in the lease, proprietorship or partnership, if it is aprivate limited or unlimited company or a registered or an A
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Aunregistered firm, shall be recognized without the previouswritten consent of the lessor or his nominee.”
5. It is not disputed that the rights of the State of Bihar havefinally been transferred to the BIADA though,in between, there mayhave been some other authorities also but that is not relevant for theBdecision of this case.
6. In the year 1998, the original lessee M/s. Orient BeveragesLtd. applied for transfer of the leasehold rights in favour of M/s.Bharat Coca-Cola Bottling North East Pvt. Ltd. and a sum ofRs.17,50,000/- was paid as premium at the time of the said transfer. ItCappears that the transfer by Orient Beverages Ltd. in favour of BharatCoca-Cola Bottling North East Pvt. Ltd. was made for a sum of Rs.2.02crores. Later in the year 1999, a scheme of amalgamation was enteredinto between Bharat Coca-Cola Bottling North West Pvt. Ltd., BharatCoca-Cola Bottling South East Pvt. Ltd. and Bharat Coca-Cola NorthWest Pvt. Ltd. (transferee of the lease) and all these threeDamalgamated to form Hindustan Coca-Cola Bottling South WestPvt. Ltd. This scheme of amalgamation was approved by the Delhi HighCourt on 10.09.1999. The name of M/s. Hindustan Coca-Cola BottlingSouth West Pvt. Ltd. was changed to M/s. Hindustan Coca-ColaBeverages Pvt. Ltd. which is the respondent before us and the originalEwrit petitioner before the High Court. Thereafter, a communicationwas sent to the appellant(s) that there was change in the name and thename should be changed in the record of the appellant-Authority andthis permission was granted on payment of some nominal fees.
In the meantime, a Committee was constituted by the GovernmentFof Bihar to lay down the modalities and fees for transfer of industrialestates from the allottees to some other person. The relevantrecommendations of the Committee are as follows:
“(a) The Lease holders should have the right to transfer or salethe land by paying fee if land use is not changed; G(b) The amount recommended was 15% of the presentmarket value in case of transfer or sale;”
7. On 18.12.2003, an office order was issued by the Appellant-Authority permitting change in the Constitution of the allottee after taking15% of the circle rate for the land at the time and other duesHpayable. On 12.03.2004, a specific order was issued permitting transfer of a land on payment of 15% of the prescribed rate. Thereafter,on 10.03.2005, a letter was issued by the appellant-Authority to the originalwrit petitioners that 15% of the market value of 1.75 acres of land worksout to Rs.4,25,250/-. After some correspondence, this amount wasdeposited on 12.04.2007. Thereafter, it appears that a decision wastaken to assess the 15% market value on the basis of the circlerate and not merely on the rate reflected in the transaction.Relying upon this latter decision of 15.05.2007, a fresh demand ofRs. 45,17,318/- was raised and after adjusting the amount alreadypaid, balance payable was assessed as Rs.40,64,523/-. Aggrievedagainst this demand, M/s. Hindustan Coca-Cola Beverages Pvt. Ltd.filed a writ petition bearing CWJC No.5553 of 2013 before the PatnaHigh Court.
8. We shall deal with the factual aspects of the case at a laterstage but the legal issues raised before us are whether the appellant-Authority is entitled to recover unearned increase and if so on whatbasis. As far as the entitlement to recover unearned increase in thevalue of the transferred allotted land is concerned even the High Courthas upheld this right of the appellant- Authority. However, the HighCourt has held that the calculation of this unearned increase will beon the basis of the value at which appellant-Authority allots the landplus development charges.
9. The contention raised by Mr. Gaurav Agrawal, appearingfor the appellant-Authority, is that there is no reason why, when thetransfers are normally made for commercial reasons, the appellant-Authority should not get its fair share in the total unearned increase inthe value of the leased property.
10. We may note that it is standard practice throughout thiscountry, specially at the time when these leases were executed toset up industrial estates wherein lands were given at very low price andsometimes at subsidized rates to help in the setting up of industrial estatesin the State. It was expected that establishment of these industrial estateswith flourishing industries would generate a lot of employment andwould also generate revenue both in the nature of direct and indirecttaxes. The issue is whether when the allottee transfers the land forcommercial reasons why should the Authority not get a reasonable portionof the unearned income earned by the allottee of the plot just bytransferring the plot in question. The premium on the unearned increase AB
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Ais being charged only on the value of the land and not on the valueof the transaction. Once an industry is set up it may have variouscomponents including the value of the immovable assets, the value ofthe machinery etc. and also the value of the goodwill which thecompany has generated. On the other hand there are companies whichare loss making units where debts and liabilities due to employees andBsundry creditors will have to be factored into while calculating the valueof the total assets of the unit. Those are not to be taken into considerationwhile assessing the unearned increase of the cost of the land.
11. The land was given to the original allottee at a price fixed byBIADA. When the allottee transfers and gets something more forCthe land or the market value as reflected in the circle rate is much morethan the price at which the land was allotted to the allottee, we see noreason why the allottee should pocket all this unearned increase andBIADA, which was the original owner of the land should be deprived ofa reasonable portion of the unearned increase from the value of theDland. Therefore we are not in agreement with the High Court thatthe unearned increase can be charged only on the basis of the BIADAvalue plus development charges and in our opinion the policy of theBIADA fixing the cost of the land on the basis of the circle rateapplicable is legal and valid.
E12. We shall now deal with the individual cases. As far as thefirst case i.e. Civil Appeal No.8219 of 2019 arising out of SLP(C)No.35887 of 2015 is concerned, we find that the Division Bench of theHigh Court of Patna vide order dated 09.03.2010 had directed thatthe arrangement made in respect of writ petitioner(s) shall not bedisturbed. Therefore, though we decide the question of law in favourFof appellant, but it will not be entitled to recover any amount from therespondent(s).
13. The appeal is disposed of accordingly.
14. As far as Civil Appeal No.8220 of 2019 arising out of SLP(C)GNo.28213 of 2016 is concerned, amalgamation took place on10.09.1999. The transfer date, which is the material date, is 10.09.1999and in our view in all cases the value of land for purposes of fixing theprice should be the date of transfer and in this case it should have been10.09.1999. Having held so, in view of the fact that the original writpetitioner paid the amount of Rs.4,25,250/- we do not want toH
open up the entire litigation for a small amount. The amount wasdemanded only on 10.03.2005 and was actually paid on 12.04.2007. Theappellant shall be entitled to interest at the rate of 9% per annum on thisamount of Rs.4,25,250/- for the period 10.03.2005 to 14.04.2007.
15. We direct that, on this amount, the interest be paid withintwo months. On payment of the interest, the formal lease deed beexecuted by the appellant-Authority in favour of the original writpetitioner(s) within two months of the deposit of interest. The appeal isdisposed of accordingly.
16. In view of the order passed hereinabove, the CA No.8222of 2019 arising out of SLP(C) No.5251/2017 is disposed of.
17. As far as Civil Appeal No.8221 of 2019 arising out of SLP(C)No.31141 of 2016 is concerned, land measuring 0.50 acres was allottedto the respondent on 07.12.2000. The allottee was M/s. Shankar SawMills through its proprietor Sukhdev Paswan. It is admitted case thatthe dues payable by Shankar Saw Mills were not paid for the period2002 to 2007. The case of the appellant is that the payment could notbe made because of the orders passed by this Court in the case ofT.N. Godavarmanvs. Union of India whereby the licence of SawMills throughout the country was stayed. It is not disputed thatfinally under a one time settlement scheme floated by the appellant-Authority, the original writ petitioner(s) paid all the dues aspayable under the scheme on 30.07.2000. However, while paying thisamount the writ petitioner(s) also prayed for permission of transferof the land in favour of transferee company known as SamrasProducts Pvt. Ltd in which it was claimed that the appellant was aDirector. There is no material before us to show what is the exactshareholding of Sukhdev Paswan in M/s. Samras Products Pvt.Ltd. Mr. Gaurav Agrawal, learned counsel, has submitted that as perthe scheme of the Authority if the original allottee retained 51% ofthe shareholding in the company then it will not be treated to be a transferand there is no liability to pay any unearned increase. There are no factsin this regard placed on record. Therefore, while setting aside the orderof the Patna High Court on the legal issues, we remit the matter back tothe Patna High Court where the parties may produce documents inthis regard. If the documents, as existing, at the time of the initialincorporation of M/s. Samras Products Pvt. Ltd., indicate that Sukhdev A
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8SUPREME COURT REPORTS
APaswan had more than 51% shareholding then obviously he is notliable to pay any transfer charges but if his shareholding is less than51%then he will pay the unearned increase as decided by usheareinabove. Since we have remitted the matter, the Writ PetitionNo.4325 of 2009 shall be restored to its original number so that itis given due seniority for decision.B
18. The appeal is disposed of accordingly.
Ankit Gyan
Appeal disposed of.
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