WP(C)/15/2011 of M/S sikkim conductor Vs State Of Sikkim and Ano. on 29 August 2011

JUDGMENT

Wangd.I, ACJ

The petitioner in the present writ petition claims tobe a proprietorship firm engaged in the business ofmanufacturing Aluminium Conductor and is represented byits Constituted Attorney, who is one Shri Nandlal Ja].ware.

As per the petitioner, the Government of Indiaprovided a package of incentives for the State of Sikkim andpublished a new Industrial Policy dated 23.12.2002,whereby, various concessions and fiscal incentives wereprovided to new industrial units including 100°/o Income Taxand Excise Duty exemption for a period of 10 (ten) yearsfrom the date of commencement of commercial production.This was published by the State of Sikkim through the Department of Commerce and Industries, vide NotificationNo. G.O./2/DI/2002-2003/901 dated 17.02.2003, which hasbeen filed as Annexure P-2 to the writ petition.

It was submitted that the industrial policy whichextended promises and assurances to the industrialists andentrepreneurs was widely published through out the countryso as to invite various industrialists and entrepreneurs to setup new industrial units in growth centres within the State ofSikkim.

It stated that on the basis of such promises andassurances the petitioner came to the State of Sikkim andapproached the concerned officers of the State-respondentsand they encouraged the petitioner to set up its industrialunit in Sikkim. But as the process of setting up of anindustrial unit entailed taking policy decision, the petitionerwas asked to approach the Chief Minister of Sikkim.

That upon the request of the petitioner, a meetingwas called by the Chief Minister to consider the proposal ofthe petitioner, which was held on 05.06.2004, and in thatmeeting which was attended by the officers of variousdepartments including the Commissioner-cum-Secretary, -t.+

Commerce and Industries Department, respondent No. 2,the petitioner was assured that it would be provided with2 acres of land for setting up its proposed industrial unit.

It was further stated that the State-respondentson 25.06.2004 prepared a Memorandum of Understanding(in short `MOU') to be executed between the petitioner andthe State-respondents for allotment of land for setting up aindustrial unit, which was forwarded to the petitioner forsignature vide letter No. 3/Regd/G/DI/04-05/250 dated25.06.2004.

The petitioner further states that theMemorandum of Understanding had been duly approved bythe Government and required only to be signed by theauthorized signatory of the petitioner-company, which wasduly complied and forwarded to the State-respondents videits letter dated 17.07.2004. Thus assured, the petitionerinitiated the process of transportation of almost allmachinery and equipments for setting up the industrial unit,a fact, which was communicated to the State-respondents.However, the petitioner states that since the official processhad not been completed, the petitioner was not allotted with the plot of land. That in order to avoid financial losses thepetitioner on its own took a plot of land on lease upon whichthe machinery and equipments were installed.

It is further stated that on the basis of promisesand assurances held out by the State-respondents, thepetitioner invested substantial amount in the process ofinstalling the machinery and equipments upon the lease-holdland and also got it temporarily registered as Small ScaleIndustries under a Provisional Registration No,SKM/E/00595/PR/SSI dated 01.07.2004 in the Departmentof Industries, Government of Sikkim, under the CentralSales Tax (Registration & Turnover) Rules, 1957 videRegistration No. 167/04-05/CT/RPO dated 30.07.2004 andunder Sikkim Sales Tax Rules, 1983 vide Registration No.170/04-05/CT/RPC dated 30.07.2004. The petitioner alsotook an electric power connection against a valid connectioncode on deposit of requisite connection charges on09.11.2005.

That however, the State-respondents failed to liveupto its promises and despite having approached themseveral times, land as promised by them was not allotted cfro making the petitioner to suffer irreparably. The land whichhad been identified by the petitioner was also refused on theground that the Department of Industries did not own it.The action of the State-respondents acting contrary to thepromises held out caused the petitioner-company irreparableinjury, damage and loss, which cannot be compensated interms of money.

10. That the conduct of the State-respondents hasdefeated the object of the Central Government policy as wellas the policy of the State of Sikkim for industrial growth.

11. That a notice demanding justice dated o8.09.2010was issued through its counsel upon the State-respondents,but by a reply dated 14.10.2010 they denied anyresponsibility to provide for the land as claimed by thepetitioner.

12. Under such circumstances the petitioner has, interalia, prayed for appropriate writ/order or directioncommanding upon the State-respondents to allot a plot ofland measuring 2 acres in a suitable place for setting up theindustry by the petitioner.

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13. Upon notice being issued, the State-respondentshave filed their counter-affidavit, wherein all materialallegations have been denied, It has been denied that therewas any assurance or promise held out by State-respondents to the petitioner for allotment of land asclaimed by it. The Memorandum of Understanding that hadbeen prepared was only a draft which had not beenexecuted as required under law and, therefore, not bindingupon the State-respondents. That the machinery andequipments for setting up the industry were transported bythe petitioner on its own for which the respondents could notbe held liable,

14. That the draft Memorandum of Understandingdoes not contain any clauses which specifies that the landwould be allotted by the Government to the petitioner. It isstated that in order to streamline and regulate theinvestment in industrial sector including the powerdevelopment, by Notification No. 8/SGHO/260/CI/09-10/174dated 30.06.2010, the State Government has published adraft Memorandum of Understanding to be executed by theinvestor to invest in the State of Sikkim and this draft Memorandum of Understanding now governs the field forsetting up of any industrial unit in the State of Sikkim.

15. That there was no binding agreement between thepetitioner and the State-respondents and that the doctrineof legitimate expectation cannot be invoked as claimed bythe petitioner as the allotment of land is not being claimedon the basis of the industrial policy of t:he StateGovernment, but upon a .draft Memorandum ofUnderstanding which has no validity in the eyes of law.

16. Mr. A.K. Upadhyaya, Sr. Advocate, learnedcounsel for the petitioner, referred to an official note inwhich the meeting held on 05.06.2004 has been recordedand submitted that amongst the points discussed was alsothe one with regard to the Industries Department providing2 acres of land on lease to the petitioner and, that it hadbeen agreed that the petitioner would be allotted 2 acres ofland on lease. Mr. Upadhyaya urged that by a letter dated25.06.2004, marked as Annexure P-6, the under Secretary-ll, Department of Commerce and Industries, Government ofSikkim, had forwarded a copy of Memorandum ofUnderstanding as approved by the Government requiring it

to be signed by the Government and the petitioner andaccordingly, the petitioner was requested to affix signaturein the space provided in the Memorandum of Understandingand return it at the earliest. As per him, ARTICLE-II at Sl.No. 1 and 2 thereunder clearly stipulate the obligation onthe part of the State-respondents to provide the petitionerwith the land. That there was a concluded contract betweenthe parties and that the State-respondents now could notresile there from.

17. That the act of the State-respondents is,therefore, unfair and unreasonable. That the State was nowbound by the principle of promissory estoppel and that therewas no overwhelming public interest, which permitted thewithdrawal of such promises. In support of the submission,Mr. Upadhyaya, learned Sr. Advocate relied upon thedeals.ion oF u.P. Power Corporation Ltd. and Anothervs. Sant Steels and AIIoys (P) Ltd. & others: (2008) 2SCC 777, particularly paragraphs 27, 33 and 35.

18. Mr. J.B. Pradhan, learned Additional AdvocateGeneral on the other hand submitted that at no point of timethe petitioner was given any assurance or promise of -S' `r allotment of land on lease as claimed by it. The industrialpolicy referred to by on behalf of the petitioner was a matterof record and that the petitioner certainly would be entitledto the concessions provided thereunder. Further, the policynowhere contains any provision by which the State-respondent was obliged to provide land for setting up theindustrial unit and reiterated what had been stated in thecounter-affidavit. It has been stated that the Memorandumof Understanding, being relied upon by the petitioner, wasonly a draft agreement requiring execution in accordancewith the law. The fact that it was signed by the petitioneralone would not in law make it a binding agreement and,therefore, there was no obligation on the part of the State-respondents to give effect to such Memorandum ofUnderstanding. It was submitted that a writ of mandamusmay be granted only in a case where there is a statutoryduty imposed upon the State and that there is a failure onthe part of the State to discharge that statutory obligation.

L9. The c,ase Of Lekhraj Sathramdas Lalvani vs.N.M. Shah, Deputy Custodian-cum-Managing Officer,Bombay & others.. AIR 1966 SC 334, was referred to.The relevant portion of which is reproduced below:

``5.

The reason is that a writ ofmandamus may be granted only in a case where there is astatutory duty imposed upon the officer concerned andthere is a failure on the part of that officer to dischargethat statutory obligation. The chief function of the writ isto compel the performance of public duties prescribed bystatus and to keep the subordinate tribunals and officersexercising public functions within the limits of theirjurisdiction ...... In our opinion, any dutyor obligation falling upon a public servant out of a contractentered into by him as such public servant cannot beenforced by the machinery of a writ under Art. 226 of theConstitution . "

20. He also referred to a decision of Ku/chh/.nder Singh and others vs. Hardayal Singh Brar and others:AJR 1976 SC 22J6, where it has been held as follows:

At its best, the writpetition seeks enforcement of a binding contract but theneat and necessary repellant is that the remedy of Article226 is unavailable to enforce a contract qua contract. Wefail to see how a supplier of chalk to a government schoolor cheese to a government hospital can ask for aconstitutional remedy under Art. 226 in the event of abreach of a contract, by-passing the normal channels ofcivil litigation. We are not convinced that a mere contractagreeing to a quota of promotions can be exalted into aservice rule or statutory duty. What is immediatelyrelevant is not whether the respondent is State or publicauthority but whether what is sovereign obligation orpublic function of a public authority. Private law mayinvolve a State, a statutory body, or a public body incontractual or tortious actions. But they cannot besiphoned off into the writ jurisdiction.

12. The controversy before us in substance will turn onthe construction and scope of the agreement when theclaim to a quota as founded cannot be decided in writjurisdiction without going back on weH-settled guidelinesand even subverting the normal processual law - exceptperhaps in extreme cases which shock the conscience ofthe Court or other extraordinary situation, an aspect weare not called upon to explore here. We are aware of the wide amplitude of Art. 226 and its potent use to correctmanifest inj.ustice but cannot agree that contractualobligations in the ordinary course, without even statutorycomplexion, can be enforced by this short, though, wrongcut. „

21. As per Mr. Pradhan even assuming that theMemorandum of Understanding was as a consequence of anagreement having been entered between the petitioner andthe State-respondents, clauses 1 and 2 under ARTICLE-II,referred to by the petitioner, do not at all reflect anycategorical promises by the State-respondents that landwould be provided to the petitioner as claimed by it. Theoffer contained in the clauses was purely conditional and notcategorical.

I have considered the rival contentions, pleadingsand the materials on record. The only question fordeterrnination in the present writ petition is as to whetherthere VIJas any promise held out to the petitioner by theState-.respondents that land measuring 2 acres would beleased out to it for setting up an industrial unit. In order toarrive at a conclusion on this, it is necessary to examine thevarious documents referred to and relied upon by thepetitioner.

23. The first document heavily relied upon by thepetitioner is Annexure P-6 i.e, the letter dated 25.06.2004written by the Under Secretary-II of the Department ofCommerce and Industries, Government of Sikkim, to ShriG.P. Dalmia forwarding a Memorandum of Understanding.For the convenience, we may reproduce the contents of theletter, which reads as hereunder:

``Ref. No. 3/Regd/9/DI/04-05/230 Date: 25/06/04

TOShri G.P.DalmiaDalmia HouseJasidih-814142, Dist. DeogharJharkhand.

Sub: Memorandum of UnderstandinSir,

I am directed to enclose herewith a copy of MOU(Memo.randum of Understanding) as approved by the Govt.which requires to be signed between the Govt. and yourgoodself. Hence, I am directed to request you to kindlyaffix your signature in the space provided in the MOu andreturn the same to this office at earliest.

Yours faithfully,

Sd/-Under Secretary-IICommerce & Industries"

24. When we consider the words used in the letterthere can be no manner of doubt that the Memorandum of Understanding, is one which was approved by the Government, requiring signature by both the StateGovernment and the petitioner and that the petitioner hadbeen asked to affix his signature in the space providedtherein and return the same to the office (meaning theDepartment of Commerce and Industries) at the earliest. Tothat extend there can be no dispute contrary to what Mr.J.B. Pradhan has urged.

25. In my view, this is the only document whichclearly shows that a Memorandum of Understanding hadbeen entered between the petitioner and the State-respondents and, therefore, a contract, if at all a`\Mamorandum of Understanding" can be treated as one, wasconcluded between them. Assuming that this is a concludedcontract, the extent of the covenant that binds theGovernment material for the purpose of this case, isprovided under clauses 1 and 2 under ARTICLE-II, which wemay reproduce below for the convenience:

ARTICLE-II

The Government will provide Two Acre land tothe Company in the Proposed Growth Centre atSamlik-Marchak or any other place as andwhen the Government of India releases thefund and the requisite infrastructure isdeveloped in these growth centres.the Company in the Proposed Growth Centre atSamlik-Marchak or any other place as andwhen the Government of India releases thefund and the requisite infrastructure isdeveloped in these growth centres.

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2. If not, alternative land will be made availableas per the policy frame work approved by theGovernment."

26. On a plain reading of the above two clauses, itcannot be said that there was a categorical promise on thepart of State-respondents for providing for land in themanner as it is claimed by the petitioner. Clause 1prescribes that the Government would provide 2 acres ofland when the Government of India releases the fund andinfrastructure is developed in these growth centres. It is notthe case of the petitioner that despite the Government ofIndia having released the fund and the requisiteinfrastructure having been developed in the growth centres,l-he Scat:e Government has refused to provide for the land aspromised. It is rather the case of the petitioner that theclause unequivocally obliges the State-respondents toprovide for land. This, in my view, does not appear to bethe correct and acceptable. aause 2 also does not reflectany unconditional or unqualified obligation on the part of theState-respondents to provide for land, as has been claimedby the petitioner. We find that in clause 2 there is analternative provision to clause 1 and, by it the State-respondents have undertaken to make land available as per the policy frame work approved by the Government. TheMemorandum of Understanding also does not specify anytime frame for giving effect to the Memorandum ofUnderstanding.

2-/. In consonance to clause 2 of ARTICLE-II, theState Government, by Notification No. 8/SGO/260/CI/09-10/174 dated 30.06.2010, marked as Annexure A-1,appears to have prescribed a Memoran'dum ofUnderstanding to be executed by the investors beforemaking investment in the State of Sikkim which has beenduly published in an official Gazette in order to streamlineand regulate investments in the industrial sector includingpower development.

28. On perusal of the prescribed Memorandum ofUnderstanding, we find that there are detailed clausescovering different aspects like compliance of rules andregulations and laws relating to the workers under clause 1and, land matters in the clause 4 and these two clauses arerelevant for the purpose of the present case. clause 1(i)(a)of the prescribed Mem6randum of Understanding stipulatesthat -- ``1. COMPLIANCE WITH RULES AND REGULATIONS ANDLAWS IN FORCE RELATING TO THE WORKERS.

(1) The investor while carrying out the authorizedactivities shall abide by the Law,Policies/Notifications enforced/notified by theGovernment of Sikkim and Government of Indiaspecially relating to:

(a) Landed properties

(b) The relevant portion of clause 4 reads as follows: -

``4. LAND MATTERS:

(1) The Investor shall ensure that the landrequired for such industries shall be procuredon lease basis only and not by outrightpurchase.required for such industries shall be procuredon lease basis only and not by outrightpurchase.

(2) While acquiring land the dealing with theunauthorized persons and agents shall bestrictly avoided.unauthorized persons and agents shall bestrictly avoided.

(3) The lnvestor shall ensure to have directnegotiations with the actual owners of land forthe proper benefits of the land owners andvillagers.negotiations with the actual owners of land forthe proper benefits of the land owners andvillagers.

(4) That the lease deed shall be registeredproperly with the concerned District Registrarsand with proper demarcation so as to avoidfuture disputes."properly with the concerned District Registrarsand with proper demarcation so as to avoidfuture disputes."

The prescribed Memorandum of Understanding pi!blished in the official Gazette clearly reflects the policyclecision of the Government t:hat now governs the field.

30. Mr. J.B. Pradhan, learned Additional AdvocateGeneral submits that the petitioner would now be obliged tocomply with the policy decision of the State Government.

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I find substance in the submission of Mr. Pradhan.Stipulation in the prescribed Memorandum of Understandingclearly reflect the policy decision of the State Governmentand, therefore, would fall within the purview of the clause 2of ARTICLE-II of the Memorandum of Understanding(Annexure P-6) signed by the petitioner.

32. The plea of the petitioner that it has acted on thepromise extended and assurance given by the State-respondents and invested substantial amount of money bytransporting the machinery and equipments and installingthe LHiit on a lease-hold land stands clearly belied by thecontents of letter dated 16.08.2004, marked as AnnexureP-5, submitted to the Director of Industries on behalf of thepetitioner-company. For proper appreciation, the letter isreprociuced below:

``Ref. No. Sikkim Cond/719/14/2004 Date: 16tri August 2004

Sri D.R. Kharel,Direct:or of Industries,Govt. of Sikkim,Kazi Road, Gangtok,SIKKIM.

Dear Sir,

the meetiHCMon05±0Q4

We have been told, your goodself is to prepareproceeding of the meeting taken by Hon'ble Chief Minister €.

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with me, Sri Sanjay Dalmia, Sri R.S. Basnet, IAS, PrincipalSecretary to HCM, Sri A.K. Srivastava IAS, IndustriesCommissioner & your goodself.

In anticipation of the same, we have alreadyinstalled the factory at Rangpo. Trail production hasalready been taken.

We will be thankful, if the proceedings are preparedat an early date.

Thanking you,

Yours faithfully,for Sikkim Conductors

(emphasis supplied)

33. Paragraph 2 of the letter duly highlighted clearlyindicate that the factory was installed by the petitionercompany at Rangpo ``in anticipation" and that ``trialproduction" had already been taken. Although, it has notbeen spelt out as to what the anticipation was, but assumingit to be in anticipation of allotment of land on lease, thepetitioner appears clearly to have proceeded with theinstallation of unit on its own option on a land which heassumed would be allotted to him. This is in clear conflictand contradiction to the pleadings contained in the writpetition that the machinery and equipments have been kepton in a lease-hold land which is not suitable for establishing ``11. That the Petitioner being rest assured with thepromises of the State Respondents, initiated theprocess of transportation of almost all machineryequipment for setting up its manufacturing unit inthe State of Sikkim, which was also intimated to theState Respondents. That when the said machineryequipment reached the state of Sikkim, the officialproceeding of the State Respondent having notcompleted, the Petitioner was not allotted with theplot of land. Therefore, the Petitioner was left withno option, but to find a temoorarv Dlace toaccommodate the said machinery eauiDments. Thatunder such circumstances, to avoid financial loss, thePetitioner on its wisdom, decided to take a blot ofland on lease wherein the said machinerments could be installed. ThereafterPetitioner aroached one Smt. Bishnu Maa Karkiwho owned some landed property at Rangpo, andaccordinalv, a Dlot of land situated at RanaDo,bearinc] Plot No. 2024, measurina an area of 30' x40'S.ft. was leased out to the Petitioner for aeriod of two vears bv the said Bishnu Maya Karki.That in this re ard a formal lease deed dated27.07.2004 was also executed between Smt. BishnuMaya Kari as Lessor and the Petitioner as Lessee.The monthly lease amount was amicably agreed @Rs.5,000/-per month. The Petitioner also paid anamount of Rs.20,000/- as advance money for thesaid land.

It must be stated herein that the sd machineJ¥ments were inst:alled bv the PetitiLj2ji_QLULrtybasis and the same isnot at allviable to Dermanentlv run manufacturing unit. Onthe other hand, Smt. Bishnu Maya Karki (Lessor) isdemanding back the said plot of land, wherein thePetitioner has temporarily installed its machineryequipments, since the agreement of lease was onlyfor a period of two years."

(underlining supplied)

34. Even otherwise the action of the petitioner-c.ompany is in clear conflict with the clauses 1 and 2 of cly ARTICLE-II to the Memorandum of Understanding, alreadydealt with above, which was forwarded to him on25.06.2004 i.e., almost 2 months preceding the letter of thepetitioner-company dated 16.08,2004 at Annexure P-5,reflected above.

35. In the facts and circumstances, the writ petitiondoes not appear to be preferred on an honest foundation.The petitioner has sought to mislead the Court by giving animpression that the petitioner was now in a disadvantageousposition due to the State-respondents resiling from itspromises and withdrawing the benefits extended to him inthe Memorandum of Understanding, when the letter dated16.08.2004 (Annexure P-5) undoubtedly reflects that, in thefirst instance the action taken by the petitioner-companywas on his own free will and volition and, secondly theassertion that it is in a disadvantageous position becauseland was not provided as assured by the State-respondentsis falsified by the fact that the industrial unit had alreadybeen set up by the petitioner-company and was inoperation, trial production having been taken as far back asa period before 16.08.2004.

36. Thus, apart from there being no merjtin thewrjtpetition, the petitioner has also not approached this Courtwith clean hands, thereby disentjtljng him from thediscretionary relief under Article 226 of the Constitution ofIndia.

37. In the result, the writ petition is dismissed withcosts, Costs assessed at Rs.25,000/- (Rupees twenty-fivethousand) only .

Index: Yes/NoInternet: Y¥/No

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