Hon’ble Mr.Justice S.Saghir Ahmad A.K.Chitale, Sr.Adv. Sakesh Kumar and S.K.Agnihotri, Advs. with him for the appellants Kapil Sibal, Sr.Adv., Rajiv Dutta and Vipin Nair, Advs. with him for the Respondents The following Judgment of the Court was delivered: The State of Madhya Pradesh & Ors. V. M/s Bindal Agro Chemical Ltd. & Anr. Kuldip Singh, J
Special leave granted.
The question for consideration before the High Court was whether M/s Bindal Agro Chemical Ltd., respondent in the appeals herein, was eligible and entitled to various incentives announced by the State Government to the entrepreneurs setting up new industries in the Raisen district of the State of Madhya Pradesh. The High Court decided the question in the affirmative and against the appellant. This appeal by the State of Madhya Pradesh is against the judgment of the division bench of the High Court dated October 9, 1990. We may briefly notice the facts. One Nand Vanaspati Indore was granted an industrial license dated January 18, 1971 under the industrial (Development and Regulation) Act 1956 (the Act) for setting up a vanaspati factory with a capacity of 50 tonnes per day. Nand Vanaspati installed the factory at village Balgarh, Tehsil Dewas. Subsequently, the Central Government by the order dated July 17, 1980 permitted the transfer of the said license in favour of 5-S Ltd. Calcutta. Bindal Agro Chemical Ltd. (the respondent) purchased the factory from 5-S Ltd. in the year 1986 under the same license granted by the Central Government. The respondent further sought permission from the Central Government for the change of location of the factory from Dewas to Mandideep against the original industrial license dated January 18, 1981. The respondent never applied and obtained a new license for its Mandideep Unit.
In order to help industrialisation of backward areas the State Government by the notification dated October 16, 1986 announced various incentives to the entrepreneurs. The incentives included the exemption from payment of sales tax, entry tax and grant of power subsidy and investment subsidy etc. The incentives were, however, subject to certain conditions. Para XIII E of the Notification is as under :
"The exemption under this
notification shall not be available
to the following industrial units.
"A new industrial unit set up, by
transferring, shifting or
dismentling or closing an existing
unit within the State of Madhya
Pradesh."
After setting up the unit at Mandideep the respondent applied for an eligibility certificate, under the exemption notification, before the State Government. The respondent was informed by the State Government by the letter dated August 1, 1987 that the industry was not eligible for the central investment subsidy. Operative part of the communication is as under :
"You have shifted your unit from
Dewas to Mandideep. Therefore, as
per decision communicated by the
Commissioner of Industries, you are
not eligible for Central Investment
subsidy. The case is returned
herewith."
The stand taken before the High Court was that the plant or machinery of Dewas unit was not shifted to Mandideep. After acquiring land at Mandideep the totality of the plant and machinery were newly purchased. It was claimed that the unit set up at Mandideep was a new industrial unit and as such was
The State of Madhya Pradesh resisted the claim of the respondent before the High Court. It was contended that no license was obtained for setting up a new industrial unit at Mandideep. The old unit from Dewas was shifted to Mandideep after obtaining permission from the Central Government. Under the Act a Vanaspati manufacturing unit could not be set up without obtaining license from the Central Government. The unit at Mandideep was operating under the same license which was granted for the Dewas unit. Once the Central Government granted permission to shift the unit under the same license the unit at Dewas could not manufacture vanaspati and it could be manufactured only at Mandideep. Since the Mandideep unit was set up by transferring/shifting the existing unit at Dewas, it was contended, the respondent was not eligible for grant of subsidy in terms of para XIII E of the notification (quoted above).
The High Court allowed the writ petitions on the following reasons :
"After carefully considering the
submissions made on behalf of both
the parties, we find substantial
foree in the contentions made on
behalf of the petitioners.
Admittedly the reasons assigned by
the respondent No.3 in his
communications to the petitioners,
as contained in Annexures R,S, T
and U, is only the alleged shifting
of the Unit of the Petitioners from
Dewas to Mandideep. Even the
counsel for the respondents have
not disputed the fact that the Unit
at Dewas is existing and has not
been shifted to Mandideep. Although
the Counsel for the respondents
made a half herted attempt to
dispute the claim of the
petitioners that the Unit set up at
Mandideep is a completely new Unit,
it must be said in all fairness to
the counsel for the respondents
that ultimately he conceded that
the Unit set up by the petitioners
at Mandideep was on a plot of land
newly allotted to the petitioners
by the State Government and the
plant and machineries put up by the
petitioners were not by way of
shifting the sane from Dewas to
Mandideep. The learned counsel for
the State, however, contended that
on account of the licence for the
Unit being an old one, issued
wayback in 1971 by the Central
Government, the Unit set up at
Mandideep should be deered to be an
old Unit. We are constrained to
hold that the notification issued
by the state Government does not
permit such interpretation..."
We are of the view that the High Court fell into patent error. In the facts of this case the High Court was not justified in reaching the conclusion that a new unit was set up at Mandideep. The respondent in the application gave following reasons for changing the location.
"The present plant being obsolete
is to be discarded at its present
location and new plant under the
licence is to be set up at
Mandideep Dist. Raisen (M.P.)
having a status of industrially
backward area."
The Government of Madhya Pradesh by the letter dated March 3, 1987 communicated to the respondent as under :
"With reference to your proposal
for change of location of Vanaspati
Unit from Dewas to Mandideep in
Raisen district it may be pointed
out that this transferred unit will
not be allowed to avail concessions
due to a new unit because this
would be transfer of capacity and
not creation of capacity."
The respondent by its letter dated March 6, 1987 replied as under :
"We acknowledge receipt of your
letter No. F-17/172/86/XI/B dated
3rd March, 1987.
In view of what has been stated in
your letter we agree that we shall
not claim concession, in case the
same is not allowed, because this
would be transfer of capacity and
not creation of capacity. In view
of this, we would request you to
grant us permission for change of
location of our vanaspati unit from
Dewas to Mandideep.
On the basis of the above commitment of the respondent the Government of Madhya Pradesh recommended the application of the respondent to the Government of India for change of location of the vanaspati unit from Dewas to Mandideep. The Government of India, thereafter, by the communication dated April 22, 1987 permitted the respondent to change the location from Dewas to Mandideep. The license granted for Dewas was amended to be operative at Mandideep.
It is obvious from the correspondence between the respondent and the two governments that the respondent was fully aware that it would not be entitled to the subsidy in respect of the unit at Mandideep. The respondent could not have set up the unit at Mandideep without obtaining license from the Central Government under the Act. No new license was granted to the respondent for the unit at Mandideep. The license was only one pertaining to Dewas unit. The respondent could either manufacture vanaspati at Dewas or at Mandideep. They sought the permission to shift the unit alongwith the license to Mandideep which was granted. The obvious result is that the process of manufacture of vanaspati at Dewas stopped with the transfer of the licence to the unit at Mandideep. We have no hesitation in holding that the new unit set up at Mandideep was by transferring/shifting the unit at Dewas. The unit at Dewas was closed so far as the manufacture of vanaspati was concerned.
We allow the appeals with cost and set-aside the impugned judgment of the High Court. The writ petitions filed by the respondent before the High Court shall stand dismissed. We quantify the costs as Rupees 20,000.
In case any subsidy has been availed by the respondent as a result of the High Court judgment the same may be recovered from the respondent by way of installments. The State Government may consider and effect the recovery by installments.