YEAST ALCO ENZYMES LTD v. STATE — 1989 DIGILAW 130 (GUJ)

S. B. MAJMUDAR, V. H. BHAIRAVIA, J. ( 1 ) THIS Letters Patent Appeal under Clause XV of the Letters Patent is directed against the decision of V. V. Bedarkar J. in Special Civil Application No. 959 of 1983. The learned single Judge partly allowed the Special Civil Application in favour of the present appellants who are the original petitioners. The appellants feeling aggrieved by that part of the judgment of the learned Judge by which their claim for being awarded pioneer unit benefits under the Govt. Resolution dated 27-8-1980 at Annexure B to the petition has been rejected have moved the present appeal. The respondent-autho- rities have not filed any cross appeal and have acquiesced in the decision of the learned single Judge allowing the writ petition partly and in granting some of the benefits to the appellants under the very game resolution. As the appellants are the original petitioners and the respondents are the original respondents in the writ petition for the sake of convenience we will refer to the appellants as the petitioners and respondents as original respondents in the later part of this judgments ( 2 ) IN order to highlight the grievance of the petitioners in the present proceedings it is necessary to note a few introductory facts. Introductory facts: The petitioner-Company was initially incor- porated as Gohilwad Sugar Mills (Private) Limited under Registration No. 2058 dated 29-3-1972. Subsequently its name was altered into Yeast Alco Enzymes (Private) Limited. The said Company came to be converted into a public limited company under a certificate issued on 9 The registered office of the Company is at Ahmedabad but it carries on its works scar Shetrunjaya Dam Site Palitana in the district of Bhavnagar. ( 3 ) THE Company when it was Gohilwad Sugar Mills (P.) Ltd. purchased the assets of M/s. Patel Sugar Mills at the cost of Rs. 21 lakhs. The said assets consisted of Khandsari unit with the land at village Moti Paniali In Palitana taluka of Bhavnagar district. When the Company was running Khandsari unit at Moti Paniali it decided to have new project of Industrial alcohol and for that purpose purchased lands nearby within the revenue limits of another village Nani Paniali with a view to constructing building for the factory premises for new plant of alcohol. When the Company was running Khandsari unit at Moti Paniali it decided to have new project of Industrial alcohol and for that purpose purchased lands nearby within the revenue limits of another village Nani Paniali with a view to constructing building for the factory premises for new plant of alcohol. In the meantime working of Khandsari unit came to difficulties and bed the end of 1977 the work of Khandsari unit came to a grinding halt. In the meantime petitioner No. 2 joined as a Director of the Company in the year 1977-78 and tried to boost up the work of Khandsari unit but his efforts failed. It could work for a few days in January 1978 and thereafter it got closed. The Company had not made any major further investment after it was purchased from Patel Sugar Mills and when Khandsari unit was working it used to employ about 60 to 70 persons during the season. Under the circum- stances the Company diverted its attention to new alcohol project. For that purpose the work of factory building was undertaken. But the plant as such could not be commissioned earlier. Originally the new project of Industrial alcohol was proposed to be with a capacity of 15 0 litres per day and D. C. T. D. registration was so obtained in 1976 but the Company never started commercial production of Industrial alcohol in those days. ( 4 ) THAT three Company Petitions Nos. 51 of 1976 34 of 1977 and 20 of 1978 came to be filed against the Company by M/s. Tata Press Limited Bombay Ganon Dunkerly 88 Company Limited and Gujarat State Financial Corporation Ahmedabad respectively in this Court. In addition to these winding up petitions one of the secured creditors of the Company M/s. Dena Bank filed Civil Suit No. 10 of 1978 in Bhavnagar Court to recover its dues. Some other suits were also filed by other creditors against the Company in different Courts. Petitioner No. 2 after he joined as a Director of the Company moved this Court and submitted a scheme for revival of the Company being Company Petition No. 24 of 1979. This Court (Coram: A. M. Ahmadi J.) approved the scheme by judgment and order dared 14-7-1980. Petitioner No. 2 after he joined as a Director of the Company moved this Court and submitted a scheme for revival of the Company being Company Petition No. 24 of 1979. This Court (Coram: A. M. Ahmadi J.) approved the scheme by judgment and order dared 14-7-1980. The scheme of compromise and arrangement sanctioned by this Court envisaged a scheme for increase in the production capacity in respect of production of Industrial alcohol from 15 0 litres to 30 0 litres per day. The original scheme when submitted was estimated to cost Rs. 40 lakhs but after its sanction in July 1980 due to escalation of price not only of the materials for construction of the plant but also in respect of machinery and other equipments for the project the estimated cost increased to 1 40 crores. It required the new management to increase capacity of the new alcohol project from 30 0 litres per day to 50 0 litres per day. The petitioner. Company thereupon approa- ched the Industries Commissioner for enhancement of the quota In the allotment of molasses and the Industries Commissioner approved the increased capacity to 50 000 litres per day and registered the requirement of molasses of 64 0 M. T. The Company made all efforts to get necessary finance from the financial agencies so that new project of Industrial alcohol could be commissioned at village Nani Paniali. The respondent State of Gujarat in the Industries Mines and Power Department had issued Resolution dated 27-8-1980 offering package of new incentives and enhancement of available incentives to now industrial units. It envisaged a scheme which was styled as New Sales Tax Incentives Scheme for Industries. It is the case of the petitioners that as they wanted to establish a new large-scale industrial unit in the backward area of Palitana taluka of Bhavnagar district they were entitled to the benefit of the aforesaid scheme especially para 7 thereof which envisaged a special incentive for pioneer units. According to the petitioner-Company new large-scale project of Industrial alcohol which the petitioners wanted to establish at village Nani Paniali as aforesaid was a pioneer unit and therefore the petitioner-Company was entitled to ail the incentive benefits as made available to the concerned units by the said resolution of the first respondent. According to the petitioner-Company new large-scale project of Industrial alcohol which the petitioners wanted to establish at village Nani Paniali as aforesaid was a pioneer unit and therefore the petitioner-Company was entitled to ail the incentive benefits as made available to the concerned units by the said resolution of the first respondent. The petitioners efforts to get the proposed new unit registered as pioneer unit under the incentive scheme envisaged by the aforesaid resolution however failed. The second respondent was not prepared to treat the petitioners project of Industrial alcohol as pioneer unit under the said resolution ( 5 ) BEDARKAR J. who heard the petition finally reached the conclusion that the petitioners case about mala fides of respondent No. 3 was not made out and that such case was not very much pressed at the stage of arguments by the learned Advocate for the petitioners But so far as merits of the petitioners case centering round applica- bility of Govt. Resolution dated 27-8-1980 was concerned the learned Judge held that the petitioners were entitled to the benefits of sales tax incentive being sales tax deferment incentive as envisaged by pars 6 of the said Resolution read with para 3 thereof. However the learned Judge further held that so far as the special incentives for pioneer unit contained in para 7 of the Resolution were concerned would not be available to the petitioners unit of Industrial alcohol. In view of that conclusion as noted above the learned single Judge partly allowed the petition and partly rejected the same and that is how the present appeal has seen the light of the day. ( 6 ) MR. Zaveri for the appellants-petitioners raised the following contentions in support of the appeal: (1) That the action of the respondents in not giving the benefit of resolution to the petitioner was actuated by mala fides of respon- dent No. 3 and hence it must be hold that the petitioners were entitled to the benefit of all the relevant paras of the said resolution. (2) It was alternatively contended that in any case the learned Judge has committed patent error of law in holding that benefit of para 7 of the Resolution cannot be made available to the petitioners unit and consequently the petitioners were entitled to the reliefs as prayed for in prayer (A) of para 31 of the petition. (2) It was alternatively contended that in any case the learned Judge has committed patent error of law in holding that benefit of para 7 of the Resolution cannot be made available to the petitioners unit and consequently the petitioners were entitled to the reliefs as prayed for in prayer (A) of para 31 of the petition. ( 7 ) THE learned Advocate General for the respondents has resisted these contentions and submitted that there is no substance in any of these contentions and the appeal is liable to be dismissed. ( 8 ) HAVING given our anxious consideration to these rival con- tentions of the parties we have come to the conclusion that the second contention made out by Mr. Zaveri is well sustained and the appeal deserves to be allowed in the light of that contention. However so far as the first contention is concerned there is no substance in the same. ( 9 ) CONTENTION No. 2 :- However so far as this contention is concerned a patent error of law and facts is discernible from the reasoning adopted by the learned single Judge in rejecting the petitio- ners case for being granted benefit as pioneer unit as per para 7 of this Resolution at Annexure B. We may in the first instance turn to the relevant provisions of the Resolution in the light of which the petitioners contention will have to be appreciated. As stated earlier it is a Resolution dated 27-8-1980 issued by the Government of Gujarat in Industries Mines and Power Department. It deals with the topic of enhancement of package of now incentives to industries. Its preamble provides that the Government have introduced a package of incentives for promotion of industries in rural and backward areas to achieve a more balanced growth and avoid further congestion of developed areas and large cities effective from 1-11-1977 vide Government Resolution dated 22-12-1977. Under the said Resolution of 1977 package of twofold incentives was given (1) cash subsidy on fixed capital investment and (2) sales tax benefit in terms of either exemption from sales tax or interest free sales tax loan (to be referred to as Old Sales Tax Incentives Scheme ). Retaining the cash subsidy on fixed capital investment further scheme of incentive by way of sales tax benefit was sought to be offered by this resolution. Retaining the cash subsidy on fixed capital investment further scheme of incentive by way of sales tax benefit was sought to be offered by this resolution. The scheme was titled as New Sales Tax Incentives Scheme for industries which was to commence from 1-6-1950 and was to remain in force for a period of i. e. upto 31-5-1985. Para 3 of the said Resolution dealt with applicability of the scheme and eligibility provisions for benefit under the scheme It was laid down that new industrial project including expansion/diversification by existing units commissioned (i. e. which have started commercial production) on or after 1-6-1980 shall be eligible to opt for sales tax benefits under this scheme in lieu of Old Sales he Incentive Scheme Industrial Commissioner viz respondent No. 2 or an officer authorised by him were to be competent authority to issue eligibility certificate. Para 6 dealt with 6 sales tax incentives which were to consist of (1) sales tax exemption incentives and (2) sales- tax deferment incentives. All industrial units eligible per paras 2 and 3 of the resolution will have an option to choose one of the shove sales tax incentives. It is not in dispute that the petitioners have opted for their Industrial alcohol unit to pet benefit of sales tax deferment incentives as envisaged by para 6 (A ). This benefit has been made available by the learned single Judge to the petitioners and there is no more controversy on this aspect between the parties as that part of the judgment has become final. Then follows para 7 with which we are concerned in this appeal. As the controversy centres round the correct interpretation of this para and its applicability to the petitioners unit it will be profitable to extract para 7 in exienso herein (7) Pioneer units special incentives : recognising the need for some special incentive for large industrial units going to a completely new location in backward areas as to compensate for extra economic burden/handicaps Involved to such pioneer units Government is pleased to direct that the such units will be eligible for incentives admissible at a C grade growth centre. In addition to this under the scheme of Sales Tax incentives they will be given extra benefit equivalent to 10% of the fixed assets or Rs. 10 lakhs whichever is less. This special incentives will be available to the 1st. In addition to this under the scheme of Sales Tax incentives they will be given extra benefit equivalent to 10% of the fixed assets or Rs. 10 lakhs whichever is less. This special incentives will be available to the 1st. 2nd and 3rd units in such areas. Such units should fulfil the following conditions for being entitled to benefit of a pioneer unit. (1) The project should involve investment in fixed assets should be of at least Rs 50 lakhs or should save an employment to 100 workers on permanent basis. (II) The location should be anywhere in the 10 backward districts or the 21 under-developed Talukas suggested by the committee of Non-backward districts (Please see Annexure A of this Government resolution (III) Such units should be 1st 2 or 3rd in such location i. e. at the particular location (i. e. town or village and areas 8 kms around it not more than two units having fixed assets of Rs 50 lakhs or more should be existing (IV) This location should be beyond 24 kms or Municipal Limits of Ahmedabad and Baroda and 10 kms of Surat Rajkot Bhavnagar sod Jamnagar and not hating population of more than one lakh it would be profitable to look at this stage to certain later develop mats in connection with the aforesaid resolution ( 10 ) BY Resolution dated 3-3-1981 of the State of Gujarat in the same department earlier restrictions on the available special incentives under para 7 of the earlier Resolution dated 27-8-1980 to pioneer units were enlarged and it was decided to give full incentive in the sales tax incentives to these pioneer units without any ceiling limit on the amount of incentives which was earlier envisaged by parent Resolution dated 27-8-1980 and by this resolution sales tax benefits to pioneer units would be available without any ceiling limit on the amount upto 904 of the investment in gross fixed assets. As in these proceedings we are concerned with availability of benefits as pioneer unit to the petitioners new alcohol project under para 7 of the parent Resolution dated 27-8-1980. we have to consider the petitioners case for the said benefits as envisaged by the parent Resolution dated 27-8-1980 as partially modified by later Resolution of 13-3-1981. As in these proceedings we are concerned with availability of benefits as pioneer unit to the petitioners new alcohol project under para 7 of the parent Resolution dated 27-8-1980. we have to consider the petitioners case for the said benefits as envisaged by the parent Resolution dated 27-8-1980 as partially modified by later Resolution of 13-3-1981. ( 11 ) ON 31-3-1981 by later resolution issued by the Government of rat in the same department Resolution of 27-8-1980 was amended. Resolution of 31-3-1981 provided that in partial relaxation of the distance restriction around the metropolitan cities areas of Hathi Committee Backward Talukas and centrally notified backward districts (Annexure) falling within the limit of 24 kms. from Municipal limits of Ahmedabad and Baroda cities and 10 Kms. of Surat Rajkot Jamna- gar and Bhavnagar cities would now be eligible for full incentives under the incentives scheme subject to the restrictions laid down in the said resolution. We ate not concerned with the Resolution dated 31 as it is an admitted position between the parties that so far as the petitioners alcohol unit at village Nani Paniali in Palitana taluka of Bhavnagar district is concerned even the earlier Resolution dated 27-5-1980 covered the area where the petitioners unit is situa- ted and therefore extended coverage became irrelevant so far as the present controversy is concerned. ( 12 ) WE may also refer to a clarificatory notification issued on 5 (Annexure L to the petition) and circular dated 8-2-1983 at an Annexure M to the petition. They sought to clarify that there should not he no industry having such investment or employment which had gone into commercial production before 1-6-1980 within a radius of 8 kms. It is not in dispute between the parties that no industry having similar investment or employment which the petitioners were offering at their Industrial alcohol project at village Nani Paniali existed within the radius of 8 kms. of that village and which had gone into commercial production before 1-6-1980. Consequently these clarificatory circulars are not relevant so far as the present case is concerned. The last circular st Annexure M is dated 8-2-1983 whereby it is clarified that pioneer units should not be expansion diversification or modernisation or renovation of an existing unit. of that village and which had gone into commercial production before 1-6-1980. Consequently these clarificatory circulars are not relevant so far as the present case is concerned. The last circular st Annexure M is dated 8-2-1983 whereby it is clarified that pioneer units should not be expansion diversification or modernisation or renovation of an existing unit. It should also not be revival of a sick unit whether by the existing or new management or whether the revival involves expansion renovation modernisation or diversification or not. liven this circular has no application to the facts of the present case for the simple reason that earlier Khandsari unit which was a small unit was already closed and had gone out of production by the year 1978. So far as alcohol project is concerned it was not an expansion diversification or modernisation or renovation of an existing unit by the petitioners nor would it about to revival of a sick unit so the earlier Khandsari unit which was sick had gone dead in the year 1978 Industrial alcohol project for which benefits under the Government Resolution at Annexure B were claimed was entirely a new project having no connection whatsoever with the old Khandsari project which had only historical importance. It must be stated that the learned Judge has not placed any reliance on these subsequent circulars at Annexures L and M for holding that the petitioners were not entitled to the benefit of pars 7 of the Resolution at Annexure B In fairness to the learned Advocate General who appeared for the respondents he also did not place reliance on those later circulars for judging the claim of the petitioners in the present petition. We need not therefore dilate any further on those subsequent circulars st Annexures L and M which are found to be totally irrelevant on the facts of the present case. ( 13 ) NOW the stage is reached for coming to the grip of the problem. The learned single Judge while considering the applicability of para 7 of the Resolution at Annexure B took the view that benefit of this pars eannot be made available to the petitioners for the simple reason that the petitioners unit was not industrial unit which was going to a completely now location in backward area. The learned single Judge while considering the applicability of para 7 of the Resolution at Annexure B took the view that benefit of this pars eannot be made available to the petitioners for the simple reason that the petitioners unit was not industrial unit which was going to a completely now location in backward area. He was of the view that earlier the petitioners had a Khandsari unit in the same ares and even though it was closed the petitioners were not novice or new comer i the area and therefore when they wanted to establish a large indust- rial unit of alcohol project at village Nani Paniali they cannot be said to be pioneers in that area We will presently show the the said reasoning of the leaned single Judge with respect is not apposite. We have already extracted para 7 of the Resolution at Annexure B To recapitulate the following conditions must be satisfied by the concerned unit before it can get the benefit of para 7 of the Govt. Resolution at Annexure B conferring special incentives for pioneer units:1 The concerned large scale industrial unit must be going to a completely new a location in backward area as Indicated in this resolution which of course will have to be road in the light of the later extension of benefits as conferred by subsequent modificatory resolution dated 13-3-1981 to which we have made a reference earlier. 2 The project should involve investment in fixed assets which should be of at least Rs 50 lakhs or should give employment to 100 workers on permanent basis. 3 The location should be anywhere In the 10 backward districts or 91 under-developed talukas suggested by Hathi Committee of Non-backward district or in area as per later extension of coverage by the Government resolutions of 13 and 31-3-1981 4 Such units should be 1st 2 or 3rd in such location i. e. at the particular location (i. e. town or village) and areas 8 kms around it not more than two units having fixed assets of Rs. 50 lakhs or more should be existing. 5 This location should be beyond 24 kms. of Municipal limits of Ahmedabad and Baroda and 10 kms of Surat Rajkot Bhavnagar and not having population of more than one lakh. ( 14 ) SO far as the above conditions are concerned conditions Nos. 50 lakhs or more should be existing. 5 This location should be beyond 24 kms. of Municipal limits of Ahmedabad and Baroda and 10 kms of Surat Rajkot Bhavnagar and not having population of more than one lakh. ( 14 ) SO far as the above conditions are concerned conditions Nos. 2 to 5 are satisfied by the petitioner-Company and there is no dispute on this aspect. It has to be kept in view that new industry was to be established by the petitioners at village Nani Paniali which was admittedly situated in a backward district as suggested by Hathi Committee on Non-backward district even leaving aside the expansion of area by subsequent modificatory resolutions. It is not in dispute that new project had investment of more than Rs. 50 lakhs and it war also true that it was to give employment to 100 workers on a perma- nant basis. It is also not in dispute that new project at village Nani Paniali was the first project of its type and no other unit having fixed assets of Rs. 50 lakhs or more was existing in that area. Admittedly location of the project was beyond 24 kms. of Municipal limits of Ahmedabad and Baroda and 10 kms. of Surat Rajkot Bhavnagar and Jamnagar. Thus conditions Nos. 2 to 5 were clearly met by the petitioner-Company and the learned Judge also hold accordingly. However in the view of the learned single Judge the first condition was not satisfied. The learned Judge noted that para 7 specifically mentioned that special incentive was to be given to large industrial units going to a completely now location in backward areas so as to compensate for extra economic barden etc. In his view if a big company in Ahmedabad take for instance the Calico Mills which is a textile industry has its own unit in Ahmedabad but in order to have an industrial growth in a backward area as contemplated by the scheme starts a new textile unit at Moti Paniali or Nani Paniali then it can be said to be an industrial unit going to a completely new location in backward area. However so for as petitions go earlier they had their industrial factory (which was closed) in that very area. However so for as petitions go earlier they had their industrial factory (which was closed) in that very area. In that view of the matter according to the learned single Judge the first condition was not satisfied and that is why he has rejected the petitioners claim for being given the benefit of para 7 of Annexure B. This illustration of Calico Mills given by the learned Judge is totally inappropriate on the facts of the present case. In our view with respect this reasoning of the learned single Judge is not justified on the record of the case. It has to be kept in view that even though the petitioners had their Khandsari unit in nearby location at village Moti Paniali it was closed since 1978. It was not a large-scale unit. rt was a small-scale unit. So far as present large project of Industrial alcohol is concerned that was being located at village Nani Paniali for the first time. It was a new industrial unit and it was a large-scale unit which was going to a completely new location in the back-ward area. The question is whether the petitioners large industrial unit of Industrial alcohol was going for the first time to the backward area or such a unit had ever gone there earlier and therefore it can be said that it was not going to a completely new location for the first time. The learned Judge has posed the question as under; The important aspects to be considered is whether the now industrial unit is going to a completely new location in backward areas. And then he has observed that it is not completely answered in favour of the petitioner. With respect posing of the question by the learned single Judge is not accurate. So far as the first condition for applica- bility of para 7 of the Resolution is concerned it is to the effect that the new large industrial unit should be going to a completely new location in the backward area. Therefore the correct question which could have been posed on the facts of the present case was as to whether new large industrial unit was going to a completely new location in the backward area or not. Therefore the correct question which could have been posed on the facts of the present case was as to whether new large industrial unit was going to a completely new location in the backward area or not. Unfortunately the learned Judge missed the word large and unduly emphasised the aspect of the new industrial unit going to a completely new location in the backward area. If the learned Judge had posed the above question in the proper perspective the answer would have been in affirmative in favour of the petitioners. On the facts of this case no doubt is left in our mind that large industrial unit of Industrial alcohol was being established in or was going to B completely new location in the backward area. viz. at village Nani Paniali. Never in the past such a large unit had ever gone to this area. What had gone in that area was a small unit of Khandsari which was already closed since years in 1978. It is interesting to note that all that Annexure B requires is that with effect from 1-6-1980 and upto 31 large industrial units which go to a completely new location in the backward area would be entitled to special incentive as pioneer units. It is not in dispute and it cannot be disputed that during this relevant period even the old small-scale Khandsari unit had never existed and it had ceased to exist prior to coming into operation of the Resolution at Annexure B. However during the relevant period large-scale unit of Industrial alcohol was being established by the petitioners for the first time in this backward area and therefore it can be said that new large industrial unit of Industrial alcohol was going to a completely new location for the first time during this relevant period. It is not in dispute that this large industrial unit of Industrial alcohol had become operative from 13-5-1985. It is also to be kept in view that para 7 of the Resolution seeks to confer incentives to pioneer units. Dictionary meaning of pioneer is one who goes first. Emphasis is on pioneer unit and not pioneer entrepreneur. Thus the same entrepreneur or owner may be entitled to benefits under para 7 if the large-scale unit established by him is first of its kind in that area. Dictionary meaning of pioneer is one who goes first. Emphasis is on pioneer unit and not pioneer entrepreneur. Thus the same entrepreneur or owner may be entitled to benefits under para 7 if the large-scale unit established by him is first of its kind in that area. Whether the same entrepreneur had earlier small-scale unit in the area or not is a totally irrelevant question for applicability of para 7 of the Resolution. With respect the learned single Judge has assumed that owner or entrepreneur should be pioneer and not the unit in question. This is not contemplated by the said para. We find that all the requirements of Govt. Resolution at Annexure B were satisfied on the facts of the present case. The learned Advocate General for the respondents we not in a position to convince us as to how the first condition of applicability of Annexure B-Resolution cannot apply to the facts of the present case. We posed a question as to whether the petitioners large-scale unit of Industrial alcohol had gone to this backward area of village Nani Paniali for the second time or it had gone for the first time. In fairness to him he could not submit that it had gone for the second time. In that view of the matter the first condi- tion of applicability of para 7 of the Resolution Annexure B must be held to have been satisfied by the petitioners. Appeal allowed. .