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2017 DIGILAW 1077 (KER)

Elankunnapuzha Grama Panchayat v. Petronet LNG Limited

2017-07-26

K.VINOD CHANDRAN

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JUDGMENT : 1. The petitioners, a Village Panchayat and its President, are before this Court seeking to enforce the conditions in Exhibit P1; which the petitioners assert is a promise by the 1st respondent Company, which is legally enforceable. The petitioners’ claim that the 1st respondent is a State under Article 12 of the Constitution of India, is seriously disputed by that respondent. 2. At the outset, it has to be stated that Exhibit P1 is the proceedings of a meeting held on 17.10.2012 in the presence of the Minister for Fisheries, Ports and Excise to arrive at a reasonable settlement between Petronet LNG Limited [for brevity “PLL”] and the Elankunnapuzha Grama Panchayat, within whose jurisdiction the PLL was intending to build a terminal. The said meeting is also said to have been convened on the basis of the protest from the local people and the Government was also interested in the commencement and functioning of the terminal, for which considerable money was expended. The PLL is a public limited Company, over which the Company asserts, the Government has no pervasive control. 3. The specific condition which is sought to be enforced is available in clause-a of paragraph 4 of the proceedings at Exhibit P1, which is extracted here-in-below:- “The Hon. Minister Shri.K.Babu ruled that PLL cannot be compelled to make any payment linking with the project costs as required by the Panchayat. No such norm exists. CSR is to be done from the profits generated and even though it would take time for PLL to start generating profits, PLL is already carrying out CSR work and are ready to carry out further developmental activities as part of CSR. However, the Minister mediated to increase the estimation of contribution by PLL. District Collector contacted MD, PLL over phone and taking into consideration the efforts of the Government, PLL has consented to contribute up to Rs.12 crores for works like road infrastructure and other development works over a period of 4 years commencing this year 2012-2013 subject to condition that there has to be a contribution by MLA/MP/Government Fund and money will be released in a phased manner through District Collector based on work completion and certification”. This at best is a promise to include the developmental works undertaken by the Panchayat in the Company’s Corporate Social Responsibility [for brevity “CSR”], which is a statutory obligation of the Company. This at best is a promise to include the developmental works undertaken by the Panchayat in the Company’s Corporate Social Responsibility [for brevity “CSR”], which is a statutory obligation of the Company. The Minister has categorically stated that there can be no compulsion made on the PLL to make payments, linked to the project cost as required by the Panchayat. The Company’s offer to include developmental activities within the Panchayat area under its CSR obligation, at best is a good-will gesture. The petitioner Panchayath cannot claim any absolute right to obtain disbursal of the amounts merely for the asking and the same is not legally recoverable. This Court did not admit the writ petition for reason of this Court finding no enforceable interest in Exhibit P1 and directed the PLL to file their version, before admission. 4. The Panchayat submits that the Panchayat had taken up a number of works; many of which have been completed and the others are nearing completion and the PLL is refusing to part with the balance amounts as promised in Exhibit P1. It is submitted that about Rupees Six Crores was paid and when the balance amounts were asked for, for the purpose of the various construction works carried out in the Panchayat, the details of which are seen at Exhibit P3; the PLL has refused to part with the same. Immediately it is to be noticed that the Panchayath in making the demand by way of Exhibit P3, admits that the money already disbursed has not been fully expended and that the works for which partial disbursement from the amounts paid under CSR was made; has not yet been completed. The said admissions dis-entitle the Panchayat from seeking more amounts under the CSR, since it is a statutory obligation and the funds set apart specifically; cannot be diverted or left under utilized. 5. The PLL has filed a counter affidavit, in which it is stated that the Panchayat had been taking up various construction activities within the Panchayat without any reference to the PLL and demanding money for such work taken up without any reference to the Company or ensuring that the works taken up come under those specified in Schedule VII of the Companies Act, 2013. Already Rs.6,09,13,261.00/- has been paid for various works. Already Rs.6,09,13,261.00/- has been paid for various works. The amounts so agreed to be paid was under the CSR as mandated by the Companies Act, 2013 [for brevity “Companies Act”]. The PLL wanted to spend the balance CSR for something of enduring benefit to the public; to be established within the Panchayat and for that purpose has approached the District Collector to propose a scheme which could be put into effect. The PLL also submits that a policy decision was taken by the Board of Directors of the PLL to spend the balance CSR funds for implementation of more sustainable social development projects with high impact and having greater outreach in the areas of health, education, etc. benefiting larger sections of community. 6. The provision for CSR is available in Section 135 of the Companies Act, wherein for every financial year a CSR Committee of the Board has to be constituted, who shall formulate and recommend to the Board a CSR Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule VII. Hence, the expenditure of the money for specified projects; and identifying such projects is the exclusive premise and prerogative of the Company; as approved by its Board of Directors, on the specific recommendation made by the Committee constituted. 7. The promise, as available in Exhibit P1, is only to expend money for development works in the Panchayat to the extent of Rupees Twelve Crores. The Panchayat cannot dictate as to the specific works for which the money has to be expended. It is also to be seen from the extracted portion of Exhibit P1 hereinabove, that what was intended was the contribution to be effected in specific cases where public money is also expended through the MLA/MP/Government funds. Looking at Exhibit P3, the Panchayat has merely listed out the various works carried out in the Panchayat and demanded the money as agreed upon in Exhibit P1. It is not as if the Panchayat has a carte-blanche to decide on the projects for which the money is to be spend, especially since the expenditure is the discharge of a statutory obligation of the Company; under the Companies Act. There is also no breakup of the public funds spent for the various works carried out as detailed in Exhibit P3. 8. There is also no breakup of the public funds spent for the various works carried out as detailed in Exhibit P3. 8. The petitioners also do not have any averment with respect to PLL having been informed in advance about the works awarded and undertaken for which the Panchayat claims money as per Exhibit P1. The Panchayat has gone ahead and awarded various works and claims the amounts expended for such work from the PLL on the basis of the alleged promise in Exhibit P1. A reading of the tabulations in Exhibit P3 demonstrates the entire money expended and proposed to be expended is for maintenance of roads, footpaths and drains and like constructions. The policy as defined by the CSR Committee constituted under the Companies Act, produced at Exhibit P3 envisages wholesome projects/programs with special emphasis on poverty elimination, eradication of hunger and malnutrition, education with special emphasis in development of vocational skills among children, elderly, women and the differently abled, empowerment of women and people belonging to the marginalized sections, promotion of gender equality, addressing environmental concerns and maintenance of ecological balance, protection of heritage art and culture and so on and so forth. Rural development projects is only one of the activities permitted, on which CSR funds could be validly spent. The projects now promoted by the petitioners and those proposed for future, are all maintenance and construction of roads, drains etc: which even otherwise is the responsibility of the Panchayath for which the State too makes budgetary provisions. 9. As has been found herein above, it cannot be said that the promise in Exhibit P1 is one enforceable under law. But even now the PLL does not resile from the above promise and agrees to spend the further amounts agreed at Exhibit P1 on enduring projects having more impact on the society and benefit to a larger community, which the Board of the respondent Company is entitled to decide upon. In fact, there is a statutory compulsion as per Section 135 that the expenditure under CSR should be on the specific recommendation made by the Committee constituted, as approved by the Board of Directors. In such circumstances, there cannot be any direction issued to the PLL to disburse the amounts as promised in Exhibit P1, to the Panchayat. 10. In fact, there is a statutory compulsion as per Section 135 that the expenditure under CSR should be on the specific recommendation made by the Committee constituted, as approved by the Board of Directors. In such circumstances, there cannot be any direction issued to the PLL to disburse the amounts as promised in Exhibit P1, to the Panchayat. 10. It is also to be noticed that it is the District Collector who has to monitor the expenditure of the amounts as promised by the PLL, in Exhibit P1. In such circumstances, suffice it to direct the District Collector to call for a meeting of the Panchayat and the PLL to find out suitable projects for which the balance money can be expended, which again has to be placed before the Committee constituted under Section 135 of the Companies Act, for recommendation and then approval by the Board of Directors of the PLL. The District Collector shall convene such a meeting within a period of three months from today and it is made clear that the identification of projects and the expenditure incurred shall be at the sole discretion of the Company; as provided under Section 135. The question whether the 1st respondent is a State under Article 12 is not answered and left for consideration in an appropriate case. The writ petition is disposed of with the above directions.