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2021 DIGILAW 129 (CAL)

Sova Solar Limited v. State Of West Bengal

2021-02-23

SABYASACHI BHATTACHARYYA

body2021
JUDGMENT Sabyasachi Bhattacharyya, J. - The Court: 1. The petitioners have challenged an order dated March 26, 2019, passed by the West Bengal Industrial Development Corporation (WBIDC), being respondent no.2 herein, whereby the petitioners' request for release of a sum of Rs.2.96 crore under the West Bengal State Support for Industry Scheme, 2008 (WBSSIS - 2008) was turned down. 2. The petitioners claimed such sum under three different heads, namely, Fixed Capital Investment Subsidy, Interest Subsidy and Electricity Duty. 3. Learned counsel for the petitioners argues that the petitioner no.1 is entitled to all the incentives as claimed under the said Scheme. Previously, the petitioners had availed of credit facilities from respondent no.2, the latter having acted as a Financial Institution as contemplated in Clause 3.2.1 of the said Scheme. Respondent no.2 subsequently restructured the term loan given to the petitioner no.1 upon such request being made by the petitioners. Ultimately, an OneTime Settlement (OTS) Scheme was offered for a sum of Rs.10,98,72,913.25p, with Rs.8,48,00,000/- as principal and Rs.2,50,72,913.25p as interest. Such scheme was accepted by the petitioners and respondent no.2 issued a 'No Dues' Certificate on December 1, 2017, upon payment of the total sum to the petitioners, certifying that payment obligations of the petitioners had been fulfilled with regard to the term loan. 4. It is submitted by learned counsel for the petitioners that, as per Clause 16 of the 2008 Scheme, the only pre-condition of disbursal of the fixed capital investment subsidy and interest subsidy is the regular payment of the Value Added Tax under the Value Added Tax Act, 2003 and the Central Sales Tax Act, 1956 without any default being committed by the assessee. Clause 16.9 of the Scheme stipulates that, in the event a unit is exempted from paying VAT/CST, payment towards the subsidy will be made by the respondent no.2 to the unit by way of account payee cheque. The petitioners claim to fall under the exempted category. Annexure P-8 at page 146 of the writ petition is relied on to show that the petitioner no.1 was exempted from payment of VAT by a notification dated January 7, 2016. The entire Scheme, according to the petitioners, does not lay down any provision for withholding payment of the subsidies if the concerned industrial unit has paid VAT/CST and interest. Annexure P-8 at page 146 of the writ petition is relied on to show that the petitioner no.1 was exempted from payment of VAT by a notification dated January 7, 2016. The entire Scheme, according to the petitioners, does not lay down any provision for withholding payment of the subsidies if the concerned industrial unit has paid VAT/CST and interest. The fixed capital investment subsidy and interest subsidy amounts are, thus, payable to the petitioners in view of certification of payment of interest by the concerned Financial Institution, being respondent no.2. That apart, no penal interest was charged, as evidenced from the affidavit affirmed by respondent nos. 2 and 3 on December 18, 2020. The OTS Scheme was, thus, entered into upon due consideration of interest being paid by the petitioners. 5. However, the respondents withheld the payment of such incentives/subsidies, compelling the petitioners to move a writ petition, which culminated in an order dated February 18, 2019 for considering the claim of the petitioners and passing a reasoned order. 6. However, such direction was followed by the order dated March 26, 2019, rejecting the claim of the petitioners illegally and in a vague manner, which is impugned in the present writ petition. 7. In the impugned order, it was observed that the principal amount was not paid and that respondent no.2 had sacrificed the same, leading to a double benefit in favour of the petitioners. However, respondent nos. 2 and 3 have admitted in their affidavit dated December 18, 2020 that the entire principal amount was required to be paid under the OTS. After issuing the No Dues Certificate, the respondents could not allege that the term loan had not been paid in full by the petitioners. The pre-condition for payment of the fixed capital investment subsidy under the Scheme is payment of VAT/CST by the concerned unit. The petitioners have paid such amount till the petitioner no.1 became exempted from paying the sum, as acknowledged by the respondents. Disbursement of such subsidy is not dependent on payment of interest or certification thereof by respondent nos.2 and 3. 8. In the impugned order, the respondents have also alleged that the OTS was pursuant to waiver of interest, which is contrary to the records. Disbursement of such subsidy is not dependent on payment of interest or certification thereof by respondent nos.2 and 3. 8. In the impugned order, the respondents have also alleged that the OTS was pursuant to waiver of interest, which is contrary to the records. In view of the interest paid certificate having been issued by the Financial Institution (here, respondent no.2) with regard to the interest incurred by the unit, there was no bar in granting interest subsidy to the petitioners. It is evident from the documents annexed to the affidavit dated December, 18, 2020 by respondent nos. 2 and 3 that huge interest of approximately Rupees Seven crore had been paid by the petitioners. 9. The consideration, that the petitioners have already derived benefit on account of term loan given by respondent no.2, is beyond the scope of consideration by respondent no.2 as an agent under the Scheme. If the term loan had been given by any other commercial bank and not respondent no.2, the consideration by respondent no.2 for the grant of subsidy would have been strictly limited to the Scheme and the interest certificates issued by such Financial Institutions. The petitioners argue that by coincidence, respondent no.2 itself was the financial institution for the petitioners in the present case, but the same reasoning should apply. 10. There is no specific allegation in the affidavit-in-opposition affirmed by respondent nos. 2 and 3 that the petitioners have not complied with the Scheme. The quantum of subsidy as claimed in paragraph 40 has also not been denied or disputed in the opposition. Vide letter dated February 23, 2018, respondent no.2 accepted that the fixed capital investment subsidy was admitted and also acknowledged that respondent no.2 received certificates from the Commissioner, Commercial Taxes certifying that the unit had not defaulted in the matter of payment of VAT duties. Issuance of interest paid certificate by respondent no.2 was also admitted in the opposition. Although the relevant letter was couched in a manner that the term loan was settled at a principal amount of Rs.8,48,00,000/-, the figure has been portrayed erroneously as a reduction in the principal amount. However, from the supplementary affidavit dated December 18, 2020 filed by respondent no.2, it would be evident that the petitioners had already paid a principal sum of Rs.1,92,00,000/-. Thus, the principal as well as interest had been paid pursuant to the OTS Scheme. However, from the supplementary affidavit dated December 18, 2020 filed by respondent no.2, it would be evident that the petitioners had already paid a principal sum of Rs.1,92,00,000/-. Thus, the principal as well as interest had been paid pursuant to the OTS Scheme. Learned Counsel for the petitioners argues that it is de hors the law for the respondents to defend the impugned order on the basis of documents and correspondences beyond the consideration of respondent no.2 while passing the impugned order. It is settled law that an authority cannot supplement its order by relying on documents or reasoning not reflected from the order itself. 11. After issuance of a No Dues Certificate, the respondents are estopped from contending that there was waiver of interest. The allegation that interests were required to be paid in full to the financial institution as a pre-condition is also not in terms of the Scheme. Such requirement, at best, was directory and not mandatory. Clause 9 of the Scheme clearly indicates that any additional interest paid for delayed payment would not be acceptable for subsidy purpose. Hence, the 2008 Scheme also contemplates payments of interest beyond the due date. Respondent no.2, it is argued, admitted that it has received certification of payment of interest on time and that VAT was paid on time. Thus, till the time VAT was being paid by the petitioners, they were entitled to reimbursement of the VAT amount. 12. The No Dues Certificate issued by respondent no.2, it is argued, indicates that nothing was due and payable by the petitioners with regard to any term loan or interest. Thus, no claim can be made in that regard against the petitioners. The contention of the petitioners deriving double interest in the event of subsidy being given is an afterthought and an arbitrary action to prevent the payment of subsidy under the 2008 Scheme. The delay on the part of the respondent in restructuring financial package and in adhering to the terms thereof also led to the delay in repayment of the entire amount to the respondents. The contractual relationship and agreement between respondent no.2 as a lender and the petitioners as borrowers is of no consequence in considering entitlement of subsidy under the 2008 Scheme. 13. The OTS did not indicate that its acceptance by the petitioners would disentitle the petitioners to subsidy under the 2008 Scheme. The contractual relationship and agreement between respondent no.2 as a lender and the petitioners as borrowers is of no consequence in considering entitlement of subsidy under the 2008 Scheme. 13. The OTS did not indicate that its acceptance by the petitioners would disentitle the petitioners to subsidy under the 2008 Scheme. Since such a condition is not mentioned in the Offer Letter of the OTS or the OTS No Dues Certificate, respondent no.2 is estopped from contending to the contrary. The relevant package provides that interest would be aligned with the State Bank of India rates, thus precluding respondent no.2 from claiming interest at a higher rate than that, leading to a conclusion that there has been a waiver of Rs.2.5 crore as interest. The restructuring letter at page 181 of the writ petition shows an agreement that the interest rate would be one per cent above the SBI base rate. However, the interest calculated for the purpose of concluding that there was a waiver, was on a much higher rate. 14. That apart, the petitioners argue, the respondents' action was arbitrary and an afterthought. The State ought to act in a manner so as to permit industry and to adhere to its promise to investors. There is no dispute that the petitioners, as investors, paid huge amounts of money to respondent no.2. The respondents cannot take advantage of their own wrong in refusing to pay the dues under the 2008 Scheme. The State, being the contractual party to such incentive Scheme, has not disputed the payments in accordance with the terms of the Scheme. The payment of incentives under the Scheme creates a contractual liability, as indicated in State of West Bengal & Ors. vs. Emami Biotech Ltd. & Ors.,2014 SCCOnLineCal 5978. A Division Bench of this Court held in the said case that, where there has been clear admission by the principal, its agent cannot supplement the stand of the principal. 15. Since the principles of the Code of Civil Procedure are applicable to the writ jurisdiction of this Court, the provisions of Order VIII Rule 5 of the Code ought to be followed, which stipulate that non-denial by the respondents of the petitioners' averments tantamount to admission. Thus, the prayers made in the writ petition ought to be allowed. 15. Since the principles of the Code of Civil Procedure are applicable to the writ jurisdiction of this Court, the provisions of Order VIII Rule 5 of the Code ought to be followed, which stipulate that non-denial by the respondents of the petitioners' averments tantamount to admission. Thus, the prayers made in the writ petition ought to be allowed. Re-sending the matter back to the respondents would serve no purpose, it is argued, since the respondents have made their stand clear by not making payment of due subsidies to the petitioners under the Scheme, by reason of frivolous pleas. 16. Learned counsel for the State-respondent submits in reply that the petitioners could not repay the loan taken from respondent no.2 as per schedule and applied for restructuring of the loan. The petitioners also committed that the subsidy may be adjusted against the outstanding dues. The petitioners further expressed its willingness to pledge ten percent of its shares. Thereafter, an OTS was arrived at between the parties, the terms of which have not been disclosed in the writ petition. 17. Learned counsel further submits that the accumulated interest on the date of approval of OTS was Rs.9,22,60,868/-, which was reduced to Rs.5,57,17,588/- on application of the SBI rate. Consequently, the principal required to be repaid was Rs.8.48 crore and interest was determined at Rs.2,50,72,913.25p. Thus, the OTS reduced the interest liability of the petitioner by Rs.67,187,754.75p. The loan for capital investment was not repaid within due dates, causing loss to the coffers of respondent no.2, a wholly-owned undertaking of the State. 18. Learned counsel for the State-respondent argues that the petitioners are not entitled to interest subsidy. On a conjoint reading of Clauses 9.2.1 and 9.2.2 of the WBSSIS-2008 Scheme, it is argued that the certificate from the financial institution is a necessity for claiming interest subsidy. However, no such certificate was issued in favour of the petitioner. The petitioner did not make out any case that it paid instalments on due dates as per terms of the loan. 19. It is argued by the respondents that the petitioners obtained the best possible bargain through the OTS and cannot claim further equitable relief of capital investment subsidy, making a further dent in the public exchequer. The petitioners occasioned financial loss to respondent no.2 and are not entitled to fixed capital investment subsidy. 19. It is argued by the respondents that the petitioners obtained the best possible bargain through the OTS and cannot claim further equitable relief of capital investment subsidy, making a further dent in the public exchequer. The petitioners occasioned financial loss to respondent no.2 and are not entitled to fixed capital investment subsidy. It is argued that the capital investment, in the present case, was inextricably connected with the loan granted by respondent no.2, since the investment could not have been made without loan being sanctioned by respondent no.2. 20. Thus, it is argued that the writ petition ought to be dismissed. 21. At the outset, it has to be clarified that respondent no.2 cannot mix up its dual capacity, as a "Financial Institution" under Clause 3.11 of the 2008 Scheme and as "Authorized Agent" under Clause 3.4, which defines the WBIDC as an agent specially authorized by the State Government for operation of the Scheme. 22. It is to be noted that all the categories of subsidies/incentives claimed by the petitioners are governed by Clause 16 of the Scheme, which requires clearance of payment of VAT dues. 23. The claims of the petitioners can be divided into three broad heads - Interest Subsidy, Fixed Capital Investment Subsidy and Waiver of Electricity Duty. 24. As far as Interest Subsidy is concerned, Clause 9.2.2 specifically stipulates that such subsidy will be payable annually, subject to submission of a statement/certificate by the Financial Institution to prove that the unit paid the interest in full to the Financial Institution within the due dates. Clause 9.2.4, relied on by the petitioners, is irrelevant for the present purpose, since the expression "delayed payment" used therein pertains to any additional interest which may be charged on such payment of the principal amount, which will not come under the purview of Interest Subsidy. No question of additional interest arises in the present case. 25. Although the petitioners obtained sanction in respect of the three heads of subsidy from respondent no.2, such sanction was subject to satisfaction of the norms and guidelines stipulated in the scheme and extant legal provisions. Thus, mere sanction cannot be construed to be final, binding the respondent no.2 to grant all the incentives to the petitioners. 26. 25. Although the petitioners obtained sanction in respect of the three heads of subsidy from respondent no.2, such sanction was subject to satisfaction of the norms and guidelines stipulated in the scheme and extant legal provisions. Thus, mere sanction cannot be construed to be final, binding the respondent no.2 to grant all the incentives to the petitioners. 26. As far as Interest Subsidy is concerned, it is evident from the loan related information issued by respondent no.2 in respect of the petitioner no.1, annexed at page 167 of the writ petition, that the petitioner no.1 last paid interest up to August 31, 2011. There is nothing on record to show that any payment of interest was made by the petitioners thereafter. 27. The attempt of the petitioners to intertwine the OTS Scheme with the payment of interest, as contemplated in the 2008 Scheme, cannot be accepted. Despite the petitioners having cleared all dues in terms of the OTS between the parties, such clearance does not absolve the petitioners from the liability under Clause 9.2.2 of the Scheme. Since the said Clause envisages payment of interest subsidy annually, subject to submission of statement/certificate by the Financial Institution to prove that the unit paid the interest in full within the due dates, the question of such Clause being attracted does not arise after August 31, 2011 up to which interest was being paid annually by the petitioners. For the subsequent period, the petitioners were defaulters in payment of annual interest. Although there was full and final settlement of all components of dues by the OTS, such development could not obliterate the past defaults of the petitioners, to entitle the petitioners to the annual payment of interest retrospectively, after August 31, 2011. 28. However, as far as Interest Subsidy up to August, 2011 is concerned, there was no valid ground for the respondents to refuse such subsidy to the petitioners, in view of the petitioners being eligible on all other yardsticks stipulated in the 2008 Scheme. 29. As far as Fixed Capital Investment Subsidy (FCIS) is concerned, the plinth of the arguments advanced by the respondents is that such subsidy was tied up with the overdue, if any, to the respondent no.2. 30. 29. As far as Fixed Capital Investment Subsidy (FCIS) is concerned, the plinth of the arguments advanced by the respondents is that such subsidy was tied up with the overdue, if any, to the respondent no.2. 30. Clause (i) of the Sanction Letter dated July 31, 2014 issued by respondent no.2 (Annexure P-6 at page 134A of the writ petition) stipulates that, at the time of disbursement of the subsidy, overdue amount to WBIDC, if any, will be adjusted. The said sanction pertains only to the FCIS and not to the Interest Subsidy or Waiver of Electricity Duty. However, although the petitioners had been defaulters prior to the OTS being approved, upon the petitioners having cleared off all dues in terms of the OTS in full and final settlement of the claims of respondent no.2 in the latter's capacity as a Financial Institution, there was no overdue amount to respondent no.2 at the time of disbursement of the subsidy. As such, Clause (i) of the sanction dated July 31, 2014 is rendered academic and cannot be a bar to release such subsidy in favour of the petitioners. 31. Hence, in view of the petitioners having cleared the other hurdles in terms of the 2008 Scheme, including the payment of VAT, they were entitled to FCIS in full at the juncture of disbursement of the subsidy. 32. As far as Waiver of Electricity Duty is concerned, the same is governed by Clause 9.3 of the 2008 Scheme, which contemplates that an eligible unit for the approved project will be entitled to Waiver of Electricity Duty on the electricity consumed for its production activity for a period of five years from the date of commencement of the commercial production, subject only to the unit having obtained all kinds of statutory clearance. 33. In the impugned order of refusal of subsidy dated March 26, 2019, there is no mention of any default on the part of the petitioners in respect of the statutory clearance of dues, nor any dispute regarding the quantum of electricity consumed for the production activity of petitioner no.1, as envisaged in Clause 9.3 of the Scheme. 34. The impugned order cites primarily the principle of double benefit for refusal of the subsidies to the petitioners. 34. The impugned order cites primarily the principle of double benefit for refusal of the subsidies to the petitioners. Such ground is de hors the 2008 Scheme itself, which clearly distinguishes between the identities of respondent no.2 (WBIDC), in its dual capacities as Authorized Agent of the State Government and as a Financial Institution, defined respectively in Clauses 3.4 and 3.11 of the Scheme. Thus, it does not lie in the mouth of respondent no.2 to plead double benefit as a ground of refusal of subsidy, since, upon full and final settlement of all claims between the petitioners and respondent no.2 (acting as a Financial Institution), there could not arise any question of overdue or previous waiver of interest by the respondent no.2. In the event the Financial Institution granting loan of the petitioners was some other entity than respondent no.2, such argument would be meaningless. In view of segregation of the two capacities of respondent no.2 in the 2008 Scheme itself, the same logic applies to respondent no.2, in its capacity of a Financial Institution, as well. Thus, double benefit or waiver of interest could not be a ground for refusal of subsidy by respondent no.2 in its capacity as an Authorized Agent of the State Government for operation of the Scheme. Such grounds are alien to the Scheme itself. 35. In view of the above discussions, WPO No.437 of 2019 is disposed of by holding that the petitioners are entitled to Interest subsidy under the WBSSIS-2008 up to August 31, 2011, to Fixed Capital Investment Subsidy in full, as claimed by the petitioners, and to total Waiver of Electricity Duty, as stipulated in Clause 9.3 of the WBSSIS-2008. 36. The respondents shall disburse the amounts due to the petitioners by way of such subsidies at the earliest, latest by 30 days from date. 37. There will be no order as to costs. 38. Urgent certified copies of this order shall be supplied to the parties applying for the same, upon due compliance of all requisite formalities.