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J&K High Court · body

2023 DIGILAW 8 (JK)

Firdous Ahmad Bhat v. UT of J&K

2023-02-01

JAVED IQBAL WANI

body2023
JUDGMENT : 1. The facts those stem out from the instant petition would reveal that the respondent 2 while acting through the respondent no. 3 issued/published a notice in a newspaper on 18.10.2015 therein offering for sale by auction of a Small Scale Industrial Unit, namely, M/s Mubarak Pharmaceuticals set up at Industrial Estate Khonmoh, Srinagar (hereinafter referred to as “the Unit”). The said notice is stated to have been followed by another notice dated 10.11.2015 in order to maximize the sale price of the Unit. 2. The petitioner herein is stated to have responded to the Notice/s (supra) and made an offer for purchase of the Unit for a price of Rs. 38,25,607/- vide letter dated 17.11.2015 along with an amount of Rs. 76,513/- being 2% of the requisite bid amount by way of a CDR. The bid amount offered by the petitioner is stated to have been enhanced during the negotiations to the tune of Rupees Forty Lacs and duly accepted by the respondent 2 as sale consideration for the Unit vide communication dated 30.11.2015. 3. It is being stated that the petitioner deposited the bid amount of Rupees Forty Lacs for purchase of the Unit in question under and in terms of Section 29 of the Jammu and Kashmir State Financial Corporation Act, 1951 (for short, Act of 1951) vesting all rights in/to the property unto the petitioner, whereupon the respondent 3 is stated to have called upon the respondent no. 8 to transfer the lease hold rights of the Unit in favour of the petitioner. 4. It is being next stated that consequent upon the vesting of the ownership rights in the petitioner of the Unit, the possession thereof came to be handed over to the petitioner on 04.05.2016 itself on the premise of “AS IS WHERE IS BASIS” as stipulated in the auction notice (supra). 5. It is being next stated that despite a request made by respondent 3 to respondent 8 for transfer of lease hold rights in favour of the petitioner qua the Unit, the respondent 8 did not effect the said transfer as was required to be effected in terms of Section 29 of the Act of 1951. 6. 5. It is being next stated that despite a request made by respondent 3 to respondent 8 for transfer of lease hold rights in favour of the petitioner qua the Unit, the respondent 8 did not effect the said transfer as was required to be effected in terms of Section 29 of the Act of 1951. 6. It is being further stated that the Unit had been purchased by the petitioner with the aim and objective of setting up of economically viable Industrial Unit for manufacturing, marketing/trading and distribution of mineral and aerated water, packaged drinking water and other non-alcoholic drinks and fruit juices for which a project report by the experts in the field had been got drawn. 7. It is being next stated that the petitioner continued to request the respondents 3, 6 and 8 in particular to transfer the lease hold rights in his favour of the Unit which the said respondents failed without any lawful reason and in this regard, even addressed a communication dated 19.12.2018 to the respondent 8 followed by an application in the prescribed format dated 14.06.2019 under Trade Marks Act, 1999, but in vain. 8. It is being further stated that the petitioner simultaneously submitted an application before the respondent 7 for provisional registration of the activity of the Unit besides approaching respondent 6 for transfer of the lease hold rights of the Unit in question who, however, addressed a communication No. SIDCO/ES/Kh/86/41/2867-70 dated 10.01.2020 to the respondent 7 herein seeking therein an NOC as also issuance of provisional registration for the Unit under the name and style of M/s Spring Hills Food Industries so that formal order of transfer of lease hold rights is issued. The letter dated 10.01.2020 as also response thereof made by the respondent 7 vide communication No. DIC/Dev-2020/280-MF/2304-07 dated 11.03.2020 are being impugned in the instant petition, seeking their quashment by the petitioner besides praying other reliefs in the instant petition. 9. The letter dated 10.01.2020 as also response thereof made by the respondent 7 vide communication No. DIC/Dev-2020/280-MF/2304-07 dated 11.03.2020 are being impugned in the instant petition, seeking their quashment by the petitioner besides praying other reliefs in the instant petition. 9. The petitioner has maintained the petition inter alia on the grounds that the Unit came to be purchased by him through an auction under Section 29 of the Act of 1951 and as such, the same vested unto the petitioner entitling him to have the lease hold rights transferred in his name with a duty cast upon the respondents 3, 6 and 8 to effect the said transfer instead of addressing of impugned communication/s as the same prejudicially affected the rights and interests of the petitioner. It is being further urged in the grounds that under section 29 of the Act of 1951, the sale of the Unit by the respondent 2 vested unto the petitioner all rights in or to the Unit transferred as if the transfer had been made by the owner of the property and that the respondents 3, 6 and 8 became obligated and duty bound in law to transfer the lease hold rights on “AS IS WHERE IS BASIS” qua all the auction purchased Unit in favour of the petitioner. It is being further urged in the grounds that the impugned action of the respondents 6 and 7 as contained in the impugned communications dated 10.1.2020 and 11.3.2020 respectively are without jurisdiction and legally unsustainable besides being arbitrary and bereft of any sanction or authority of law, more so in view of the issuance of no objection certificate issued by the respondent 2 as regards the change of constitution inasmuch as the no objection from sales tax authorities. It is being further urged in the grounds that the impugned actions of the respondents 6 and 7 contained in the impugned communications dated 10.1.2020 and 11.3.2020 suffer from the vice of being without jurisdiction and are as well violative of the mandate of rule of law guaranteed under Articles 14 and 19 (1) (g) of the Constitution of India. 10. Objections to the petition have been filed by the respondents 1, 5 and 7 as also respondents 4, 6 and 8. 11. 10. Objections to the petition have been filed by the respondents 1, 5 and 7 as also respondents 4, 6 and 8. 11. In the objections filed by the respondents 1, 5 and 7, it is being stated that in terms of the impugned communication dated 11.3.2020, the petitioner came to be asked to produce relevant documents as per Govt. Order No. 58 Ind of 2016 dated 15.03.2016 (Industrial Policy of 2016) as also the Procedural Guidelines issued vide Government Order No. 129 Ind of 2017 dated 07.06.2017 for grant of provisional registration in his favour for setting up of industrial unit under the new name and style with change of line of activity. It is being also stated that before issuing provisional registration in favour of the petitioner as sought by him, the respondents are bound to process the case for de-registration of the previous Unit. It is being also stated that for processing the case of the petitioner for provisional registration, the petitioner have had to complete pre-requisite mandatory formalities envisaged in the Industrial Policy of 2016 and Procedural Guidelines issued vide Government Order dated 07.06.2017 which the petitioner failed to fulfill. It is lastly being stated in the objections that the earlier unit holder have had a liability of Rs. 2,66,180/-upto September 2020 of electric arrears and that for processing the case of de-registration of the Unit and consequent new registration of the Unit of the petitioner, the petitioner have had to obtain the No Objection Certificate from the Electricity Department. 12. In the objections filed by the respondents 4, 6 and 8, it is also being sated therein that before processing the case of the petitioner for registration and transfer of lease hold rights, the petitioner had to fulfill the requisite formalities provided under Industrial Policy of 2016 and Procedural Guidelines of 2017, being a pre-condition. It is being also stated that the petitioner cannot take refuge under section 29 of the Act of 1951 while seeking transfer of Lease Hold Rights as also the registration of his new Unit on any grounds and that the said aspect was required to be taken into consideration by the Financial Corporation (respondent 2 herein) as also the petitioner at the time of auction. It is also being stated that the allotments/re-allotments/transfer of lease hold rights from one entrepreneur to another are to be effected by the answering respondents as per the Industrial Policy of 2016 and Procedural Guidelines of 2017 without any deviation and that as per the Lease Deed, the respondents 2 and 3 were obliged and required to inform the answering respondents before putting the Unit to auction, which the said respondents failed to do though having been impressed upon by the answering respondents earlier, yet the same stands ignored by the Financial Corporation for which the answering respondents cannot be put to loss in any way. It is further stated that the Financial Corporation in fact misrepresented to the petitioner in the matter and that the lease hold rights qua the Unit cannot be transferred in favour of the petitioner in disregard to the Industrial Policy of 2016 and Procedural Guidelines of 2017 respectively. The petitioner is stated to be bound to deposit the premium amount with the answering respondents while seeking transfer of lease hold rights in terms of the Industrial Policy of 2016 and Procedural Guidelines of 2017, though it is being admitted in the objections that the Corporation sold the Unit in question to the petitioner by way of auction, yet the land whereupon the said Unit is established is stated to be belonging to the answering respondents and that the transfer of the same by the answering respondents had to be done in accordance with the Industrial Policy of 2016 read with Procedural Guidelines of 2017. Heard counsel for the parties and perused the record. 13. The indisputable facts emanating from the pleadings of the parties are:- • The Unit came to be put to auction by the respondent-Financial Corporation vide Notice dated 18.10.2015 undertaken in exercise of the statutory power contained in Section 29 of the Act of 1951 for sale by auction of all that fixed and moveable assets of the Unit, namely, M/s Mubarak Pharmaceuticals set up at Industrial Estate Khonmoh, Srinagar. • Communication dated 30.11.2015 forming Annexure-V to the petition demonstrates that the bid amount in the sum of Rs. 38,25,607/- initially offered by the petitioner came to be enhanced on negotiations to Rupees Forty Lacs and consequently approved and accepted by the respondent 2 as consideration for sale of the Unit in favour of the petitioner as a statutory auction purchaser. 38,25,607/- initially offered by the petitioner came to be enhanced on negotiations to Rupees Forty Lacs and consequently approved and accepted by the respondent 2 as consideration for sale of the Unit in favour of the petitioner as a statutory auction purchaser. • On deposit of the bid amount of rupees Forty Lacs, the possession of the Unit came to be delivered/handed over by the Corporation to the petitioner on 04.05.2016. • The Corporation in terms of letter dated 04.05.2016 called upon the respondent no. 8 to transfer the lease hold rights in favour of the petitioner. 14. Before proceeding to advert to the issues involved in the petition, it would be appropriate to refer hereunder to Section 29 of the Act of 1951 being relevant and germane herein:- 29. Rights of Financial Corporation in case of default.-(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any installment thereof [or in meeting its obligations in relation to any guarantee given by the Corporation] or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the [right to take over the management or possession or both of the industrial concerns], as well as the [right to transfer by way of lease or sale] and realize the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. (2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1), shall vest in the transferee all rights in or to the property transferred [as if the transfer] had been made by the owner of the property. (3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. (3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. (4) [Where any action has been taken against an industrial concern] under the provisions of sub-section (1), all costs, [charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it [as incidental thereto] shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto.] (5) [Where the Financial Corporation has taken any action against an industrial concern] under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of [the concern]. 15. A reference hereunder to the Procedural Guidelines for transfer of lease hold rights as provided under the Industrial Policy of 2016 also becomes imperative being relevant:- 15.0 Transfer of lease hold rights:- 15.1 Transfer of lease hold rights in the Industrial Estates managed by SIDCO/SICOP shall be permitted by the concerned Managing Director only after the unit comes into production and subject to fulfillment of following conditions/formalities/processes: 15.1.1 Furnishing of documents viz. Partnership Deed/Dissolution Deed/Retirement Deed duly registered in the Court of Law or any other relevant deed and /or Form-14/Resolution of Board of Directors/Firm Registration Certificate/Incorporation Certificate by the Registrar of Companies/Articles of Association/Memorandum of Association/Entrepreneur’s Memorandum/Profit & Loss Account Statements/Balance Sheets/Share Capital structure duly certified by Chartered Accountant etc., as may be applicable. 15.1.2 Public Notice in leading dailies inviting objections. 15.1.3 NOC/NDC from the concerned Bank/Financial Institution/Sales Tax/Excise/PDD/PCB/DIC wherever required. 15.1.4 An undertaking by the incoming Promoter (attested by Judicial Magistrate) stating therein that liability if any arising due to transfer of lease hold rights (Outright-sale) shall be borne by the Proprietor/Partners/Company. 15.1.2 Public Notice in leading dailies inviting objections. 15.1.3 NOC/NDC from the concerned Bank/Financial Institution/Sales Tax/Excise/PDD/PCB/DIC wherever required. 15.1.4 An undertaking by the incoming Promoter (attested by Judicial Magistrate) stating therein that liability if any arising due to transfer of lease hold rights (Outright-sale) shall be borne by the Proprietor/Partners/Company. 15.1.5 An affidavit by the outgoing Promoter duly executed in the Court of Law to the effect that the land is free from all encumbrances. 15.1.6 Clearances of all estates dues if any. 15.1.7 Execution of surrender deed before execution of fresh lease deed. 15.1.8 Furnishing of transfer/Sale/release/relinquishment deed. 15.1.9 De-registration of the outgoing unit by the concerned Director, Industries & Commerce in case the incoming promoter desires to establish an Enterprise with different Line of Activity/Name and Style. 15.1.10 Execution of fresh lease deed. 15.1.11 Any other formality as may be deemed appropriate by the Managing Director, SIDCO/SICOP. 15.1.12 Payment of transfer fees @ 50% of the prevalent land premium. In case of transfer of lease hold rights/Outright sale by way of public auction, transfer fee @ 50% of the prevalent land premium applicable on the date of issuance of transfer order/permission by the concerned Corporation shall be payable. 16. Keeping in mind the provisions of Section 29 of the Act of 1951 (supra) as also the guideline (supra), the moot question that would emerge for consideration by this court in the instant petition would be as to whether the Unit acquired by the petitioner through the auction purchase from respondent no. 2 is free from all encumbrances and as to whether any liability thereof attached to the Unit can be passed on or fastened upon the petitioner. Admittedly the petitioner acquired the Unit in question from respondent 2 by way of an auction under and in terms of the provisions of Section 29 of the Act of 1951. Sub-section (2) of Section 29 of the Act of 1951 as noticed in the preceding paras in explicit terms provides that any transfer of property made by the Financial Corporation, in exercise of its powers under sub- section (1), shall vest in the transferee all rights in or to the property transferred [as if the transfer] had been made by the owner of the property. A bare perusal of the auction notice appended with the petition would manifestly show that it does not anywhere provide that any liability attached to the property will pass on to the new purchaser, therefore, in absence of any such stipulation or condition, it cannot, by any sense of imagination, be said that the Unit was not free from any encumbrance and that charge or encumbrance, if any, would pass on to the auction purchaser. Law is no more res integra and that there is a long line of decisions of the Apex Court on the subject including the one titled as “Isha Marbles vs. Bihar State Electricity Board and another”, reported in (1995) 2 SCC 648 , wherein it has been laid down that where a premises comes to be owned and occupied by the auction purchaser, the said auction purchaser cannot be called upon to clear the past arrears and such an auction purchaser cannot be made liable to liquidate the liability of the erstwhile Unit holder with the change of ownership of the Unit, but if the erstwhile owner is liable to pay any arrears, the same can be recovered from the said erstwhile owner/Unit holder. In the case in hand, the de-registration and consequent re-registration as also the transfer of lease hold rights of the Unit of the petitioner seemingly is not being done by the respondents on account of arrears of Electricity charges of the erstwhile unit holder as also on account of non-fulfillment of the pre-requisites enshrined in the Industrial Policy of 2016 read with Procedural Guidelines of 2017, however, a bare perusal of its clause 15.1.12 as noticed in the preceding paras provides for payment of transfer fee at the rate of 50% of the prevalent land premium in case of transfer of lease hold rights/outright sale by way of public auction, applicable on the date of issuance of transfer order/permission by the concerned Corporation. In presence of the aforesaid specific provision in the policy/guidelines, the respondents cannot insist upon the petitioner to fulfill the requirements other than the aforesaid requirement as provided under Clause 15.1.12 as it is an admitted fact that the petitioner is the statutory auction purchaser of the Unit. In presence of the aforesaid specific provision in the policy/guidelines, the respondents cannot insist upon the petitioner to fulfill the requirements other than the aforesaid requirement as provided under Clause 15.1.12 as it is an admitted fact that the petitioner is the statutory auction purchaser of the Unit. Thus, in view of the aforesaid facts and circumstances, it is evident that the respondents have proceeded in the matter of transfer of lease hold rights as also de-registration and consequent registration of the Unit of the petitioner on wrong premise. 17. Viewed thus, what has been observed, considered and analyzed hereinabove, the petition merits to be allowed. Accordingly, by issuance of a writ of certiorari, impugned communications dated 10.01.2020 and 11.03.2020 are quashed and by issuance of writ of mandamus, the respondents are commanded to effectively consider the transfer the lease hold rights or the Unit in favour of the petitioner as also upon registration of the same in the light of the observation made hereinabove expeditiously preferably within a period of eight weeks from the date a copy of this judgment is served upon the respondents by the petitioner. 18. Disposed of accordingly along with connected applications. Disposed Of