THE STATE OF MADHYA PRADESH AND ORS. v. M/S. BINDAL AGRO CHEMICAL LTD. AND ANR.

The Judgment of the Court was delivered by

KULDJP SINGH, J. Special leave 6'fanted. H

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A The question for consideration before the High Cou't was whether M/s. Bindal Agro Chemical Ltd., respondent in the appeals herein, was eligible and entitled to various incentives announced by the State Govern-· ment to the entrepreneurs setting up ne\v 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 B 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 Yanaspati Indore was granted and industrial licence 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 C Yanaspati installed the factory at village Balgarh, Tehsil Dewas. Sub- sequently, 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 licence granted by the Central Government. The respondent further sought permission from the Central D Government for the Change of location of the factory from Dcwas lo Mandidcep against the original industrial license dated january 18, 1981. The respondent never applied and obtained a new license for its Man- dideep Unit.

In order to help industrialisation of backward areas the State E 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, ho\vcver, subject to certain conditions. Para Xlll E of the Notification is as under :

F "The exemption under this notification shall not be available to the following industrial units.

11 A nc\v industrial unit set up, by transferring, shifting or dismen- G tling 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 H Government. The respondent was informed by the State Government by

STATE v. BINDALAGRO CHEMICAL LID. [KULDII' SINGH,J.] 757

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 11

"You have shifted your unit from Dewas lo Mandidecp. Therefore, as per decision co1nn1unicated by the Con1n1issioner of Industries, you arc not eligible for Central Investment subsidy. The case is returned herc\vith. 1'

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 Mandi<lecp the totality of the plant and m<J.Chinery were newly purchased. It was claimed that the unit set up al Mandideep was a new c industrial unit and as such \Vas entitled to the grant of subsidy.

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 as Mandideep. The old unit from Dewas D was shifted to Mandidccp after obtaining permission from the Central Govern1ncnt. Under the Act a Vanaspati n1anufacturing unit could not be set up \Vithout obtaining license fron1 the Central Government. The unit at Mandi<leep \Vas operating under the same license \vhich was granted for the Dcwas unit. Once the Central Government granted permission to shift the unit under the same license the unit at Dewas could not manufacture E vanaspati and it could he manufactured only at Mandideep. Since the Mandideep unit was set up by transferring/shifting the existing unit at Dcwas, it was contended, the respondent was not eligible for t,'Tant of subsidy in terms of para Xlll E of the notification (quoted above).

The High Court allowed the writ petitions on the following reasons : F

11 .A.fter carefully considering the submissions made on behalf of both the parties, we find substantial force in the contentions 1nade on behalf of the petitioners. Admittedly the reasons assigned by the respondent No. 3 in his communications to the petitioners, as G 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 al Dewas is existing and has not been shifted to Mandideep. Although the Counsel for the respondents made a half hearted attempt to dispute the claim of the petitioners that the Unit set up H

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A al Mandi<leep is a completely new Unit, it must be said in all fairness to the counsel for the respondents that ultimatelv he conceded that the Unit set up by lhc petitioners at Mandideep was on a plot of land newly allottt·<l to the. petitioners by the State Government and the plant and Machineries put up by the petitioners were not by way of shifting the same from Dewas to B Mandi deep. 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 <leered lo be an old unit. We are constrained to hold that the notification i"ued by the slate Government does C nol permit such inlerprctation ... .' 1

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 con- clusion that a new unit was set up at Mandidcep. The respondent in the application gave follo\ving reasons for changing the location. D "The present plant being obsolete is to be discarded at its present location and new plant under the licence i5 to be set up at Mandidecp Dist. Raisen (M.P.) having a status of industrially backward arca.' 1 E The Government of Madhya Pradesh by the letter dated March 3, 1987 communicated lo the respondent as under :

"With reference to your proposal for change of location of Vanaspati Unit from Dewas to Mandideep in Raiscn district it may be pointed out that this transferred unit will nol be allowed to avail F concessions due to a ne\v uni.t because this \vould be transfer of capacity and not creation of capacity. 11

The respondent by its Jetter dated March 6, 19~7 replied as under:

G "We acknowledge receipt of your letter No. F- 17/172/86/Xl/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 i:-; not allo\ved, because this would be transfer of capacity and not creation of H capacity. Jn view of this, we would request you to grant us permis-

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sion for change of location of our vanaspati unit from Dewas to A Mandidcep."

On the basis of the above commitment of the respondent the Govern- ment of Madhya Pradesh recommended the appellation 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 B communication dated April 22, 1987 permitted the respondent to charge the location from Dewas to Mandideep. The licence granted for Dewas was amended to be operative at M andideep.

It is obvious from the correspondence between the respondent and the two government that the respondent was fully aware that it would not c be entitled to the subsidy in respect of the unit at Mandideep. The respondent could not have set up the unit at Mandidcep without obtaining license from the Central Government under the Act. No new license was granted to the respondent for the unit at Mandideep. The licence was only one pertaining Dewas unit. The respondent could either manufacture vanaspati at Dcwas 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 \Vas 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. F

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 may of installments. The State Government may consider and effect the recovery by installments. G R.P. Appeals allowed.