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

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

                                    JULY 19, 1996

B              [KVLD!P SINGH ANDS. SAGHIR AHMAD, JJ.]

          Jndusflial and Development Regulation Act, 1956:

          Indusuial development-Madhya Pradesh State ·Govel7!!1lent Notifica-
C tion dated 16. J0.198{r-Para XIII £-Incentives to entrepreneurs-Not avail-
    able to new industlial units set up by transfcning, shifting, closing an existing
    unit-Held, the new unit set up by re.1pm1dent was by transfening/shifting the
    existing unit, and as sflch it lvas not entitled to the subsidy under the
    Notification.

D         The respondent-Company purchased a vanaspati factory, which was
    granted an industrial licence by the Central Government under the In-
    dustrial (Development and Regulation) Act, 1956. Later, the respondent
    applied for and was granted permission by the Government to change the
    location of the factory from Dewas to Mandideep against the original
E   industrial licence dated 18.1.1981.

          The State Government of Madhya Pradesh in order to help in-
    dustrialisation of backward areas, by Notification dated 16.10.1986 an-
    nounced various incentives to the entrepreneurs. Ho\vever, para XIII E of
    the N otilication provided that the incentives would not be available to a
F   new industrial unit set up by transferring, shifting or dismentling or
    closing an existing unit within the State. The respondent, after setting up
    the unit at Mandideep, ap1ilied for an eligibility certificate under the 1986
    Notification, which was declined by the State Government on the ground
    that the respondent had shifted the unit from Dewas to Mandideep.

G         The respondent filed a writ petition before the High Court contend-
    ing that plant/machinery of Dewas Unit was not shifted to Mandideep but
    after acquiring land at Mandideep the totality of the plant and machinery
    were newly purchased and as such the unit set up at Mandideep was a new
    industrial unit entitled to the subsidy under the Notification. It was
H   contended for the State that under the Act a vanaspati manufacturing unit
                                           754
      STJ\TEv.13!NDALAGROCHEMICJ\LLTD. [KULDIPSINGH,J.]                    755

could not be set up without obtaining licence from the Central Govern·            A
rnent; no licence \Vas obtained for setting up a new industrial unit at
J\1andideep w·hich \'\'as operating under the licence granted for De\l'as unit;
since the Mandideep unit was set up by transferring/shifting the existing
unit at Dewas, the respondent was not eligible for grant of subsidy in terms
of pars Xlll E of the Notification. The High Court allowed the llTit petition.
                                                                                  B
Aggrieved, the State Government tiled the appeal.

      Allowing the appeal, this Court

      HELD : 1. The High Court was not Justified in holding that a new
unit was set up at Mandideep. The Central Government permitted the                C
respondent to charge the location from lle\'\'aS to 1\-tandideep. The cor~
respondence beh\·een the respondent and the IB'o governments clearly
shows that the respondent was fully aware that it would nnt be entitled to
the subsidy in respect of the unit at Mandidecp. The respondent could not
have set up the unit at Mandideep without obtaining licence from the
Central Governrnent. No ne\v licence \\'as granted to the respondent for the      D
unit at l\tandidcep. The process of J\fanufacture of vanaspati at Dewas
stopped with the transfer of the licence to the unit at Mandideep. The new
unit set up at Mandideep was by transferring/shifting the unit at Dewas.
The unit at De\\as was closed so far as the manufacture of vanaspati was
concerned. [758-C; 759-C·E]                                                       E
      2. 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 respon-
dent in instalments. [759-F-G]

      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9384-85                     f
of 1996.

     From the Judgment and Order dated 9.10.90 of the Madhya Pradesh
High Court in M.P. No. 1/88 and 4348 of 1989.

      A.K Chitale , Sakesh Kumar and S. K Agnihotri for the Appellants.           G

      Kapil Sibal, Rajiv Dutta and Vipin Nair for the Respondents.

      The Judgment of the Court was delivered by

      KULDJP SINGH, J. Special leave 6'fanted.                                    H
    756                       SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

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     A
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       B
        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
    758                  SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

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-
       STATE v. BINDALAGRO CHEMICAL LID. [KULDIP SINGH, J.]             759

         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             D
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          E
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.