http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: THE STATE OF MADHYA PRADESH & ORS.

       Vs.

RESPONDENT: M/S. BINDAL AGRO CHEMICAL LTD. & ANR

DATE OF JUDGMENT:       19/07/1996

BENCH: KULDIP SINGH (J) BENCH: KULDIP SINGH (J) AHMAD SAGHIR S. (J)

CITATION:  JT 1996 (7)     1        1996 SCALE  (5)449

ACT:

HEADNOTE:

JUDGMENT:                  THE 19TH DAY OF JULY, 1996 Present:           Hon’ble Mr.Justice Kuldip Singh           Hon’ble Mr.Justice S.Saghir Ahmad A.K.Chitale, Sr.Adv. Sakesh Kumar and S.K.Agnihotri, Advs. with him for the appellants Kapil Sibal, Sr.Adv., Rajiv Dutta and Vipin Nair, Advs. with him for the Respondents                       J U D G M E N T The following Judgment of the Court was delivered: The State of Madhya Pradesh & Ors. V. M/s Bindal Agro Chemical Ltd. & Anr.                       J U D G M E N T Kuldip Singh, J      Special leave granted.      The question  for consideration  before the  High Court was whether M/s Bindal Agro Chemical Ltd., respondent in the appeals  herein,   was  eligible  and  entitled  to  various incentives  announced   by  the   State  Government  to  the entrepreneurs  setting  up  new  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 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 Vanaspati  Indore was  granted  an  industrial  license 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 Vanaspati installed the  factory at  village  Balgarh,  Tehsil  Dewas. Subsequently, 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   license  granted  by  the  Central

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

Government. The  respondent further  sought permission  from the Central  Government for  the change  of location  of the factory  from   Dewas  to  Mandideep  against  the  original industrial license  dated January  18, 1981.  The respondent never applied  and obtained  a new license for its Mandideep Unit.      In order  to help  industrialisation of  backward areas the State  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,  however,  subject  to  certain conditions. Para XIII E of the Notification is as under :      "The    exemption     under    this      notification shall not be available      to the following industrial units.                   .........      "A new  industrial unit  set up, by      transferring,      shifting      or      dismentling 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  Government. The  respondent was informed  by the  State Government  by 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 :      "You have  shifted your  unit  from      Dewas to  Mandideep. Therefore,  as      per decision  communicated  by  the      Commissioner of Industries, you are      not eligible for Central Investment      subsidy.  The   case  is   returned      herewith."      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 Mandideep the totality of the plant and machinery were newly purchased. It was claimed that the  unit set up at Mandideep was a new industrial unit and as such was      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 at Mandideep. The  old unit from Dewas was shifted to Mandideep after obtaining  permission  from  the  Central  Government. Under the  Act a  Vanaspati manufacturing  unit could not be set  up   without  obtaining   license  from   the   Central Government. The  unit at  Mandideep was  operating under the same license  which was granted for the Dewas unit. Once the Central Government  granted permission  to  shift  the  unit under  the   same  license  the  unit  at  Dewas  could  not manufacture vanaspati and it could be manufactured only at Mandideep.  Since   the  Mandideep   unit  was   set  up  by transferring/shifting the existing unit at Dewas, it was contended, the respondent was not eligible for grant of subsidy in  terms of para XIII E of the notification (quoted above).      The High  Court  allowed  the  writ  petitions  on  the following reasons :      "After  carefully  considering  the      submissions made  on behalf of both      the parties,  we  find  substantial      foree in  the contentions  made  on

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

    behalf    of    the    petitioners.      Admittedly the  reasons assigned by      the   respondent    No.3   in   his      communications to  the petitioners,      as 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      at Dewas  is existing  and has  not      been shifted to Mandideep. Although      the  Counsel  for  the  respondents      made  a   half  herted  attempt  to      dispute   the    claim    of    the      petitioners that the Unit set up at      Mandideep is a completely new Unit,      it must  be said in all fairness to      the  counsel  for  the  respondents      that ultimately  he  conceded  that      the Unit  set up by the petitioners      at Mandideep  was on a plot of land      newly allotted  to the  petitioners      by the  State  Government  and  the      plant and machineries put up by the      petitioners  were  not  by  way  of      shifting the  sane  from  Dewas  to      Mandideep. 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 deered to be an      old Unit.  We  are  constrained  to      hold that  the notification  issued      by the  state Government  does  not      permit such interpretation..."      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 conclusion that a new unit was set up at  Mandideep. The  respondent in  the  application  gave following reasons for changing the location.      "The present  plant being  obsolete      is to  be discarded  at its present      location and  new plant  under  the      licence  is   to  be   set  up   at      Mandideep   Dist.   Raisen   (M.P.)      having  a  status  of  industrially      backward area."      The Government  of Madhya  Pradesh by  the letter dated March 3, 1987 communicated to the respondent as under :      "With reference  to  your  proposal      for change of location of Vanaspati      Unit from  Dewas  to  Mandideep  in      Raisen district  it may  be pointed      out that this transferred unit will      not be allowed to avail concessions      due to  a  new  unit  because  this      would be  transfer of  capacity and      not creation of capacity."      The respondent  by  its  letter  dated  March  6,  1987 replied as under :      "We  acknowledge  receipt  of  your      letter No.  F-17/172/86/XI/B  dated

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

    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 is  not allowed,  because this      would be  transfer of  capacity and      not creation  of capacity.  In view      of this,  we would  request you  to      grant us  permission for  change of      location of our vanaspati unit from      Dewas to Mandideep.      On the  basis of the above commitment of the respondent the Government of Madhya Pradesh recommended the application 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 communication dated April 22,  1987  permitted  the  respondent  to  change  the location from  Dewas to  Mandideep. The  license granted for Dewas was amended to be operative at Mandideep.      It is  obvious  from  the  correspondence  between  the respondent and  the two  governments that the respondent was fully aware  that it would not be entitled to the subsidy in respect of  the unit  at Mandideep. The respondent could not have set  up the unit at Mandideep without obtaining license from the  Central Government  under the  Act. No new license was granted to the respondent for the unit at Mandideep. The license  was   only  one   pertaining  to  Dewas  unit.  The respondent could either manufacture vanaspati at Dewas 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  was 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.      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 way  of installments. The State Government  may consider  and effect  the recovery  by installments.