KARNATAKA STATE SMALL INDUSTRIES DEVELOPMENT CORPORATION LIMITED BANGALORE Vs. PRIYANKA PRODUCTS MUMBAI

JUDGEMENT

(1.) WITH a view to promote and develop small scale industries in the state of Karnataka, the Karnataka State Small Industries Development corporation Limited (for short, 'the Corporation') allots plots/industrial sheds to entrepreneurs under its different schemes on such terms and conditions as agreed to between the parties. Industrial shed No. 303 (a)under the Hire Purchase Scheme in the Industrial Estate, Peenya II stage, Bangalore was allotted by the Corporation to M/s. Priyanka products a sole proprietorship concern of Y. M. Shetty, resident of No. 40, hill Queen, Dr. Ambedkar Road, Khar, Mumbai (hereinafter referred to as 'the petitioner) for establishing an industry for the manufacture of electroplating and Heat Treatment Salt. This allotment was made on the terms and conditions contained in the letter of intent dated 19-4-1983 and the lease-cum-sale agreement executed between the corporation and the petitioner on 8-10-1983. Clauses 8 and 13 of the letter of intent provide as under:

(2.) AFTER cancelling the allotment in favour of the petitioner shed No. 303 (a) was allotted to M/s. TEX CEM, Bangalore the 2nd respondent herein. This allotment was made on 6-6-1995 and a lease-cum-sale agreement executed between the Corporation and the 2nd respondent on 9-6-1995. Power supply was sanctioned to the 2nd respondent on 12-9-1995 and since then it is carrying on its industry.

(3.) FEELING aggrieved by the order of cancellation dated 24/27-1-1995 the petitioner filed W. P. No. 12799 of 1998 in this Court in April 1998 making a grievance that the Corporation could not have taken possession of the industrial shed without resort to the provisions of the karnataka Public Premises (Eviction of Unauthorised Occupants) Act, 1974. It was also urged on behalf of the petitioner that it was for the corporation to provide infrastructure to the petitioner to start his industry in terms of the letter of intent and that no electricity was provided to the shed and therefore the industry could not be started. The petitioner contended that it became necessary for him to approach the karnataka Electricity Board for supply of electricity and it is in these circumstances that the industry could not be set up. The writ petition was contested by the Corporation and a detailed counter-affidavit had been filed on its behalf. The cancellation of the allotment was sought to be justified on the ground that the petitioner failed to set up the industry and therefore the Corporation had no option but to cancel the allotment. It was pleaded on behalf of the Corporation that on several occasions the petitioner had been told to start his industry and that the orders of cancellation passed earlier had been revoked on assurances given by the petitioner that he would start the industry. The matter was considered by the learned Single Judge who came to the conclusion that the petitioner was not diligent in complying with the terms and conditions contained in the letter of intent and the sale agreement and despite the orders cancelling the allotment on three earlier occasions he did not start the industry and therefore he could not be heard to say that the Corporation had failed to comply with the provisions of the public Premises Act. The learned Single Judge also found that after cancelling the order of allotment the shed had been allotted to the 2nd respondent who was running the industry there. As regards the action of the Corporation in forfeiting the sale consideration amount paid by the petitioner, the learned Single Judge held that Clause 8 of the sale agreement which enables the Corporation to forfeit the amount was opposed to public policy and being unconscionable could not be given effect to. He placed reliance on the judgments of the Apex Court in central Inland Water Transport Corporation Limited v Brojo Nath ganguly and Delhi Transport Corporation v Delhi Transport corporation Mazdoor Congress, in this regard and directed the corporation to refund the forfeited amount. Since the petitioner had remained in possession of the shed, the Corporation was allowed to deduct the rent for the period the petitioner remained in its occupation. The writ petition was dismissed with a direction to the Corporation to refund the amount after deducting the rent for use and occupation of the shed. It is against this order of the learned Single Judge that the corporation has filed the present writ appeal.