2016 (12) TMI 1907 - HC - Indian Laws

Developer must pay infrastructure costs including EDC despite PAPRA exemption under 2006 agreement terms

The Punjab and Haryana HC held that the petitioner was liable to pay proportionate costs towards infrastructure development works, including External ... Principles of Legitimate expectation and promissory estoppel - Levy of EDC - Scope and extent of exemptions claimed to have been granted under the Industrial Policy, 2003 - amount paid in lieu of EDC and cess - Refund sought on the premise that the petitioner has been exempted from such levies under the Industrial Policy, 2003 - requirement to obtain NDC from GMADA as a pre-condition for approval of Layout and Zoning Plans - prayer for grant of extension of time towards completion of the project on account of delays having been caused by the respondents. Whether the phrase ‘cost of infrastructure development’ as contained in para 5 (iv)(q) of the Agreement dated 11.10.2006 is synonymous to the expression ‘External Development Works’ as defined in Section 2(p) of PAPRA, 1995? - If so, whether the petitioner is exempted from payment of External Development Charges/Cost of Infrastructure Development in view of para 5(iv)(j) of the Agreement dated 11.10.2006 whereunder its project has been exempted from PAPRA, 1995? - HELD THAT:- The petitioner’s contention that there is no statutory backup to levy the cost of infrastructure development, for there is no such provision in the PAPRA, 1995, is wholly misconceived. Once the petitioner’s project is exempted from PAPRA, 1995, the affairs of the parties shall be governed by the terms and conditions of the Agreement dated 11.10.2006. Further, since the External Development Works stand included in the infrastructure development works, there can be no escape but to hold that the petitioner is liable to pay such charges as per the binding contract read with Section 5 of the PAPRA, 1995. It is clarified that since the exemption from PAPRA, 1995 granted to the petitioner was subject to its liability to pay proportionate cost towards infrastructure development works, hence, there was no exemption to it in legal parlance from the levy of ‘external development charges’ as defined in Section 2(p) read with Section 5 of PAPRA, 1995. What is the effect of para-6 of the Agreement dated 11.10.2006 on the petitioner’s claim for exemption from payment of EDC and other charges? - Whether the time prescribed for completion of the project is the essence of contract, and if so, whether it would have any adverse effect on the petitioner’s claims after the expiry of the extended period? - HELD THAT:- It is undeniable that as per para (6) of the Agreement dated 11.10.2006 if the petitioner-company was unable to comply with provisions of para 5(i), 5(ii) and 5(iii) within the stipulated period of three years commencing from 29.03.2006 (which was later on extended upto 28.03.2012, with a further renewal offer under the new policy decision dated 06.02.2015), the concessions enumerated in para 5(iv) were liable to be automatically withdrawn - Since it is viewed that the petitioner is liable to pay the proportionate costs towards infrastructure development works which include the ‘External Development Works’ within the meaning of Section 5 of PAPRA, 1995, it is not necessary to dwell upon the implications of petitioner’s failure to make an investment of ₹ 952 crore within the initially agreed and/or subsequently extended period. Since the respondents themselves are not keen to adhere to the time schedule, we hold that GMADA has no authority to assume the role of State Government or to invoke Para 6 of the Agreement to say that the petitioner has lost its right to claim concessions due to the ‘expiry’ of time period, within which the project was required to be completed. Whether the respondents are bound by the principles of ‘legitimate expectation’ and ‘promissory estoppel’ and consequently are debarred from levying EDC on the petitioner? - HELD THAT:- The State Government while granting special package of incentives on 05.05.2006, expressly informed the petitioner of its liability towards proportionate cost of infrastructure development and it was thereafter that both the parties knowing fully well the implications of such clause, entered into the Agreement dated 11.10.2006. The petitioner having agreed with open eyes to pay the proportionate cost of infrastructure development cannot turn around and invoke the principle of ‘promissory estoppel’ against the respondents as what the petitioner has been asked to pay is necessarily a component of the cost towards infrastructure development works only. So long as the respondents have not withdrawn the exemption from PAPRA, 1995 which might result into levy of other statutory charges on the petitioner, it cannot be said that the respondents have acted contrary to their promise. Similarly, the petitioner cannot be heard to say that it ‘legitimately expected’ not to pay the proportionate cost of infrastructure development works even after it agreed to share such liability while entering into agreement. We thus do not find any merit in this contention as well. Whether the action of the respondents in levying EDC/CLU/licence fee etc. is discriminatory, based upon arbitrary and irrational considerations? - HELD THAT:- The petitioner is liable to pay proportionate cost towards infrastructure development works and all the ‘External Development Works’ as defined in PAPRA, 1995 are by implication included in the infrastructure development works. The inescapable consequence would be that the impugned recovery notices served on the petitioner are fully justified. The respondents may be right to an extent in contending that the petitioner lacks the financial capability to fulfill the promise for which it entered into the Agreement or that it has consistently failed to honour the commitment towards payment of due charges. At the same time, it has to be kept in view that the petitioner has already invested more than ₹ 150 crores. If all the doors are closed for the petitioner on a hyper-technical plea that the time limit extended under the policy dated 06.02.2015 already stands expired, the drastic consequence would be that the petitioner’s project would suffer hammer blow. It serves no one’s purpose. The petitioner has also laid challenge to the acquisition of a small part of its land, by way of a miscellaneous application in the second case. Since such acquisition is a subsequent event, no views expressed on its merits and the petitioner’s application is disposed off with liberty to initiate appropriate separate proceedings in that regard, if so advised. Petition disposed off. Issues Involved:1. Exemption from External Development Charges (EDC) under the Industrial Policy, 2003.2. Legitimacy of demands for EDC, licence fee, and Change of Land Use (CLU) charges.3. Compliance with the terms of the Agreement dated 11.10.2006.4. Application of principles of legitimate expectation and promissory estoppel.5. Allegations of discrimination in levying charges.Issue-wise Detailed Analysis:1. Exemption from External Development Charges (EDC) under the Industrial Policy, 2003:The petitioner claimed exemption from EDC under the Industrial Policy, 2003. The court found that while the policy and subsequent agreements did exempt the petitioner from PAPRA, 1995, they also included a specific clause obligating the petitioner to pay the proportionate cost of infrastructure development. The court held that 'infrastructure development' includes 'external development works' and thus, the petitioner is liable to pay these charges as per the binding contract and Section 5 of PAPRA, 1995.2. Legitimacy of demands for EDC, licence fee, and Change of Land Use (CLU) charges:The court examined the demands for EDC, licence fee, and CLU charges. It concluded that the petitioner is liable to pay EDC and infrastructure development costs but exempted from CLU charges as per the Agreement dated 11.10.2006. The court directed that any payments made towards CLU charges should be adjusted against the infrastructure development costs. The court also found that the demand for the 'Social Infrastructure Fund' was without legal backing and should be adjusted similarly.3. Compliance with the terms of the Agreement dated 11.10.2006:The court noted that the petitioner failed to complete the project within the initially agreed period and the extended period. However, it rejected GMADA's argument that the time is the essence of the contract, noting that the State Government itself extended the time limit multiple times. The court directed the State Government to consider granting further extension and rescheduling the payment of instalments to enable the project's completion.4. Application of principles of legitimate expectation and promissory estoppel:The court dismissed the petitioner's arguments based on legitimate expectation and promissory estoppel. It held that the petitioner was aware of its liability to pay the proportionate cost of infrastructure development when it entered into the Agreement dated 11.10.2006. The court found no merit in the contention that the respondents acted contrary to their promise.5. Allegations of discrimination in levying charges:The court addressed the petitioner's claim of discrimination by comparing its case with those of M/s Janta Land Promoters and M/s Chandigarh Overseas Pvt. Ltd. The court found that the agreements with these companies did not include a clause for the proportionate cost of infrastructure development, unlike the petitioner's agreement. Thus, the court held that the petitioner cannot claim parity with these cases. However, it directed that the petitioner should not be liable for the 'Social Infrastructure Fund' and that any payments made towards it should be adjusted against other permissible liabilities.Conclusion:The court concluded that the petitioner is liable to pay the proportionate cost of infrastructure development, which includes EDC, as per the Agreement dated 11.10.2006. It exempted the petitioner from CLU charges and the 'Social Infrastructure Fund' and directed adjustments for any payments made towards these charges. The court also directed the State Government to consider granting further extension and rescheduling the payment of instalments to facilitate the project's completion. The writ petition was disposed of accordingly.