Supreme Court overturns High Court decision on SEZ land dispute, emphasizes balanced approach

The Supreme Court found the High Court's approach in a case involving the inclusion of 34 acres of land in a Special Economic Zone (SEZ) and related disputes to be untenable. The Court emphasized the need for a balanced approach and highlighted conflicting stands of government ministries. The Supreme Court set aside the High Court's judgment, remitted the writ petitions for fresh consideration, and directed a resolution within six months. An interim order allowing the appellant to continue operations was maintained, with encouragement for amicable settlement between the parties.

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Issues Involved:
1. Inclusion of 34 acres of land in SEZ.
2. Compliance with SEZ Act and Rules.
3. Denotification/delineation of the 34 acres of land.
4. Validity of the lease agreement between CWC and APSEZL.
5. High Court's directive on relocation and construction of a new warehouse.
6. Dispute over underwriting future business losses.

Detailed Analysis:

1. Inclusion of 34 acres of land in SEZ:
The appellant-CWC argued that the 34 acres of land in its possession should not have been included in the SEZ areas. They contended that APSEZL suppressed the fact that the land was already under CWC's possession, which should have precluded its inclusion in the SEZ. The Ministry of Consumer Affairs, Food and Public Distribution (CAF&PD) supported this view, stating that the land was included in the SEZ by suppressing facts. The Ministry of Commerce and Industry (C&I), however, rejected the request for delineation/denotification, asserting that there was no provision in the SEZ Act and Rules for such action.

2. Compliance with SEZ Act and Rules:
APSEZL argued that CWC was required to comply with SEZ Act provisions, including obtaining necessary approvals for operating within SEZ. CWC countered that it was not required to seek such approvals as the land became part of SEZ after they had taken possession and constructed the warehouse. The Ministry of C&I maintained that compliance with SEZ regulations was mandatory, while the Ministry of CAF&PD argued that CWC had fulfilled its obligations under the original lease agreement.

3. Denotification/delineation of the 34 acres of land:
CWC's request for delineation/denotification was rejected by the Ministry of C&I, which stated there was no provision for such action. The Ministry of CAF&PD, however, cited precedents and argued that delineation/denotification was permissible and had been done in other cases. The High Court did not resolve this conflict but noted the opposing stands of the two ministries.

4. Validity of the lease agreement between CWC and APSEZL:
APSEZL contended that the lease agreement with CWC had become null and void as it was not registered within the stipulated time. CWC argued that the lease was valid as they had taken possession and made substantial investments in the warehouse. The Ministry of CAF&PD supported CWC's position, stating that the lease existed by virtue of actions taken by both parties.

5. High Court's directive on relocation and construction of a new warehouse:
The High Court directed CWC to either obtain SEZ compliance or relocate to an equivalent plot outside SEZ, with APSEZL constructing a new warehouse. CWC accepted the relocation proposal with conditions, including APSEZL underwriting future business risks. APSEZL initially agreed but later retracted from underwriting the revenue risk. The High Court upheld the first two conditions but left the third for mutual settlement or mediation, which CWC challenged.

6. Dispute over underwriting future business losses:
CWC insisted that APSEZL should underwrite future business losses as part of the relocation agreement. APSEZL retracted this commitment, leading to a dispute. The High Court did not compel APSEZL to adhere to this condition, which CWC argued was unfair as the original proposal was a composite one.

Judgment:
The Supreme Court found the High Court's approach untenable, noting that the High Court effectively forced CWC to accept a settlement without ensuring APSEZL's compliance with all conditions. The Court emphasized the need for a balanced approach, considering CWC's statutory nature and the potential financial implications. The conflicting stands of the two ministries were also highlighted, with the Court urging the Union of India to resolve such conflicts internally.

The Supreme Court set aside the High Court's judgment and remitted the writ petitions back to the Single Judge for fresh consideration, directing an expeditious resolution within six months. The interim order allowing CWC to continue its operations remained in force until further orders. The Court also encouraged both parties to seek an amicable settlement.

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