TaxTMI 
TaxTMI 
1996 (7) TMI 598
X X X X Extracts X X X X
X X X X Extracts X X X X
....993. By clause 2(p)(1) of the said agreements, the petitioners covenanted with the Board to complete the civil construction work and erection of the factory within 12 months, and to commence production within 24 months, from the date of confirmatory letter of allotment. Clause 4 of the said agreements provides that, if the allot tee/lessee lessee committed breach of any of the lessee's covenants, the Board (lessor) may re-enter upon the leased premises. 3. As the petitioners did not commence the civil construction work at all and consequently did not complete the construction nor commence production before 6-2-1995 and 12-1-1995 respectively, the Board issued notices dated 16-2-1995 and 15-2-1995 to the petitioners calling upon them to show cause why action for resumption should not be taken under clause 4 of the agreement. The petitioners gave their replies dated 4-4-1995 and 30-3-1995 stating that for want of water supply and for want of financial assistances, it was not possible for them to take up the construction and sought extension by one year, to complete the construction and commence production. Thereafter, by letters dated 22/23-6-1995 (Annexures 'F' and &#....
X X X X Extracts X X X X
X X X X Extracts X X X X
....E' and 'F' in W.P.No. 2170/96 on 24-1-1996. 7. The petitioners contend that they could not commence and complete construction for reasons beyond their control; that the Board ought to have granted extension sought by them for completing construction and commencing production as the agreement provides for such extension; that the power of re-entry/resumption reserved in the agreement does not authorise the Board to forcibly dispossess the lessees from the plot, even if the termination of the lease was valid; that the Board could not have resumed the plot without recourse to law, that is either by filing a suit for adjustment possession or by initiating eviction proceedings underline Karnataka Public Premises (Eviction of Unauthorised Occupants); Act, 1974 ('Public Premises Act' for short); and that the Board was guilty of discrimination and favouritism as Board has not taken any action for cancellation in the case of several prior allottees who have also not commenced or completed construction. Petitioners also contend that the Board's action in forcibly resuming the plots being illegal, the consequential allotment and delivery of possession to fourth resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the earlier allotment of Plot No. 2 and the subsequent allotment of Plots 1A and 1B; and if at this distance of time, the allotment in its favour is again interfered with, it will be put to irreparable loss and hardship; and therefore this Court should not disturb the resumption of plots from petitioners, even if such resumption is found to be without the authority of law. 10. On the above factual background and contentions, the following questions arise for consideration : a) Whether the Board can take possession of the plots in the possession of its lessees, without having recourse to a civil suit for possession or to an eviction proceedings under the provisions of the Karnataka Public Premises (Eviction of Unauthorised Occupants) Act, 1974; b) Whether the validity of the action of the Board, in regard to termination of lease and resumption, relating to a contract can be considered in a writ proceedings; and c) Whether the delay on the part of the petitioners in approaching this Court disentitles the petitioners to any relief. Re : Point (a) : 11. The Board contends that the provisions of KIAD Act, in particular S. I4(4)(ii) empower the Boa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es in industrial areas and construct and maintain or cause to be maintained works and buildings therefore; (d) to make available buildings on lease or sale or lease-cum-sale to industrialists or persons intending to start industrial undertakings; (e) to construct buildings for the housing of the employees of industries; (f)(i) to allot to suitable persons factory sheds or such buildings or parts of building including residential tenements in the industrial areas established or developed by the Board; (ii) to modify or rescind such allotments, including the right and power to evict the allottees concerned on breach of any terms or conditions of their allotments; (g) to delegate any of its powers generally or specially to the Executive Member; (h) to enter into and perform all such contracts as it may consider necessary or expedient for the carrying out of any of its functions; and (i) to do such other things and perform such acts as it may think necessary or expedient for the proper conduct of its functions, and the carrying into effect the purposes of this Act. 11.4 Section 25 in Chapter VI of the KIAD Act providing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from lessees and the express provision for making Public Premises Act applicable to the premises leased by the Board, leads to the inescapable conclusion that termination of leases and eviction of lessees are left to be governed by contract and general law. Therefore, any act of forcible dispossession of a lessee by the Board will be an act otherwise than in accordance with law. 11.7 It is well settled that a lessor with the best of title cannot resort to forcible dispossession. Law in India does not recognise in the lessor a right to extra-judicial re-entry unless specifically provided for bylaw. Such a right cannot be inferred. It is a part of concept of 'Rule of Law' that no claim to a right to dispossess by the use of force, without recourse to a procedure in accordance with law, is recognised or countenanced in India. The lessor can dispossess or evict the lessee only by having recourse to law and by obtaining an order or decree for eviction/selectmen or in a manner known to law -- See Midnapur Zamindary Co. Ltd. v. Naresh Narayan Roy reported in AIR 1924 PC 144, cited with approval by the Supreme Court in Lallu Yeshwant Singh v. Rap Jagdish Singh reported in AIR 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce the word 'evict' in S. 14(4)(ii) only means to take possession in the manner provided in law. At all events, S. 14(4)(ii) does not apply to allottees of plots or sites. Section 14(f)(ii) empowers the Board to modify or rescind such allotments, including the right and power to evict the allottees concerned, on breach of any of the terms or conditions of their allotments. The use of the words 'such allotments' and 'allottees concerned' in S. 14(f)(ii) shows that the bower to 'evict' is in respect of allottees mentioned in sub-clause (1) of S. 14(f), that is, all plots of factory sheds or part of buildings or residential tenements and not allottees of plots. 12. The Board next contended that 'the Regulations Governing disposal of lands by KIADB, 1969' are made by the Board in exercise of its power under S. 41 of KIAD Act and the said Regulations were said before the State Legislature under S. 42 and therefore, they have statutory force. The said Regulations provide that the Board shall decide the manner of disposal of land/shed in each industrial area or part thereof, i.e., whether by lease, lease-cum-sale, sale, auction sale, auction leas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....feited to the lessor subject to the refund of amount not exceeding 84%/89% of cost of land as indicated in clause (1), only to such of the financial institutions or banks who have financed the lessee towards the cost of land and in addition, no compensation shall be payable to the lessee on account of the building or improvements built or carried out on demised premises, or claimed by the lessee on account of the building or improvements built or made, provided always that except for non-payment of rent as aforesaid, the power of re-entry hereinbefore contained shall not be exercised unless and until the lessor or the Executive Member on behalf of the lessor shall have given to the lessee or left on some part of the demised premises a notice in writing of his intention to enter and of the specific breach or breaches of covenants in respect of which, the re-entry is intended to be made and default shall have been made by the lessee in remedying such breach or breaches within 120 days after the giving or leaving of such notice. 13.2 The meaning of the word 're-entry' came up for consideration of the Supreme Court in State of U.P. v. Maharaja Dharmananda Prasad Singh, [1989....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the allottee had acquired no legal right on the basis of a proposal for allotment. That decision is of no assistance to the Board. 13.4 Applying the principles said down in Dharmananda Prasad Singh's case, [1989]1SCR176 , it has to be held that the power of re-entry and 'resumption' that is reserved by the Board in the lease-cum-sale agreement, does not authorise the Board to directly or forcibly resume possession of the leased land, on termination of the lease. It only authorises the Board to take possession of the leased land in accordance with law. In this case, that can be either by having recourse to the provisions of the Public Premises Act or by filing" a Civil Suit for possession not otherwise. Re: Point (b) : 14. Several contentions are advanced and several documents are relied by both the sides on the question whether there was any justification for the Board to terminate the lease and on the question whether the termination is wrongful. Whether the petitioners committed any breach of their covenants under the Lease-cum-Sale Agreement and whether there was any justification for failure to commence and complete construction and commence productio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tate action in other contexts have any relevance or application when the impugned action is in pursuance of contract. The only exceptions being: (i) When the contract is in exercise of statutory power; (ii) Where State is liable pursuant to promissory estoppel; (iii) Where State is at 'thereshold' of entering into contract in choosing the other party with which it wishes to deal. 14.3A In Kiabd v. Sohanlal Sisodia (W.A. No. 2416/1990 decided on 21-3-1991) a Division Bench of this Court held as follows:-- "..... We have not the slightest hesitation in holding that Section 14 of the Karnataka Industrial Areas Development Act, 1966 merely catalogues the powers which could be exercised by the Corporation created under Section 5 of the Act. Therefore, when by exercise of that power, a contract is entered into with reference to allotment under Section 14(f) (i) and (ii), the rights of the parties are governed by that contract and contract alone. The argument which found favour with the learned single Judge that by reason of these two clauses viz., (f)(i) and (ii) a Statutory right enures in favour of the allottee cannot be supported in la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hands of the State in any of its actions." Re: Point (c): 15. The facts disclose that possession of the two plots was taken on 25-7-1995 after giving notices on 16-2-1995 and 22/23-6-1995. In the notice dated 16-2-1995, the petitioners' attention was expressly drawn to the provisions of the agreement and the consequences of nonfulfilment of its obligations. Again by notice dated 22-6-1995, petitioners were notified that their leases were terminated and their plots would be resumed on 25-7-1995. The fact that on 25-7-1995 the Board took back possession of the plots is not disputed. Though the petitioners gave letters requesting for extension of time on 5-7-1995 and met the Executive Member of the Board in August 1995, they apparently did not pursue the matter thereafter. They, however, claim to have sent a letter dated 13-9-1995 stating that they were making arrangements for necessary finance for speedy construction and implementation of the Project and that they were making arrangements for water from a nearby borewell; and that they were agreeable to pay the difference in cost of the plots at the current rates prevailing and requesting the Board to inform the amount to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lief on account of delay. The following observations are relevant (at p. 1652) :-- "..... Moreover, the Writ Petition was filed by the appellant more than five months after the acceptance of the tender of 4th respondent and during this period, 4th respondent incurred considerable expenditure aggregating to about Rs. 1,25,000 in making arrangements for putting up the restaurant and the snack bars and in fact set up the snack bars and started running the same. It would now be most inequitous to set aside the contracts of fourth respondent at the instance of the appellant. The position would have been different if the appellant had filed the Writ Petition immediately after the acceptance of the tender of 4th respondent but the appellant allowed a period of over five months to elapse during which 4th respondent altered their position. We are, therefore, of the view that this is not a fit case in which we should interfere and grant relief to the appellant in the exercise of our discretion under Art. 226 of the Constitution." 15.3 Even though the action of the Board in taking possession otherwise than in accordance with law can be declared to be illegal, having regard to the ....