BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY & ORS.versusAMIT KUMAR & ORS.

                          [2019] 14 S.C.R. 1                             1


         BIHAR INDUSTRIAL AREA DEVELOPMENT                               A
                  AUTHORITY & ORS.
                                  v.
                      AMIT KUMAR & ORS.
                   (Civil Appeal No. 8219 of 2019)                       B
                        OCTOBER 22, 2019
       [DEEPAK GUPTA AND ANIRUDDHA BOSE JJ.]
       Industrial Development – Recovery of unearned increase –
Entitlement to – An allotment was made to the allottee of a land for
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industrial purposes – A lease deed was entered into between the
State of Bihar (rights were later transferred to Bihar Industrial Area
Development Authority (BIADA)) and the allottee – A committee was
constituted by the Government of Bihar to lay down the modalities
and fees for transfer of industrial estates from allottees to some
other persons – Pursuant thereto, BIADA fixed the cost of the land       D
on the basis of the circle rate applicable for further transfer – High
Court held that when the allottee of land further transferred land
to some other entity, the BIADA was only entitled to recover the
unearned increase on the basis of cost of land and development
and not on the basis of the market value of the land or the circle
                                                                         E
rate of the land – Propriety of – Held: Not proper – The land was
given to the original allottee at a price fixed by BIADA – When
allottee transfers and get something more for the land or the market
value as reflected in the circle rate is much more than the price at
which the land was allotted to the allottee, there is no reason why
the allottee should pocket all the unearned increase and BIADA,          F
which was the original owner of the land should be deprived of a
reasonable portion of the unearned increase from the value of the
land – Therefore, fixing the cost of land on basis of the circle rate
applicable by BIADA was legal and valid.
      Disposing of the appeal, the Court                                 G
      HELD: 1. It is standard practice throughout this country,
specially at the time when these leases were executed to set up
industrial estates wherein lands were given at very low price and

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2            SUPREME COURT REPORTS                     [2019] 14 S.C.R.


A   sometimes at subsidized rates to help in the setting up of
    industrial estates in the State. It was expected that establishment
    of these industrial estates with flourishing industries would
    generate a lot of employment and would also generate revenue
    both in the nature of direct and indirect taxes. The issue is whether
    when the allottee transfers the land for commercial reasons why
B
    should the Authority not get a reasonable portion of the unearned
    income earned by the allottee of the plot just by transferring the
    plot in question. The premium on the unearned increase is being
    charged only on the value of the land and not on the value of the
    transaction. Once an industry is set up it may have various
C   components including the value of the immovable assets, the
    value of the machinery etc. and also the value of the goodwill
    which the company has generated. On the other hand there are
    companies which are loss making units where debts and liabilities
    due to employees and sundry creditors will have to be factored
    into while calculating the value of the total assets of the unit.
D
    Those are not to be taken into consideration while assessing the
    unearned increase of the cost of the land. [Para 10] [5-F-H;
    6-A-B]
           2. The land was given to the original allottee at a price
    fixed by BIADA. When the allottee transfers and gets something
E   more for the land or the market value as reflected in the circle
    rate is much more than the price at which the land was allotted to
    the allottee, there is no reason why the allottee should pocket all
    this unearned increase and BIADA, which was the original owner
    of the land should be deprived of a reasonable portion of the
F   unearned increase from the value of the land. Therefore, this
    Court is not in agreement with the High Court that the unearned
    increase can be charged only on the basis of the BIADA value
    plus development charges and in opinion of this Court the policy
    of the BIADA fixing the cost of the land on the basis of the circle
    rate applicable is legal and valid. [Para 11] [6-C-D]
G
          CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8219
    of 2019.
          From the Judgment and Order 11.05.2015 of the High Court of
    Judicature at Patna in LPA No. 68 of 2008 in CWJC No. 9696 of 2005.
H
BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY v.                              3
                  AMIT KUMAR

      With                                                                  A
      C.A. Nos. 8220/2019, 8221/2019, 8222/2019.
      Gaurav Agrawal, Ms. Anisha Upadhyay, Rajiv Tyagi, Neeraj
Shekhar, Animesh Kumar, Sumit Kumar, Ashutosh Thakur, Ms. Ekta
Bharati, Advs. for the appearing parties.
                                                                            B
      The Judgment of the Court was delivered by
      DEEPAK GUPTA, J. (ORAL)
      1. Leave granted.
       2. The legal issue involved in these appeals is whether the
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Patna High Court was right in holding that when the allottee of land,
allotted for industrial purposes, further transferred the land to some
other entity, the Bihar Industrial Area Development Authority (BIADA)
was only entitled to recover the unearned increase on the basis of
cost of land and development charges and not on the basis of the
market value of the land or the circle rate of the land.                    D
       3. In view of the decision that we intend to take in these four
cases before us, it is not necessary to give the facts of each case in
detail. However, for the purposes of decision of these set of
appeals, we may refer to the facts in C.A. No.8222/2019 (arising out
of SLP(C) No.5251/2017). Clause 4(i) of the Lease Deed entered              E
into between the State of Bihar and M/s. Orient Beverages Ltd. to which
the land was granted on lease for a period of 99 years for a sum of
Rs.42,000/- plus rent of Rs.87.50 per year, reads as follows:
      “Clause 4(i):-
      That the lessee will not assign, mortgage, underlet or part with      F
      the possession over the land or any right or interest therein or in
      respect thereto without the previous consent of the lessor or its
      nominee.”
      4. Clause 4(ii) of the Lease Deed provided that no transfer
of lease shall take place unless specifically permitted by the State.       G
The said clause reads as follows:
      “Clause 4(ii):-
      No change in the lease, proprietorship or partnership, if it is a
      private limited or unlimited company or a registered or an
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4             SUPREME COURT REPORTS                         [2019] 14 S.C.R.


A         unregistered firm, shall be recognized without the previous
          written consent of the lessor or his nominee.”
           5. It is not disputed that the rights of the State of Bihar have
    finally been transferred to the BIADA though,in between, there may
    have been some other authorities also but that is not relevant for the
B   decision of this case.
           6. In the year 1998, the original lessee M/s. Orient Beverages
    Ltd. applied for transfer of the leasehold rights in favour of M/s.
    Bharat Coca-Cola Bottling North East Pvt. Ltd. and a sum of
    Rs.17,50,000/- was paid as premium at the time of the said transfer. It
C   appears that the transfer by Orient Beverages Ltd. in favour of Bharat
    Coca-Cola Bottling North East Pvt. Ltd. was made for a sum of Rs.2.02
    crores. Later in the year 1999, a scheme of amalgamation was entered
    into between Bharat Coca-Cola Bottling North West Pvt. Ltd., Bharat
    Coca-Cola Bottling South East Pvt. Ltd. and Bharat Coca-Cola North
    West Pvt. Ltd. (transferee of the lease) and all these three
D   amalgamated to form Hindustan Coca-Cola Bottling South West
    Pvt. Ltd. This scheme of amalgamation was approved by the Delhi High
    Court on 10.09.1999. The name of M/s. Hindustan Coca-Cola Bottling
    South West Pvt. Ltd. was changed to M/s. Hindustan Coca-Cola
    Beverages Pvt. Ltd. which is the respondent before us and the original
E   writ petitioner before the High Court. Thereafter, a communication
    was sent to the appellant(s) that there was change in the name and the
    name should be changed in the record of the appellant-Authority and
    this permission was granted on payment of some nominal fees.
          In the meantime, a Committee was constituted by the Government
F   of Bihar to lay down the modalities and fees for transfer of industrial
    estates from the allottees to some other person. The relevant
    recommendations of the Committee are as follows:
          “(a) The Lease holders should have the right to transfer or sale
          the land by paying fee if land use is not changed;
G         (b) The amount recommended was 15% of the present
          market value in case of transfer or sale;”
          7. On 18.12.2003, an office order was issued by the Appellant-
    Authority permitting change in the Constitution of the allottee after taking
    15% of the circle rate for the land at the time and other dues
H   payable. On 12.03.2004, a specific order was issued permitting
 BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY v.                                 5
          AMIT KUMAR [DEEPAK GUPTA, J.]

transfer of a land on payment of 15% of the prescribed rate. Thereafter,        A
on 10.03.2005, a letter was issued by the appellant-Authority to the original
writ petitioners that 15% of the market value of 1.75 acres of land works
out to Rs.4,25,250/-. After some correspondence, this amount was
deposited on 12.04.2007. Thereafter, it appears that a decision was
taken to assess the 15% market value on the basis of the circle
                                                                                B
rate and not merely on the rate reflected in the transaction.
Relying upon this latter decision of 15.05.2007, a fresh demand of
Rs. 45,17,318/- was raised and after adjusting the amount already
paid, balance payable was assessed as Rs.40,64,523/-. Aggrieved
against this demand, M/s. Hindustan Coca-Cola Beverages Pvt. Ltd.
filed a writ petition bearing CWJC No.5553 of 2013 before the Patna             C
High Court.
       8. We shall deal with the factual aspects of the case at a later
stage but the legal issues raised before us are whether the appellant-
Authority is entitled to recover unearned increase and if so on what
basis. As far as the entitlement to recover unearned increase in the            D
value of the transferred allotted land is concerned even the High Court
has upheld this right of the appellant- Authority. However, the High
Court has held that the calculation of this unearned increase will be
on the basis of the value at which appellant-Authority allots the land
plus development charges.
                                                                                E
       9. The contention raised by Mr. Gaurav Agrawal, appearing
for the appellant-Authority, is that there is no reason why, when the
transfers are normally made for commercial reasons, the appellant-
Authority should not get its fair share in the total unearned increase in
the value of the leased property.
                                                                                F
       10. We may note that it is standard practice throughout this
country, specially at the time when these leases were executed to
set up industrial estates wherein lands were given at very low price and
sometimes at subsidized rates to help in the setting up of industrial estates
in the State. It was expected that establishment of these industrial estates
with flourishing industries would generate a lot of employment and              G
would also generate revenue both in the nature of direct and indirect
taxes. The issue is whether when the allottee transfers the land for
commercial reasons why should the Authority not get a reasonable portion
of the unearned income earned by the allottee of the plot just by
transferring the plot in question. The premium on the unearned increase         H
6             SUPREME COURT REPORTS                          [2019] 14 S.C.R.


A   is being charged only on the value of the land and not on the value
    of the transaction. Once an industry is set up it may have various
    components including the value of the immovable assets, the value of
    the machinery etc. and also the value of the goodwill which the
    company has generated. On the other hand there are companies which
    are loss making units where debts and liabilities due to employees and
B
    sundry creditors will have to be factored into while calculating the value
    of the total assets of the unit. Those are not to be taken into consideration
    while assessing the unearned increase of the cost of the land.
           11. The land was given to the original allottee at a price fixed by
    BIADA. When the allottee transfers and gets something more for
C   the land or the market value as reflected in the circle rate is much more
    than the price at which the land was allotted to the allottee, we see no
    reason why the allottee should pocket all this unearned increase and
    BIADA, which was the original owner of the land should be deprived of
    a reasonable portion of the unearned increase from the value of the
D   land. Therefore we are not in agreement with the High Court that
    the unearned increase can be charged only on the basis of the BIADA
    value plus development charges and in our opinion the policy of the
    BIADA fixing the cost of the land on the basis of the circle rate
    applicable is legal and valid.
E          12. We shall now deal with the individual cases. As far as the
    first case i.e. Civil Appeal No.8219 of 2019 arising out of SLP(C)
    No.35887 of 2015 is concerned, we find that the Division Bench of the
    High Court of Patna vide order dated 09.03.2010 had directed that
    the arrangement made in respect of writ petitioner(s) shall not be
    disturbed. Therefore, though we decide the question of law in favour
F   of appellant, but it will not be entitled to recover any amount from the
    respondent(s).
          13. The appeal is disposed of accordingly.
           14. As far as Civil Appeal No.8220 of 2019 arising out of SLP(C)
G   No.28213 of 2016 is concerned, amalgamation took place on
    10.09.1999. The transfer date, which is the material date, is 10.09.1999
    and in our view in all cases the value of land for purposes of fixing the
    price should be the date of transfer and in this case it should have been
    10.09.1999. Having held so, in view of the fact that the original writ
    petitioner paid the amount of Rs.4,25,250/- we do not want to
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 BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY v.                                7
          AMIT KUMAR [DEEPAK GUPTA, J.]

open up the entire litigation for a small amount. The amount was               A
demanded only on 10.03.2005 and was actually paid on 12.04.2007. The
appellant shall be entitled to interest at the rate of 9% per annum on this
amount of Rs.4,25,250/- for the period 10.03.2005 to 14.04.2007.
       15. We direct that, on this amount, the interest be paid within
two months. On payment of the interest, the formal lease deed be               B
executed by the appellant-Authority in favour of the original writ
petitioner(s) within two months of the deposit of interest. The appeal is
disposed of accordingly.
     16. In view of the order passed hereinabove, the CA No.8222
of 2019 arising out of SLP(C) No.5251/2017 is disposed of.                     C
        17. As far as Civil Appeal No.8221 of 2019 arising out of SLP(C)
No.31141 of 2016 is concerned, land measuring 0.50 acres was allotted
to the respondent on 07.12.2000. The allottee was M/s. Shankar Saw
Mills through its proprietor Sukhdev Paswan. It is admitted case that
the dues payable by Shankar Saw Mills were not paid for the period             D
2002 to 2007. The case of the appellant is that the payment could not
be made because of the orders passed by this Court in the case of
T.N. Godavarman vs. Union of India whereby the licence of Saw
Mills throughout the country was stayed. It is not disputed that
finally under a one time settlement scheme floated by the appellant-
Authority, the original writ petitioner(s) paid all the dues as                E
payable under the scheme on 30.07.2000. However, while paying this
amount the writ petitioner(s) also prayed for permission of transfer
of the land in favour of transferee company known as Samras
Products Pvt. Ltd in which it was claimed that the appellant was a
Director. There is no material before us to show what is the exact             F
shareholding of Sukhdev Paswan in M/s. Samras Products Pvt.
Ltd. Mr. Gaurav Agrawal, learned counsel, has submitted that as per
the scheme of the Authority if the original allottee retained 51% of
the shareholding in the company then it will not be treated to be a transfer
and there is no liability to pay any unearned increase. There are no facts
in this regard placed on record. Therefore, while setting aside the order      G
of the Patna High Court on the legal issues, we remit the matter back to
the Patna High Court where the parties may produce documents in
this regard. If the documents, as existing, at the time of the initial
incorporation of M/s. Samras Products Pvt. Ltd., indicate that Sukhdev
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8                SUPREME COURT REPORTS                   [2019] 14 S.C.R.


A   Paswan had more than 51% shareholding then obviously he is not
    liable to pay any transfer charges but if his shareholding is less than
    51%then he will pay the unearned increase as decided by us
    heareinabove. Since we have remitted the matter, the Writ Petition
    No.4325 of 2009 shall be restored to its original number so that it
    is given due seniority for decision.
B
           18. The appeal is disposed of accordingly.


    Ankit Gyan                                             Appeal disposed of.


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