KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION LTD.versusKUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.

                  [2023] 12 S.C.R. 775 : 2023 INSC 871



                             CASE DETAILS

     KARNATAKA STATE ELECTRONICS DEVELOPMENT
                 CORPORATION LTD.
                                      v.
KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
                     (Civil Appeal No. 8073 of 2022)
                           OCTOBER 05, 2023
   [VIKRAM NATH AND AHSANUDDIN AMANULLAH, JJ.]
                              HEADNOTES
      Issue for consideration: Matter pertains to the demand raised by the
State Undertaking from the allottee towards the charges for conversion of
nature of use from IT Sector to Hospitality Sector.
      Land laws – Conversion of nature of use – Payment of conversion
charges – Allotment of plot by State undertaking to the respondent-
allottee for setting up Information Technology-IT industry on lease cum
sale basis, but the allottee later sought conversion of nature of use from
IT Sector to Hospitality Sector – Permission of change of use granted
on payment of charges for change of activity, however a year later an
audit objection raised that permission of change of use was granted
at a much lower rate – Demand raised by the Undertaking towards
conversion of usage charges – Allottee did not pay the same and filed writ
petition seeking execution of sale deed by the Undertaking – Allowed by
the Single Judge of the High Court which was upheld by the Division
Bench – Correctness:
      Held: Any loss suffered by the appellant being a fully owned State
Undertaking would be a loss to the public exchequer – Allottee shifted its
purpose of setting up an IT related industry to a hospitality sector to set up
a hotel – If the amount for such conversion of usage is not legally recovered
from the allottee, loss being suffered by the Undertaking would not be in
public interest – Also all other similarly situated allottees have paid the
rate determined in the Board Meeting of the Undertaking – Allottee got
undue advantage merely because the clerical staff and the officer signing the

                                     775
776          SUPREME COURT REPORTS                          [2023] 12 S.C.R.


demand notice applied the lower rate – Neither of them competent to override
or deviate from the decision taken in the Board Meeting – Furthermore, the
Board Meeting took place prior to the allottee applied for change of use and
issuance of the demand notice for conversion, thus, no justification for not
adhering to the decision taken in the Board Meeting – Bona fide mistake
could always be corrected – Allotment letter as also the lease agreement
clear that the rate was tentative and the final rate was to be determined later,
which would be binding on the allottee – Once the final rate is determined
by the Board, being the prevailing rate of the Collector, would be binding on
the allottee – Division Bench failed to exercise its discretion vested under
the law in condoning the delay, thereby resulting into serious prejudice and
financial loss to the Undertaking-public entity – Thus, demand notice does
not suffer from any infirmity and allottee liable to pay the same – Judgments
passed by the Division Bench and the Single Judge set aside – Constitution
of India – Art. 136. [Para 22, 21, 24, 25, 28]

       LIST OF CITATIONS AND OTHER REFERENCES

      Karnataka Industrial Development Board Anr. vs. M/s Prakash Dal
Mill and Ors. (2011) 6 SCC 714 : [2011] 5 SCR 26 – distinguished.
      M. Nagabhushana v. State of Karnataka (2011) 3 SCC 408 : [2011] 2
SCR 435; Dnyandeo Sabaji Naik v. Pradnya Prakash Khadekar (2017) 5
SCC 496 : [2017] 2 SCR 95; Vinod Kapoor v. State of Goa (2012) 12 SCC
378 : [2012] 8 SCR 1089; Sandhya Educational Society v. Union of India
(2014) 7 SCC 701; Union of India vs. West Coast Paper Mill (2004) 3 SCC
458 : [2004] 2 SCR 642 – held not applicable.
     Neeraj Jhanji v. Commr. of Customs & Central Excise (2015) 12 SCC
695; Haryana State Coop L&C Federation Ltd. v. Unique Coop L&C Coop
Society Ltd. (2018) 14 SCC 248 – referred to.
       OTHER CASE DETAILS INCLUDING IMPUGNED
              ORDER AND APPEARANCES

      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8073 of 2022.
    From the Judgment and Order dated 28.07.2017 of the High Court of
Karnataka at Bengaluru in WA No.175 of 2017.
    KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION                   777
    LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.


       Appearances:
    Ms. Aakriti Priya, Balaji Srinivasan, Devamshu Behl, Rohan Dewan,
Advs. for the Appellant.
     Gautam S. Bharadwaj, Ashwin Kumar D. S., Ms. Anagha Sharma,
Ms. Surbhi Mehta, Advs. for the Respondent.

        JUDGMENT / ORDER OF THE SUPREME COURT

                                      JUDGMENT
       VIKRAM NATH, J.
     1. This appeal is directed against the judgment and order dated
28.07.2017 passed by the Division Bench of the High Court of Karnataka
in Writ Appeal No. 175 of 2017 titled “Karnataka State Electronics
Development Corporation Ltd. Vs. Kumaon Entertainment and
Hospitalities Private Limited”, whereby the appeal of the appellant
was dismissed, thereby confirming the judgment of the learned Single
Judge dated 03.09.2015 and 14.11.2016, allowing the Writ Petition
No.1605 of 2015 of the respondent and dismissing the review petition
respectively.
      2. The State of Karnataka came up with a policy decision for the
purposes of promoting and developing industries related to Electronic &
Information Technology within the State. It established Karnataka State
Electronic Development Corporation Ltd.1 as a Non-Profit Organisation
for the aforesaid purpose across the State including the Electronic City in
Bangalore. Acquisition of land in large amount was made in Bangalore city
for setting up an area known as Electronic City.
       3. The appellant, vide its 133rd Board Resolution came up with a new
selection process for allotment of land in the Electronic City. Vide allotment
letter dated 25.01.2006, the appellant allotted plot admeasuring 0.25 acres to
the respondent for development of such land to be used in industry relating
to Information Technology & Electronic Development Sector (Animation
& Multi Media Services). The tentative price fixed of the allotted land was


1     In short known as “appellant”
778          SUPREME COURT REPORTS                          [2023] 12 S.C.R.


Rs. 1 Crore per acre. The respondent was required to commence the project
at the earliest.
      4. The allotment was made on lease cum sale basis for a period of
ten years. It was further stipulated that upon completion of ten years or
on completion of the project, the lease would convert to a sale, subject to
fulfilment of all the terms & conditions of allotment and payment of price
of land in full as may be finally determined by the appellant. It was also
clearly mentioned in the allotment letter that the price of land indicated
was only tentative (Rs. 1 Crore per acre). The final price of the allotted
land would be communicated later, which would be dependent upon other
factors being finalized in the meantime. Possession of the land was given
to the respondent on 09.05.2006.
      5. A lease cum sale agreement was executed between the appellant and
the respondent on 30.10.2006. The terms of the lease cum sale agreement
would be dealt in detail at a later stage.
       6. The respondent, which was originally a partnership firm, applied
for it being converted into a private limited company in 2007. The appellant
issued no objection certificate in that regard on 18.05.2007.
     7. In the 141st Board meeting of the appellant dated 19.07.2007, the
Board resolved that the price for allotment would be as per the guidance
value fixed by the Government, which was Rs. 800/- per sq. ft. It would
work out to Rs. 3.2 Crores per acre. The said value was duly adopted based
upon the guidance value determined by the Government.
      8. On 23.07.2007, the respondent applied to the appellant for conversion
of nature of use from Information Technology sector to Hospitality sector.
As per the terms of allotment and the lease agreement, change in nature of
use could be granted, subject to the payment of additional charges at the
prevailing rate. On 24.09.2007, communication was issued by the appellant
granting permission for the change in the nature of activity, subject to
payment of Rs. 20 lacs per acre. The respondent thereafter paid an amount of
Rs. 5 lacs as the allotted land was only one quarter of an acre. On 15.10.2007,
the respondent also applied for approval of its plan for construction.
     9. On 06.11.2008, an audit objection was raised stating that the
prevailing rate of plot at the time of change of use was Rs. 3.2 Crores per
 KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION                       779
 LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
                     [VIKRAM NATH, J.]

acre, whereas permission of change of use was granted at a much lower rate.
The appellant had, therefore, suffered a loss of Rs. 46.25 lacs. Further, as
the rate of Rs. 3.2 Crores per acre was applicable for residential purposes,
but this being used for commercial purpose, the rate would be higher by 40
per cent and, therefore, the loss would be additional Rs. 32 lacs.
     10. On 31.10.2011, the respondent requested the appellant for
execution of the sale deed. Thereafter he also gave a show cause
notice on 05.06.2012 for execution of the sale deed. The appellant
sent a reply in response to the notice on 25.07.2012, calling upon the
respondent to pay Rs. 83.25 lacs for execution of the sale deed in view
of the prevailing rate being Rs. 3.2 Crores per acre for residential
purposes and for commercial use would be Rs.4.48 Crores being
enhanced by 40%.
     11. The respondent challenged the reply dated 25.07.2012 by way
of Writ Petition No. 10338 of 2013. The said petition was disposed of
by order dated 14.08.2014 with a direction to the respondent to submit a
representation and a further direction to the appellant to decide the said
representation within two months.
      12. The representation submitted by the respondent was rejected by
the appellant. The respondent thereafter preferred Writ Petition No. 1605 of
2015, praying for a direction to the appellant to execute the sale deed in their
favour, as according to them, they had fulfilled all the formalities. Before
the High Court, the respondent also filed a communication which took place
between the appellant and the audit department, wherein the appellant sent
a response to the audit objection justifying that the prevailing rate was Rs.
1 Crore per acre and not Rs. 3.2 Crore per acre.
      13. The learned Single Judge, vide judgment dated 03.09.2015, relying
on the said audit objection and its response by the appellant, allowed the Writ
Petition No.1605 of 2015. Appropriate directions were issued to appellant to
execute the sale deed. Subsequent thereto the appellant filed an intra Court
appeal and also filed a review. Further, after dismissal of review, appellant
filed another intra Court appeal and also filed a review before the Division
Bench. Finally, came the judgement of the Division Bench dated 28.07.2017.
Same is impugned in this appeal. The fact remains that the Writ Petition
filed by the respondent was allowed by the Single Judge and the intra court
780             SUPREME COURT REPORTS                       [2023] 12 S.C.R.


appeal filed by the appellant was dismissed by the Division Bench. This
gave rise to the filing of the present appeal.
     14. We have heard learned counsel for the parties and perused the
material on record.
      15. The submissions advanced by learned counsel for the appellant
are summarized as hereunder:
       (a) The Division Bench committed an error in dismissing the appeal
           primarily on the ground of delay of 459 days, which was not
           satisfactorily explained. The Division Bench failed to take into
           consideration the time spent by the appellant in taking recourse
           to other legal measures permissible under the law before a valid
           forum. The appellant was entitled to benefit of section 5 of the
           Limitation Act, 19632. Reliance has been placed on the judgment
           of this Court in the case of Union of India vs. West Coast Paper
           Mill3.
       (b) The Single Judge and the Division Bench erred in relying
           upon the communication or the correspondence with respect
           to the objections raised in the audit report merely because the
           appellant was trying to justify the demand of Rs. 5 Lakhs, the
           said justification being on a wrong premise, cannot deprive the
           appellant, which is a Public Sector Undertaking, from recovering
           the valid dues payable by the respondent which is a commercial
           entity. The respondent cannot take undue advantage of the internal
           communication. The same was not supported by the decision
           taken in the Board meeting which alone would be binding on the
           appellant.
       (c) It was very clearly mentioned in the agreement of sale cum
           lease that the rate of Rs.1 Crore was tentative rate. It was further
           stipulated in clear terms that at the time of final execution of sale
           cum lease deed, the prevailing rate would be charged as would
           be finalised in due course of time depending upon other attending


2     The Limitation Act
3     (2004) 3 SCC 458
 KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION                    781
 LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
                     [VIKRAM NATH, J.]

        charges which may be liable to be paid by the appellant. Under the
        decision of the 141st Board meeting, the prevailing rate in 2007
        at the time when change in nature of use was sought was Rs.3.2
        Crores per acre and further addition of 40% was liable to be paid
        for the change in nature as the use was for commercial purposes.
    (d) The Single Judge and the Division Bench failed to appreciate that
        all other entities, list of which was provided, had been charged
        at the final rate determined as per the 141st Board resolution. In
        case the respondent is allowed to pay at the tentative rate only,
        all other similarly placed entities who have paid at the final rate
        would start claiming refund from the appellant causing immense
        loss of public revenue.
    (e) The communication based on ignorance of a Board decision,
        demanding only Rs. 5 lakhs could not be said to be the decision of
        the appellant. It was a mistake committed by the staff apparently
        because the Board resolution had been passed about two months
        earlier. It may not have come to the knowledge of the staff dealing
        with the request made by the respondent for execution of sale-
        cum-lease deed after change of nature of the use.
    (f) The Single Judge and the Division Bench of the High Court
        fell in error in not appreciating that any loss to the appellant
        would amount to loss to the public exchequer. The appellant is a
        Public Sector Undertaking working under the aegis of the State
        of Karnataka. It is a non-profit organisation, established for the
        growth and promotion of Information Technology and Electronics
        sector in the State of Karnataka. It had been established to help
        the IT industries to flourish in the State of Karnataka. Hundred
        per cent shares of the appellant company are held by the State of
        Karnataka.
    (g) The impugned order passed by the Division Bench deserves to
        be set aside, the appeal deserves to be allowed and as a result the
        writ petition preferred by the respondent is liable to be dismissed.
     16. The submissions advanced by the learned counsel for the
respondent are briefly summarised as under:
782            SUPREME COURT REPORTS                     [2023] 12 S.C.R.


      (a) The price of land reflected in the Letter of Allotment could be
          done only on two counts namely towards development work or
          finalization of court of awards. The respondent has already paid
          an additional amount of Rs.3,75,000/- towards land development
          cost for which a separate demand had been raised as such no
          further demand could be raised on the basis of revision of prices.
          Any change in the price reflected in the Letter of Allotment ought
          to have been done at the earliest in view of the expressions used
          “as soon as it may be” in clause 13 (b) of the Lease cum Sale
          Agreement dated 30.10.2006. Reliance has been placed upon
          a judgment of this Court in the case of Karnataka Industrial
          Development Board Anr. vs. M/s Prakash Dal Mill and Ors. 4.
      (b) The respondent has already paid the demand raised vide letter
          dated 24.09.2007 for an amount of Rs.5 Lakhs with respect to the
          charges for change in activity. After much delay further demand
          of more than Rs.83 Lakhs has been made based on some audit
          objection. The same has rightly been held to be illegal by the
          Single Judge as also the Division Bench of the High Court.
      (c) The demand raised on the basis of the rates determined in the
          141st Board meeting of the appellant was not applicable to the
          respondent inasmuch as the said fixation was for fresh allotment
          of stray plots.
      (d) The appellant had themselves admitted in response to the audit
          objections that the prevailing rate was Rs.1 Crore per acre and
          not Rs.3.2 Crores per acre and, therefore, they cannot keep on
          changing their stand from time to time in order to extract more
          money from the respondent who has always been compliant to
          their previous demands.
      (e) It was only when the respondent repeatedly requested the appellant
          to execute the final lease cum sale deed and was compelled to
          issue a legal notice that an additional demand of Rs.83 Lakhs was
          raised vide communication dated 25.07.2012. The said conduct


4     (2011) 6 SCC 714
 KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION                       783
 LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
                     [VIKRAM NATH, J.]

          of the appellant was wholly unjustified and has been rightly
          disapproved by the High Court. The repeated fi ling of reviews
          and appeals by the appellant also shows their malicious conduct
          in somehow or the other stalling the execution of the lease cum
          sale deed and to somehow or the other extract unwarranted
          amount from the respondent which was otherwise not payable.
          Reliance was placed upon the following four judgments:
          • M. Nagabhushana v. State of Karnataka5, paras 12, 13,
            18 & 22;
          • Dnyandeo Sabaji Naik v. Pradnya Prakash Khadekar6
            – para 14;
          • Vinod Kapoor v. State of Goa7, paras 11to 13;
          • Sandhya Educational Society v. Union of India 8, paras
            13, 16 to 18.
     (f) Benefit of the Limitation Act was not admissible to the appellant
         in as much as the entire exercise and the time spent in filing
         reviews and appeals repeatedly was in itself an abuse of process
         of law. Reliance was placed upon the following two judgments:
          • Neeraj Jhanji v. Commr. Of Customs & Central Excise 9,
            paras 2-3;
          • Haryana State Coop L&C Federation Ltd. v. Unique
            Coop L&C Coop Society Ltd.10, at paras 11-15.
    The appeal lacks merit and is liable to be dismissed based on the
above submissions.
     17. Before proceeding to analyze the arguments advanced by the
learned counsel for the parties, at the outset, it would be relevant to refer to



5    (2011) 3 SCC 408
6    (2017) 5 SCC 496
7    (2012) 12 SCC 378
8    (2014) 7 SCC 701
9    (2015) 12 SCC 695
10   (2018) 14 SCC 248
784           SUPREME COURT REPORTS                         [2023] 12 S.C.R.


the terms of the allotment letter, terms of the agreement between the parties
as also the resolutions passed from time to time.
      (a) A copy of letter of intent/allotment dated 25.01.2006 is filed as
          Annexure – P1. According to it, the respondent which was earlier
          known as “M/s Kumaon Associates & Technology”, at the time
          of allotment, was allotted 0.25 acres of land in Plot No.56 within
          Survey No.66 of Doddathougur Village at Electronic City for
          setting up of IT related service activities.
      (b) Paragraph 1 of the said allotment letter provided that the lease
          shall be converted into a sale subject to fulfilment of all terms
          and conditions of allotment and payment of price of land in full
          as finally fixed, subject to adjustment of amount already paid
          towards premium and rent.
      (c) Paragraph 2 mentions that the price of land would be determined
          by the appellant and intimated in due course to the respondent. It
          was only for the purposes of allotment that the tentative price of
          the land was fixed at Rs.1 Crore per acre.
      (d) Paragraph 9 of the allotment letter provided that the appellant
          reserves its rights to increase the tentative price of land indicated
          in the said letter after completion of all development works and
          finalization of court awards, if any.
      (e) Paragraphs 1, 2 and 9 of the allotment letter are reproduced
          hereunder:
           “1. The allotment of land is on lease cum sale basis for a period
           of 10 year. At the end of 10 years or completion of the project
           for which land is allotted whichever is early, the lease shall be
           converted into a sale subject to fulfillment of all the terms and
           conditions of allotment and payment of price of land in full
           as finally fixed subject to adjustment of amounts paid by you
           towards premium and rents. The conversion of lease into a sale
           shall also be subject to the utilization of minimum 50% of the
           extent handed over as determined by KEONICS on the merits
           of each case. The decision of KEONICS in this behalf is final
           and binding on you.
KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION                     785
LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
                    [VIKRAM NATH, J.]

        2. The price of the land shall be determined by KEONICS
        and intimated to the applicant in due course. However, for the
        purposes of this allotment the tentative price of the land per acre
        has been fixed at Rs.1 Crore per acre.
        …….           …….. ……..
        9. KEONICS reserves its right to increase the tentative price of
        the land indicated in this letter of intent after completion of all
        development works and finalization of Court Awards, if any.”
   (f) The Lease cum Sale Agreement (Annexure -P2) dated 30.10.2006
       executed between the parties also contains similar clauses which
       are briefly referred to hereunder.
   (g) Paragraph 6 of the said agreement states that the parties have
       agreed to the price of land being tentatively fixed at Rs.25 Lakhs.
       The said paragraph is reproduced hereunder:
        “6. And whereas the LESSOR and the LESSEE having agreed
        that the price of the land tentatively to be Rs. 25,00,000/- (Rupees
        Twenty Five Lakhs Only) and the LESSOR having received
        Rs.25,00,000/- (Rupees Twenty Five Lakhs Only) from the
        Lessee towards the final consideration, the receipt of which the
        LESSOR hereby acknowledges.”
   (h) Under the terms and conditions of the agreement, clause (3) lays
       down several conditions. Relevant for our purposes are clauses
       3r(i) and (ii). Clause r(i) provides that lessee (respondent) would
       not change the constitution status of its firm/company without
       previous written consent of the lessor and clause r(ii) thereof
       provides that the lessee (respondent) would not change the name/
       product as mentioned in the application again without the previous
       written consent of the lessor (appellant). For such change the
       lessee would have to pay prevailing rate of the plot. The said two
       clauses are reproduced hereunder:
        “r(i) The lessee shall not change the constitution/status of its firm/
        company (proprietary or partnership (registered or un-registered)
        or private limited company or unlimited Company) without
786          SUPREME COURT REPORTS                           [2023] 12 S.C.R.


           the previous written consent of the lessor or any other officer
           authorized by the lessor and such consent shall be granted by the
           lessor subject to the condition that the original applicant/ partners/
           promoters/Directors/shareholders should continue to hold a
           minimum 51% of the interest/shares in the newly constituted
           firm/company. And in the event of the lessee’s death, the person
           to whom the title shall be transferred as heir or otherwise shall
           cause notice thereof to be given to the lessor within three months
           from such death.
           ii) The lessee shall not change the name/product (as mentioned
           in the application) without the previous written consent of the
           lessor or any officer authorized by the lessor and such consent
           shall be granted by the lessor subject to the condition that the
           lessee has to pay prevailing rate of the plot.”
      (i) The next relevant clause is clause 13(b) which provides that the
          lessor (appellant) would fix the price as soon as it is convenient
          and the same would be communicated to the lessee so that the
          sale could be affected. It further records that the decision of the
          lessor would be final and binding on the lessee.
      (j) Clause 13(c) provides that the allotment would be for a period of
          ten years and at the expiry of the ten years or completion of the
          project for which land was allotted whichever is earlier, the lease
          would be converted into a sale subject to fulfillment of the terms
          and conditions of allotment and payment of price of land in full
          as finally fixed. It further records that the decision of the lessor
          in the said behalf would be final and binding. Clauses 13(b) and
          13(c) are reproduced hereunder:
           “13(b). As soon as it may be convenient the LESSOR shall fix
           the price of the demised premises in the allotment letter and at
           which it will be sold to the LESSEE and communicate it to the
           LESSEE and the decision of the LESSOR in this regard will be
           final and binding on the LESSEE. The LESSEE should pay the
           balance of the value of the property, if any after adjusting the
           premium and the total amount of the rent paid by the LESSEE
           and earnest money deposit within one month from the date of
 KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION                        787
 LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
                     [VIKRAM NATH, J.]

           receipt of communication from LESSOR. On the other hand, if
           any sum is determined as payable by the LESSOR to the LESSEE
           after the adjustment as aforesaid, such sum shall be refunded to
           the LESSEE before the date of execution of the sale deed.
           (c) The allotment of land is on lease cum sale basis for a period
           of ten year. At the end of ten years or completion of the project
           for which land is allotted whichever is early, the lease shall be
           converted into a sale subject to fulfillment of all the terms and
           conditions of allotment and payment of price of land in full
           as finally fixed subject to adjustment of amounts paid by you
           towards premium and rents. The conversion of lease into a sale
           shall be subject to the utilization of minimum 50% of the extent
           handed over as determined by LESSOR on merits of each case.
           The decision of LESSOR in this behalf is final and binding on
           you.”
     18. The request of the respondent for change of name and status
was permitted by issuing a No Objection Certificate on 18.05.2007 from
Partnership to Private Limited Company. The request for change of activity
from IT sector to Hospitality sector was permitted vide communication dated
24.09.2007 subject to payment of charges for change of activity i.e.Rs.5
lakhs at that time.
      19. The Government Audit Party, while auditing the records of the
appellant, raised an objection at Audit Enquiry No.27 vide communication
dated 06.11.2008 that the appellant was suffering a loss of at least Rs.78.25
lakhs in as much as the change in activity from IT related sector to hospitality
sector would amount to a fresh transaction and, therefore, the rate prevailing
at the time of seeking change in activity should have been applied treating it
to be a fresh transfer. The objection also noted that the land was originally
allotted for promoting Information Technology and related industry in the
Electronic City but the allottee had completely changed usage of the said
land by wanting to set up a hotel which fell in the hospitality sector. The
objection of the Audit Party is reproduced hereunder:
     “6. The allotment of land in January 2006 was influenced by the
     objective of setting up of IT related industry. However, in contravention
     the Allottee proposed (June/July 2007) to construct the Hotel.
788           SUPREME COURT REPORTS                           [2023] 12 S.C.R.


      Therefore, the consent should have been accorded by charging the
      prevailing rate of plot (Rs.3.2 Crores per acre) in terms of clause 3(4)
      (ii) of the Land cum Sale Agreement. Failure to do so, that caused loss
      to the Company to extent of Rs.46.25 lakhs. Further, the rate of Rs.3.20
      Crore per acre was applicable to residential purpose and the rate has
      to be increased by 40 percent for commercial purpose. Considering
      this loss would further increase by Rs.32 lakhs.”
      20. It is true that initially the appellant tried to justify the demand of
change in activity of Rs.5 lakhs calculated at the rate being Rs.1 Crore per
acre but later on it realized that the audit objection was correct and, therefore,
the appellant was entitled to demand the revised final rate as determined by
the 141st Board meeting. It would be relevant to reproduce the Resolution
of Board of Directors passed in its 141st meeting:
      “EXTRACT OF THE RESOLUTION PASSED AT THE 141 ST
      MEETING OF THE BOARD OF DIRECTORS OF M/S. KARNATAKA
      STATE ELECTRONICS DEVELOPMENT CORPORATION
      LIMITED HELD ON THURSDAY, THE 19TH DAY OF JULY, 2007
      AT 03.00 PM AT THE REGISTERED OFFICE, 29/1, RACE COURSE
      ROAD, BANGALORE – 560 001
      ADDITIONAL SUBJECT:
      Additional Subject No.2:- Fixation of Land Cost for stray plots in
      Electronics City, Bangalore.
      Identification and availability of some stray sites due to
      (a) Resurveying and fixation of boundaries to various allotees,
      (b) Reclaiming of some plots due to court decision.
      (c) Result of lifting of green belt in the present CDP plan by BDA was
          noted by the Board.
      The Board further noted about the huge demand for land by the
      industries to set up IT Parks and IT related activities in Electronics
      City, and fixation of guidance value by the Government in Electronics
      City at Rs.800/- per sq. ft., which works out to around Rs.3.2 Crores
      per acre.
 KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION                       789
 LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
                     [VIKRAM NATH, J.]

     The Directors suggested to adopt the guidance value of Rs.3.2 Crores
     per acre fixed by the Government, which will enable the Corporation to
     maximize its returns, hence, to fix, the price of Rs.3.2 Crores per acre.
     Thereafter the Board resolved to approve for adopting the guidance
     value of Rs.3.2 Crores fixed by the Government as allotment rate for
     the stray and other sites available in the Electronics city. And further
     authorized the Managing Director for taking necessary actions in this
     regard.
     For KARNATAKA STATE ELECTRONICS DEVELOPMENT
     CORPORATION LIMITED.”
      21. There is no denying the fact that the appellant is a fully owned
Undertaking/ Corporation of the State of Karnataka. Any loss suffered by it
would be a loss to the Public Exchequer. The respondent, on the other hand,
has shifted its purpose of setting up an IT related industry to a Hospitality
sector to set up a hotel. If the amount for such conversion of usage is not
legally recovered from the respondent, as a result, loss being suffered by
the appellant, would not be in public interest. It is also not disputed that all
other similarly situate allottees have paid at the rate determined in the 141 st
Board Meeting of the appellant.
      22. The respondent seems to be getting undue advantage merely
because the clerical staff and the officer signing the demand notice for
conversion charges applied the tentative rate of Rs. 1 Crore per acre instead
of the prevailing rate of Rs.3.2 Crores per acre and in addition, additional
40 percent for use as commercial as the rate of Rs.3.2 Crores per acre being
that for residential purposes. Neither the clerical staff nor an officer of the
appellant would be competent to override or deviate from the decision of
the Board of Directors taken in the 141st Board Meeting. The 141st Board
Meeting has taken place prior to the respondent applying for change of
use and issuing of the demand notice for conversion, there could be no
justification for not adhering to the decision taken in the 141st Board Meeting.
A bona fide mistake could always be corrected.
      23. The arguments advanced by the respondent and strongly relied
upon by the learned Single Judge as also the Division Bench regarding
the stand taken by the appellant in filing its objections to the audit report
790          SUPREME COURT REPORTS                         [2023] 12 S.C.R.


regarding the financial loss, also cannot be of any help to the respondent.
The said objections being contrary to the 141st Board Meeting decision,
would again be a mistake at the hands of the clerical staff and some officers
of the appellant Corporation. The audit objection is based upon correct
appreciation of the decisions taken in the Board Meeting, in particular,
141st Board Meeting as also based upon the terms and conditions laid down
in the Letter of Allotment and the Lease Agreement. We have no reason
to find any fault with the audit objections.
      24. The relevant clauses of the allotment letter as also the lease
agreement have already been reproduced in the earlier part of this order.
They are very clear that the rate of Rs.1 Crore per acre was tentative rate
and the final rate was to be determined later on which would be binding
on the lessee i.e. the respondent. The respondent cannot, in any manner,
go against the terms and conditions given under the Letter of Allotment as
also the Lease Agreement. Once the respondent is bound by the terms and
conditions, the final rate determined by the Board in its 141 st meeting, being
the prevailing rate of the Collector, would be binding on the respondent.
      25. It is true that the appellant had filed repeated review applications
both before the learned Single Judge as also the Division Bench, which
had resulted into delay in filing the appeal before the Division Bench.
The Division Bench ought not to have taken into consideration the delay
of 459 days to be without any satisfactory explanation in dismissing the
appeal of the appellant. As a matter of fact, the Division Bench failed
to exercise its discretion vested under the law in condoning the delay
in order to advance justice inter se parties thereby resulting into serious
prejudice and financial loss to the appellant Corporation which is a public
entity. Four judgments relied upon by the respondent regarding filing of
review petitions have no application on facts to the present case. In the
case of M.Naghabhushana (supra), the party had reagitated the issue
before the High Court after having lost upto this Court. The principle
of res judicata was applied. The case of Dnyandeo Sabaji Naik (supra)
was regarding filing of frivolous and groundless filing of applications/
petitions, which is not the case in hand, as we have already held that the
orders passed by the Single Judge and the Division Bench are not tenable
in law. The case of Vinod Kapoor (supra) related to filing of a second
 KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION                    791
 LTD. v. KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
                     [VIKRAM NATH, J.]

S.L.P. after withdrawal of the first without liberty to file a fresh one. The
case of Sandhya Educational Society (supra) also has no application as
it related to maintainability of the S.L.P. only against the order passed in
the Review by the High Court, without challenging the main order. The
other two judgments relied upon by the respondent regarding applicability
of Section 14 of the Limitation Act also are of no assistance as we are
not extending any benefit under Section 14 of the Limitation Act to the
appellant. In our considered view, the delay in filing the appeal before the
Division Bench had been satisfactorily explained and as such it ought to
have been condoned under Section 5 of the Limitation Act.
      26. Another argument advanced on behalf of the respondent that the
final rate ought to have been determined at the earliest i.e. soon after the
Letter of Allotment and there being sufficient delay in determining the
final rate, the respondent should be allowed to get the sale deed executed
at the tentative rate. Reference has been made to the phrase ‘as soon as
it may be’ in Clause 13(b). Further reliance has been placed upon the
judgment in the case of Prakash Dal Mill (supra) This argument has no
legs to stand prior to the request for execution of the sale deed, the final
rate had already been determined in the 141st Board Meeting and, therefore,
the respondent would be bound to and abide by the same. The judgment
in the case of Prakash Dal Mill (supra) is of no help to the respondent.
In the said case, for the same land the final rate was fixed belatedly. In
the present case, the respondent itself had applied for change of use to
hospitality on 23.07.2007 whereas in the Board meeting of 19.07.2007
the final rates applicable had been fixed.
      27. Another argument advanced was with respect to the rate of
Rs.3.2 Crores per acre being applicable to for a stray site available in the
Electronic City being not applicable to the respondent is also without any
merit. Once the respondent had made a request for change of use of the
allotted plot from an IT sector industry to a Hospitality sector, it would
amount to a fresh transaction and, therefore, the rate determined in the
141st Meeting would be fully applicable.
     28. For all the reasons recorded above, we find that the demand raised
by the notice dated 25.07.2012 does not suffer from any infirmity. The
respondent is liable to pay the demand as per the said notice. Accordingly,
792            SUPREME COURT REPORTS                    [2023] 12 S.C.R.


the appeal is allowed. The impugned judgments passed by the Division
Bench and the Single Judge are set aside and the writ petition filed by the
respondent stands dismissed.




Headnotes prepared by:                                       Appeal allowed.
Nidhi Jain