Nos.32557 of 2004 and 1278 of 2007 Shasun Chemicals & Drugs Ltd v. The Small Industries PromotionCorporation of Tamilnadu

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 20-9-2007CORAMTHE HONOURABLE MR.JUSTICE M.CHOCKALINGAMW.P.No.26737 of 2004andWPMP Nos.32557 of 2004 and 1278 of 2007Shasun Chemicals & Drugs Ltd.,No.3 Duraisamy RoadT.Nagar, Chennai 600 017,Represented by itsCompany SecretaryV.Parthasarathy.. Petitioner vs1.The Small Industries PromotionCorporation of Tamilnadu Rep. By its Chairman No.19-A, Rukmani Lakshmipathi Road Egmore, Chennai 600 008.2.S.Balakrishnan (deceased) Proprietor, Chemix No.10, A.V.Krishnaswamy Street Valasaravakkam Chennai 600 0873.B.Alamelu4.B.Srinivasan5.B.Subramaniam (RR3 to 5 substituted as the LRs of the deceased 2nd respondent as per order dt.26.10.2006 in WPMP Nos.18212 and 18213/2006).. RespondentsWrit petition filed under Article 226 of the Constitution ofIndia praying for a writ of mandamus directing the firstrespondent to grant approval and consequently permit transfer ofland of 5.01 acres at the SIPCOT Industrial Complex, Cuddalore, infavour of the petitioner without insisting upon the payment of anydifferential land cost as per their demand letter dated 1.12.2003.For Petitioner : Mr.Sathish ParasaranFor Respondents: Mr.P.S.Seetharaman for R1 https://hcservices.ecourts.gov.in/hcservices/ ORDERSeeking a writ of mandamus to direct the first respondent togrant approval and consequently permit transfer of land of 5.01acres at SIPCOT Industrial Complex, Cuddalore, in favour of thepetitioner without insisting upon the payment of any differentialland cost as per the demand of the SPICOT's letter dated1.12.2003, the petitioner has brought forth this writ petition.2.The Court heard the learned Counsel on either side andperused the materials available.3.The following facts would emerge as facts admitted:(a) The petitioner is a Public Limited Company engaged inmanufacturing and marketing the drugs and chemicals. In order toexpand its production activities, they were finding a goodlocation for plant preferably something proximate to the existingfacility at Cuddalore. The second respondent had an industrialplot with land and building, all situated in Plot No.A-1A in theSPICOT Industrial Complex at Cuddalore, next to the petitioner'sUnit. He was desirous of selling the same. Originally, the saidindustrial plot together with land and building was the propertyof one Amajin Agro Exports Ltd., which had set up its Export Unitfor manufacturing cattle feed. In view of the financial crisis,the company came to be wound up by the proceedings before thisCourt in C.P.No.249/97. The assets and liabilities including thesubject property, came under the custody of the OfficialLiquidator. Then, the property was brought for public auction.Following the advertisement, the upset price was fixed at Rs.92.50lakhs. The second respondent participated in the bid and came outsuccessful. Consequently, this Court passed an order on30.4.2002, directing the second respondent to remit the bid amountand also directed the first respondent SIPCOT to execute the leasecum sale deed in favour of the second respondent. Pursuant to theabove orders, the first respondent executed a modified leased deedon 4.12.2002, a registered one, whereby it transferred theleasehold rights of the said Amajin Agro Exports Ltd, namely theoriginal lessee, in favour of the second respondent. Thepetitioner entered into a Memorandum of Understanding with thesecond respondent even before the execution of the modified leasedeed referred to above. (b) While the matter stood thus, the petitioner sent arepresentation to the first respondent for the sale deed to beexecuted in its favour. The first respondent filed an applicationbefore the Company Court stating that a mistake has crept in thatproceedings, and hence, a suitable direction should be given forthe remittance of a sum of Rs.64.68 lakhs towards the differentialland cost, to which it was entitled to. In that proceedings, thesecond respondent has contended that it is not a regulartransaction made by the SIPCOT; but, it was an auction purchasemade, and a sale by public auction, and therefore, Clause 25 found https://hcservices.ecourts.gov.in/hcservices/ therein, cannot be given effect to, and there was no need for anypayment of any differential land cost as asked for by the SIPCOT.That application is pending. Thereafter, there was exchange ofnotices between the parties. 4.Under such circumstances, the petitioner has brought forththe instant writ petition before this Court seeking the reliefthat there should be a direction to the first respondent SIPCOT toexecute a modified lease deed in its favour since a memorandum ofunderstanding was actually entered into between the petitioner andthe second respondent in the petitioner's place, and hence, it hasgot to be executed in its favour.5.Advancing his arguments on behalf of the petitioner, thelearned Counsel would submit that in the instant case, it is notin controversy that originally, the property in question, wasactually with one Amajin Agro Exports Ltd. Once that company wenton liquidation, all the assets and liabilities including theproperty in question, vested in the custody of the OfficialLiquidator; that pursuant to the orders of the Court, they weresold in auction, and the second respondent was the highest bidder;that under the circumstances, the modified lease deed, pursuant tothe orders of the Court, was executed by the first respondent infavour of the second respondent; that even before that, there wasa memorandum of understanding entered into for the transfer ofleasehold rights by the second respondent in favour of thepetitioner, of which the first respondent had got a clearknowledge; that pursuant to the request made for executing themodified lease deed directly in favour of the petitioner, a demandwas made by the first respondent asking payment of Rs.64.68 lakhsas differential land cost, which is nothing but an illegal demand;that once the property has been sold in public auction and thepayment has also been made, now the demand made, would be nothingbut payment of consideration for the second time; that apart fromthat, it is the case of the SIPCOT as if the differential landcost has got to be obtained; that since there was a transfer ofthe leasehold right, there is no differential land cost that couldbe shown, noticed or worked out; that under the circumstances, thedemand is nothing but an illegal one; that apart from that, thematter is also pending in the hands of the the Company Court; thatthe said question has got to be decided; that it has been clearlyspoken to in Clause 1 of the modified lease agreement entered intobetween the first respondent and the second respondent; that itwould be clear that till it is decided, no question of making anypayment would arise; and that in view of the same, a direction hasgot to be given to the first respondent to execute the modifiedlease deed in favour of the petitioner.6.Contrary to the above contentions, the learned Counsel forthe first respondent would submit that it is true that pursuant tothe orders of the Court, a modified lease agreement was enteredinto between the first respondent and the second respondent on4.12.2002 wherein Clause 25 has been incorporated; that the saidClause reads that whenever there is a transfer of the leasehold https://hcservices.ecourts.gov.in/hcservices/ right, the payment of the differential land cost has got to bepaid; that in the instant case, it is not correct to state thatthe sale was made in public auction; that it is also not a leasecum sale as alleged; that it was a lease deed; that Clause 25makes it clear that the differential land cost has got to be paid;that the same is worked out at Rs.64.68 lakhs; that even as perthe Clause, either the Official Liquidator or the secondrespondent has to pay; that so long as it is not asked for, thereis no question of considering the case of the petitioner; that thepetitioner would come with the request for the transfer of theleasehold right and the execution of the modified lease deed inits favour; that once the petitioner has come with such a request,it is for the petitioner to make payment of Rs.64.68 lakhs; thatthe petitioner who wants to get the lease deed transferred fromthe second respondent, is also bound by the same agreement enteredinto between the first and the second respondents, whereby thedifferential land cost is payable; that even without makingpayment of the differential land cost, the petitioner has askedfor transfer of the leasehold right; that now, the firstrespondent has no objection for executing the modified lease deedin favour of the petitioner; but, it must be on condition ofpayment of Rs.64.68 lakhs which would represent the differentialland cost; that if a direction is issued to the first respondentto execute a modified lease deed in favour of the petitionerwithout that condition, it would be against the Clause 25 of themodified lease deed entered into between the first and the secondrespondents dated 4.12.2002; that further, it would directlyaffect the interest of the SIPCOT and cause loss; that under thecircumstances, the petitioner's request for the execution of themodified lease deed in favour of the petitioner even withoutmaking payment of the differential land cost, should not beconsidered and has got to be rejected, and hence, the writpetition has got to be dismissed.7.The Court paid its anxious consideration on the rivalsubmissions made. 8.In the instant case, it is not in controversy that theproperty in question was originally in possession of Amajin AgroExport Ltd., and when the company went on liquidation, theproperties were in the custody of the Official Liquidator. Theproperties were brought for sale in auction after due publication.The highest bidder was the second respondent. Pursuant to theorders of this Court on 30.4.2002, a modified lease deed came tobe executed by the first respondent in favour of the secondrespondent on 4.12.2002. Now, the request of the petitioner ascould be seen above, is that it has entered into an agreement withthe second respondent, and there was also a Memorandum ofUnderstanding between the petitioner and the second respondenteven before the execution of the modified lease deed dated4.12.2002, and therefore, there cannot be any impediment formaking such a modified lease deed in its favour directly by thefirst respondent. Contrarily, the first respondent comes out withthe case to say that it is not denied that the Memorandum of https://hcservices.ecourts.gov.in/hcservices/ Understanding was placed in its hand by the petitioner and thesecond respondent; but, the differential land cost which wouldamount to Rs.64.68 lakhs, must be paid. Now, at this juncture, itwould be more apt and appropriate to look into the Clauses foundin the modified lease deed, in respect of their contentions. Thepetitioner relies on Clause 1 while the first respondent relies onClause 25 of the modified lease deed entered into between theparties on 4.12.2002. Clause 1 reads thus:"1.M/s CHEMIX the Party of the Second Part agrees to paythe sum of Rs.64.68 lakhs being the differential Landcost and other dues demanded by SIPCOT, if the courtordered to pay the same to the party of the FirstPart....."Clause 25 reads as follows:"The party of the second part shall not assign, sublet,transfer or part with his interest in the allotted ploteither in whole or in part except with the prior writtenconsent of the party of first part. In the event of theparty of second part seeking approval for change inconstitution, or change in the management or control oramalgamation with any other company or transfer ofinterest to any third party either in whole or in part,party of first part shall grant approval provided theparty of second part or any person claiming under theparty of second part agrees to pay the cost determinedby party of first part and the cost determined by partof first part shall be final and binding on the party ofsecond part or any person claiming under the party ofsecond part and cannot be questioned in any court oflaw."9.A reading of the Clause 25 would indicate that wheneverthere is a transfer of interest, SIPCOT is entitled to have thedifferential land cost, which, according to the first respondent,amounts to Rs.64.68 lakhs. From the materials available, it isclear that after the execution of the modified lease deed by thefirst respondent in favour of the second respondent on 4.12.2002,a petition was filed by the first respondent before the CompanyCourt stating that a mistake has crept in; that they are entitledto have the differential land cost which is Rs.64.68 lakhs, andhence, a direction should be given to the Liquidator or the secondrespondent to make the payment. It is pertinent to point out thatthe said application was contested by the second respondentstating that the first respondent was not entitled to the paymentof the said differential land cost for the reason that it was nota sale made by the SIPCOT; but, it was a public auction conductedthrough the Official Liquidator, and under the circumstances, theClause 25 cannot be given operation. Further, it is also noticedby this Court that under Clause 1 of the said modified lease deed,the party of the second part agrees to pay the sum of Rs.64.68lakhs being the differential land cost and other dues demanded bythe SIPCOT, if the Court ordered to pay the same to the party offirst part. The emphasis has got to be laid to the words "if the https://hcservices.ecourts.gov.in/hcservices/ Court ordered to pay the same to the party of the first part", andthus, it would be quite clear that the application now pendingbefore the Company Court and also whether the SIPCOT is entitledfor the further sum of Rs.64.68 lakhs are matters yet to bedecided. Only thereafter, the demand of the SIPCOT would come toa close. It is admitted that the matter is yet pending before theCompany Court. In such circumstances, there is no question ofordering the party either the second respondent or the OfficialLiquidator or the petitioner before this Court to make payment ofRs.64.68 lakhs as differential land cost, because the saidquestion is yet to be decided by the Company Court. 10.Now, at this juncture, this Court is able to see force inthe contention put forth by the learned Counsel for the firstrespondent. As far as the differential land cost is concerned, ifthere is a direction given to the first respondent to execute amodified lease deed in favour of the petitioner, then the firstrespondent could not secure its interest in respect of the saidamount which would represent the differential land cost. Undersuch circumstances, this Court has to necessarily safeguard theinterest of the first respondent also. Hence, it would be fit andproper to order as follows:(i)The first respondent is directed to execute amodified lease deed in favour of the petitioner inrespect of the properties, within a period of eightweeks herefrom on condition of the petitioner giving abank guarantee for a sum of Rs.64.68 lakhs which,according to the SIPCOT, would represent thedifferential land cost.(ii)The bank guarantee is directed to be kept alive byrenewal if necessary, till the said question is decidedby the Company Court.(iii)The first respondent is also entitled to keep thebank guarantee in its custody till the payment of thesaid amount, if and by whom to be made. 11.Hence, this writ petition is, accordingly, ordered. Nocosts. Consequently, connected WPMPs are closed.nsv/Sd/Asst.Registrar/true copy/Sub Asst.RegistrarTo:The ChairmanThe Small Industries PromotionCorporation of TamilnaduNo.19-A, Rukmani Lakshmipathi RoadEgmore, Chennai 600 008. https://hcservices.ecourts.gov.in/hcservices/ + 1 cc to Mr. Satish Parasaran, Advocate SR No. 58746+ 1 cc to Mr. P. S. Seetha Raman, Advocate SR No. 58705JRG(CO)SR/28.9.2007WP No.26737 of 2004