Full Judgment Text
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CASE NO.:
Appeal (crl.) 410 of 1997
PETITIONER:
State (Union of India)
RESPONDENT:
Ram Saran
DATE OF JUDGMENT: 04/12/2003
BENCH:
DORAISWAMY RAJU & ARIJIT PASAYAT.
@
J U D G M E N T
ARIJIT PASAYAT,J
Questioning conviction made by the Assistant Commandant of Central
Reserve Police Force (in short the ’CRPF’) made under Section 10(m) of
the Central Reserve Police Force Act, 1949 (in short the ’Act’) and
consequential sentences imposed, the respondent filed an appeal before
the Sessions Judge, Solan and Sirmaur. The Sessions Judge held that the
Assistant Commandant had no jurisdiction to record conviction and impose
sentence. The said judgment was questioned before the High Court of
Himachal Pradesh by a revision petition filed by the Union of India. The
revision was also dismissed. Both the Sessions Judge and the High Court
held that the Assistant Commandant, III Battalion, ITBP, Nahan could not
have exercised powers of Judicial Magistrate Ist Class and, therefore,
the trial and conviction of the accused-respondent were illegal. The
High Court held that combined reading of Sections 11, 12 and 13 of the
Code of Criminal Procedure, 1973 (in short the ’Code’) clearly rule out
the appointment of any person exercising powers of Judicial Magistrate,
Ist Class in the absence of conferment of powers by the High Court.
This, according to the Sessions Judge and the High Court stemmed from
the fact that there was separation of judiciary from the Executive in
1973 and thereafter the powers of appointment and conferment for
functioning as Judicial Magistrate either of First Class or Second Class
could only be done by the High Court and the Central Government or the
State Government had no power to invest any person with powers of
Judicial Magistrate of any class. Reference was also made to Section 5
of the Code and observed that the expression "in the absence of a
specific provision to the contrary" used therein did not render Section
16(2) of the Act redundant.
At this juncture, it would be necessary to take note of the
factual position.
The respondent while functioning as a Constable (Sweeper) in the
III Battalion, ITBP, Nahan did not join duty after expiry of the leave
granted to him. Though he was granted leave for the period from 9.4.1987
to 24.5.1987, he did not join after expiry of the period. There was no
intimation to the competent authority or request for extension of leave.
The respondent accepted that he had stayed beyond the period of leave,
but indicated several reasons as to why the same was necessitated.
Complaint was lodged by the concerned authorities and the Assistant
Commandant exercising powers of Judicial Magistrate, Ist Class in terms
of Section 10 (m) of the Act, issued notice in terms of Section 251 of
the Code and after trial found him guilty and sentenced him to undergo
imprisonment for three months. The said order as noted above was
questioned before the Sessions Judge by the respondent and in view of
the relief granted to him by the Sessions Judge, the matter was carried
in revision by the Union of India. But the same having been rejected,
this appeal has been filed.
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In support of the appeal, learned senior counsel for the appellant
submitted that the Sessions Judge and the High Court clearly lost sight
of Section 16(2) of the Act and Rule 36 (a), (b), (e) and (f) of the
Central Reserve Police Force Rules, 1955 (in short the ’Rules’) as well
as Sections 4 and 5 of the Code. Section 16(2) of the Act clearly
indicates that notwithstanding anything contained in the Code, the
provisions of the Act could be applied. Section 4(2) of the Code permits
action under any law other than the Indian Penal Code, 1860 (for short
the ’IPC’). Section 5 refers to absence of a specific provision to the
contrary in any special or local law. The Act was a special law which
operated in a specified field. These aspects were not considered in
their proper perspective by the Sessions Judge and the High Court.
Per contra, learned counsel for the respondent submitted that the
Sessions Judge and the High Court were justified in interfering with the
order passed by the Assistant Commandant as he had no jurisdiction to
function and his appointment by a Notification issued by the Central
Government could not have conferred on him any power to act as a
Judicial Magistrate when the sole repository of the power to so notify
is the High Court after the Code was enacted in 1973. The position may
have been different under the Code of Criminal Procedure, 1898 (in short
the ’Old Code’), but the present position is entirely different and the
Ministry of Home Affairs’ Notification dated 25.1.1978 was really of no
consequence.
The Courts below have overlooked certain essential and vital
aspects necessary to appreciate the relevant issues arising in their
proper perspective. Under Section 3(1) of the Act, CRPF is constituted
to be an ’armed force’ maintained by the Central Government, and
consequently it would be ’any other armed forces of the union’ as
envisaged in Entry 2 of List I of the VII Schedule to the Constitution
of India. Entry 93 of List I enables Parliament also to provide for
offences against laws with respect to any of the matters enumerated in
List I. Sections 9 and 10 create by enumerating what are stated to be
’more heinous offences’ and ’less heinous offences’ respectively and
many of such specially created offences for the purposes of this Act
cannot constitute or amount to be offences under the ordinary criminal
law of the land. To that extent they are new class of offences created
with punishments therefor, which are unknown to ordinary criminal law in
force. Section 16 provides for empowering Competent Authorities in the
hierarchy of the force itself with powers or duties conferred or imposed
on a police officer of any class or grade by any law for the time being
in force and by further enacting a provision with a specific "non
obstante" clause stipulates that notwithstanding anything contained in
the Code, the Central Government may invest the Commandant or Assistant
Commandant with the powers of a Magistrate of any class for the purpose
of inquiring into or trying any offence committed by a member of the
force and punishable "under this Act" or any offence committed by a
member of the force against the person or property of another member.
Consequently, what is purported to be done by these provisions are
merely to refer to the nature and extent of powers possessed by such
authorities under the other laws being made available to the authorities
designated under this Act, for discharging their duties under this Act,
without exhaustively enumerating the details of all such powers or
without re-enacting all such provisions in detail as part and parcel of
this law \026 the Act, and not to constitute them to be or empower them as
Magistrates as such for all or any of the purposes for which Courts of
ordinary criminal justice have been constituted under the Code. Section
5 of the Code sufficiently protects the authorities empowered to
function and exercise powers under the Act, from any such challenge as
are directed against them, in this case. The fallacy in the reasoning
of the Courts below lies in their superficial and cursory nature of
consideration undertaken therein, without reference to the competence
and powers of the Parliament to specifically and specially provide for
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trial and punishment of offences separately created under a special
enactment of Parliament, in a manner distinct and separate from the
method of trying other ordinary criminal offences under the general
criminal law of the country.
At the outset, it must be noted that certain infractions which are
relatable to service broadly fall within the spectrum of disciplinary
proceedings. Section 10(m) is an infraction which though normally would
have attracted departmental proceedings, keeping in view the
essentiality of force and imminent and ever alert situation in which
with high sense of morale and duty consciousness the member of this
service is expected to be demonstrate at all times, a serious view of
the same is being taken. But the CRPF, the Army, the Navy and the Air
Force are disciplined forces and even any infraction which otherwise
would not be an offence is deemed to be an offence under certain
provisions like Section 10(m) of the Act. Unauthorised absence of an
employee staying beyond the sanctioned period of leave is not an offence
in the normal course under the ordinary criminal law of the land. But as
noted above, disciplined forces with the intention of enforcing
discipline have made them punishable considering them as offences and
have prescribed various sentences. For such particular purposes the
designated officials have been conferred with magisterial powers. The
Assistant Commandant who passed the order undisputedly acted as a
Judicial Magistrate in view of the powers conferred on him under the
Act. The conferment of such power has not been distinctly questioned and
could not have been questioned in a proceeding, appeal or a revision
under the Code. As long as the specific provision in Act exists enabling
the competent Authority to pass the order under challenge, the same will
have full force and efficacy. It is well settled that creature of any
statute cannot consider the vires of a particular provision in that
statute or any other statute as well. Exclusive power for such purposes
are vested under the Constitution of India, 1950 (in short ’the
Constitution’) only on Courts exercising powers of judicial Review under
Articles 32/226 of the Constitution alone. While exercising appellate or
revisional jurisdiction under the Code it is impermissible for any Court
to decide on the vires of the provision. That is precisely what the
Sessions Judge and the High Court have done in the present case. The
vires of a provision can only be questioned in a writ proceeding before
the Constitutional Court. That being the position, neither the Sessions
Judge nor the High Court could have found fault with the exercise of
jurisdiction by the Assistant Commandant in exercising magisterial
powers. It will also be relevant to note that in List I of Seventh
Schedule to the Constitution in Union List, Entry 2 makes the position
clear that members of CRPF are part of the armed forces of the Union
Government. The punishments to be imposed under the Act for various
offences are defined by Sections 9 and 10, which have been created by
statute. As noted earlier, they are deemed offences and in the scheme of
enforcing discipline they have been treated as infractions unbecoming of
members belonging to disciplined forces like the CRPF That being the
position, the Sessions Judge and the High Court were not justified in
holding that the Assistant Commandant had no jurisdiction to deal with
the respondent in the concerned trial.
It would also be necessary to take note of Sections 10(m), 16(2)
of the Act and Sections 4 and 5 of the Code:
Act
"Section 10 (m)- Every member of the Force who
absents himself without leave, or without sufficient
cause overstays leave granted to him shall be
punishable with imprisonment for a term which may
extend to one year, or with fine which may extend to
three months’ pay, or with both".
Section 16(2)- Notwithstanding anything contained in
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the Code of Criminal Procedure, 1898 (5 of 1898) the
Central Government may invest the Commandant or an
Assistant Commandant with the powers of a Magistrate
of any class for the purpose of inquiring into or
trying any offence committed by member of the Force
and punishable under this Act, or any offence
committed by a member of the Force against the person
or property of another member:
Provided that-
(i) when the offender is on leave or absent
from duty, or
(ii) when the offence is not connected with
the offender’s duties as a member of the Force, or
(iii)when it is a petty offence, even if
connected with the offender’s duties as a member of
the Force,
the offence may, if the prescribed authority within
the limits of whose jurisdiction the offence has been
committed, so directs, be inquired into or tried by
an ordinary criminal court having jurisdiction in the
matter".
Code
Section 4: Trial of offences under the Indian Penal
Code and other laws- (1) All offences under the
Indian Penal Code (45 of 1860) shall be investigated,
inquired into, tried, and otherwise dealt with
according to the provisions hereinafter contained.
(2) All offences under any other law shall be
investigated, inquired into, tried, and otherwise
dealt with according to the same provisions, but
subject to any enactment for the time being in force
regulating the manner or place of investigating,
inquiring into, trying or otherwise dealing with such
offences.
Section 5:Saving- Nothing contained in this Code
shall, in the absence of a specific provision to the
contrary, affect any special or local law for the
time being in force, or any special jurisdiction or
power conferred, or any special form of procedure
prescribed, by any other law for the time being in
force".
Provisions of the Code would be applicable to the investigations,
inquiries into and trials of cases by criminal Courts of various
descriptions, being the parent statute, in the absence of any contrary
provision in any special statute or special provision excluding
jurisdiction or applicability of the Code. Sub-section (1) of Section 4
deals with offences under the IPC. Second limb of sub-section (2) deals
with the exclusion, reading ".........but subject to any enactment for
the time being in force regulating the manner or place of investigating,
inquiring into, trying or otherwise dealing with such offences". (See
Directorate of Enforcement v. Deepak Mahajan and Anr. (1994 (3) SCC
440). In a case involving Bombay Prevention of Gambling Act, 1887 it was
held that the Act was a special law providing special procedures for the
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manner or place of investigating or inquiring into the offences under
it, and therefore the provisions thereof must prevail and no provisions
of the Code can apply. (See Nilratan Sircar v. Lakshmi Narayan Ram Niwas
(AIR 1965 SC 1).
Section 5 consists of three components, and as observed in Maru
Ram etc.etc. v. Union of India and Ors. (1981 (1) SCC 107), they are as
follows:
"(1) The Code covers matters covered by it;
(2) If a special or local law exists covering
the same area, the said law is saved and will
prevail;
(3) If there is a special provision to the
contrary, that will override the special or local
law. A "special law", as observed in Kaushalya Rani
v. Gopal Singh (AIR 1964 SC 260), means a law enacted
for special cases, in special circumstances, as
distinguished from the general rules of law laid down
as being applicable to all cases dealt with by the
general law. The Act fits the description.
Additionally, Section 16(2) of the Act begins with a
non obstante clause relating to the Code."
There are parallel provisions to Section 10(m) of the Act in the
Army Act, 1950 (hereinafter referred to as the ’Army Act’). In fact
Section 39 of the Army Act deals with ’absence without leave’. The
maximum period of imprisonment may extend to three years or with such
less punishment as is mentioned in the said Act itself.
The inevitable conclusion is that the Assistant Commandant was
clothed with necessary jurisdiction for trial of the matter.
Residual question is what would be an appropriate sentence. It is
not disputed and rather fairly conceded that for a person in a
disciplined service like the CRPF, any act of indiscipline deserves
adequate and stringent punishment under the Act. In terms of Section
10(m) an employee who absents himself without leave or without
sufficient cause overstays leave granted to him can be punished with
imprisonment for a term which may extend to one year or with fine which
may extend to three months pay or with both. The offence has been
treated as one of "less heinous offences". More heinous offences are
provided in Section 9. The Assistant Commandant has found the
explanation given by the respondent to be not acceptable. Therefore, he
has been rightly held to have committed a less heinous offence. Taking
note of the relevant aspects, we feel the fine of two months pay which
respondent was drawing at the time when the proceedings were initiated
would meet the ends of justice. By altering the punishment we are not
belittling the gravity of offence but, in our view deterrent punishment
must be resorted to when such absence is resorted to avoid and evade
undertaking a testing or trying venture or deployment \026 essential at any
given point of time, and not as a routine in the normal course. The
appeal is allowed to the extent indicated above.
+
5 4617 1996
!
M/s. Sun Beverages (P) Ltd.
Vs.
The State of Uttar Pradesh & Ors.
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November 28, 2003.
#
P. Venkatarama Reddi & Dr. AR. Lakshmanan.
JUDGMENT:
J U D G M E N T
Dr. AR. Lakshmanan, J.
The present appeal was filed against the judgment dated 19.05.1995
pronounced by the Division Bench of the High Court of Judicature at Allahabad by
which the writ petition of the appellant bearing No. 1607 of 1988 was dismissed. The
writ petition was filed by the appellant to issue a writ prohibiting the respondents from
recovering Rs. 18,72,821.92 constituting cash subsidy plus interest thereon from the
appellant-Company as arrears of land revenue after quashing notice dated 15.09.1987
(Annexure 8 to the petition) and recovery certificate dated 31.10.1987 (Annexure 11 to
the petition).
The sequence of facts and events leading to the filing of this civil appeal are as
follows:-
By an order dated 30.09.1982, the Government of Uttar Pradesh formulated a
scheme known as ’Capital Grant Scheme’ (hereinafter referred to as ’Scheme’) for the
grant of subsidies to various industrial units for giving an impetus to the industrialisatio
n
of the backward areas i.e. zero industrial areas of the State.
In the said Scheme, ’Pioneer Unit’ has been defined as :
"Such industrial units to be set up during the period from 01.10.1982 to
31.03.1985 firstly in any part of the Tehsil or at Tehsil level where no heavy
industry is established prior to 01.10.1982 and that those capital investment is
more than Rs. one crore shall be treated as a Pioneer Unit."
In view of the aforesaid incentive Scheme, Shri Rajan Sethi (since deceased)
and his wife decided to incorporate a Company for bottling of aerated waters in the
backward area of the District Agra. The Company was incorporated under the
Companies Act on 01.10.1983 and it had entered into a franchise agreement with M/s
Campa Beverages Private Limited on 06.05.1983 for bottling various brands of aerated
waters. For the purpose of becoming entitled to the cash subsidy under the aforesaid
Scheme, the appellant purchased land and building and made an investment of Rs.
17,11,845.95. The Company made further investment on installing plant and machinery
in the unit. The total investment made by the appellant in establishing this unit
amounted to Rs.1,07,78,368.34 with the location of the industrial unit in a zero industrial
area. According to the appellant, because of the total investments made, the appellant
became entitled to cash subsidy under the aforesaid Scheme as a pioneer unit.
The aforesaid Scheme prescribed the following two conditions for grant of cash
subsidy to industrial units -
(i) That it will be a ’Pioneer Unit’ within the terms of the Scheme.
(ii) That it is registered with the Director General of Technical Development.
Under the Notification issued by the Government of India, in the year 1983, a
Small Scale Industry has been defined under the Industries Development Regulation
Act, 1948 as one which had made an investment of up to Rs. 20 lacs in plant and
machinery alone apart from other assets. As a Small Scale Industry, the appellant was
liable to be registered with the Government and as a Medium Scale Industry, the
appellant was entitled to be registered with the Director General of Technical
Development (in short ’the DGTD’), Government of India. The investment of the
appellant in the plant and machinery exceeded Rs. 20 lacs. The DGTD was obliged to
register the appellant industry as a Medium Scale Industry since the investment in the
plant and machinery exceeded Rs. 20 lacs. The appellant accordingly applied to the
Director General of Industries for registration and the appellant was registered on
28.11.1984 with the DGTD as a Medium Scale Industry for the manufacture of 43.2
million bottles of soft drinks per annum. The appellant applied for cash subsidy to the
Government of U.P. as it fulfilled both the above stated conditions under the Scheme.
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The Government of U.P., on 31.03.1986, sanctioned a subsidy of Rs. 15 lacs to the
appellant and this subsidy was paid to the appellant in two instalments. An agreement
was entered into between the appellant and the respondents under which the mode and
method of the payment of subsidy of Rs. 15 lacs was prescribed. It was covenanted :
"1(b). That the grantee will comply with and faithfully observe all the
provisions of the said Scheme as also any other conditions imposed by the
order sanctioning the said subsidy.
(c) That for a period of five years from the date of receiving the subsidy or
any part thereof or from the date of production starts, whichever of these
dates are earlier, the grantee will allow the officers subordinate to the Director
or any other person or persons authorised by the Director or by the State
Level Committee constituted under the said Scheme to inspect the work for
which the Special State Capital Subsidy has been given and also the machine
plant, appliances, tools, equipment for the procuring of which the grant has
been made.
(f) That within a period of five years from the date of going into
production or of the date of receipt of the Subsidy or any part thereof
whichever of these dates are later. The Grantee will not change the place or
location of the said Industrial Unit entirely or partly, nor enter into partnership
with anyone nor change its constitution nor will the grantee effect substantial
contractive disposal of substantial part of its total fixed capital investment
without the written prior permission of the Director.
2. It is hereby agreed and declared by and between the parties hereto
that in any of the following cases the Director shall have the right to stop
further payment of the State Capital Subsidy and to require the Grantee to
refund the amount of subsidy already paid and the Grantee shall refund the
same forthwith together with interest at the Bank lending rate then prevailing
and in the case of Grantee’s failure to do so, the Director may recover the
same as arrears of land revenue.
(a) Where Grantee has obtained the said Subsidy by misrepresentation
as to an essential fact or by furnishing of false information/or where his
industrial unit does not go into production;
(b) Where the Grantee’s said industrial unit goes out of production within
five years from the date of commencement of production except in cases
where the unit remains out of production for short periods extending to six
months due to reason beyond its control such as shortage of raw material,
power, etc. or
(c) Where the Grantee fails to furnish the prescribed statement and/or
information which it is called upon to furnish, or
(d) If the Grantee commits a breach of any one of the covenants herein
contained or of the Provisions of the said Scheme."
Subsequent to the registration of the appellant as Medium Scale Industry, the
Government of India, by Notification dated 18.03.1985 altered the definitions of ’Small
Scale Industry’ and ’Medium Scale Industry’. By this notification, it was provided that if
the investment of an industrial unit in plant and machinery alone (excluding other
investments) was up to Rs. 35 lacs, it was entitled to be registered as a Small Scale
Industry, but if it exceeded Rs. 35 lacs, it was entitled to be registered as Medium Scale
Industry. In other words, the limit of investment in plant and machinery for Small Scale
Industry was increased from Rs. 20 lacs to Rs. 35 lacs. The existing registered medium
scale industries were given option to get themselves registered as small scale
industries if they so chose within six months. The appellant was advised to apply to the
DGTD for de-registration on the ground that its investment in plant and machinery was
less than Rs. 35 lacs in view of the revised definition of the Small Scale Industry and
the Medium Scale Industry made by the Government of India by its Notification issued
on 18.03.1985. The appellant was advised to apply to the DGTD for de-registration
more than a year after the cash subsidy had been sanctioned and granted to the
appellant under the Scheme and much after the expiry of the option period. By letter
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dated 04.08.1987, the DGTD cancelled the registration of the appellant as a Medium
Scale Industry and directed the appellant to approach the Director of Industries, U.P. for
registration as a Small Scale Industry. According to the appellant, the registration could
not be cancelled as the option period of six months had already expired. The appellant
thereupon applied for registration with the General Manager, District Industries, Agra,
for being registered as a Small Scale Industry.
On 24.09.1987, the appellant received a communication dated 15.09.1987 from
respondent No.2 calling upon the appellant to refund the cash subsidy together with
interest amounting to more than Rs.18,40,767.12 on the only ground that the unit of the
appellant was required to continue to remain a Medium Scale Industry for five years
from the date of the agreement and on account of the cancellation of its registration by
the DGTD, the appellant had caused a violation of the scheme. It is also stated that the
power to seek refund of the subsidy is also circumscribed by clause 2 of the Agreement
dated 31.03.1986 executed between the parties. Clause 2 of the said Agreement has
already been extracted above.
While so the respondent without waiting for a reply from the appellant or
affording any opportunity of hearing straight away issued a recovery certificate on
31.10.1987 to the third respondent calling upon him to recover the sum of Rs. 18 lacs
and odd as arrears of Land revenue from the appellant. The appellant thereupon made
a representation to the Government of U.P. that the said demand and subsequent
recovery order were illegal and contrary to the factual position. As no response was
received to the aforesaid representation and as the respondents were taking recourse
to coercive processes, the appellant filed a writ petition before the High Court.
It was contended before the High Court on behalf of the respondents that the
appellant has not faithfully observed all the provisions of the Scheme as also other
conditions imposed by the order sanctioning the scheme and that a perusal of the terms
of the scheme under which the subsidy was allowed only show that a Pioneer Unit
holding DGTD registration was eligible for subsidy under the Scheme and a combined
reading of the Scheme and the Agreement shows that the loanee that is the petitioner
(appellant) had to retain its character as a Pioneer Unit holding DGTD registration for a
period of five years to be computed from the year in which the disbursement of the
subsidy was made. It was further submitted that after raising of the limit from Rs. 20
lacs to Rs. 35 lacs in the meanwhile, the appellant lost its DGTD registration which was
cancelled on its own application vide order dated 04.08.1987 as a result of which the
appellant was relegated to the character of a Small Scale Unit. It was further argued by
the respondents that the inevitable consequence of the loss of the DGTD registration by
the appellant as aforesaid was that the appellant ceased to be eligible for special
subsidy paid to it under the Scheme and this indeed constituted violation of condition
No.1(b) of the Agreement. Under such circumstances, the subsidy of Rs. 15 lacs paid
to the appellant under the Scheme as a Pioneer Unit holding DGTD registration
became recoverable by the respondents as provided in clause 2 and clause 2(d) of the
Agreement along with interest at current bank lending rate calculated from the date of
payment of subsidy till the date of recovery of the amount.
The Division Bench of the High Court held that the writ petition filed by the
appellant was bereft of merits and that the respondents are entitled to recover the
subsidy with interest as demanded. The High Court proceeded on the basis that there
was breach of the terms granting subsidy by reason of the appellant being de-
recognised by DGTD
Aggrieved by the judgment of the High Court, the above appeal has been filed.
We have perused the pleadings, the judgment under appeal, the anneuxres and
other relevant documents and, in particular, the Scheme, notice for recovery of subsidy,
certificate for recovery issued by the Commissioner and Director of Industries, U.P.,
correspondence between the appellant and the respondents, Sanction letter dated
31.03.1986, Agreement dated 31.03.1986, cancellation order of DGTD registration
dated 04.08.1987 and the proceedings issued by the Government of India in regard to
the procedure for registration of units on transfer from DGTD etc., consequent upon
revision in the definition of Small Scale Industries dated 17.01.1981 and the Notification
dated 18.03.1985.
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We heard the arguments of Mr. Kailash Vasdev, learned senior counsel for the
appellant and Mr. R.K. Singh, learned counsel for the respondents. The counsel for the
respective parties reiterated their submissions advanced before the High Court.
On the aforesaid facts and circumstances of the case, the following questions
may arise for consideration :
(1) If an industrial unit of a Company is granted subsidy in terms of the
Scheme framed by the State Government when it fulfils all the terms and
conditions of the Scheme, is it open to the State Government to call for
refund of the subsidy at a later stage when the ’pioneer unit’ chooses to
get itself registered as a Small Scale Industry with the State Government
instead of remaining registered as a Medium Scale Industry with the
Director General of Technical Development, Government of India in
accordance with the change effected in the definition of a Small Scale
Industry and a Medium Scale Industry by the Government of India,
although it continues to remain ’pioneer unit’ and there is absolutely no
change in the control of the State Government over the unit in the
obligations, investments and assets of the pioneer unit?
(2) Whether there is any provision in the Scheme or Agreement that a
’Pioneer Unit’ which had been granted subsidy must continue to remain
registered with the Director General of Technical Development for a
period of five years and if it does not remain registered, are respondents
1 & 2 entitled to seek refund of the subsidy?
In the instant case, the following facts are not in dispute :-
(1) That both the parties to this action have entered into an Agreement;
(2) That the Government of U.P. formulated a scheme known as ’Capital
Grant Scheme’ for the grant of subsidies to various industrial units for
giving an impetus to the industrialisation of the backward areas of the
State;
(3) That the Scheme provides for payment of subsidies to the industries
sector in the zero industrial area;
(4) That the petitioner, in fact, had set up his industrial unit in the zero
industrial area;
(5) That the industrial unit had been set up during the period from
01.10.1982 to 31.03.1985 in a backward area where no heavy industry is
established prior to 01.10.1982;
(6) That the appellant’s unit was treated as a Pioneer Unit within the terms of
the scheme and that it was registered with DGTD;
(7) That the appellant had made a total investment of Rs.1,07,78,368/- on
building, land and machinery etc. and became entitled to cash subsidy
under the Scheme;
(8) That the appellant’s unit was registered with DGTD as a Medium Scale
Industry and that the appellant had fulfilled the conditions of the scheme;
(9) That the sanction of subsidy of Rs.15 lacs to the appellant and payment
of the same in two instalments;
(10) That the Government of India has issued fresh guidelines on 18.03.1985
which provided that an industry, investment of which did not exceed Rs.
35 lacs in plant and machinery alone shall be entitled to be treated as a
Small Scale Industry;
(11) That the DGTD cancelled the registration of the appellant as a Medium
Scale Industry on 04.08.1987 and directed the appellant to approach
Director of Industries, U.P. for registration as a Small Scale Industry and
as a consequence of de-registration as a Medium Scale Industry by the
DGTD, the Government of U.P. issued notice for recovery of Rs. 15 lacs
and again called upon the appellant to refund Rs. 15 lacs as DGTD had
cancelled the registration contending that the appellant had violated
condition 1(b) of the Agreement.
A resume of the aforesaid undisputed facts clearly show that there has been
absolutely no violation of any provision of the Scheme on the part of the appellant and
that the demand for the refund was wholly illegal and arbitrary.
In this background, we have also to see as to whether the grantee/appellant
complied with and observed all the provisions of the Scheme and of the covenants of
the Agreement or violated any terms of the Agreement.
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We have already noticed as a result of change in the definition of Small Scale
Industry by the Development Commissioner, Government of India the industrial units
which had invested upto Rs. 35 lacs in plant and machinery was liable to be treated as
small scale industries and that it was on this ground alone, the appellant’s industrial unit
been de-registered as a Small Scale Industry but it continued to be a pioneer unit in
terms of the scheme to which the subsidy had been granted to the appellant. In the
circumstances, the appellant stated that the question of seeking refund of the amount
from them did not arise as the appellant had not violated any terms of the Scheme or of
the Agreement. In our view, the High Court has overlooked the aforesaid facts and
documents in this regard.
It is also pertinent to notice that subsequent to the registration of the appellant
as Medium Scale Industry, the Government of India, by Notification dated 18.03.1985
altered the definitions of Small Scale Industry and Medium Scale Industry. By this
Notification, it was provided that if the investment of an industrial unit in plant and
machinery alone was up to Rs.35 lacs. It was entitled to be registered as a Small Scale
Industry, but if it exceeded Rs.35 lacs, it was entitled to be registered as a Medium
Scale Industry. In fact, the respondents could not point out that there was any change
in the investment, assets, production, land, building, plant and machinery of the
appellant and that there had been any change in the control exercised by the
respondent Nos. 1 and 2 over the appellant and its units. There has been no change in
the obligations of the appellant. The appellant had applied for re-registration with
DGTD as a Small Scale Industry more than a year after grant of subsidy on the advise
that in view of the revised Notification issued by the Government of India, the appellant
was liable to be registered as a Small Scale Industry. In our opinion, the registration of
a unit as a Small Scale and Medium Scale Industry is done in pursuance of notifications
issued under the Industries Development and Regulation Act, 1951 by the Government
of India and that the subsequent cancellation of registration by DGTD on account of
change of criteria has no bearing on the status of an industrial unit as a Pioneer Unit
under the scheme framed by the State of U.P.
The appellant was registered as a DGTD Unit on 21.10.1983 and the said
registration continued. Thereafter, in the year 1985, there have been some changes in
the definition of the Small Scale Industries by the Development Commissioner,
Government of India by which the definition of a Small Scale Industries Unit has been
amended and the limit of investment in the plant and machineries has been extended
from Rs. 20 lacs to Rs. 35 lacs. It has also been made clear that while computing the
value of the machineries, only the value of those machineries will be considered which
are directly involved in the production, while the other accessories and other
machineries which are used in the manufacturing process but are not directly involved
in the process of manufacture were not to be included for considering the unit as Small
Scale Industry unit. In this view of the matter, even though the investment of the
appellant in the machineries was more than Rs.35 lacs, but the machineries which are
utilised for manufacturing was less than Rs.35 lacs i.e. Rs.32,15,861/-, hence the
appellant was compelled to get it registered as Small Scale Industry unit, instead of a
DGTD Unit. Thereafter, the appellant applied for registration as Small Scale Industry
Unit and the requisite registration certificate was granted to the appellant by the
General Manager, District Industries Centre, Agra, registering the appellant as a Small
Scale Industry Unit.
It is also pertinent to notice that the respondents without issuing any show cause
notice to the appellant as to why the said recovery be not made against the appellant
and without affording any opportunity to show cause, a call notice dated 15.09.1987 has
been issued to the appellant for recovering that amount and again followed by a
recovery certificate from the office of the Commissioner and Director of Industries for
recovering the sum of Rs.18,72,821.92 as the arrears of land revenue. In our opinion,
the entire recovery proceedings initiated against the appellant by the respondents as
arrears of land revenue is absolutely illegal and in gross violation of the principles of
natural justice.
In this context, we may reproduce clause 13 of the Scheme which reads as
follows :
"13. Recovery of Special State Capital Grant: The Director of Industry,
Uttar Pradesh shall have power to get the Special State Grant recovered
as is the recovery of land revenue is done consequent to following
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circumstances:
a) If the Industrial Unit has obtained the State Capital Grant by
giving false facts or by submitting necessary facts in fraudulent manner.
b) If the Unit has stopped the production work within five years of
the commencement of the production. However, this condition of
restriction shall not be applicable to such units where the production
work has remained suspended for a short period of 6 months due to
reasons beyond its control such as sick and shortage of power etc.
c) If industrial Unit fails to provide prescribed details and information
sought for. If Director of Industries of Uttar Pradesh could not get the
Special State Capital Grant recovered from the Unit under the normal
procedure, then he can get the amount of loan recovered as the arrear
of land revenue recovery done under the Government of Uttar Pradesh
rules.
d) If the Director of any Unit who has partly or fully received the
grant has to change the place of his unit or dispose of any part of
immoveable property/assets within five years from the date of start of
production.
Clause 2 of the Agreement has been extracted in paragraphs supra.
The above two clauses mentioned the circumstances under which the cash
subsidy may be recovered as arrears of land revenue. None of the said clauses is
applicable or attracted in the instant case. Therefore, we are of the opinion that the
entire recovery proceedings are absolutely illegal and without jurisdiction. It is not the
case of the respondents that the appellant has practised any fraud or guilty of making of
any mis-representations in obtaining the sanction/eligibility. The only provision which
refers for recovery of cash subsidy as arrears of land revenue is mentioned in the
above two clauses and inasmuch as none of the conditions enumerated therein is
attracted, the entire recovery of the cash subsidy as arrears of land revenue is illegal.
Even otherwise, the allegations made in the call notice for recovery of the cash subsidy
as arrears of land revenue is uncalled for.
We have carefully perused the entire Scheme which goes to show that the cash
subsidy would be granted to the unit which is a Pioneer Unit i.e. having an investment
of more than Rs. 1 crore and which has been established after 01.10.1982 and at the
time of grant of cash subsidy, the said Unit should be registered as DGTD Unit.
Nowhere it provides that the said industry should remain as a DGTD Unit for a period of
five years as mentioned in clause 4 of the call notice. A perusal of the scheme further
goes to show that it has been provided in the scheme that the production should not be
stopped for a period of five years but it nowhere provides that the unit should remain as
a DGTD Unit for a period of five years. In fact, the appellant had been compelled to get
the registration under the Small Scale Industries Unit on account of the change in the
definition of the Small Scale Industries Unit by the Central Government and not on
account of any inaction of the appellant. Hence, if on account of the change in the
definition of the Small Scale Industries Unit, the appellant was de-recognised as DGTD
Unit then the appellant could not be denied the benefit of cash subsidy.
We have already seen that clause 13 of the Scheme and clause 2 of the
Agreement has been invoked by the respondents for the recovery of the subsidy. A
close scrutiny of the above two clauses goes to show that in the event of violation of
any conditions, the recovery will be made as arrears of land revenue and so prior to
initiating action for breach of the terms of clause 13 of the Scheme and clause 2 of the
Agreement, the opportunity ought to have been provided by the respondent No.2 to the
appellant to demonstrate whether the provisions of the Scheme and the Agreement are
violated or not and that having not done so the entire recovery proceedings initiated
against the appellant is bad for violation of principles of natural justice.
As already observed, a perusal of the pleadings would reveal that there is no
allegation regarding playing of fraud or mis-representation in obtaining the
sanction/eligibility. The argument of the learned counsel for the respondents that the
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appellant on his own freewill applied for de-registration vide letter dated 12.06.1987 and
that the appellants were no more entitled to be registered under DGTD and since the
constitution of the Company had undergone change and under the changed conditions
the respondents were entitled to recover the subsidy given to the appellant cannot at all
be countenanced.
Having taken note of the aforesaid factual situation, we have no hesitation to
hold that the respondents have acted arbitrarily and contrary to the terms of the
Scheme and the Agreement and on the basis of unwarranted assumptions in seeking to
recover the amounts given as subsidy to the appellant.
In the facts and circumstances of the aforesaid, we set aside the judgment of the
High Court impugned in this appeal and allow this appeal. However, there will be no
order as to costs.