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BIHAR INDUSTRIAL AREA DEVELOPMENT

AUTHORITY & ORS.

v.

AMIT KUMAR & ORS.

(Civil Appeal No. 8219 of 2019)

OCTOBER 22, 2019

[DEEPAK GUPTA AND ANIRUDDHA BOSE JJ.]

Industrial Development – Recovery of unearned increase –

Entitlement to – An allotment was made to the allottee of a land for

industrial purposes – A lease deed was entered into between the

State of Bihar (rights were later transferred to Bihar Industrial Area

Development Authority (BIADA)) and the allottee – A committee was

constituted by the Government of Bihar to lay down the modalities

and fees for transfer of industrial estates from allottees to some

other persons – Pursuant thereto, BIADA fixed the cost of the land

on the basis of the circle rate applicable for further transfer – High

Court held that when the allottee of land further transferred land

to some other entity, the BIADA was only entitled to recover the

unearned increase on the basis of cost of land and development

and not on the basis of the market value of the land or the circle

rate of the land – Propriety of – Held: Not proper – The land was

given to the original allottee at a price fixed by BIADA – When

allottee transfers and get something more for the land or the market

value as reflected in the circle rate is much more than the price at

which the land was allotted to the allottee, there is no reason why

the allottee should pocket all the unearned increase and BIADA,

which was the original owner of the land should be deprived of a

reasonable portion of the unearned increase from the value of the

land – Therefore, fixing the cost of land on basis of the circle rate

applicable by BIADA was legal and valid.

Disposing of the appeal, the Court

HELD: 1. It is standard practice throughout this country,

specially at the time when these leases were executed to set up

industrial estates wherein lands were given at very low price and

[2019] 14 S.C.R. 1

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sometimes at subsidized rates to help in the setting up of

industrial estates in the State. It was expected that establishment

of these industrial estates with flourishing industries would

generate a lot of employment and would also generate revenue

both in the nature of direct and indirect taxes. The issue is whether

when the allottee transfers the land for commercial reasons why

should the Authority not get a reasonable portion of the unearned

income earned by the allottee of the plot just by transferring the

plot in question. The premium on the unearned increase is being

charged only on the value of the land and not on the value of the

transaction. Once an industry is set up it may have various

components including the value of the immovable assets, the

value of the machinery etc. and also the value of the goodwill

which the company has generated. On the other hand there are

companies which are loss making units where debts and liabilities

due to employees and sundry creditors will have to be factored

into while calculating the value of the total assets of the unit.

Those are not to be taken into consideration while assessing the

unearned increase of the cost of the land. [Para 10] [5-F-H;

6-A-B]

2. The land was given to the original allottee at a price

fixed by BIADA. When the allottee transfers and gets something

more for the land or the market value as reflected in the circle

rate is much more than the price at which the land was allotted to

the allottee, there is no reason why the allottee should pocket all

this unearned increase and BIADA, which was the original owner

of the land should be deprived of a reasonable portion of the

unearned increase from the value of the land. Therefore, this

Court is not in agreement with the High Court that the unearned

increase can be charged only on the basis of the BIADA value

plus development charges and in opinion of this Court the policy

of the BIADA fixing the cost of the land on the basis of the circle

rate applicable is legal and valid. [Para 11] [6-C-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8219

of 2019.

From the Judgment and Order 11.05.2015 of the High Court of

Judicature at Patna in LPA No. 68 of 2008 in CWJC No. 9696 of 2005.

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3BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY v.

AMIT KUMAR

With

C.A. Nos. 8220/2019, 8221/2019, 8222/2019.

Gaurav Agrawal, Ms. Anisha Upadhyay, Rajiv Tyagi, Neeraj

Shekhar, Animesh Kumar, Sumit Kumar, Ashutosh Thakur, Ms. Ekta

Bharati, Advs. for the appearing parties.

The Judgment of the Court was delivered by

DEEPAK GUPTA, J. (ORAL)

1. Leave granted.

2. The legal issue involved in these appeals is whether the

Patna High Court was right in holding that when the allottee of land,

allotted for industrial purposes, further transferred the land to some

other entity, the Bihar Industrial Area Development Authority (BIADA)

was only entitled to recover the unearned increase on the basis of

cost of land and development charges and not on the basis of the

market value of the land or the circle rate of the land.

3. In view of the decision that we intend to take in these four

cases before us, it is not necessary to give the facts of each case in

detail. However, for the purposes of decision of these set of

appeals, we may refer to the facts in C.A. No.8222/2019 (arising out

of SLP(C) No.5251/2017). Clause 4(i) of the Lease Deed entered

into between the State of Bihar and M/s. Orient Beverages Ltd. to which

the land was granted on lease for a period of 99 years for a sum of

Rs.42,000/- plus rent of Rs.87.50 per year, reads as follows:

“Clause 4(i):-

That the lessee will not assign, mortgage, underlet or part with

the possession over the land or any right or interest therein or in

respect thereto without the previous consent of the lessor or its

nominee.”

4. Clause 4(ii) of the Lease Deed provided that no transfer

of lease shall take place unless specifically permitted by the State.

The said clause reads as follows:

“Clause 4(ii):-

No change in the lease, proprietorship or partnership, if it is a

private limited or unlimited company or a registered or an

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unregistered firm, shall be recognized without the previous

written consent of the lessor or his nominee.”

5. It is not disputed that the rights of the State of Bihar have

finally been transferred to the BIADA though,in between, there may

have been some other authorities also but that is not relevant for the

decision of this case.

6. In the year 1998, the original lessee M/s. Orient Beverages

Ltd. applied for transfer of the leasehold rights in favour of M/s.

Bharat Coca-Cola Bottling North East Pvt. Ltd. and a sum of

Rs.17,50,000/- was paid as premium at the time of the said transfer. It

appears that the transfer by Orient Beverages Ltd. in favour of Bharat

Coca-Cola Bottling North East Pvt. Ltd. was made for a sum of Rs.2.02

crores. Later in the year 1999, a scheme of amalgamation was entered

into between Bharat Coca-Cola Bottling North West Pvt. Ltd., Bharat

Coca-Cola Bottling South East Pvt. Ltd. and Bharat Coca-Cola North

West Pvt. Ltd. (transferee of the lease) and all these three

amalgamated to form Hindustan Coca-Cola Bottling South West

Pvt. Ltd. This scheme of amalgamation was approved by the Delhi High

Court on 10.09.1999. The name of M/s. Hindustan Coca-Cola Bottling

South West Pvt. Ltd. was changed to M/s. Hindustan Coca-Cola

Beverages Pvt. Ltd. which is the respondent before us and the original

writ petitioner before the High Court. Thereafter, a communication

was sent to the appellant(s) that there was change in the name and the

name should be changed in the record of the appellant-Authority and

this permission was granted on payment of some nominal fees.

In the meantime, a Committee was constituted by the Government

of Bihar to lay down the modalities and fees for transfer of industrial

estates from the allottees to some other person. The relevant

recommendations of the Committee are as follows:

“(a) The Lease holders should have the right to transfer or sale

the land by paying fee if land use is not changed;

(b) The amount recommended was 15% of the present

market value in case of transfer or sale;”

7. On 18.12.2003, an office order was issued by the Appellant-

Authority permitting change in the Constitution of the allottee after taking

15% of the circle rate for the land at the time and other dues

payable. On 12.03.2004, a specific order was issued permitting

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transfer of a land on payment of 15% of the prescribed rate. Thereafter,

on 10.03.2005, a letter was issued by the appellant-Authority to the original

writ petitioners that 15% of the market value of 1.75 acres of land works

out to Rs.4,25,250/-. After some correspondence, this amount was

deposited on 12.04.2007. Thereafter, it appears that a decision was

taken to assess the 15% market value on the basis of the circle

rate and not merely on the rate reflected in the transaction.

Relying upon this latter decision of 15.05.2007, a fresh demand of

Rs. 45,17,318/- was raised and after adjusting the amount already

paid, balance payable was assessed as Rs.40,64,523/-. Aggrieved

against this demand, M/s. Hindustan Coca-Cola Beverages Pvt. Ltd.

filed a writ petition bearing CWJC No.5553 of 2013 before the Patna

High Court.

8. We shall deal with the factual aspects of the case at a later

stage but the legal issues raised before us are whether the appellant-

Authority is entitled to recover unearned increase and if so on what

basis. As far as the entitlement to recover unearned increase in the

value of the transferred allotted land is concerned even the High Court

has upheld this right of the appellant- Authority. However, the High

Court has held that the calculation of this unearned increase will be

on the basis of the value at which appellant-Authority allots the land

plus development charges.

9. The contention raised by Mr. Gaurav Agrawal, appearing

for the appellant-Authority, is that there is no reason why, when the

transfers are normally made for commercial reasons, the appellant-

Authority should not get its fair share in the total unearned increase in

the value of the leased property.

10. We may note that it is standard practice throughout this

country, specially at the time when these leases were executed to

set up industrial estates wherein lands were given at very low price and

sometimes at subsidized rates to help in the setting up of industrial estates

in the State. It was expected that establishment of these industrial estates

with flourishing industries would generate a lot of employment and

would also generate revenue both in the nature of direct and indirect

taxes. The issue is whether when the allottee transfers the land for

commercial reasons why should the Authority not get a reasonable portion

of the unearned income earned by the allottee of the plot just by

transferring the plot in question. The premium on the unearned increase

BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY v.

AMIT KUMAR [DEEPAK GUPTA, J.]

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is being charged only on the value of the land and not on the value

of the transaction. Once an industry is set up it may have various

components including the value of the immovable assets, the value of

the machinery etc. and also the value of the goodwill which the

company has generated. On the other hand there are companies which

are loss making units where debts and liabilities due to employees and

sundry creditors will have to be factored into while calculating the value

of the total assets of the unit. Those are not to be taken into consideration

while assessing the unearned increase of the cost of the land.

11. The land was given to the original allottee at a price fixed by

BIADA. When the allottee transfers and gets something more for

the land or the market value as reflected in the circle rate is much more

than the price at which the land was allotted to the allottee, we see no

reason why the allottee should pocket all this unearned increase and

BIADA, which was the original owner of the land should be deprived of

a reasonable portion of the unearned increase from the value of the

land. Therefore we are not in agreement with the High Court that

the unearned increase can be charged only on the basis of the BIADA

value plus development charges and in our opinion the policy of the

BIADA fixing the cost of the land on the basis of the circle rate

applicable is legal and valid.

12. We shall now deal with the individual cases. As far as the

first case i.e. Civil Appeal No.8219 of 2019 arising out of SLP(C)

No.35887 of 2015 is concerned, we find that the Division Bench of the

High Court of Patna vide order dated 09.03.2010 had directed that

the arrangement made in respect of writ petitioner(s) shall not be

disturbed. Therefore, though we decide the question of law in favour

of appellant, but it will not be entitled to recover any amount from the

respondent(s).

13. The appeal is disposed of accordingly.

14. As far as Civil Appeal No.8220 of 2019 arising out of SLP(C)

No.28213 of 2016 is concerned, amalgamation took place on

10.09.1999. The transfer date, which is the material date, is 10.09.1999

and in our view in all cases the value of land for purposes of fixing the

price should be the date of transfer and in this case it should have been

10.09.1999. Having held so, in view of the fact that the original writ

petitioner paid the amount of Rs.4,25,250/- we do not want to

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open up the entire litigation for a small amount. The amount was

demanded only on 10.03.2005 and was actually paid on 12.04.2007. The

appellant shall be entitled to interest at the rate of 9% per annum on this

amount of Rs.4,25,250/- for the period 10.03.2005 to 14.04.2007.

15. We direct that, on this amount, the interest be paid within

two months. On payment of the interest, the formal lease deed be

executed by the appellant-Authority in favour of the original writ

petitioner(s) within two months of the deposit of interest. The appeal is

disposed of accordingly.

16. In view of the order passed hereinabove, the CA No.8222

of 2019 arising out of SLP(C) No.5251/2017 is disposed of.

17. As far as Civil Appeal No.8221 of 2019 arising out of SLP(C)

No.31141 of 2016 is concerned, land measuring 0.50 acres was allotted

to the respondent on 07.12.2000. The allottee was M/s. Shankar Saw

Mills through its proprietor Sukhdev Paswan. It is admitted case that

the dues payable by Shankar Saw Mills were not paid for the period

2002 to 2007. The case of the appellant is that the payment could not

be made because of the orders passed by this Court in the case of

T.N. Godavarman vs. Union of India whereby the licence of Saw

Mills throughout the country was stayed. It is not disputed that

finally under a one time settlement scheme floated by the appellant-

Authority, the original writ petitioner(s) paid all the dues as

payable under the scheme on 30.07.2000. However, while paying this

amount the writ petitioner(s) also prayed for permission of transfer

of the land in favour of transferee company known as Samras

Products Pvt. Ltd in which it was claimed that the appellant was a

Director. There is no material before us to show what is the exact

shareholding of Sukhdev Paswan in M/s. Samras Products Pvt.

Ltd. Mr. Gaurav Agrawal, learned counsel, has submitted that as per

the scheme of the Authority if the original allottee retained 51% of

the shareholding in the company then it will not be treated to be a transfer

and there is no liability to pay any unearned increase. There are no facts

in this regard placed on record. Therefore, while setting aside the order

of the Patna High Court on the legal issues, we remit the matter back to

the Patna High Court where the parties may produce documents in

this regard. If the documents, as existing, at the time of the initial

incorporation of M/s. Samras Products Pvt. Ltd., indicate that Sukhdev

BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY v.

AMIT KUMAR [DEEPAK GUPTA, J.]

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Paswan had more than 51% shareholding then obviously he is not

liable to pay any transfer charges but if his shareholding is less than

51%then he will pay the unearned increase as decided by us

heareinabove. Since we have remitted the matter, the Writ Petition

No.4325 of 2009 shall be restored to its original number so that it

is given due seniority for decision.

18. The appeal is disposed of accordingly.

Ankit Gyan Appeal disposed of.