1

AFR

HIGH COURT OF CHHATTISGARH BILASPUR

WPC No. 3151 of 2016

M/s Parth Concast Ltd. Through Mr. Balraj Garg, Director, Registered

Office D- 128, Upper Ground Floor, New Rajendra Nagar, Shankar

Nagar Road, New Delhi 110060

Corporate Office - Walfort City- B No. A- 33, Bhatagaon, Ring Road,

Raipur Chhattisgarh 429001

Works Plot No. 77 A- B, 78-80, 105-108, Borai Industrial Growth

Centre, Rasmada, Dist Durg 4951001, Chhattisgarh

---- Petitioner

Versus

1.State of Chhattisgarh Through The Secretary, Commerce And

Industries Department, Mahanadi Bhawan, Naya Raipur, District

Raipur, Chhattisgarh

2.Chhattisgarh State Industrial Development Corporation Ltd.

Through Managing Director, First Floor, Udyog Bhawan, Ring

Road, No. 1, Telibandha, Raipur, Chhattisgarh

3.Executive Director, Chhattisgarh State Industrial Development

Corporation Ltd. First Floor, Udyog Bhawan, Ring Road No. 1,

Telibandha, Raipur, Chhattisgarh

4.General Manager, Chhattisgarh State Industrial Development

Corporation Ltd. Branch Office, Durg, District Durg Chhattisgarh

5.State Bank of India, Stressed Assets Management Branch, Plot

No. 1, Arera Hills, First Floor, State Bank of Building, Bhopal

Madhya Pradesh

---- Respondents

(Cause-title taken from Case Information System)

For Petitioner : Mr. S.P. Upadhyay, Senior Advocate

assisted by Mr. Ankit Pandey, Advocate

For Respondent No.1 : Mr. Jitendra Pali, Deputy Advocate General

For Respondents No.2 to 4: Mr. Prafull N. Bharat, Senior Advocate with

Mr. Ayaz Naved, Advocate

For Respondent No.5 : Ms. Sharmila Singhai, Senior Advocate with

Mr. P.R. Patankar, Advocate

Dates of hearing : 27.07.2022 & 29.09.2022.

Date of order : 03.11.2022 2022:CGHC:24674-DB

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Hon'ble Shri Arup Kumar Goswami , Chief Justice

Hon'ble Shri Parth Prateem Sahu, Judge

C A V Order

Per Arup Kumar Goswami, Chief Justice

Heard Mr. S.P. Upadhyay, learned senior counsel assisted by

Mr. Ankit Pandey, learned counsel for the petitioner. Also heard

Mr. Jitendra Pali, learned Deputy Advocate General appearing for

respondent No.1, Mr. Prafull N. Bharat, learned senior counsel

assisted by Mr. Ayaz Naved, learned counsel, appearing for

respondents No.2 to 4 and Ms. Sharmila Singhai, learned senior

counsel assisted by Mr. P.R. Patankar, learned counsel, appearing for

respondent No.5.

2. The petitioner is a Company registered under the provisions of

the Companies Act, 1956 engaged in the business of producing steel

and iron products. The case of the petitioner, as presented in the writ

petition, is that the Chhattisgarh State Industrial Development

Corporation Limited (for short, ‘CSIDC’) had allotted four parcels of

land situated at Industrial Development Center, Borai, Village

Rasmada, District Durg to one M/s Brahaspati Iron and Steel Company

Private Limited (for short, ‘BISCPL’), who is engaged in manufacturing

of hot and cold rolled products of steel and ancillary purposes, on

lease for a period of 99 years. Four lease deeds were executed on

16.04.2004, 08.01.2007, 30.01.2009 and 21.05.2009, in respect of Plot

Nos.77A, 77B, 78, 79, 80, 105, 106, 107, 108A, 108B & Part 81 & 104, 2022:CGHC:24674-DB

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Plot Nos.65-74 (zone-c); Plot Nos. Part 82, 83 to 87 & Part 99, 100 to

102, and Plot Nos.88 to 98 Part 99, respectively. Lease deed dated

16.04.2004 was for the period 16.04.2004 to 15.04.2103 in respect of

4.004 hectares; lease deed dated 08.01.2007 was for the period

08.01.2007 to 07.01.2106 in respect of 6.245 hectares; lease deed

dated 30.01.2009 was for the period 30.01.2009 to 29.01.2108 in

respect of 2.897 hectares; and lease deed dated 21.05.2009 was for

the period 21.05.2009 to 20.05.2108 in respect of 4.00 hectares.

3. BISCPL took loan from the State Bank of India, i.e. respondent

No.5 after obtaining No Objection Certificate (for short, ‘NOC’) from

CSIDC against creation of security interest over its lease hold rights in

respect of properties in question. The BISCPL defaulted in repayment

of its secured debt to respondent No.5 and respondent No.5 declared

BISCPL as Non Performing Asset (for short, ‘NPA’) as per the

provisions of the Securitisation and Reconstruction of Financial Assets

and Enforcement of Security Interest Act, 2002 (for short, ‘SARFAESI

Act’) and informed CSIDC in advance about initiating proceeding

under the provision of Section 13(4) of the SARFAESI Act and for

recovery of secured debt, took possession of the secured assets

including the right to transfer by way of lease, assignment or sale for

realizing the secured asset. An e-auction sale notice under Section

13(4) of the SARFAESI Act was published on 09.05.2015 for sale /

transfer of the lease hold rights in the above mentioned properties.

4. The petitioner participated in the e-auction and was declared

successful auction purchaser, and accordingly, sale certificate in 2022:CGHC:24674-DB

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respect of above mentioned properties was issued on 16.06.2015

upon payment of 25% of the total consideration amount of

Rs.3,20,00,000/- to respondent No.5. The sale certificate was duly

stamped by the petitioner by paying Rs.80,00,000/- as stamp duty and

Rs.10,24,170/- as other ancillary registration charges on 24.06.2015.

The petitioner paid Rs.12,80,00,000/- to respondent No.5 as total

consideration for purchase of lease hold rights in the above mentioned

properties.

5. By a letter dated 22.06.2015, CSIDC was informed by the

petitioner about the purchase of lease hold rights, and accordingly,

request was made for substitution of its name in place of BISCPL. By

another letter dated 04.07.2015, the petitioner requested CSIDC for

substitution of its name in place of BISCPL in the lease deeds.

6. A request was again made by another letter dated 07.07.2015

for substitution of its name in place of BISCPL. Once again, the

petitioner wrote a letter on 10.07.2015 to CSIDC for substitution of

name of the petitioner in the lease deeds.

7. It was after many correspondences by the petitioner, by letter

dated 27.07.2015, CSIDC informed the petitioner for the first time that

the transfer of lease would be done in accordance with the provisions

of Chhattisgarh Audhyogik Bhoomi Avam Bhawan Prabandhan Niyam,

2015 (for short, ‘Rules of 2015’).

8. After protracted correspondences as well as oral request,

CSIDC issued four separate land transfer orders on 04.08.2015 2022:CGHC:24674-DB

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demanding the petitioner to pay an amount totalling

Rs.21,54,24,600/-.

9. In the meantime, an application submitted by the petitioner to

Chhattisgarh State Power Distribution Company Limited (for short,

‘CSPDCL’) for a new HT connection was rejected by a letter dated

05.08.2015 as there were no lease deed in favour the petitioner. In

such circumstance, the petitioner, under duress, paid the transfer fees

for transfer of lease in respect of plots of lands forming part of lease

deed dated 16.04.2004.

10. It is pleaded that the Chhattisgarh Environment Conservation

Board (for short, ‘CECB’), by the letter dated 03.10.2015, had granted

renewal of consent under Sections 25, 26 of the Water (Prevention

and Control of Pollution) Act, 1974 (for short, ‘Act of 1974’) as well as

under Section 21 of the Air (Prevention and Control of Pollution) Act,

1981 (for short, ‘Act of 1981’) and had also accorded approval of

change of name from earlier BISCPL to the petitioner.

11. In the background of the above facts, the petitioner prayed for

declaration of the provisions of the Rules of 2015, which are

inconsistent with the SARFAESI Act, Transfer of Property Act, 1882

(for short, ‘Act of 1882’) and the Constitution of India as ultra-vires.

Prayer was also made for quashing of the order dated 04.08.2015

issued by CSIDC and for substitution of name of the petitioner in place

of BISCPL in the lease deeds for remaining lease hold rights over the

property, and for refund of the transfer charges which the petitioner 2022:CGHC:24674-DB

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had deposited under duress for transfer of one of the parcels of lease

hold properties.

12. No specific provision of Rules of 2015 was indicated in the

prayer for declaration of the same as ultra-vires.

13. In the return filed by respondents No.2 to 4, it is stated that

BISCPL was having only lease hold rights over the parcels of the land.

The lease granted in favour of BISCPL was forfeited and cancelled in

the year 2012-13 as it had breached the conditions of the lease.

Against the orders of cancellation of lease dated 09.10.2012,

19.06.2013, 19.06.2013 and 19.06.2013, BISCPL had preferred an

appeal, which was partly allowed by an order dated 31.08.2015,

extending time for compliance of the terms of the lease deed. Even

thereafter, there was no compliance by BISCPL in terms of the

appellate order and therefore, the order of cancellation of lease deeds

had attained finality.

14. It is pleaded that the orders of cancellation were forwarded to

respondent No.5. Much after determination of the lease, auction sale

was conducted on 12.06.2015 and thereafter, sale certificate was

issued on 16.06.2015, and therefore, the auction sale made by the

authorities on 12.06.2015 would not have any bearing in so far as

lease hold rights are concerned.

15. It is further stated that respondent No.5 was aware of the fact

that the auction purchaser has to pay transfer charges, lease transfer

charges, stamp duty, registration charges along with other statutory or 2022:CGHC:24674-DB

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non-statutory duties, and therefore, specific terms and conditions with

regard to the aforesaid were incorporated in the advertisement dated

09.05.2015 issued by respondent No.5. The petitioner was, thus,

aware of the terms and conditions. The transfer fee is required to be

deposited within 30 days, which period is extendable on request on

payment of interest. In pursuance of the transfer order No.245 dated

04.08.2015, the petitioner deposited the requisite transfer fee in

respect of Plot Nos.77A, 77B, 78, 79, 80, 105, 106, 107, 108A, 108B &

Part 81 & 104 covered by lease deed dated 16.04.2004. However,

transfer fee was not deposited in respect of transfer orders No.246,

247 and 248, all dated 04.08.2015, in respect of other lease deeds.

16. As no request was made for extension of time, subsequently,

on 09.11.2016, acting on an application dated 06.07.2016 submitted

by M/s Tirumala Balaji Smelters Private Limited, a lease deed was

executed on 20.12.2016 for 2.10 hectares and the land was handed

over to the said unit on 19.01.2017. Similarly, one M/s Balram Biotech

Private Limited had submitted three different applications dated

21.10.2016 for a total 2.80 hectares, for which, Letter of Intent (for

short, ‘LOI’) was issued on 10.01.2017 and as such, third party interest

had been created in respect of property in question. It is stated that

there is no merit in the petition and that apart, the writ petition is also

liable to be dismissed on the ground of delay and laches as the order

dated 04.08.2015 was challenged after more than one year and four

months by filing the writ petition on 07.12.2016, that too, after

complying with one transfer order dated 04.08.2015 by paying transfer

fee. 2022:CGHC:24674-DB

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17. Since the plots of lands were the property of respondent No.2,

BISCPL could not have mortgaged and created any security interest

over the land with respondent No.5. It is stated that ‘security interest’

can be created by the secured creditor on a property only to the extent

the title vested with the borrower. As BISCPL was having only lease

hold rights, any charge in terms of SARFAESI Act can be created only

with respect to lease hold rights and not beyond it. The secured

creditor, i.e., respondent No.5, on the date of e-auction was not having

any title or right over the land in dispute because the lease deeds were

cancelled. Since the lease deeds in favour of BISCPL were cancelled,

any NOC granted in pursuance to the lease deed cannot be enforced

after cancellation of the lease deed.

18. It is denied that respondent No.5 had duly intimated the

respondents No.2 to 4 about initiation of proceedings under Section

13(4) of the SARFAESI Act and it is averred that respondent No.5

never intimated about any such proceedings initiated by it.

19. It is also pleaded that by the advertisement dated 09.05.2015,

the properties of BISCPL were put to auction for recovery of the dues

of respondent No.5 only, though indicating that BISCPL is having

pending dues to the tune of Rs.22,92,830/- with CSIDC. Neither

valuation of the property in the auction was made nor the transfer

charges as stipulated in clause 13 of the advertisement was ever

assessed by respondent No.5. It is pleaded that clause 3.4.2.1.1 deals

with the situation where the property is purchased under the provisions

of SARFAESI Act and it provides that in such cases, clause 3.4.2.1 to 2022:CGHC:24674-DB

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clause 3.4.2.5 of the Rules of 2015 would be applicable.

20. In the return filed by respondent No.5, it is stated that BISCPL,

before creating the mortgage, had obtained NOC from CSIDC on

30.05.2009 with a condition that the charge of CSIDC would have

priority and before initiating recovery proceedings, respondent No.5

would give three months prior notice to CSIDC. BISCPL had taken

credit facilities from State Bank of Indore, which was subsequently

acquired and merged with the State Bank of India on 28.07.2010 and

all assets and liabilities of the State Bank of Indore had vested with

State Bank of India. As BISCPL had defaulted in repayment of loan

amount, BISCPL was declared as NPA on 29.07.2013. In compliance

of the terms of the NOC, the Bank informed the CSIDC by letter dated

15.02.2014, which was duly served about initiation of recovery

proceedings against BISCPL. However, the Bank was never informed

by CSIDC that leases granted to BISCPL were cancelled. Even after

notice under Section 13(2) of the SARFAESI Act was issued on

22.07.2014, no objections were raised.

21. It was further pleaded that on 12.12.2014, possession notice

under Section 13(4) of the SARFAESI Act was issued and the Bank

took symbolic possession of the lease hold properties mortgaged with

respondent No.5 and the fact of taking symbolic possession was

published in two leading newspapers having wide circulation in the

locality i.e. Raipur and Durg. An e-auction notice of sale of lease hold

rights was published, first on 11.02.2015, and then again on

09.05.2015. Even after publication of e-auction notices, the CSIDC did 2022:CGHC:24674-DB

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not intimate the Bank about cancellation of the lease deeds granted in

favour of BISCPL. Rather, by a letter dated 05.06.2015, the General

Manager of CSIDC, while acknowledging receipt of a letter dated

15.02.2014 by which the Bank had indicated about taking steps for

recovery of dues, had requested the Bank to take steps for recovery of

Rs.43,84,580/-, which was due to CSIDC from BISCPL for the period

01.01.2012 to 31.12.2015 along with outstanding loan amount.

However, no intimation about cancellation of the lease deeds was

given, which in essence, approved the steps taken by the Bank for

recovery of the amount.

22. In compliance of the order dated 26.05.2015 (4 in number)

issued by District Magistrate, Durg, possession of the lease hold

properties were handed over to the authorized officer of the Bank on

17.06.2015 and the same, in turn, was handed over to the successful

bidder, i.e. the petitioner, on 17.06.2015 itself. By the letter dated

25.06.2015, respondent No.5 informed the CSIDC that lease hold

rights on the mortgaged property as well as plant and machinery had

been sold by way of e-auction and the same were purchased by the

petitioner on 12.06.2015, for which sale certificate was issued on

17.06.2015. It was also informed in the said letter that the auction

purchaser was intimated about outstanding amount of Rs.43,84,580/-

payable to CSIDC by BISCPL. Even after receipt of the said letter,

CSIDC kept silent and did not inform the Bank about cancellation of

lease deeds executed in favour of BISCPL. The four cancellation

orders were never served upon respondent No.5. The orders, if at all 2022:CGHC:24674-DB

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sent, were sent to State Bank of Indore, which was no more in

existence on 19.06.2013, and not to respondent No.5. Respondent

No.5 came to know about cancellation of such leases by the CSIDC

for the first time when these facts were brought before the Court by

CSIDC.

23. It is pleaded that CSIDC having allowed the Bank to proceed

with the recovery proceedings, the contention advanced that the Bank

had no right to auction the lease hold rights, is wholly without any

substance. It is stated that the petitioner was well aware about the

terms and conditions enumerated in the auction notice, which

stipulates that the purchaser shall bear the applicable stamp duty,

additional stamp duty / transfer charges, lease transfer charges /

registration charges, fees, etc. and statutory and non-statutory dues. In

view of the stand taken in the return of CSIDC, it is stated that M/s

Tirumala Balaji Smelters Private Limited and M/s Balram Biotech

Private Limited are necessary parties.

24. In the return filed by the State / respondent No.1, it is stated

that it relies on the return filed by respondents No.2 to 4, i.e. CSIDC.

25. Though one return was filed by respondents No.2 to 4 and

another by respondent No.5, a rejoinder-affidavit is filed by the

petitioner clubbing together the returns filed by respondents No.2 to 4

and by respondent No.5.

26. In the rejoinder-affidavit, it is stated that e-auction notice dated

09.05.2015 indicated that the title vested with BISCPL, and therefore, 2022:CGHC:24674-DB

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the plea taken by the CSIDC that BISCPL had no perfect title as lease

deed was cancelled, is perverse. It is pleaded that the officials of the

Bank and CSIDC are colluding with each other. It is stated if the lease

deed was cancelled in the year 2012-13, then why CSIDC insisted

upon payment of transfer charges. It is also pleaded that in view of

Section 35 of SARFAESI Act, the provision of SARFAESI Act will

prevail over the Rules of 2015. The petitioner was diligently pursuing

the matter at the departmental level and failed to achieve any desired

result, and therefore, the petitioner was compelled to send a notice

dated 13.04.2016 under Section 80 of the Code of Civil Procedure,

1908 (for short, ‘CPC’), but no response was given to the same. It is

pleaded that there is no transfer in the instant case and the petitioner

has merely stepped into the shoes of BISCPL as it had acquired the

property in terms of the SARFAESI Act.

27.Once the lease deeds are mortgaged after grant of NOC by

the CSIDC, the same could not have been terminated by the CSIDC

without consent of the Bank and there is no material on record to

indicate that consent of the Bank was obtained. It is stated that to

defeat the claim of the petitioner, CSIDC had passed the order dated

09.11.2016 in favour of M/s Tirumala Balaji Smelters Private Limited,

executed the lease deed on 20.12.2016, handed over the land on

19.01.2017 and also executed LOI to M/s Balram Biotech Private

Limited on 10.01.2017.

28.With regard to the plea taken by the Bank that M/s Tirumala

Balaji Smelters Private Limited and M/s Balram Biotech Private Limited 2022:CGHC:24674-DB

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are necessary parties, it is stated that the same are misplaced and

such LOI and lease deeds are non-est in law.

29. Mr. S.P. Upadhyay, learned senior counsel for the petitioner

submits that Section 2(zf) of the SARFAESI Act would go to show that

title and rights pass on to the auction purchaser and in the instant

case, lease rights, which were mortgaged to the Bank, had passed on

to the petitioner after mortgaged land was sold in an auction for

enforcing security interest created in favour of the Bank, which was the

secured creditor. The learned senior counsel has also drawn the

attention of the Court to Section 35 of the SARFAESI Act to contend

that the provisions of the Act shall have effect, notwithstanding

anything inconsistent therewith contained in any other law for the time

being in force or any instruments having effect by virtue of any such

law. It is submitted that Rules 3.2.4.1, 3.4.2.5 and 3.4.2.11 of the

Rules of 2015 are repugnant to SARFAESI Act as demand for

payment of transfer fee is against the very object of the SARFAESI

Act. It is contended that the petitioner having purchased lease hold

rights of BISCPL, the petitioner had only stepped into the shoes of the

erstwhile lessee, and therefore, it is a case of substitution of the name

of petitioner in place of BISCPL. In support of his submissions, he has

placed reliance on paragraph-26 of M/s Transcore v. Union of India

& Another, reported in (2008) 1 SCC 125, paragraphs-46 & 47 of P.H.

Paul Manoj Pandian v. P. Veldurai, reported in (2011) 5 SCC 214,

paragraph-27 of Rajasthan State Industrial Development &

Investment Corporation v. Subhash Sindhi Cooperative 2022:CGHC:24674-DB

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Housing Society Jaipur & Ors., reported in (2013) 5 SCC 427,

paragraphs-11 & 13 of MGB Gramin Bank v. Chakrawarti Singh ,

reported in (2014) 13 SCC 583, paragraphs-48 & 49 of Punjab

National Bank v. Union of India through its Secretary, reported in

2022 SCC Online 227, paragraphs-23, 24&26 of Krishna Rai (Dead)

through Lrs. & Others v. Banaras Hindu University through

Registrar & Others, reported in 2022 SCC Online SC 750.

30. Mr. Prafull N. Bharat, learned senior counsel, appearing for

respondents No.2 to 4 submits that when it is an admitted position that

the lease deeds executed in favour of BISCPL had been cancelled, the

contention of the petitioner that it had stepped into the shoes of

BISCPL is not tenable. It was made clear in the advertisement that

transfer fee would be payable by the auction purchaser and petitioner

being aware of such condition had participated in e-auction, and

therefore, subsequently the petitioner cannot turn around and question

the demand of transfer charge, more so, as the petitioner, without any

demur, had paid the transfer fee in respect of one lease deed, which

was executed earlier in favour of BISCPL. It is submitted that in the

present factual matrix, adjudication as to the validity of the provisions

of Rules of 2015 need not be considered as viewed from any angle,

present is not a case of petitioner stepping into the shoes of the earlier

lessee, i.e., BISCPL as there was no existence of a valid lease. It is

also submitted that the petitioner having itself admitted that the third

party rights had been created, the petitioner did not array M/s Tirumala

Balaji Smelters Private Limited and M/s Balram Biotech Private Limited 2022:CGHC:24674-DB

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as parties. He relies on paragraph-6 of the judgment in Akhil Bhartiya

Upbhokta Congress v. State of M.P. & Others, reported in (2011) 5

SCC 29 and paragraph-50 of City Industrial Development

Corporation through its Managing Director v. Platinum

Entertainment & Others, reported in (2015) 1 SCC 558.

31. Ms. Sharmila Singhai, learned senior counsel, appearing for

respondent No.5 submits that a specific stand was taken by

respondent No.5 that M/s Tirumala Balaji Smelters Private Limited and

M/s Balram Biotech Private Limited are necessary parties in the

proceedings and they having not been made parties, the writ petition is

liable to be dismissed.

32. We have considered the submissions of learned counsel for

the parties and have perused the materials on record.

33. Materials on record would go to show that lease deeds

executed in favour of BISCPL were cancelled, as against which, an

appeal was preferred. The Appellate Court had extended time for

compliance of the conditions of the lease to BISPCL. As there was no

compliance even during the extended period, the order of cancellation

of lease deeds had attained finality. The orders of cancellation were

forwarded to respondent No.5. Respondent No.5 had pleaded that the

same were not forwarded and served upon it and if at all the orders of

cancellation were sent, it may have been sent to State Bank of Indore,

which was merged with State Bank of India way back on 28.07.2010. 2022:CGHC:24674-DB

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34. Clause 13 of the advertisement indicates that the purchaser

shall bear the applicable stamp duties / additional stamp duty / transfer

charges / lease transfer charges / Registration charges, fees etc. and

also all the statutory / non-statutory dues, taxes, rates, assessment

charges, fees, etc.

35. The e-auction sale notice indicates the name of the title holder

as M/s Brahaspati Iron and Steel Company Private Limited.

36. Clause 3 of the e-auction sale notice indicated that to the best

of knowledge and information of the authorized officer, there is no

other encumbrance on the properties. It was also stated therein that

the intending bidders should make their own independent inquiries

regarding the encumbrances, title of properties put on auction and

claims / rights / dues / affecting the property, prior to submtting their

bid. It was also stated that the e-auction advertisement did not

constitute and would not be deemed to constitute a commitment or any

representation of the bank and that the property was being sold with all

the existing and future encumbrances whether known or unknown to

the bank. The authorized officer / secured creditor shall not be

responsible in any way for any third party claims / rights / dues.

37. E-auction sale notice goes to show that outstanding dues for

recovery of which property was being sold, as on 28.04.2014, was

Rs.15,09,58,565.89 plus interest thereon with effect from 29.04.2014.

Reserve price was set at Rs.12,80,00,000.00 and the property was

auctioned at the reserve price. 2022:CGHC:24674-DB

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38. At this juncture, it will be relevant to take note of clauses

3.4.1.1, 3.4.2, 3.4.2.1, 3.4.2.2, 3.4.2.3, 3.4.2.4, 3.4.2.5 and 3.4.2.11.

They are reproduced as translated into English by the petitioner:

“3.4.1.1 – Transfer means

A. Transfer means that the original allottee / original

allottees (leaseholder / lessee) of the land, shed-

building has changed the nature of the organization

and by making such change, the share / part of the

original allottee / original allottees should be reduced

to less by not remaining 51 percent. Provided that

the change in the form of organization / formation in

the formation of a company or partnership with a

sole proprietorship or partnership from company

shall not be considered as transfer, if the part /

share of the original allottees remains 51 percent or

more as sole or jointly in the organization.

B. There can be a person in cases of sole

proprietorship, a single partner or more than one

partner in partnership cases and one shareholder or

more than one shareholder in cases of the company

at the time of allotment and these are the original

allottee (leaseholder / lessee).

C. After execution of deeds related to land transfer /

transfer, in whose favour the transfer lease will be 2022:CGHC:24674-DB

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executed for the remaining period, they will become

the original allottee (leaseholder / lessee) same as

in clause (b) above and the sequence will be

continuous, if the transfer takes place in the future in

period of lease deeds.

Note: It is clarified that mere change in the name of

the industry or change in the products of the industry

will not be considered as land transfer / transfer.

3.4.2-Transfer will be allowed subject to the

following situations / conditions:

3.4.2.1- In cases where no building required for

production except boundary wall has been

constructed as per the proposed project report on

the allotted plot, that is, even if the not suitable

building is constructed for boundary wall / production

work, the application for transfer of vacant plots,

sheds, buildings will not be done under any

situation. In such cases, such vacant plots / sheds

buildings as the case may be, its possession will be

taken immediately by the GM/CGM, District Trade

and Industry Center / CSIDC and subsequently, its

allotment will be as per the procedure prescribed

elsewhere in these rules.

3.4.2.2- In cases where there is a investment of 2022:CGHC:24674-DB

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minimum of 25 (twenty five) percent of the proposed

project cost in the building head shown in the

proposed project report on the allotted plot and in

case of minimum 25 (twenty five) percent of the

proposed investment in the plant and machinery

head, in them, an amount equal to 25 (twenty five)

percent of the prevailing land interest will be payable

as transfer fee in the cases.

3.4.2.3- In cases where minimum 50(fifty) percent of

the proposed project cost has been invested in the

building head shows in the proposed project report

on the allotted plot and minimum 50 (fifty) percent of

the proposed investment in plant and machinery

head, in those cases, an amount equal to 20

(twenty) percent of the then prevailing interest will

be payable as transfer fee.

3.4.2.4- Cases in which the industry has been set up

on the allotted land, i.e. the working or close industry

after coming into production, in which the action of

land use has been completed as per the Project

Report (DPR) submitted at the time of allotment and

whom the certificate of commencement of

production by the department viz. Part-2 and

production certificates have been issued and

cancellation order has been issued in the case of 2022:CGHC:24674-DB

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closed industry, 15 (fifteen) percent of the land

premium prevailing at the time will be payable as

transfer fee.

3.4.2.5 – In the case from 3.4.2.1 to 3.4.2.4 above,

the rates of land transfer, maintenance charges,

street light charges etc. after any such transfer will

be applicable as per prevailing premium at that time.

It will be mandatory to clearly mention in the

amendment order / lease deed. In such cases, land

rent, maintenance charges, street light charges etc.

will be calculated by determining the prevailing

premium in the case in a symbolic manner.

3.4.2.11- Even in cases of Securitization and

Reconstruction of Financial Assets and Enforcement

of Securities Interest Act (SARFAESI Act), the land

transfer fee will be payable as per clause 3.4.2.1 to

3.4.2.5, as applicable above.”

39. Section 2(zf) of the SARFAESI Act defines “security interest”.

Section 2(zf) is reproduced below:

“2(zf) “security interest” means right, title or

interest of any kind, other than those specified

in Section 31, upon property created in favour

of any secured creditor and includes- 2022:CGHC:24674-DB

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(i) any mortgage, charge, hypothecation,

assignment or any right, title or interest of any

kind, on tangible asset, retained by the secured

creditor as an owner of the property, given on

hire or financial lease or conditional sale or

under any other contract which secures the

obligation to pay and unpaid portion of the

purchase price of the asset or an obligation

incurred or credit provided to enable the

borrower to acquire the tangible asset; or

(ii) such right, title or interest in any intangible

asset or assignment or licence of such

intangible asset which secures the obligation to

pay any unpaid portion of the purchase price of

the intangible asset or the obligation incurred or

any credit provided to enable the borrower to

acquire the intangible asset or licence of

intangible asset.”

40. Section 13(4) and 13(6) of the SARFAESI Act read as follows:

“13. Enforcement of security interest.-

x x x

x x x

(4) In case the borrower fails to discharge his

liability in full within the period specified in sub- 2022:CGHC:24674-DB

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section (2), the secured creditor may take

recourse to one or more of the following measures

to recover his secured debt, namely:-

(a) take possession of the secured assets of

the borrower including the right to transfer by

way of lease, assignment or sale for realising

the secured asset;

(b) take over the management of the secured

assets of the borrower including the right to

transfer by way of lease, assignment or sale

and realise the secured asset;

(c) appoint any person (hereafter referred to

as the manager), to manage the secured

assets the possession of which has been

taken over by the secured creditor;

(d) require at any time by notice in writing,

any person who has acquired any of the

secured assets from the borrower and from

whom any money is due or may become due

to the borrower, to pay the secured creditor,

so much of the money as is sufficient to pay

the secured debt.”

x x x

(6) Any transfer of secured asset after taking 2022:CGHC:24674-DB

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possession thereof or take over of management

under sub- section (4), by the secured creditor or

by the manager on behalf of the secured creditor

shall vest in the transferee all rights in, or in

relation to, the secured asset transferred as if the

transfer had been made by the owner of such

secured asset.”

41. Section 35 of SARFAESI Act reads as follows:

“The provisions of this Act to override other

laws.- The provisions of this Act shall have effect,

notwithstanding anything inconsistent therewith

contained in any other law for the time being in

force or any instrument having effect by virtue of

any such law.”

42. The substratum of argument of Mr. Bharat is that the

petitioners cannot step into the shoes of BISCPL as the lease in favour

of BISCPL was cancelled. That BISCPL took loan from respondent No.

5 after obtaining NOC from CSIDC against creation of security interest

over the lease hold rights in respect of the properties in question is not

in dispute. It is also not in dispute that the respondent No. 5 is a

secured creditor.

43. In M/s Transcore (supra), the Hon'ble Surpeme Court held as

follows: 2022:CGHC:24674-DB

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“26. Section 13(6) inter alia provides that any

transfer of secured asset after taking possession

or after taking over of management of the

business, under Section 13(4), by the bank/FI

shall vest in the transferee all rights in relation to

the secured assets as if the transfer has been

made by the owner of such secured asset.

Therefore, Section 13(6) inter alia provides that

once the bank/FI takes possession of the secured

asset, then the rights, title and interest in that

asset can be dealt with by the bank/FI as if it is

the owner of such an asset. In other words, the

asset will vest in the bank/FI free of all

encumbrances and the secured creditor would be

entitled to give a clear title to the transferee in

respect thereof.”

44.The decision in M/s Transcore (supra) lays down that once the

secured creditor takes possession of the secured asset, such asset

well vest in the secured creditor free of all encumbrances and that it

can deal with such asset, as if it is the owner of such asset. Not only

that, all rights in relation to the secured asset vest in the transferee as

if the transfer has been made by the owner of secured assets. In

MGB Gramin Bank (supra), it was observed by the Hon'ble Supreme

Court that the vested right is a right independent of any contingency

and it cannot be taken away without consent of the person concerned.

Vested right can arise from contract, statute or by operation of law. 2022:CGHC:24674-DB

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Cancellation of the lease deeds in favour of BISCPL does not alter the

legal position as noticed herein above. Therefore, whether the lease

deed in favour of BISCPL was cancelled or not is not a relevant

consideration.

45.Clauses 3.4.2.1 to 3.4.2.4 lay down situations / conditions under

which transfer would be allowed. Clause 3.4.2.5 lays down in what

manner rates of land transfer, manufacture charges, etc. could be

levied when transfer takes place in terms of Clauses 3.4.2.1 to

3.4.2.4. Perusal of the definition of transfer as defined in Clause

3.4.1.1 would go to show that the transfer that had taken place in the

instant case is not the kind of transfer that is contemplated in Clause

3.4.1.1.

46.Learned counsel for the petitioner has not been able to show

how Clause 3.4.1.1 or Clause 3.4.2.5 is arbitrary and bad in law. Of

course, application of Clause 3.4.1.1. or Clauses 3.4.2.1 to 3.4.2.5 in

respect of a transfer taking place under the provision of SARFAESI Act

is a different matter altogether.

47.In Rajasthan State Development Industrial Development &

Investment Corporation (supra), the Hon'ble Supreme Court held

that executive instructions which have no statutory force, cannot over-

ride the law. In P.H. Paul Manoj Pandian (supra), it was held that

once a law occupies the field, it will not be open to the State

Government in exercise of its executive power under Article 162 of the

Constitution to prescribe in the same field by an executive order.

However, it is well recognized that in matters relating to a particular 2022:CGHC:24674-DB

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subject in absence of any parliamentary legislation on the said subject,

the State Government has the jurisdiction to act and to make executive

orders.

48.In Punjab National Bank (supra), the Hon'ble Supreme Court,

having regard to the provisions contained in section 2(zc) to (zf) of

SARFAESI Act read with provisions contained in Section 13 of the

SARFAESI Act, observed that the secured creditor will have a First

Charge on the Secured Assets and that Section 35 of the SARFAESI

Act shall have overriding effect on all other laws. In that context, it was

observed that provisions contained in Section 11E of the Central

Excise Act, 1944 are subject to the provisions contained in SARFAESI

Act.

49.In view of the above discussion, we are of the considered

opinion that Clause 3.4.2.11 is ultra vires to Section 35 of the

SARFAESI Act and that the provisions contained in SARFAESI Act will

prevail over Rules of 2015.

50.Resultantly, we are of the opinion that demand of transfer fee

made by the CSIDC is not sustainable in law.

51.It is, however, noticed that the petitioner had deposited transfer

fee in respect of lease deed dated 16.04.2004, as it appears, without

any demur, although stand is taken that such payment was made

under duress without bringing on record relevant circumstance

demonstrating the same. Therefore, at this juncture, we are not

inclined to pass any direction for refund of the transfer fee made by the

petitioner to CSIDC. 2022:CGHC:24674-DB

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52.An interim order dated 03.02.2007 was passed to the effect that

(i) the respondents shall not proceed further in the matter of transfer of

lease hold rights of the subject land beyond the stage, which stood as

on that date, (ii) no further coercive steps shall be taken against the

petitioner to recover any transfer fee and (iii) the land shall not be

subjected to any change or alteration for any purpose to any person.

53.On 07.05.2018, after hearing the learned counsel for the parties,

I.A. Nos. 3 & 4, application for directions to respondents No.2 to 5 and

application for grant of further interim relief were disposed of and it was

directed that subject to deposit of amount of @ Rs.5 Lakhs per annum

by the petitioner in respect of the plots, for which, the demand had

been raised on 24.04.2018, the petitioner should not be dispossessed

from any of the plots. It was further directed that the payment made by

the petitioner should remain subject to final outcome of this petition.

54.Therefore, notwithstanding the fact that the petitioner had

responded to the e-auction notice which contains, amongst others,

requirement of payment of transfer fee, since the petitioner has not till

date paid the transfer fee in respect of the other 3 lease deeds and the

interest of the petitioner is protected till date by means of an interim

order, the petitioner cannot be fastened with condition of e-auction

notice requiring payment of transfer fee. As held in Krishna Rai

(Dead) through Lrs (supra), principle of estoppel cannot over-ride the

law.

55. In Udit Narain Singh Malpaharia v. Additional Member,

Board of Revenue, reported in AIR 1963 SC 786, the Hon'ble 2022:CGHC:24674-DB

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Supreme Court has held that a necessary party is one without whom

no order can be made effectively; a proper party is one in whose

absence an effective order can be made but whose presence is

necessary for a complete and final decision on the question involved in

the proceeding.

56. It is an admitted position that third party rights had been

created in favour of M/s Tirumala Balaji Smelters Private Limited and

M/s Balram Biotech Private Limited, but they are not made party

respondents to the proceedings. As such, no adverse orders can be

passed against M/s Tirumala Balaji Smelters Private Limited and M/s

Balram Biotech Private Limited in their absence.

57. Accordingly, the CSIDC is directed to execute the lease deeds

in favour of the petitioner for the remaining terms of the original lease

deeds based on the sale certificates issued. However, area of land in

respect of which third party right had been created shall be excluded

from the original area for which lease deeds were earlier executed.

58. We further direct that the registration and other statutory

charges required for the lease deeds to be executed will be borne by

the petitioner. The amounts paid by the petitioner in terms of the

interim order dated 07.05.2018 shall be adjusted towards payment of

registration fees.

59. The writ petition is allowed as indicated above.

Sd/- Sd/-

(Arup Kumar Goswami) (Parth Prateem Sahu)

Chief Justice Judge

Anu/Hem 2022:CGHC:24674-DB

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