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2013 Supreme(Mad) 3224
HIGH COURT OF JUDICATURE AT MADRAS
V. RAMASUBRAMANIAN, J.
Chennai Petroleum Corporation Limited, (formerly known as Madras Refineries Limited)
Versus
Asset Reconstruction Company (India) Ltd., Mumbai & Others
Company Application Nos. 163 to 165 of 2011
Decided on : 12-09-2013
For the Petitioner:R. Senthilkumar, Advocate.
For the espondents:R1, N.R. Chandran, Senior Counsel for M/s. Surana & Surana, Arvind Shukla for Official Liquidator, Advocates, S. Gomathinayagam for Government of Tamil Nadu, Additional Advocate General.
Headnote:
The Court held that the mortgage created by the company-in-liquidation in favor of the bank was invalid in view of the statutory prohibition under Section 44-A(1) of the Land Acquisition Act, 1894. The Court also held that the order dated 20.12.2010 permitting the sale of the property by ARCIL was contrary to the order of the Division Bench of the Bombay High Court and hence, the order dated 20.12.2010 was recalled.
Fact of the Case:
The Madras Refineries Limited (MRL) entered into a Memorandum of Understanding with Southern Petrochemical Industries Corporation Ltd. (SPIC) for the promotion of a joint venture company by name National Aromatics and Petrochemicals Corporation Limited (AROCHEM) for the manufacture of O-xylene, Benzene and PTA. The Government of Tamil Nadu accorded administrative sanction for the acquisition of 1655.92 acres of patta and poramboke lands in the villages of Mathur, Kosapur, Amullavoyal, Vaikadu, Elanthancheri and Manali, under Part-II of the Land Acquisition Act, 1894. A careful perusal of G.O.Ms.No.648, Industries, dated 16.9.1989, would show that at the time when the said order was passed, neither SPIC nor the company-in-liquidation, was anywhere in the picture. The Government Order was actually in response to a letter of Madras Refineries Ltd., (the applicant herein) dated 14.3.1988. This is why in paragraph 3 of the said Government Order, the Government directed that the expenditure towards the cost of 1015 acres of land (out of the total extent of 1655.92 acres) including establishment charges should be collected from Madras Refineries Ltd. Again in para-11 of the Government Order, the Government directed the expenditure to be duly recovered only from the applicant herein. But after about 6 years, the Government decided to allot 168.38 acres of land in Kosapur village to the company-in-liquidation, as seen from the letter of the Government dated 22.6.1994. It is also seen from the said letter that this land was part of what was to be given to AROCHEM. The decision to divert one portion of the lands intended for AROCHEM, to the company-in-liquidation appears to have been taken by the Government at the instance of SPIC. Therefore, two conditions were imposed by this letter viz., (i) that the company-in-liquidation should bear all costs incurred in the acquisition; and (ii) that as and when AROCHEM implements the original project, the Unit floated by the company-in-liquidation should be integrated with AROCHEM backwardly.
Finding of the Court:
The Court held that the mortgage created by the company-in-liquidation in favor of the bank was invalid in view of the statutory prohibition under Section 44-A(1) of the Land Acquisition Act, 1894. The Court also held that the order dated 20.12.2010 permitting the sale of the property by ARCIL was contrary to the order of the Division Bench of the Bombay High Court and hence, the order dated 20.12.2010 was recalled.
Issues: 1. Whether the mortgage created by the company-in-liquidation in favor of the bank was valid? 2. Whether the order dated 20.12.2010 permitting the sale of the property by ARCIL was contrary to the order of the Division Bench of the Bombay High Court?
Ratio Decidendi: 1. The Court held that the mortgage created by the company-in-liquidation in favor of the bank was invalid in view of the statutory prohibition under Section 44-A(1) of the Land Acquisition Act, 1894. The Court observed that Section 44-A of the Act, in so far as its application to the State of Tamil Nadu is concerned, reads as follows:- "44-A. Restriction on transfer, etc.,-- (1) No company for which any land is acquired under this Part shall be entitled to transfer the said land or any part thereof by sale, mortgage, gift, lease or otherwise except with the previous sanction of the appropriate Government. (2) Where it is noticed or any information has been received that any land has been transferred in contravention of sub-section (1), the Government may, by order, declare the transfer to be null and void and, on such declaration, the land shall, as penalty, be forfeited to, and vest in, the Government in Revenue Department free from all encumbrances: Provided that no order under this sub-section shall be made unless the company has had a reasonable opportunity of being heard." The Court further observed that the Tamil Nadu amendment to Section 44-A should be understood in the context of a similar amendment to Section 16. In both cases, the focus of the Government was to forfeit the land and to have it vested in the Government in the Revenue Department free of all encumbrances. Therefore, if the steps contemplated under sub-section (2) of Section 44-A have not been initiated or have not been taken to their logical end, the forfeiture of the land and the vesting of the same in the Government may get postponed. But the transfer would not automatically become valid. 2. The Court held that the order dated 20.12.2010 permitting the sale of the property by ARCIL was contrary to the order of the Division Bench of the Bombay High Court and hence, the order dated 20.12.2010 was recalled. The Court observed that the Division Bench of the Bombay High Court had passed an order on 17.4.2003, not to dispossess the company from the property and not to sell the property, as per the orders of the DRT. The Court further observed that the said order prohibiting the sale of the property is stated to be in force even till date. Therefore, the applicant contends that the order dated 20.12.2010 permitting the sale of the property by ARCIL, was contrary to the order of the Division Bench of the Bombay High Court.
Final Decision: The Court allowed the applications C.A.Nos.163 and 164 of 2011 and recalled the order dated 20.12.2010 passed in C.A.Nos.1114 and 1115 of 2010. The other application C.A.No.165 of 2011 was closed, since the prayer therein is only for a stay pending disposal of the other two applications. There will be no order as to costs.
1. While the application in C.A.No.163 of 2011 is to recall and set aside the order dated 20.12.2010 passed in C.A.No.1114 of 2010, the application in C.A.No.164 of 2011 is to recall and set aside an another order passed on the same date in C.A.No.1115 of 2010. The prayer in C.A.No.165 of 2011 is to grant an interim order of injunction till the disposal of the other two applications.
2. I have heard Mr.R.Senthilkumar, learned counsel for the applicant in these applications, Mr.N.R.Chandran, learned Senior Counsel appearing for the first respondent herein, which is the Asset Reconstruction Company (India) Limited, Mr.S. Gomathinayagam, learned Additional Advocate General appearing for the Government of Tamil Nadu and Mr.Arvind Shukla, learned Official Liquidator.
3. The case on hand has a chequered history. Since the scope of the disputes raised in these applications cannot be understood, without knowing fully the factual setting, it is necessary to extract the matrix as follows:-
(a) In pursuance of a letter of intent issued by the Government of India, agreeing to issue an Industrial License for the manufacture of O-XYLENE, BENZENE and PURIFIED TERAPHTHALIC ACID (PTA), the Madras Refineries Limited, whose name later got changed as Chennai Petroleum Corporation Ltd., (the applicant herein) entered into a Memorandum of Understanding on 17.1.1985 with the Southern Petrochemical Industries Corporation Ltd., for floating a Public Limited Company, as a Joint Venture, to implement the project for which of the Government of India agreed to grant license. The name of the Joint Venture Company, to be formed by the applicant herein and Southern Petrochemical Industries Corporation Ltd., was National Aromatics and Petrochemicals Corporation Ltd.
(b) By an order dated 16.9.1989, the Government of Tamil Nadu accorded administrative sanction for the acquisition of 1655.92 acres of patta and poramboke lands in various villages, for the purpose of allotment to the Joint Venture Project. The Joint Venture project was referred to as AROCHEM.
(c) Unfortunately, the project was getting delayed due to various reasons about which we are not in no way concerned. Therefore, it appears that Southern Petrochemical Industries Corporation, floated a Company by name SPIC Petrochemicals Limited and requested the Government to allot 168.35 acres of land to them. The Government of Tamil Nadu conceded this request subject to the condition that the newly formed Company, SPIC Petrochemicals Limited remits all costs of acquisition and also on condition that after the Joint Ventre Project got implemented, the Unit started by SPIC Petrochemicals Limited would get integrated backwardly with the new Joint Venture Company.
(d) An Agreement was entered into between SPIC Petrochemicals Limited and the Government of Tamil Nadu on 27.6.1994 for the allotment of the said 168.35 acres.
(e) Upon coming to know of the fact that SPIC floated a new Company by name SPIC Petrochemicals Limited and also sought the allotment of plant, the Madras Refineries Limited (the applicant herein) filed a civil suit in C.S.No.67 of 1996 on the file of this Court, seeking a declaration that the project sought to be implemented through SPIC Petrochemicals Limited was in breach of trust and also in violation of the MOU dated 17.1.1989.
(f) Pending suit, Madras Refineries Ltd., (the applicant herein) sought an interim injunction in O.A.No.77 of 1996, to restrain SPIC from implementing the project through SPIC Petrochemicals Limited. They also sought another injunction in O.A.No.78 of 1996, restraining the SPIC from implementing the AROCHEM project.
(g) The applicant also filed a second suit in C.S.No.73 of 1996 to declare that the promoters of the Company as well as SPIC committed a breach of trust by getting 168.35 acres of land transferred to SPIC Petrochemicals Limited. Even in this second suit, the applicant prayed for two different types of interim orders of injunction in O.A.Nos.8
