Tuesday, September 6, 2011

High Court dismisses, with costs, industrial unit’s petition accusing govt of reneging on MoU

GANGTOK, 01 Sept: The Sikkim High Court has dismissed a writ petition filed by Sikkim Conductors, an industrial unit manufacturing aluminum conductors, and further imposed a cost of Rs. 25,000 on it for not approaching the Court with clean hands and, as the Acting Chief Justice SP Wangdi observes, the petition itself not appearing to have been preferred on an honest foundation.
The manufacturing company had accused the State government, particularly the Commerce & Industries Department, of having reneged on its promises and assurances of providing land to set up the industrial unit and other commitments included in the Memorandum of Understanding signed between the State Government and GP Dalimia, the owner of the Jharkand-based company. The accusation was made in the backdrop of the package of incentives provided by the Government of India to industrial units setting up in Sikkim [as published in its new Industrial Policy of 2002]. The concessions and financial incentives included 100% Income Tax and Excise duty exemptions for a period of 10 years from the date of commencement of commercial production.
The petitioning party had also contended that a meeting had been called by the Chief Minister in June 2004 during which the petitioner was assured of being provided 2 acres of land for setting up the proposed unit, and following this, an MoU was signed between the state and the company.
The court however noted inconsistencies between the submission of the petitioner and certain submissions made in the process. It was claimed that on the basis of certain assurances received from the State Government, the company started transporting machinery and equipment for the unit, but since the official process of land allotment was not completed, the petitioner was left with no option but to make temporary arrangements to accommodate the machinery. For this purpose and to avoid losses, it was claimed by the petitioner, that a piece of land taken on lease at Rangpo where the machinery was installed. The company had claimed that this land was “not at all viable” to permanently run the manufacturing unit.
This submission was found to be in clear conflict with the contents of a letter submitted to the Director, Industries Department in August 2004 by the company. The letter states that in anticipation (of allotment of land on lease) the company had installed its factory at Rangpo and had started trial production.
In this regard the Acting Chief Justice observed that the petitioner appeared to have proceeded with the installation of the unit on its own option on land which he assumed would be allotted to him. This was found to be in contradiction to the submission that the machinery had been kept on a lease hold land not suitable for establishing the unit.
As for the MoU, it was submitted on behalf of the State that this was only a draft agreement requiring execution in accordance with the law and that the assurances were conditional and not categorical. The claim of the petitioner was that the MoU unequivocally obliged the state to provide for the land. This, the court noted, did not appear to be correct and acceptable.
On the other hand Additional Advocate General JB Pradhan also submitted that the petitioning company would now be obliged to comply with the policy decision of the state government by a notification published in June 2010 in which it prescribed an MoU to be executed by investors before making investment in the state. This MoU requires the investing company to comply by certain rules and regulations relating to employment and land matters. The court agreed that the petitioning company would now be obliged to comply with these rules and regulations.
Finally, the court also noted that the act of the company in setting up its machinery on land which it acquired on lease on its own and on which it started trial production to be in clear conflict with the MoU signed with the state government earlier.
Not finding the petition “to be on an honest foundation”, the Acting Chief Justice stated that the petitioner sought to mislead the court by giving an impression that it was in a disadvantageous position due to the state reneging on its promises when the action of the company in relation to setting up its machinery was on the free will of the petitioner and is further falsified as the industrial unit had already started operation with trial production having started as far back as in August 2004.
Consequently, the Court found no merit in the petition and further noted that the petitioner had not approached the Court with clean hands. The petition was dismissed with costs.

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