Industry Cannot Be Charged For Delay In Implementation Of Project If Govt Itself Failed To Remove Encroachment From Allotted Land: MP High Court

The Madhya Pradesh High Court recently condemned the act of State authorities holding a company (SPV) liable for delay in implementation of an industrial project when the authorities themselves failed to deliver vacant possession of the entire allotted land.

A single-judge bench of Justice Pranay Verma sitting at Indore held that it is the duty of the respondents to have allotted encroachment free land for the purpose of establishment of an industry. It observed,

“If a considerable part of the land is under encroachment, it would not be possible for the industry to be set up since the building plan which has to be prepared is to be done by taking into consideration the entire land and not only vacant land. It cannot be perceived that establishment of the industry would be commenced over the available vacant land and upon its completion it would be necessary to wait for the remaining land under encroachment to be made available so that the remaining establishment can be made. That cannot be the logical manner for establishment of any industry. The same cannot be done in piecemeal. Respondents cannot contend that establishment of industry should be commenced over the vacant land and completed and thereafter the remaining industry should be established after obtaining possession of the remaining land.”

“Even as per Rule 15 of M.S.M.E. Rules, 2021, lessee has to obtain possession of the land/building and implement the project in a specified time period. Implementation of the project within the specified time period has to be done only after obtaining possession of the land / building. It is not contemplated that the project has to be implemented in parts. Implementation is only subsequent to obtaining possession. If the respondents themselves have not made possession of the land available to the members of petitioner, they cannot charge them with having failed to commence implementation of the project within the specified time period. Until and unless possession of the leased land is not delivered to the members of the petitioner so as to enable them to commence establishment of the industry, the respondents cannot insist upon them for establishing their industries.”

Background

The petitioner registered as a Special Purpose Vehicle (SVP) under the Companies Act, 1956, was allotted plots of land to 20 industries by the Micro, Small, and Medium Enterprises Department of the M.P. Government. However, after a survey was completed, it was found that 0.829 hectares of land out of a total of 3.565 hectares were under encroachment.

Following the survey, an eviction order was passed directing the encroachers to vacate their possession of the allotted lands to the petitioners. Pursuant to receiving a favorable order from the High Court against the encroachers' eviction, a notice was issued to the petitioners directing them to take necessary steps to establish industries, stating that otherwise, the allotment would be cancelled.

It was contended by the Petitioners that unless the encroachers were not removed then how could it be possible for them to establish the industry over the allotted plot for them they have paid huge amount of premium but due to encroachment on the land it is not possible for them to establish the industries.

Whereas, the respondent/state government opposed the petitioner's stand by contending that as per Rule 15 of the Micro, Small, and Medium Enterprises land Rules implementation of the project has to be done within two years. The members of the petitioner have failed to start production even after completion of one and a half year on the available land area. It is for that reason that the impugned notices have been issued to them.

Accepting the petitioner's contention, the court observed that since a considerable part of the land was under encroachment, and the entire land was not allotted to the petitioners, therefore it would be unjustifiable on behalf of the State Government to issue notice to the petitioners to establish the industry on an encroached land.

“Admittedly, considerable part of the leased land is still under encroachment and proceedings for their removal are under process. Till vacant possession of the leased land is not delivered to the members of the petitioner, the respondents are legally unjustified in issuing the impugned notices (Annexure P/1) to the members of the petitioner. The same being arbitrary and illegal cannot be sustained and are hereby quashed.”, the court held.

Accordingly, the petition was allowed.

Case Title: INDORE INTERNATIONAL TOY CLUSTER ASSOCIATION INCORPORATED UNDER THE COMPANIES ACT 2013 THORUGH ITS D Versus THE STATE OF MADHYA PRADESH AND OTHERS, WRIT PETITION No. 22735 of 2023

Click Here To Read/Download Order