Bihar Industrial Investment Promotion Policy Does Encourage Manufacturing Industries But No Bar On Establishment Of Other Industries: Patna High Court

The Patna High Court recently allowed a writ petition of M/S Kaveri Liquors (P) Ltd. for change of nature of its industry to a 'hotel industry' on the land allotted by Bihar Industrial Area Development Authority (BIADA). 

The bench of Justice Sanjeev Prakash Sharma observed:

“The nature of an industry has not been limited to a particular field under the Act. Of course, the Policy, 2016 mentions of encouraging the industries, which are engaged in manufacturing, however, the Policy, 2016 essentially is for the purpose of encouraging the investment in State of Bihar. If the investments in a particular field are being allowed, it does not mean that the other industries are barred from being established"

Background

The petitioner, an auction purchaser of industrial land, filed a writ petition seeking permission to change the nature of his industry to a hotel industry. The land was earlier allotted by the BIADA to M/s Bombay Safe and Steel Works, which changed its name to M/s Jupiter Electrical Lamps, in 1971. The petitioner, who purchased the property through an auction, was handed over the property in 2009.

BIADA allowed the land to be transferred in favour of the petitioner in 2014 with the condition that the petitioner had to start production within six months of the transfer of land. However, the property fell into litigation and the lease papers of the land were not handed over to the petitioner. As a result, the petitioner did not have an opportunity to set up any industry.

The BIADA then issued a show cause notice to the petitioner in 2015 asking why the land allotted to him should not be cancelled. Subsequently, in 2022, the BIADA proceeded to cancel the allotment of land.

However, the court a case filed earlier by Kaveri Liquors quashed the order of cancellation of allotment of land and allowed the BIADA to proceed in accordance with the law after providing an opportunity of hearing to the petitioner.

Submissions

The petitioner contended that no show cause notice with regard to cancellation of allotment of land was thereafter ever issued to him, while it was the stand of the respondent that in terms of the order passed by the Court, BIADA again proceeded to give an opportunity of hearing to the petitioner and for the said purpose, he has been directed to present himself before the Director (DI), Industries Department to place his defence.

Senior Counsel for BIADA submitted that the writ petition for allowing him to change the nature of his industry to a hotel industry, ought not be examined at this stage, as the very question of allotment was under consideration before the Director (D.I.), Industries, Department. He, thus, prayed for deferring the matter for another one month till the decision is taken with regard to the question of cancellation of allotment.

He also submitted that the question of allowing the petitioner to set up a hotel industry is beyond the provisions of Bihar Industrial Investment Promotion Policy, 2016, which only allows allotment of land for the purpose of setting up manufacturing units. A hotel industry does not come within the said framework.

Verdict

Justice Sharma initially observed that an auction purchaser, purchasing land allotted by BIADA, is not bound to set up the same industry, which the original allottee was allowed to set up.

"In terms of the policy, the allottee has a right to change user of the land for another industrial purpose. In the present case, since the original lease papers of the land were not made available to the petitioner and the litigation continued till 2023, there was no occasion for him to set up any industry. The question now arises whether he can be said to have flouted the conditions of allotment," said the court. 

Justice Sharma said as per the Policy, 2016 and Bihar Industrial Area Development Authority Act, 1974, the word “industry” would have the same meaning as has been assigned to it under The (Bihar State) Aid to Industries, Act, 1956, which defines an industry as any kind of industrial work including agriculture, which may be set up by an individual, or by a cooperative, or by any limited, or by a public company, or by partners etc.

“The nature of an industry has not been limited to a particular field under the Act. Of course, the Policy, 2016 mentions of encouraging the industries, which are engaged in manufacturing, however, the Policy, 2016 essentially is for the purpose of encouraging the investment in State of Bihar. If the investments in a particular field are being allowed, it does not mean that the other industries are barred from being established,” Justice Sharma further said.

Justice Misra observed that the policy only is a manner of upliftment of a particular part of industries, however, it does not, in any manner, restrain any individual entrepreneur or any company to set up any other kind of industry, which may be institutional or otherwise.

Justice Sharma allowed the writ petition, and held, “In view thereof, the stand taken by the respondents of disallowing the petitioner to set up an industry relating to hospitality or the hotel in particular cannot be said to be beyond the provisions of the Act, 1974. The requisite licenses from the various stakeholders, of course, will have to be taken into consideration before setting up any such industry, which would include, forest, pollution etc.”

The court further held that it was not necessary to wait for the respondents to make a decision regarding the allotment issue, as the previous allotment of land to another party would not have any binding effect on an auction purchaser who has bought industrial land through auction. 

Case Title: M/S Kaveri Liquors (P) Ltd vs. The State of Bihar Civil Writ Jurisdiction Case No.12186 of 2022

For the Petitioner/s : Mr. Satyabir Bharti, Advocate Mrs. Sushmita Sharma, Advocate Mr. Abhishek Anand

For the State : Advocate Mr. Subhash Pd. Singh, GA-3 Mr. Shiv Kumar, AC to GA-3

For the BIADA : Mr. Lalit Kishore, Sr. Advocate Ms. Binita Singh, Advocate

For IDBI Bank : Mr. Shivendra Kr. Roy, Advocate

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