Syntex and Another vs General Manager and Others

Rajesh H. Shukla, J.—Present petition has been filed by the petitioner under Articles 14, 19, 21 and 226 of the Constitution of India for the prayer that appropriate writ, order or direction may be issued to the Respondent No. 1 to quash and set aside the demand not dated 15.09.1990 and also to quash and set aside the recovery proceedings initiated by the respondent No. 3 and also to protect the possession of the petitioner''s unit situated at GIDC Estate, Waghodia, Dist. Vadodara, on the grounds stated in the petition. The facts of the case briefly summarized are that the petitioner No. 1 is a sole proprietor established firm, of which the petitioner No. 2 is the proprietor, who has applied for the subsidy in the scheme under "Capital Investment Subsidy Scheme For new Industries in Backward Areas" introduced by the Government vide Resolution No. 19.08.1983. The scheme provided for the subsidy, subject to the fulfillment of the conditions. The petitioner had, therefore, applied for the cash subsidy with the project report. The unit of the petitioner was established to manufacture Plastic Woven Sacks with an annual capacity of 175 mt using the power loom method. The District Industries Centre (DIC) issued the certificate of registration for grant of cash subsidy on 31.12.1984 and the District Industries Centre sanctioned subsidy to the tune of Rs. 3,94,000/-. However, after the subsidy was released, as stated in detail in the petition, the petitioner is said to have committed breach of the conditions or failed to fulfill the conditions for such cash subsidy. Therefore, the recovery is sought to be made, which has led to filing of the present petition. The reference is made to various correspondences, which includes that the District Industries Centre has called up to produce certain information and it was observed that the petitioner was not a manufacturing unit for 5 years.

Heard learned Counsel Shri Mitul Shelat for the petitioner and learned AGP Shri K. Kashyap Pujara for the respondents.

Learned Counsel Shri Mitul Shelat for the petitioner referred to the papers at length and tried to submit that the purported exercise of powers for refund are exercised as per the Clause 14(B). He has referred to the final notice dated 15.09.1990 issued by the District Industries Centre. However, he referred to the communication dated 03.04.1991 addressed to the Mamlatdar and submitted that the unit could not be closed for five years as stipulated in the conditions. He has submitted that the unit has continued and it has kept growing. He has submitted that due to change in the policy by the Government of India, the demand of the plastic begs was reduced and the jute packaging was permitted. He, therefore, submitted that the Circular Looms was easy then the Conventional Looms, therefore, they had to close down the looms making plastic fabrics for some time.

Learned Advocate Shri Shelat has, therefore, submitted that the powers are reasonably exercised that the unit was not required to be closed for five years but, thereafter, even if it is closed, which does not justify any exercise of powers for recovery or refund of the subsidy that the production is not undertaken by the petitioner. He has, therefore, submitted that the underlying object of the scheme is to give subsidy to direct the investment in the new undertaking and the petitioner has, in fact, made an investment and the unit has grown. Therefore, the refund could not be claimed. He also referred to the affidavit-in-rejoinder at page No. 126 and has referred to the chart at page No. 131 to support his submission about manufacturing activity. He, therefore, submitted that as there is no adjudication of the claim and the basic principles of rules of natural justice have been followed before the impugned decision and the same may be quashed and set aside. He also submitted that in fact the contract is not entered into and also the copy was not asked by the petitioner. He submitted that no document or opportunity of hearing was given, therefore, such a decision for recovery or refund of the subsidy is arbitrary and illegal and the same may be quashed and set aside. He referred to the communication dated 30.09.1992 addressed to the Industries Commissioner, Gandhinagar and submitted that once again the petitioner has requested the Industries Commissioner to look into the matter and submitted the details regarding payment of salary bill, payment of electricity bill, payment of sales tax, payment of excise duty, details of sales and purchase right from 1986 to 1992. He also referred to and relied upon the judgment of the High Court reported in Bhavesh Gas Suppliers Vs. District Industries Centre and Others, in case of Bhavesh Gas Suppliers through Proprietor Manjulalben C. Shah v. District Industries Centre & Ors.

Learned AGP Shri K. Kashyap Pujara for the respondents referred to the papers and pointedly referred to the agreement and Clause 14 and 15(B) providing for conditions that "The industrial unit will remain in production continuously for at least five years." He has further submitted that in fact the unit has not continued with the manufacturing activity. He has also referred to the contract produced on record (Appendix-VIII) and emphasized that "If the Government is satisfied that the subsidy to the Company/Firm is obtained by misrepresentation as to an essential fact, furnishing of false information if the Firm/Company goes out of production within Five Years after commencement, the Government may claim refund to the subsidy from the Firm/Company after giving an opportunity to the Firm/Company to be heard." He has further submitted that sufficient opportunity has been given to the petitioner, as could be seen from the correspondences. For that he referred to the correspondences as well as communication from the office of the District Industries Centre dated 15.09.1990, as final notice produced at Annexure-P-11 and submitted that there is no reference to repeated communications and final notice was issued as per the Bombay Land Revenue Code. Thereafter, the proceedings have taken place. He also referred to the communication dated 18.12.1989 addressed by the petitioner to the Joint Commissioner, District Industries Centre and submitted that it has been admittedly stated that they have got power supply disconnected just to save unit from becoming sick and to reduce financial burdens. He further submitted that it has been stated that within six to eight months, the plant is sought to be set up replacing the flat looms with circular looms.

Learned AGP Shri Pujara, therefore, submitted that as the petitioner has not continued with the production, which has also been again reiterated and stated by the petitioner in communication dated 03.04.1991 addressed to the Mamlatdar stating that unit has been closed and plant for making plastic fabrics has been closed. It is also sated that due to change in the policy, the demand has been reduced. He has, therefore, submitted that as stated in detail in the affidavit-in-reply, the petitioner has not continued with manufacturing activity for a period of five years and, therefore the claim for refund has been made under the contract. He has submitted that opportunity of hearing has been given and therefore the submission about rules of natural justice is misconceived. He submitted that the present petition may not be entertained. He has also submitted that the underlying object or the idea to provide subsidy is to increase production and the manufacturing activity, but using the cash subsidy without undertaking the manufacturing activity by getting ready made items would dis-entitle the petitioner from any such claim. Learned AGP Shri Pujara further submitted that as the proceedings have been initiated under the Bombay Land Revenue Code regarding recovery, the petitioner may take appropriate proceedings by filing the suit or under the Bombay Land Revenue Code, but the petition under Article 226 may not be available. He submitted that the recovery of the amount of subsidy cannot be stayed and therefore the present petition may not be entertained.

In rejoinder, learned Counsel Shri Shelat again referred to the papers and submitted that there is no decision about violation of any condition and therefore the present petition may be allowed.

In view of the rival submissions, it is required to be considered whether the present petition can be entertained or not.

The petition is filed for the prayers that refund of the cash subsidy, which has been made, may not be claimed. The agreement, which is at Appendix-VIII clearly provides, as stated above, that if the Government is satisfied that the subsidy is obtained by misrepresentation then the government may claim the refund of the subsidy. However, the opportunity of hearing is required to be given as provided therein. The petitioner has also been granted one after another notices as well as final notice as referred hereinabove. In spite of the notice, the petitioner has not produced any papers or details that the manufacturing activity has been continued for a period of five years, as stipulated under the contract/agreement. Further, the petitioner has admitted about certain circumstances like change in policy, reduction in demand, for which he had to close down the unit and even the electricity supply was discontinued to save the expenses. It is also stated that they would set up circular looms within six months. In fact, the revival proposal was submitted to the Bank for the advances. Therefore, the submission that the petitioner had continued with manufacturing activity for five years cannot be believed or accepted. Hence, when the manufacturing activity has not been continued, which is one of the conditions, the respondent has resorted to Clause provided in the contract/agreement that the claim of the refund of the subsidy, could be made, subject to providing an opportunity of hearing. The opportunity of hearing has been provided.

Further, as rightly submitted that when the recovery has sought to be made for the cash subsidy, which has been obtained by the petitioner, the petition under Article 226 may not be maintainable, in as much as, it involves the question of facts, which require closer scrutiny of the evidence. In any case, as stated above, if the manufacturing activity has not continued for the period of five years as per the condition, the government is entitled to recover the amount of cash subsidy. Further, though the details had been called for, the petitioner has not supplied any such details and has taken the stand that the technology is not available and it is difficult to run the industry. Therefore, the goods are purchased from the outside and they are prepared by stitching them in their own premises. This itself would suggest that manufacturing activity was not undertaken and what has been sought to be canvassed by the learned Counsel Shri Shelat that manufacturing activity is going continuously and also reliance was placed on the chart produced with the affidavit-in-rejoinder, is thoroughly misconceived. In any case, even the show-cause notice dated 05.11.1999, which is a final show cause notice produced on record, the same has not been explained satisfactorily, which has led to the proceedings of recovery of the amount. Therefore, as the petitioner has failed to explain the show-cause notice satisfactorily, and when there is a specific provision for recovery of the amount, the same cannot be said to be arbitrary or illegal, which would call for any interference under Article 226 of the Constitution of India. Having regard to the aforesaid relevant facts and the observations, the present petition cannot be allowed and deserves to be dismissed and accordingly stands dismissed. Interim relief, granted earlier, shall stand vacated. Rule is discharged.