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2021 (6) TMI 1121 - HC - Indian LawsNotified SEZ Area or not - 34 Acres on which the CWC constructed godown formed part of notified SEZ Area which was developed by APSEZL as Developer in terms of Special Economic Zone Act, 2005 or not - Rule 11(5) and 11(7) of the SEZ Rules - HELD THAT - The CWC in the present case, is not only in this spree of litigation against the private Respondent - APSEZL but also against its own parent, namely, the Central Government challenging its action of not agreeing with the CWC to exclude its existing area of Warehouse from the SEZ Area, which was allotted to the private Respondent - APSEZL and is being developed by them in accordance with the provisions of SEZ Act, 2005 and Rules made thereunder just because under a sub-lease given by APSEZL to CWC, it had already constructed a Warehouse there, before a much larger area of more than 5000 Acres including that warehouse area of 34 Acres was declared as a SEZ area under the special and overriding law. There are considerable force in the submission made by Mr. Kamal Trivedi, learned Senior Counsel for the Private Respondent that even though the Respondent No.3 APSEZL was not under any kind of legal obligation or contractual obligation, it made an offer to Appellant - CWC to construct at the cost of APSEZL an equal size Warehouse, outside the SEZ Area for CWC for its warehousing facility which was not permitted within the SEZ Area as per the over riding legal provisions of the SEZ Act 1951 and Rules which has over riding effect as per Section 51 of the SEZ Act - The Proposal No.3 in letter dated 9.3.2019 was also conditional and it was given only if new warehouse outside SEZ area was provided by APSEZL to CWC by taking such a warehouse on rent, purportedly to facilitate immediate shifting out of CWC from the existing warehouse within SEZ area. Section 51 of the Act provides that nothing inconsistent in any other law or even in any instrument having effect by virtue of any other law shall override the provisions of this Act. The Board for Approval has been constituted under Chapter III of the said Act to approve the proposals for creating SEZ areas, while a lower authority in the form of Development Commissioner has also been created in Chapter IV of the Act to oversee the operations of each SEZ Area - both the parties can now start working upon the mutually agreed first two proposals, namely, providing of land of the same size by the Respondent - APSEZL to Appellant CWC outside the SEZ zone at the cost of APSEZL and to construct a Warehouse of the same size at the cost of APSEZL and provide the same to CWC on mutually agreed terms and conditions, as a valid contract between the two parties on these two proposals can be deemed to have already come into existence vide letter dated 9.3.2019 and follow up letter of APSEZL and CWC Board Resolution dated 12.6.2019. Following directions are issued after considering all issues - (i) That Appellant CWC is allowed three months time from today either - (a) to seek and obtain approval as a SEZ compliant Unit from the competent authority under the SEZ Act in respect of its Warehouse facility situated in 34 acres of land in question within SEZ Area developed by Respondent APSEZL; or (b) to obtain a waiver of the conditions to comply with the provisions of SEZ Act as a SEZ Unit and the Competent Authority while considering any such application of CWC, if any filed by it, will provide opportunity of hearing to both the parties; (ii) If CWC fails to get such approval as a SEZ compliant Unit or waiver as aforesaid within aforesaid period of three months, the Respondent - APSEZL may acquire the land of the same size of approximately 34 Acres outside SEZ area as already identified and selected by CWC, for the construction of a Warehouse facility for the Appellant CWC of approximately same size as agreed between the parties under Proposal Nos.1 and 2 in the letter dated 9.3.2019 and affirmed by subsequent correspondence and Board Resolution dated 12.6.2019 of CWC and the Affidavits of the parties filed in this Court. Such acquisition of land and construction of warehouse by the Respondent - APSEZL may be completed within a period of one year after the expiry of aforesaid period of three months in Clause (i) above and same may be offered to CWC to be occupied by the Appellant - CWC on such terms and conditions in consonance with the previous Agreement between the parties vide Lease Agreement dated 2.6.2004 or under such mutually agreed terms as may be agreed afresh between the parties. (iii) Once the completed construction on the land outside the SEZ Area, already identified and selected by CWC, is offered to the Appellant - CWC, the Appellant - CWC shall vacate the existing premises of the warehousing facility on the said 34 acres of land situated within SEZ area within three months of such communication of the Respondent - APSEZL and the Appellant - CWC shall be bound to hand over the peaceful and vacant possession of existing warehousing facility and land of 34 Acres in question to the Respondent - APSEZL within such period of three months of the communication of the Respondent - APSEZL that new warehousing facility on the land situated outside the SEZ area is ready to be taken in possession and occupied by CWC. (iv) If the Appellant CWC fails to hand over the vacant and peaceful possession to the Respondent, even thereafter, the Respondent - APSEZL shall be free to approach this Court or the concerned Development Commissioner or the learned Single Judge or other authorities of the State for appropriate execution of these directions of this Court. (v) That regarding Proposal No.3 about underwriting of the future business loss of CWC on the basis of published tariffs or market tariffs or otherwise, the parties are left free to make efforts for amicable settlement of this issue between themselves with the help of Development Commissioner or the Mediation process under Section 89 of Civil Procedure Code in the High Court annexed Mediation Centre, where services of Senior Trained Mediators can be made available to the parties at the appropriate point of time. (vi) For the aforesaid period of 18 months of timeline involved in the aforesaid directions namely, three months under Clause (i) and one year or 12 months under Clause (ii) and three months for handing over the vacant possession under Clause (iii) aforesaid, the interim order granted by the coordinate bench of this Court on 11.1.2017 shall continue to operate between both the parties. (vii) That if the extension of the aforesaid time period(s) becomes very necessary for compelling reasons, both the parties shall be at liberty to apply to the learned Single Judge in the pending Writ Petition; being Special Civil Application No.184 of 2017 and the learned Single Judge keeping in view the conduct of the applicant-party may grant such further time as may be considered expedient and necessary by the learned Single Judge.
Issues Involved:
1. Validity of the communication dated 5.1.2017 by APSEZL to CWC. 2. Compliance with SEZ Act and Rules by CWC. 3. Proposals for alternative arrangements by APSEZL. 4. Interim relief and settlement efforts. 5. Legal implications of SEZ Act overriding other agreements. 6. Continuation of warehousing activities by CWC within SEZ. Detailed Analysis: 1. Validity of the Communication Dated 5.1.2017 by APSEZL to CWC: The impugned communication from APSEZL to CWC dated 5.1.2017 stated that CWC must obtain a Letter of Approval (LOA) from the Development Commissioner as a SEZ Unit or obtain specific permission to continue warehousing activities. This was based on the SEZ Act and Rules, particularly Rule 11(5) and 11(7), which prohibit leasing land in SEZ to entities without a valid LOA. CWC challenged this communication, arguing that their lease agreement dated 2.6.2004 should allow them to continue their activities without further approvals. 2. Compliance with SEZ Act and Rules by CWC: The court emphasized that SEZ Act, 2005 is a special law with overriding provisions as per Section 51, which mandates compliance for any entity operating within SEZ. Despite CWC's lease predating the SEZ notification, the court noted that CWC must either obtain the necessary approvals or seek a waiver from the Development Commissioner to continue its operations legally. 3. Proposals for Alternative Arrangements by APSEZL: APSEZL offered to relocate CWC's warehousing facility to an equivalent plot outside the SEZ area and construct a new warehouse at their own cost. This proposal was made to facilitate APSEZL's compliance with SEZ regulations. The court found this offer to be generous and in good faith. However, CWC's insistence on additional conditions, including underwriting future business losses based on their published tariffs, was deemed unreasonable and beyond the scope of the initial proposal. 4. Interim Relief and Settlement Efforts: The court noted that interim relief was granted to CWC by a Coordinate Bench on 11.1.2017, allowing them to continue their warehousing activities within the SEZ. Despite several adjournments to facilitate an out-of-court settlement, the parties could not reach an agreement, particularly on the third proposal concerning future business losses. 5. Legal Implications of SEZ Act Overriding Other Agreements: The court highlighted that the SEZ Act, 2005, with its overriding provisions, supersedes any prior agreements, including the lease agreement between CWC and APSEZL. This means that CWC's operations must comply with SEZ regulations, irrespective of their prior lease terms. 6. Continuation of Warehousing Activities by CWC within SEZ: The court provided a timeline for CWC to either obtain necessary approvals or relocate to a new facility constructed by APSEZL outside the SEZ area. The interim order allowing CWC to continue its activities within the SEZ was extended for this period. The court also left the issue of underwriting future business losses open for further negotiation or mediation. Conclusion: The court directed CWC to comply with SEZ regulations within three months or relocate to a new facility provided by APSEZL within a year. The interim relief allowing CWC to continue its activities within the SEZ was extended for this period. The court emphasized the need for compliance with SEZ Act and Rules, while also facilitating a practical solution for both parties through alternative arrangements.
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