2020 (5) TMI 174 - HC - Customs

Establishment of Special Economic Zone (SEZ) - Cancellation of Co-developer status of the petitioner - Challenge to approval granted by the respondent No.1-Board to the proposal to grant co-developer status to the respondent No.4 in the SEZ at Dahej - Auction of plot by the bank after the default in payment of the loan taken from SIDBI by the petitioner - HELD THAT - Though the petitioner was granted approval of co-developer and a co-developer agreement was executed between the petitioner and the respondent No.3, who is a developer.the petitioner did not pay the due outstanding service charges from 2013 onwards. Moreover, thereafter plot allotted to the petitioner was sold in auction and sale certificate was issued in favour of the four persons, who are directors of the respondent No.4-Company. The Board of Approval- respondent No.1 was justified in taking the decision to approve the status of co-developer to the respondent No.4 who was handed over the possession by the SIDBI after the auction sale. Therefore, as per Section 2(f) of the SEZ Act, which defines 'Co-developer' means a person who, or a State Government which, has been granted a letter of Approval under sub-section (12) of section 3 by the Central Government. The contentions raised by the petitioner that provision of Section 10 would be applicable for the suspension and transfer of letter of Approval as a co-developer would not be applicable in the facts of the case as the petitioner has lost the status of codeveloper pursuant to the transfer of plot in question to the respondent No.4 in the auction held by the SIDBI under the provisions of the Securitisation Act - it would be necessary to refer to the provisions of Section 35 of the Act, which provides for finality of the actions taken under the Securitisation Act. Moreover, reference to Rule 2(s) of the Rules which prescribes the procedure for the purpose of suspension and transfer of letter of approval as provided in Section 10 of SEZ Act would also be of no assistance to the petitioner as no action is required to be taken under the provisions of Section 10 of the SEZ Act as the same would not be applicable. The contentions raised on behalf of the petitioner, relying upon Section 10 of the SEZ Act read with Section 2(s) is without any basis - As the petitioner had challenged the action under Securitisation Act before the Debt Recovery Tribunal, and having failed in such action of challenge to get any interim order or final order, the petitioner cannot now challenge the action of the respondent No.1 granting request of approval status of co-developer in favour of the respondent No.4. The contentions raised on behalf of the petitioner are therefore required to be rejected as it was only last attempt to see that the auction sale effected in favour of the respondent No.4 is not being given effect to by the respondent Nos.1 and 3. Though prima facie arguments canvassed on behalf of the petitioner look attractive but considering the facts of the case as well as the provisions of the Securitisation Act and SEZ Act, the same are required to be rejected - As no action is required to be taken under the provisions of the SEZ Act for suspension or transfer or cancellation of letter of Approval in favour of the petitioner which has become redundant and extinguished in view of auction sale by the SIDBI, analyzing and/or applying the provisions of Section 10, 13 and 51 of the Act would be an academic exercise. It emerges from the materials on record, the respondent Nos. 1 and 3 have only given effect to the actions taken by the SIDBI under the Securitisation Act to grant the request for approval of co-developer status to respondent No.4 subject to the conditions specified in the decision dated 04.04.2018 of the respondent No.1 - petition dismissed.

Issues Involved:
1. Validity of the decision to approve co-developer status to Respondent No. 4.
2. Compliance with procedural requirements under SEZ Act and Securitisation Act.
3. Petitioner's locus standi and right to challenge the decision.

Issue-wise Detailed Analysis:

1. Validity of the decision to approve co-developer status to Respondent No. 4:
The petitioner challenged the decision taken on Proposal No. II under Item No. 82.9 by Respondent No. 1 in the 82nd Meeting held on 04.04.2018, arguing that it was not a speaking decision/order and was made without giving the petitioner an opportunity of hearing. The petitioner contended that the decision violated Section 10 of the SEZ Act, which provides for the suspension of the co-developer agreement only under specific conditions, none of which were met. The petitioner also argued that the approval process did not consider Sections 10(1) and 10(9) of the SEZ Act, which require a show cause notice and an opportunity of hearing before suspending or transferring the letter of approval.

2. Compliance with procedural requirements under SEZ Act and Securitisation Act:
The petitioner argued that the co-developer agreement could not be canceled without following the procedures outlined in Section 10 of the SEZ Act. The petitioner also contended that the sale certificate issued by SIDBI and the subsequent actions were sub judice before the Debt Recovery Tribunal, making the approval of co-developer status to Respondent No. 4 premature and illegal. The petitioner further argued that the provisions of the Securitisation Act cannot override the SEZ Act, citing Section 51 of the SEZ Act, which has an overriding effect over other laws.

3. Petitioner's locus standi and right to challenge the decision:
The respondent No. 4 argued that the petitioner had no locus standi to challenge the decision as the possession of the plot was already taken by SIDBI and sold in auction. The respondent No. 4 contended that the decision of the Board of Approval was merely a ratification of the co-developer agreement executed by Respondent No. 3 in favor of Respondent No. 4, making the original co-developer agreement with the petitioner redundant. The respondent No. 4 also argued that the actions taken by SIDBI under the Securitisation Act were final and binding, and the petitioner had no grounds to challenge the decision of the Board of Approval.

Judgment:
The court held that the petitioner, after defaulting on the loan repayment, lost the status of co-developer pursuant to the auction conducted by SIDBI under the Securitisation Act. The court found that the Board of Approval was justified in approving the co-developer status to Respondent No. 4, who had acquired the property through a legitimate auction process. The court rejected the petitioner's contentions regarding the applicability of Section 10 of the SEZ Act, stating that the petitioner was no longer a co-developer after the auction sale. The court also noted that the actions taken by SIDBI under the Securitisation Act were final and binding, and the petitioner had no grounds to challenge the decision of the Board of Approval.

The court dismissed the petition, stating that the contentions raised by the petitioner were without basis and that no action was required under the SEZ Act for the suspension or transfer of the letter of approval, which had become redundant due to the auction sale by SIDBI. The petition was dismissed with no order as to costs.

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