The Telegraph
Since 1st March, 1999
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Blow to surplus land sale
- High Court out-stepped limits of its jurisdiction, says SC

New Delhi, April 7: The Supreme Court today ruled that the division bench of Calcutta High Court had badly erred when it cleared the sale of 300 cottahs of “surplus land” owned by the ailing Sur Enamel and Stamping Works to the Purnendu Chatterjee-owned Chatterjee Management Services to enable the latter to set up a software park in the city.

The landmark ruling is expected to set a precedent for ailing units in Bengal, which have been trying to unlock capital locked in their surplus land to finance revival plans.

A two-member Supreme Court bench of Justices K.G. Balakrishnan and P. Venkatarama Reddi said the division bench of Calcutta High Court had “out-stepped the limits of its jurisdiction and passed orders of an extraordinary nature” when it approved the sale of surplus land of approximately 20,000 sq metres at 21 Sil Lane and 24 Christopher Road to Chatterjee Management Services for Rs 3.90 crore.

The state government had refused to grant exemption under section 20 of the Urban Land Ceiling Act and ordered Sur Enamel to hand over possession of the vested land on September 15, 1995. Two months later, it confirmed that the land now vested with the state government.

Sur Enamel, which had suspended operations in 1991, had wanted to sell the surplus land and pay off its creditors, including United Bank of India with which the assets of the company were mortgaged.

Under the plan cleared by the high court in January 1996, Sur Enamel was to pay Rs 1.80 crore to UBI, Rs 60 lakh to the workmen and an equal amount to Eastern Coal Agency, another creditor.

The division bench of the court had said the deal was a win-win situation for everyone and ought to be cleared “in view of the fact that the state is facing an acute unemployment problem.”

The high court also rejected the state’s contention that it could not grant an exemption under the land ceiling Act after the vesting of the land.

The Supreme Court upheld the state government’s appeal and said the high court had erred when it said the government had rejected the Sur Enamel on the basis of “unknown guidelines”. “The high court was not justified in describing them as ‘unknown guidelines’ because the orders containing the guidelines were very much on record,” it ruled.

The apex court said the division bench of the high court had been “largely influenced” by the proposal receiving “the imprimatur of the court”.

“We deem it appropriate to consider whether the acceptance of the proposal involving the sale of the company’s surplus land to CMS Ltd and the consequential directions issued by the high court are supportable in law,” they said.

The apex court set aside the impugned order of the high court but refrained from expressing any view on whether the application for exemption under Section 20 of the land ceiling Act should be solely dealt with from the point of view of the guidelines. It directed a division bench of the high court to consider this as well as related questions.

However, this appears to be an academic exercise. CMS did not appear before the Supreme Court and the judges said this could mean that it was “no longer interested in the deal”. After having waited for eight years, the patience of Purnendu Chatterjee, who is the largest investor in Haldia Petrochemicals, has probably worn thin.

Moreover, UBI is also no longer agreeable to abiding by the terms agreed upon earlier, under which it would have received Rs 1.80 crore in full settlement of its claim.

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