M/S G M SUGARS AND ENERGY PVT.LTD. vs. THE STATE OF KARNATAKA

O R D E R

The petitioner is before this Court assailing the communications/orders dated 13.10.2015 and 03.11.2015 as at Annexures-L and M. By the said communications, respondent No.1 has ordered that the direction for payment of interest at 10% on the amount paid by the petitioners towards voluntary retirement of the employees of respondent No.3 is withdrawn and pursuant to the same the communication is addressed

to inform the petitioner that the amount towards such interest shall not be deducted from the lease rentals payable by them. The petitioner therefore claims to be aggrieved.

time of entering into the lease deed. In that regard it is contended that the Voluntary Retirement Scheme (‘VRS’ for short) which had been announced and the amount required to be paid as arrears to the workmen in that regard had also not been disclosed, except for stating that the amount payable is meager. However, subsequently when the farmers and employees started demanding the arrears of wages, the Co-operative Minister of the Government of Karnataka convened a meeting on 04.08.2008 wherein the petitioner is stated to have brought to the knowledge of the Minister the misrepresentation made by respondent No.3 at the time of entering the lease deed. Hence, it was resolved in the meeting that the petitioner would pay the amount of Rs.770.34 lakhs and the Managing Board of respondent No.3 had agreed to pay 10% interest on the advance payment made by the petitioner and also permitted the petitioner to deduct the said interest amount from the payment of annual lease amount. The respondent No.2 is said to have directed respondent No.3 as well as the

petitioner to implement the resolution through its letter dated 08.09.2008.

No.2 had directed that the change be effected in the lease deed as per the modalities.

However, subsequently by the impugned communications at Annexures-L and M the decision to pay the interest being withdrawn the petitioner claims to be aggrieved.

towards interest was considered. Though that is the position, the perusal of Clauses 46 and 47 of the lease deed does not indicate the liability to pay any interest.

into between the petitioner and respondent No.3. The Clause No.46 contained in the agreement is extracted and it is contended that it expressly states that no interest will be payable. This respondent also has referred the very same correspondence to indicate that the petitioner had been informed that they cannot claim interest on the amount payable by them as per the agreement. With regard to the meeting dated 04.08.2008 it is contended that the Managing Director of respondent No.3 though shown to be present, he does not have the authority to take a decision to alter the terms of the agreement. The proceedings of the meeting was never placed before the committee for ratification nor did it translate into an alteration of the term in the agreement. Thus certain observations relating to a matter which was not on the agenda for the meeting cannot bind the respondent No.3 is the contention. Hence when the Board of respondent No.3 has not agreed to pay interest at 10% and when it is not a part of the contract and the Government has no role in the matter even if any assurance is given, the same will not

bind the parties to the agreement. Even in the absence of the impugned communication the petitioner did not have the right to deduct amount towards interest and as such they cannot make out any grievance.

payment which is to be made by the petitioner in the manner as indicated therein regarding which the petitioner is claiming interest at 10% presently. For better appreciation of the issue, Clause Nos.45 and 46 are reproduced, which reads as hereunder; "45. The Lessee shall avail services of all existing employees of the factory for the crushing season 2007-08 only and pay their salaries and allowances from the date of agreement till the closer of crushing season 2007-08. The Lessor as agreed to formulate the voluntary retirement schemes on the lines of Pandavapura SSK, in consultation with the Lessee, the employees unions and also with the approval of the Commissioner for Cane Development and Director of Sugar to reduce the existing staff strength. The Voluntary Retirement Scheme (VRS) shall be finalized and got approved before 31.05.2008 and implemented before start of the next crushing season during 2008-09 i.e., before 30.09.2008. the Lessor has also agreed to provide consent letters from their employees unions and also enter in to a Memorandum of Understanding for acceptance of Voluntary Retirement Scheme and settlement of arrears of salaries, wages etc.

opt for VRS. The Lessee and the Lessor have agreed to bear the cost of compensation of VRS in the ratio of 30:70 towards Voluntary Retirement Scheme (VRS) settlement. Further the Lessee has also agreed to advance the share of the Lessor in respect of VRS settlement and gratuity payable by the Karkhane to the employees those who opt for VRS as and when required. This advance shall not bear any interest. The Lessee is entitled to deduct 50% of the lease rental from fifth year of the lease, towards the advance made by him for VRS settlement till the entire advance is recovered from the Lessor.” (emphasis supplied)

of 30:70 to be paid to such employees and it is also agreed that the share payable by the respondent No.3- the Lessor will also be paid by the petitioner- the Lessee and it would be deducted from the rent payable, in the manner as indicated in the deed. It is explicitly clarified therein that such payment will not bear any interest. The petitioner therefore as a prudent businessman, with open eyes has entered into such transaction. If any of the terms are to be altered, no doubt it can be done in accordance with law and it will take effect as provided under Section 62 of the Contract Act. In the instant case, there is no dispute to the fact that no other contract has been executed between the parties to the initial deed dated 18.02.2008.

10% interest will be payable and the proceedings is signed by the Minister alone. Such consideration has not translated into an agreement between the parties nor has it been made a part of the initial deed by altering it. The payment of the amount to the employees opting for VRS was not a new issue that arose subsequent to the parties executing the lease deed dated 18.02.2008, but formed a part of the agreement and also the mode and manner in which it would be paid and recovered is also contained in the deed. The same could not have been altered in a casual manner as it is sought to be made out. Even if it is the grievance of the petitioner that they have been made to incur the quantum of amount for which they had not bargained for if according to them all details on this aspect had not been disclosed, it is a matter of inter se dispute relating to the terms of the contract between the parties which will have to be resolved in the manner as provided under the deed.

relating to legitimate expectation. Having carefully perused the said cases, it is clear that the said decisions cannot be made applicable to the present case since as already indicated above the parties are governed by the contract where under the terms are regulated. The petitioner, even as per the terms was required to pay the proportion of the VRS amount payable by the respondent No.3, that too with the clear understanding that interest is not payable. In such event an entity who is not a party to the contract holding out any assurance contrary to the terms agreed between the parties by itself is not valid so as to raise any expectation much less legitimate expectation and to contend estoppel.

Sahara India (Firm), Lucknow -vs- Commissioner of Income Tax, Central-I and another [(2008) 14 SCC 151] and in the case of Associate Builders -vs- Delhi Development Authority [(2015) 3 SCC 49] are relied upon. Having perused the said decisions, I am of the opinion that the same will not assist the petitioner in the instant facts. Firstly, in the instant facts this Court is not examining the matter in the context of an administrative action, but is essentially a contractual matter. Secondly, though the impugned letter dated 13.10.2015 employs the word withdrawal, the same does not withdraw any benefit available under the agreement entered into between parties or otherwise. It refers only to the modalities that had been suggested being withdrawn which in any event was not binding on the parties. Thirdly, the impugned communication is not by a party to the lease deed who could neither confer any additional benefits or withdraw the benefits which are agreed to between the parties without the consent of both the parties to the deed. In that view, in the instant facts when the matter was governed by a

contract, the issue of notice will only be an empty formality nor was it required to be complied. The same therefore has not violated any existing right of the petitioner. However, as already indicated above if there are any inter se disputes relating to the terms of the deed or the performance of the terms agreed between the parties, certainly it will be open for the petitioner to avail the appropriate remedy in accordance with law. The contentions in that regard are left open and any of the observations contained herein shall not prejudice the parties. The forum concerned shall consider all aspects based on the material and evidence available before it.

In the result, the challenge to the communications dated 13.10.2015 and 03.11.2015 at Annexures-L and M fails. The petition is disposed of leaving it open to avail other remedies if open to the petitioner in accordance with law. No costs.

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JUDGE akc/bms