M J Antony: Industrial sops gone awry

OUT OF COURT

Trust in the government's promises is an important factor in business confidence. However, a lot of litigation revolves around retraction of industrial incentives, change of policy or notifications withdrawing benefits with retrospective effect. Two judgments of the Supreme Court in recent weeks displayed this strife between government agencies and industries.

The first dispute was between the Haryana State Industrial Development Corporation and several firms that were allotted plots at concessional rates for setting up units. In one case, the construction of the factory building was delayed because of the faults of both parties. The firm faced financial constraints for some time and the corporation delayed the handing over of the plot and approval of the plans. Despite the corporation's contribution to the delay in the project, it took back the plot alleging breach of the terms of the contract. The firm moved the Punjab & Haryana high court that restored the plot to the firm. The corporation appealed to the Supreme Court, without result.

 

According to the court, the power of resumption and forfeiture should be resorted to as a last resort. This is all the more significant since the corporation was a government agency. The entrepreneur should be notified beforehand if any action is going to be taken against him. The plot was allotted to him in the first place after determining his capacity and bona fides. Therefore, the corporation should assign some reason if the plot is to resumed. The corporation, in cases like this, should take into consideration its own conduct. "A party cannot take advantage of its own wrong," the judgment said, indicating the contributory role of the corporation, and added: "While the state takes penal action against the allottee, its bona fide would be one of the relevant factors before an order of resumption and forfeiture of the amount deposited is passed