M/S.Sunitha Industries vs. The State Of Telangana And 2 Others

Facts

The petitioner, M/s. Sunitha Industries, a proprietorship firm established by a Scheduled Caste woman entrepreneur, was allotted Plot No. M4 (1000 Sq. Mtrs.) by the Telangana State Industrial Infrastructure Corporation (TSIIC) on 01.10.2018 for setting up a manufacturing unit. A lease agreement was executed on 20.03.2019, and possession was given on 04.07.2019. The lease terms required construction to start within six months and production within two years. The petitioner sought an extension due to health issues, the COVID-19 lockdown, and a change in business activity advised by bankers. The third respondent, TSIIC, by proceedings dated 29.10.2021, granted an extension until 03.07.2022 but imposed a penalty of Rs. 1,13,280/- (including GST) for the delay. The petitioner requested a waiver of this penalty, citing Regulation 19(1)(b) of the TSIIC Industrial Parks Allotment Regulations, 2012, and arguing the delay was beyond her control. This request was rejected, leading to the present writ petition challenging the penalty as illegal, arbitrary, and violative of constitutional provisions.

Held

The Court held that the petitioner's delay in starting commercial production was not excused by the COVID-19 pandemic or the change in business activity. These factors, while acknowledged, did not exempt the petitioner from her lease obligations. The Court found that the penalty imposed by the Corporation under Government guidelines was lawful and justified. The petitioner's claim that the penalty was arbitrary was deemed unsupported by the record, and there was no evidence of mala fide intent by the respondents. Consequently, the challenge to the penalty and the extension granted was found to be unsustainable. The Court dismissed the writ petition, finding no merit in the petitioner's arguments.

Key Issues

1. Whether the penalty imposed by the third respondent for the delay in project implementation is illegal, arbitrary, and violative of Articles 14, 19, and 21 of the Constitution of India, contrary to Regulation 19 of the TSIIC Industrial Parks Allotment Regulations, 2012? Petitioner's arguments: The petitioner contended that the delay was beyond her control due to the COVID-19 pandemic and a change in business activity. She argued that as a small enterprise under the MSME Act, the case falls under Regulation 19(1)(b) of the TSIIC Regulations, which allows for waiver or condonation of delay under certain circumstances. She further argued that the Government Memo cited by the respondents was invalid as it was not officially published. The petitioner also claimed that the respondents were blocking NOCs for bank loans, causing further delay. Respondents' arguments: The respondents (TSIIC) argued that the petitioner failed to start production within the stipulated two years, breaching the lease terms. Although the extension request was late, the Corporation granted it on payment of a delay fee. They stated that the petitioner had not started any industrial activity and was delaying the process. The respondents asserted that the penalty was imposed based on Government guidelines and was lawful and justified, and the petitioner's claim of arbitrariness was unsupported by evidence.