Simplified Explanation of the Judgment

This case arose when a private dairy company, incorporated under the Companies Act, approached the Patna High Court against the cancellation of its industrial plot allotment by the Bihar Industrial Area Development Authority (BIADA).

The petitioner company had been allotted a 24,032 sq. ft. industrial plot (Plot No. NS-11, Patliputra Industrial Area, Patna) in 2008 under a registered lease deed. It set up a dairy unit to manufacture milk, paneer, ghee, dahi, butter, and ice-cream with a daily processing capacity of about 25,000 liters. The unit was financed by banks and was operational since 2008.

Background of the Dispute

• In August 2015, the company received a show-cause notice from BIADA alleging that:
  • No production activity was visible during inspection.
  • Illegal construction (a two-storey building) had been made on the plot.
• The company responded, explaining that production was ongoing and the construction was part of legitimate expansion.
• Despite replies, on 31.03.2016, BIADA cancelled the allotment, forfeited security deposits, and ordered restoration of possession.
• The company’s appeal against cancellation was also dismissed on 27.12.2016.
• Later, in November 2018, the Development Commissioner dismissed the company’s statutory appeal on grounds that the unit was “non-functional” and directed BIADA to take possession of the plot.

Company’s Contentions

The petitioner argued that:

• Its factory had always been functional since 2008, supported by government inspections, grants, and subsidies.
• An inspection by the Industries Department in 2018 confirmed the unit was running, complete with photographs.
• It entered into a contract manufacturing agreement with Amul (Gujarat Cooperative Milk Marketing Federation) in December 2018 to produce and supply milk under the “Amul” brand in Bihar.
• Government agencies like the Pollution Control Board, Weights & Measures Department, and Chief Inspector of Boilers had all issued renewed certificates for its operations.
• The cancellation orders were arbitrary, mala fide, and aimed at harassing the company.

BIADA’s Position

• BIADA insisted that during inspection, only 40 liters of milk was found boiling in a pot and the boiler was shut down.
• According to BIADA, this showed no real industrial activity.
• BIADA argued that sufficient opportunities were given but the unit failed to demonstrate continuous operation, justifying cancellation.

Court’s Analysis

Hon’ble Justice Anjani Kumar Sharan examined extensive records and held:

• Multiple departments of the State had certified that the company was functional, renewed its licenses, and even released subsidies.
• BIADA’s stand was inconsistent with other State authorities. If the Department of Industries and other regulatory bodies recognized the unit as operational, BIADA alone could not unilaterally declare it “non-functional.”
• During the COVID-19 pandemic, even BIADA itself had issued a lockdown pass to the company treating it as an essential services unit.
• The State Government encourages investment and industrialization in Bihar. Arbitrary cancellation of leases discourages entrepreneurs and harms employment generation.

The Court noted that sudden cancellation of industrial leases not only harms companies but also affects employees, creditors, and the wider economy. Instead of abrupt cancellation, authorities should give time for revival or diversification of units.

Court’s Decision

• The High Court found the petitioner’s evidence credible and concluded the dairy unit was a “functional and running” industry.
• The orders dated 31.03.2016, 27.12.2016, and 20.11.2018 cancelling the allotment and dismissing appeals were quashed.
• The writ petition was allowed in favour of the company.

Significance or Implication of the Judgment

1. For Industrial Entrepreneurs: The decision protects bona fide industries from arbitrary cancellation of land allotments by BIADA. It reassures investors that courts will step in against unfair administrative actions.
2. For BIADA and State Authorities: The ruling is a warning to ensure inter-departmental consistency. One agency cannot ignore certifications, subsidies, and approvals given by others.
3. For Government Policy: Since Bihar is actively seeking industrial investment, this judgment emphasizes creating a supportive and predictable environment for entrepreneurs.
4. For Employment and Economy: By protecting a functional unit, the Court indirectly safeguarded jobs, local milk supply, and ancillary businesses tied to the dairy sector.

Legal Issue(s) Decided and the Court’s Decision

• Whether BIADA was justified in cancelling the industrial plot allotment citing non-functionality?
  • Decision: No. The Court found the unit was functional as certified by multiple State bodies. Cancellation was arbitrary.
• Whether inconsistency between State departments can justify punitive action against an industrial unit?
  • Decision: No. The Court held that where several departments recognized the unit as functional, BIADA could not unilaterally declare otherwise.

Judgments Relied Upon or Cited by Court

• The Court primarily relied on documentary evidence and general legal principles of fairness, consistency, and promotion of industrial policy.

Case Title

M/s Naturals Dairy Private Ltd. v. State of Bihar & Ors.

Case Number

Civil Writ Jurisdiction Case No. 22922 of 2018

Citation(s)

2021(2) PLJR 261

Coram and Names of Judges

Hon’ble Mr. Justice Anjani Kumar Sharan (Judgment dated 22.03.2021; uploaded on 22.03.2021)

Names of Advocates and who they appeared for

• For the Petitioner: Mr. Sanjay Singh, Advocate; Mr. Nikhil Kumar Agrawal, Advocate; Ms. Aditi Hansaria, Advocate.
• For BIADA: Mr. Naresh Dixit, Advocate.
• For the State: Mr. Suresh Kumar, AC to GP-1.

Link to Judgment

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