The Patna High Court has clarified how industrial plot allotments by the Bihar Industrial Area Development Authority (BIADA) should be evaluated when a unit is accused of not operating at “full capacity.” In a writ petition filed against cancellation of an industrial plot and threatened forcible possession, the Court set aside the appellate order and remanded the matter for fresh consideration with clear directions on what documents and factors must be examined. The judgment, delivered on 22 July 2024 by Hon’ble Mr. Justice A. Abhishek Reddy, emphasizes that production levels fluctuate with market conditions and maintenance schedules, and that authorities must consider objective records like electricity bills, GST returns, job-work agreements, and photographs before taking coercive action.

The petitioner had been allotted an industrial plot of 6,250 sq. ft. in the Patliputra Industrial Area for establishing a factory; a change of project was later permitted on 21.07.2022 for manufacturing stainless steel pipes, shutter pattis, and shutter laths. When the Deputy General Manager of BIADA cancelled the allotment with effect from 22.01.2024, and the Regional Manager directed the petitioner to hand over possession on 08.02.2024 — failing which forcible possession would be taken with administrative help — the petitioner approached the High Court seeking to quash both actions and to protect possession.

Before the Court, the petitioner argued that the cancellation was mechanical, passed without appreciating the detailed reply and supporting records: electricity bills, GST returns, and job-work agreements that showed the unit was operational. The petitioner’s counsel stressed that no manufacturing unit can run at 100% capacity year-round; production varies due to market demand, supply conditions, work orders, and routine maintenance. The petitioner also pointed out that there was never an allegation of a complete stoppage of production.

BIADA, on the other hand, questioned the maintainability of the writ and claimed repeated opportunities had been granted to start commercial production. BIADA read the electricity consumption to suggest that the unit was not functioning, or at least not at full production, and relied on a comparative chart showing higher electricity usage by a similarly placed unit. On that basis, BIADA sought dismissal of the writ petition.

After reviewing the record, the Court recorded several important findings. First, on the materials produced — electricity bills, GST returns, job-work agreements, and photographs — the unit stood established and was in production. Second, the Court noted that the project report indicated an installed capacity of around 75 metric tons per month. Third, and most crucially, the Court recognized the reality that production cannot remain at full capacity at all times: market fluctuations, maintenance shutdowns, and order cycles affect output. The Court observed that if the unit’s average production is more than 75%, that benchmark is acceptable and must be taken into account before any adverse action is taken.

Applying these principles, the Court set aside the appellate order and remanded the matter to the authority to re-decide the appeal. It directed the petitioner to file a comprehensive representation within four weeks, enclosing all relevant documents (electricity bills, GST returns, job-work agreements, photographs, and any other material to substantiate full/adequate production). The authority was directed to consider those records, grant a hearing, keep the Court’s observations in view, and pass a speaking order within preferably 12 weeks from receipt of the representation. Any decision must be communicated to the petitioner. With these directions, the writ petition was allowed to the extent indicated.

Overall, the judgment sends two key messages: authorities cannot treat temporary dips in output as proof of non-functioning, and cancellations affecting industrial plots must be preceded by a fair, evidence-based appraisal of objective indicators of production. This approach protects both industrial growth and administrative fairness.

Significance or Implication of the Judgment

This ruling offers practical guidance for industrial units situated in BIADA estates across Bihar and for administrative officers exercising cancellation powers:

• It acknowledges real-world production cycles. The Court’s recognition that production varies with market demand, maintenance, and work orders will help prevent over-hasty cancellations based on narrow snapshots (e.g., one or two months of lower electricity consumption).
• It sets a pragmatic benchmark. While not laying down a rigid rule for all cases, the Court’s indication that an average production exceeding 75% is “acceptable” provides a useful yardstick for both industry and regulators when assessing compliance with allotment conditions.
• It strengthens procedural fairness. By remanding the case with directions to consider electricity bills, GST returns, job-work agreements, and photographs and by mandating a hearing and a reasoned order within a time-bound schedule, the judgment prioritizes due process.
• It cautions against mechanical orders. The Court’s intervention highlights that appellate and administrative authorities must actively apply their mind to the material on record rather than rely solely on inferences from comparative charts or assumptions about “full capacity.”

In short, the judgment aims to balance the State’s interest in productive use of industrial land with industrial units’ legitimate operational realities, promoting a more predictable and fair regulatory environment.

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

• Whether cancellation and threatened forcible possession of an industrial plot could be sustained solely on the ground that the unit was allegedly not operating at “full capacity.”
  • Decision: Not without a holistic, evidence-based assessment. The Court emphasized that production can’t be constant year-round and set an “average >75%” benchmark as acceptable, subject to evidence.
• Whether the appellate order suffered from non-application of mind for failing to consider material documents like electricity bills, GST returns, job-work agreements, and photographs.
  • Decision: Yes. The appellate order was set aside and the matter remanded for fresh consideration of all such documents, after hearing the petitioner and keeping the Court’s observations in view.
• What procedure should the authority follow on remand?
  • Decision: The petitioner must file a representation within four weeks; the authority must decide the appeal preferably within 12 weeks from receipt, after considering all documents and granting an opportunity of hearing, and then communicate the order.
• How should production capacity be assessed in similar disputes?
  • Decision: Beyond theoretical “full capacity,” the authority must look at objective indicators such as electricity consumption trends, GST filings indicating sales/output, and job-work or supply agreements — and appreciate market/maintenance realities — before initiating coercive steps.

Case Title
Work Brigade Venture LLP v. The State of Bihar & Ors. (BIADA matter).

Case Number
Civil Writ Jurisdiction Case No. 2777 of 2024.

Coram and Names of Judges
Hon’ble Mr. Justice A. Abhishek Reddy.

Names of Advocates and who they appeared for
For the petitioner: Ms. Nivedita Nirvikar, Senior Advocate; Ms. Supragya, Advocate.
For BIADA: Mr. Avinash Kumar, Advocate; Mr. Ajay Kumar Mehta, Advocate.
For the State/Respondents: Government Pleader 20.

Link to Judgment
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