M/s Laxmi Tobacco Company Vs State Of Chhattisgarh

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Digitally signed by V PADMAVATHI Date: 2026.01.05 18:35:40 +0530

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NAFR

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HIGH COURT OF CHHATTISGARH AT BILASPUR

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WPC No. 58 of 2016

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1 - M/s Laxmi Tobacco Company A Unit Of Laxmi Ventures India Private Limited, Having Its Unit At Industrial Estate, Bhilai, Through Its Authorized Signatory Mr. Nimish Sunil Agrawal, Son Of Shri Sunil Agrawal, Aged About 35 Years, R/o 1/45, Nehru Nagar, East, Bhilai Durg. Chhattisgarh

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2 - Mr. Nimish Sunil Agrawal, S/o Shri Sunil Agrawal, Aged About 35 Years R/o 1/45, Nehru Nagar, East, Bhilai Durg, Authorized Signatory Of M/s Laxmi Tobacco Company, A Unit Of Laxmi Ventures India Private Limited., District : Durg, Chhattisgarh

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... Petitioner(s)

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versus

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1 - State Of Chhattisgarh Through Chief Secretary, Mantralaya, Naya Raipur Chhattisgarh

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2 - State Of Chhattisgarh, Through Secretary, Department Of Industries And Commerce, Mantralaya, Naya Raipur District : Raipur, Chhattisgarh

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3 - Commissioner, Industries, Directorate Of Industries, Udyog Bhawan, Ring Road 1, District : Raipur, Chhattisgarh

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4 - Chief General Manager, District Industries Centre, Durg Chhattisgarh, District : Durg, Chhattisgarh ... Respondents

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(Cause title is taken from the CIS)

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-----------------------------------------------------------------------------------------------------------------For Petitioners : Shri Neelabh Dubey, Advocate (virtual mode) For Respondent/State : Shri Kalpesh Ruparel, PL

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Hon'ble Shri Justice Ravindra Kumar Agrawal Order on Board

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08.12.2025

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1. The petitioner-company in the present writ petition has challenged the order dated 24-09-2015 (Annexure P-26), passed by Respondent No.

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2, whereby the application for reconsideration of the order dated

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21-02-2011 is rejected and the order dated 25-10-2011 passed by Respondent No. 2 is affirmed.

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2. The brief facts relevant for disposal of the present writ petition are that the petitioner-company is a company incorporated under the Companies Act, 1956, which established a manufacturing unit of Cigarettes on a job work basis for ITC Limited. For the purpose of establishing the said establishment, petitioner-company obtained a lease deed for about 20,000 sq. ft. plot at Industrial Area, Bhilai, and Plot No. 17 was allotted to him on 26-05-1981 for the period of 99 years i.e. from 26-05-1981 to 25-05-2080. The petitioner-company started its production on 27-09-1986, and the permanent registration certificate No. 10/12/08/671/PMT SST was obtained from the Government of India on 05-12-1987. On 01-03-1994 and 29-01-1997, two additional leases were granted in favour of the petitioner-company and Plot Nos. 16 and 17-B, area 10,000 Sq. Ft. and 18,000 Sq. Ft. respectively, were allotted to him, for the period of 30 years. Initially, the petitioner-company was a smallscale industry; however, in the year 1991, it was updated and registered as a medium-scale industry.

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3. It is also the case of the petitioner-company that it is paying the highest tax revenue to the State Government from the period between 1986 to 2002, which came up to the tune of Rs. 10,176,366,499/-. The industrial unit ran properly up to 2002, and thereafter, some dispute arose between two brothers, who were shareholders of the petitioner-

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company. The dispute between them had become aggravated and could not be reconciled, even after various efforts, and in the year 2002, one of them approached the Company Law Board, New Delhi, for division of assets and business of the petitioner-company. In the proceeding before the Company Law Board, vide order dated 19-06-2002, the other brother, namely Mr. Anil Agrawal and others, were restrained from interfering with the working of the Bhilai unit of the petitioner-company, which was being run by Mr. Sunil Agrawal. Thereafter, Mr. Anil Agrawal started writing letters to the ITC company, and ultimately, the ITC company withdrew its contract of manufacturing Cigarettes from the petitioner-company, which resulted in to closure of the petitioner-company. Thereafter, petitionercompany filed a petition before the Bombay High Court in various proceedings, like Arbitration, Company appeal, Writ petition, etc. petitioner-company has the license for manufacturing Cigarettes and was under the apprehension that he would be engaged in a contract for manufacturing Cigarettes by any other major Cigarettes manufacturing company, because only a few companies have such a license. With the above intention, petitioner-company kept the manufacturing unit in a spruced condition, as the same is highly specialized equipment and sensitive, and ready to go into production.

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4. On 07-02-2008, Respondent No. 4 issued notice to the petitionercompany intimating about the violation of Clause 2 and 23 of the lease deeds that it was not paying any lease rent since 2001 and has stopped its production, and to rectify the breach of conditions of the lease deeds

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within a period of 60 days from the date of notice and to submit a certificate to the office of Respondent No. 2, or else, the possession of the leased plots will be taken back after cancelling the lease granted in its favour. Pursuant to the notice dated 07-02-2008, petitioner-company deposited the lease rent of Rs. 5,243/- through bank challan on 28-022008 and submitted it to the office of Respondent No. 4. In the letter dated 29-02-2008, the petitioner-company also requested Respondent No. 4 to stay the proceeding for cancellation of the lease deeds on the ground that the proceeding before the Company Law Board, New Delhi, with respect to dispute between him and his brother is pending for its consideration but on 31-03-2008, Respondent No. 4 cancelled the lease deeds dated 26-05-1981, 01-03-1994, 29-01-1997, 21-02-1994, 29-011997 and 17-04-1997, which were granted with respect to Plot Nos. 17, 16 and 17-M (in the lease deed dated 29.01.1997 Annexure P2, it is plot No.17-B) total area 48,000 Sq. Ft., on the ground that the deficiencies have not been rectified by the petitioner-company, as has been noticed on 07-02-2008.

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5. Petitioner-company filed an appeal against the order dated 31-032008 before the Commissioner of Industries (Respondent No. 3) on 1504-2008. In the appeal, the grounds taken by the company are that there exists a dispute between two brothers/ shareholders of the company, pending before the Company Law Board, and the control and management of the company was handed over to Mr. Sunil Agrawal, vide its order dated 19-06-2002 and 06-06-2005, and the petitioner-company

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is under negotiations with the ITC company. The said appeal was dismissed by Respondent No. 3 on 27-06-2008, holding that the petitioner-company is not interested in restarting its production.

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6. The petitioner-company filed a second appeal before the Secretary, Directorate of Industries (Respondent No. 2), against the order dated 2706-2008. After hearing the parties, the second appeal was disposed of by Respondent No. 2 vide its order dated 17-12-2008, holding that the petitioner-company has stopped production for a long time, and since the Company Law Board has granted control and management of the company to the petitioner, and he is trying to restart its production, 06 months time was granted to the petitioner-company to restart its production. With the above condition of restarting production within 06 months, the order dated 27-06-2008 was set aside. It was also ordered that if the company failed to comply with the condition, the order dated 27-06-2008 would become effective and operative. Despite making efforts, the production could not be started by the petitioner-company due to pending disputes. Then, Respondent No. 4, again issued an order on 22-09-2010 that the company failed to restart its production there, and the order dated 27-06-2008 has now become effective and operative and asked the petitioner-company to hand over the vacant possession of the subject plots.

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7. The petitioner-company again made an application/appeal on 2302-2011 before Respondent No. 2 against the order dated 27-06-2008. After hearing the parties and considering the facts and circumstances of

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the case, the application/appeal made by the company was rejected on 25-10-2011, holding that sufficient time of more than 03 years had been given to the company to restart its production, but it failed to do so. Thereafter, vide memo dated 03-11-2011, Respondent No. 4 again asked the petitioner-company to hand over the vacant possession of the subject plots.

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8. Against the order dated 25-10-2011, the petitioner-company approached this Court in W.P.C. No. 6810 of 2011. In the said writ petition, it was submitted that the order impugned was passed without giving any opportunity of hearing to the petitioners, and the Company had already made an application for recalling of the order, which is pending. In view of the fact that the application for recalling of the order is pending, the said writ petition was disposed of on 22-03-2012, to decide the application of the petitioner-company in accordance with law after giving opportunity of hearing to the petitioners. Thereafter, on 07-06-2013, petitioner-company made an application before the respondent department, that the Bombay High Court permitted Mr. Sunil Agrawal to run the petitioner’s industry, and now the petitioner-company wants to restart the Printing and Packaging unit in the said premises, and it undertakes to restart it within 04 to 06 months, and it already procured the machinery. In the meantime, petitioner-company received a letter intimating the date of hearing of 01-07-2014 in the appeal filed by it before the State Government. On 01-07-2014, the petitioner-company again made a representation before the authorities that it may be

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permitted to restart the Printing and Packaging unit of the Company by inserting the nature of the said industry, along with the Cigarette manufacturing industry, in the lease deed. Another representation was made on 03-02-2015 to the authorities for the same.

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9. In compliance of the order dated 22-03-2012 passed in W.P.C. No. 6810/2008, the application made by the petitioner-company was decided by Respondent No. 2 on 24-09-2015, and it was rejected holding that the production of the petitioner-company had been stopped for a long time, and despite the time granted to him, the production could not be restarted. The production of the petitioner-company was stopped since 2002, and the application for restarting of the Printing and Packaging unit is also rejected. Despite being given various opportunities, it could not restart the industry, and the land of the State Government remained unused for a long time, which is against the interest of the State Government. Hence, this petition.

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10. The State Government filed its return and denied claim of the petitioners. It is pleaded in the return that three plots of No. 16, 17 and 17-M were allotted to the petitioner-company under the conditions mentioned therein the lease deeds, and the petitioner-company was bound to comply with the conditions of the lease deeds. When the petitioner-company violated Clauses 2 and 23 of the leased deed, notice was issued to him on 07-02-2008. Respondent No. 4, dissatisfied with reply of the company, canceled allotment of plots vide order dated 27-06-

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In the appeal filed by the petitioner, on 17-12-2008, Respondent No. 2 sympathetically considered the difficulties of the petitionercompany, and granted 06 months’ time to restart the production of the Cigarette industry, failing which the order dated 27-06-2008 would be effective and operative. The order dated 17-12-2008 has never been challenged by the Company, and it attained its finality. After a lapse of about 02 years, the petitioner-company made an application for change of its business over the leased plots, i.e. for starting Printing and Packaging unit, and 45 days’ time was sought, which was also rejected on 25-10-2011. After the order dated 22-03-2012, passed in W.P.C. No. 6810/2008, opportunity of hearing was provided to the petitionercompany, and the application for recalling of the impugned order was again rejected on 24-09-2015, by passing a detailed order. While passing the order dated 24-09-2015, it was found by the authority that production had been stopped since 2002; there is no machinery at all, and even there is no electricity connection. The huge Industrial area of Bhilai has remained unused for a long time which is huge financial loss to the State Government. Therefore, there is no merit in the petition, and the same is liable to be dismissed.

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11. Learned counsel for the petitioner-company would submit that the petitioner-company still has the Cigarette manufacturing license, which is generally not granted in favour of anyone. Petitioner-company had paid the highest tax revenue to the State Government between 1986 to 2002, which comes to more than one thousand crore rupees. The company is

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still ready and willing to restart the manufacturing unit of cigarettes, but due to dispute between the brothers, it has not been done to date. By cancellation of lease granted in favour of the petitioner, the State would be in deep financial loss, and it would not be entitled for such a huge tax/revenue from the petitioner’s industry. It would also be submitted that the State Government has various lands and projects, and there is no loss to it if the subject plots remain as they are, in favour of the petitionercompany. Ultimately, the State Government would definitely allot the subject plots to any other industry, then why not to the present petitioner? He would also submit that the petitioner-company is also willing to start his printing and packaging unit in the subject plots, for which he also made an application. Learned counsel for the petitioner-company referred to various intermittent correspondence that was made between the petitioner-company and respondent Nos. 2 to 4, canvassing the point that Respondent No. 2 was never intended to cancel the lease of the petitioner-company and granted 06 months to restart the production. There is no allegation that the lands were used for any purpose other than for what they have been allotted. Reason for closing the production is something beyond control of the petitioner, and the authorities have also found genuine and satisfactory reason for closing the production, yet only 06 months’ time was given, which is arbitrary. It was also contended that the grounds on which the application/appeal filed by the petitionercompany was rejected are not sustainable, as the request of the petitioner-company to start printing and packaging unit was rejected by the authorities. The ITC company is still ready to give contract to the

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petitioner-company for manufacturing Cigarettes. Therefore, there is sufficient ground in the petition to grant relief to the petitioner, and the same may be allowed.

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12. Per contra, learned counsel for the respondents/state opposed the submissions of the learned counsel for the petitioner-company and submits that the production of the petitioner’s industry has been stopped since 2002, and there is no possibility of restarting the said unit. There is no machinery and electricity connection. Petitioner-company wants to keep the land with him without any useful purpose. Despite being granted time, he could not start the production at the subject plots, which clearly shows that he is not interested in restarting the production of his industry, and such a huge piece of land in an industrial area, Bhilai, remained unused for a long time. The appeals and applications filed by the petitioner-company have been repeatedly rejected by the authorities, and there is no bona fide on the part of the petitioner-company to leave the subject plots with him. Payment of high tax or revenue to the State Government may not be a ground to retain the subject plots allotted to the petitioner. The very purpose is to keep the subject plot useful for some constructive purpose. There is a continuous violation of Clauses 2 and 23 of the lease terms, and the petitioner’s lease is liable to be terminated, which has rightly been done by the authorities, and the writ petition is liable to be dismissed.

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13. I have heard learned counsel for the parties and perused the material produced in the writ petition by the parties.

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14. Having heard the contentions put forth by the counsel appearing on either side, what stands admitted from the pleadings made by the petitioners is that the petitioner-company was granted lease for plot Nos. 16, 17 and 17-M, at Industrial Area, Bhilai, by way of three lease deeds executed on 26-05-1981, 01-03-1994 and 29-01-1997. The petitionercompany set up a manufacturing unit of Cigarettes in collaboration with the ITC company, and started production thereon. Petitioner-company continued his business till 2002, and because of some dispute between the two brothers, who are shareholders of the company, production unit of the petitioner-company was closed down, and since then, company is not able to resume the production unit again, in spite of numerous opportunities being granted.

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15. The closure of production for six months or more, is considered to be breach of the conditions of the lease. Relevant condition of the breach, and its consequences are given in the lease deed dated 16-051981 in Clauses 2, 18 and 23, which reads as under:-

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“2. The lessee having paid to the lessor for the said land the advance rent as prescribed under Rule 10 of the Madhya Pradesh Industries (Allotment of shades, Plots and land) Rules, 1974 (herein after referred to as the said Rules) he shall pay to the lessor for the said land premium of Rs. 735.00

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(Rupees Seven Hundred Thirty Five) only and three years rent and one year’s rent in once of educated unemployed as security deposit within thirty days of the execution of this deed. Thereafter, during the terms of the lease the lessee shall pay to the lessor the annual ground rent of Rs. 73.50 (Rs. Seventy Three and paise fifty) only and such other sums as may be determined in accordance with clause 3 hereunder on or before the 10th day of April of each year in the office of the General manager, District Industrial Centre, Durg or at such place of places as the General Manager of Industries from time to time direct.

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The lessee shall continuously run during the period of lease the factory for which the land is allotted. Closure of the factory for a continuous period exceeding 6 months without proper reason to the satisfaction of the allotting authority shall be considered as a breach of the condition.

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On the expiry of the lease period or termination of the lease due to the breach of the condition of the lease deed, the lessor will have the right of re-entry over the land. On such reentry, the lessor may pay to the lessee the premium/cost of acquisition paid by the lessee at the time the land was leased out to the lessee or the market value, whichever is less. The lessor may also subject to clause 13 here of pay to the lessee

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the cost actually incurred by the lessee on the constructions standing on the land less their deprecated value as determined by the Chief Engineer (D & R) Public Works Department or the market value on the date of re-entry, as estimated by the Chief Engineer, Public Works Deptt. (D & R), whichever is less in once the lessor decides to take possession of the construction also. In case the lessor does not propose to take over the construction the lessor shall be bound to remove them within the period fixed by the lessor. If the construction are not removed within the period so fixed the construction shall lapse to the lessor and no compensation on their account will be payable to the lessee by the lessor.”

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16. In the lease deed dated 01-03-1994 and 29-01-1997, clause 2 remains as it is. Clauses 18 and 23 of the lease deed dated 16-05-1981 come in Clauses 23 and 27, respectively, of the lease deed dated 01-031994 and 29-01-1997 but the amount of lease rent and security deposit have been changed.

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17. The petitioner-company had been granted 06 months’ time by Respondent No. 2 by its order dated 17-12-2008, to resume its production, and 06 years is quite a long time for any establishment to take steps for ensuring that the lease conditions are not violated. The contention of the petitioner-company is that it has a cigarette manufacturing license, which is rarely granted to a person because

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conditions for grant of such a license are too strict, and the company may restart its production and negotiations with the ITC company are going on, such excuse is not tenable for the reason that even if the ITC company has terminated its agreement with the company, any other company can enter into agreement with it, who is engaged in Cigarette manufacturing business, but the company does not get any offer from any other company. The lease of the petitioner-company does not depend upon its contract with the ITC company, rather it depends upon the running production, either its contract with the ITC company or with any other company. Further, as per contention of the petitioner-2 himself, the Company Law Board, New Delhi, as well as the Bombay High Court has passed an order in his favour and handed over the control and management of the company, so that there may not be any impediment for restarting the production of the petitioner-company. Moreover, what is also reflected from the pleadings is that there have been numerous correspondences in the form of notices issued to the petitioner, applications made by him and orders passed by the authorities, and when the petitioner-company could not resume its production unit operational, the lease granted to it was cancelled on 3103-2008. The matter was ultimately referred to Respondent No. 2 in the second appeal, and 06 months’ time was granted to restart the production, or else, the order dated 27-06-2008 would become operative, yet the production of the company could not be started.

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18. It further reflects from para 4 of the order dated 24-09-2015 (Annexure P-26) that when the petitioner-company could not restart its production unit of cigarettes, it obtained permission to start the Fabrication unit from the leased plots, but the same was also closed. Thereafter, an application was made on 21-02-2011, for permission to start a Paper Slitting unit (Printing and Packaging unit), but the request has also been rejected. There is no machinery in the Cigarette manufacturing unit and no electricity connection, which clearly demonstrates that the Cigarette production unit of the petitioner-company is completely closed, and the company is not required the leased plot any more. The production of the Cigarette manufacturing unit of the petitioner-company has been closed since 2002.

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19. Perusal of the lease deed executed between the parties would clearly show that there is specific mention in Clause 18 of the lease deed dated 16-05-1981 and Clause 23 of the lease deeds dated 01-03-1994 and 29-01-1997 that closure of the factory continuously for a period exceeding six months without any proper reason will be considered to be breach of the conditions of the lease deed. Admittedly, the appellant’s factory has been closed since 2002. Notice in terms of the lease deed was issued to the appellant on 07-02-2008, but no acceptable or reasoned reply was filed by the petitioners, which led the authorities to pass the order dated 31-03-2008, cancelling the lease deed. In order dated 17-12-2008 passed in the second appeal filed by the petitioners, respondent No.2, while partly allowing the appeal, granted six months’

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time to the petitioner-company to restart factory and production, but it has not utilized the said opportunity granted to it by respondent No.2. More so, when the order passed in the second appeal by respondent No. 2, which was a conditional order, making it clear that if the factory and production not restarted within six months, then the order dated 27-062008 of the first appeal affirming the cancellation of lease deed, will automatically come into force. As per submission of the learned counsel for the petitioners himself, factory and production could not be started within a period of six months; hence, the order of cancellation of the lease deed came into force, and the order of cancellation of the lease of lands allotted to the petitioner-company became effective and operative after expiry of six months from 17-12-2008 itself.

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20. All the aforesaid factual matrix of the case, particularly, various notices issued to the petitioner-company, application made by it and orders passed by the authorities enclosed with the writ petition, would clearly demonstrate that the petitioner-company had been granted sufficient opportunity, and time before the lease was ordered to be cancelled, and even after its cancellation, time was granted to restart the Cigarette manufacturing unit but the petitioner-company failed to restart the same. Instead, it wants to change the nature of the business. After granting permission once on 11-02-2009 for the fabrication business, company now wants to change it to a printing and packaging unit, which was previously rejected. There is no machinery, and no electricity connection was found by the authorities. The allotted land has remained

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unused for a long time, which is contrary to interest of the State Government. Though, the stack of revenue paid by the petitionercompany may be a relevant consideration, but the fact remains that since 2002, the state has not received any revenue from there, and in view of the dispute between the brothers, the subject land cannot be kept unused for indefinite period, that too without any tax or revenue. In these circumstances, the order dated 24-09-2015 (Annexure P-26) passed by Respondent No. 2 does not suffer from any infirmity or arbitrariness.

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21. However, after finalization of the dispute between the brothers/shareholders of the petitioner-company, if occasion arises and the petitioner-company still willing to restart cigarette production, petitioner-2 may make an application to the respondent authorities, for grant of lease for its industrial unit. In such an eventuality, the authorities concerned shall consider the application in accordance with law, keeping in view the present lease granted to the company, subject to any other impediment, if any.

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22. Accordingly, the writ petition being devoid of merit, deserves to be, and it is hereby dismissed.

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Sd/- (Ravindra Kumar Agrawal) JUDGE

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padma

M/s Laxmi Tobacco Company v. State Of Chhattisgarh

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M/s Laxmi Tobacco Company v. State Of Chhattisgarh

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