Allowed

Moti Enterprises v. Union of India

Gujarat HC4 Oct 2019SCA/5458/2014

Case brief

AI extract

What is this about?

The High Court allowed the petition in part, directing the respondents to consider the petitioner's claim for a capital subsidy under the Credit Linked Capital Subsidy Scheme. The court held that the petitioner, who imported the machine in March 2012, is entitled to the benefit as the retrospective deletion of 'etc.' in the August 2012 Office Memorandum could not apply to the pending claim.

What did the court decide?

The petition is allowed in part. The respondents are directed to consider the petitioner's case under the CLCSS provisions and grant the benefit of capital subsidy within three months.

Moti Enterprises Vs Union of India — Banking and Recovery | Gujarat HC (2019)

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C/SCA/5458/2014 JUDGMENT

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/SPECIAL CIVIL APPLICATION NO. 5458 of 2014

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FOR APPROVAL AND SIGNATURE:

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HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?

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4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?

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MOTI ENTERPRISES & 1 other

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Versus

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UNION OF INDIA & 2 other

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Appearance:

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MR UDAYAN P VYAS(1302) for the Petitioner Nos. 1, 2 MR DEVANG VYAS(2794) for the Respondent Nos. 1, 2 MR KM PARIKH(575) for the Respondent No. 3

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CORAM: HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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Date : 04/10/2019

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ORAL JUDGMENT

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Rule returnable forthwith. Mr.Devang

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Vyas, learned ASG waives service of notice of rule on behalf of the respondent nos.1 and 2. Mr. K. M. Parikh, learned advocate waives service of notice of rule on behalf of the respondent no.3.

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Having regard to the controversy arising in the present petition in narrow compass, with the consent of the learned advocates, the matter is taken-up for hearing.

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By this petition under Article 226 of the Constitution of India, the petitioners have prayed for the following reliefs.

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“(A) That this Hon’ble Court be pleased to issue writ of mandamus or writ in the nature of mandamus or any other appropriate writ, order or direction declaring the action of the respondents in denying the benefit of subsidy in respect of import of “CNC AC Servo Turret Punch Press” Machine under Entry XXVI of Credit Linked Capital Subsidy Scheme as illegal, unlawful, arbitrary, discriminatory and violative of fundamental rights guaranteed under Article 14 and Article 19(1)(g) of the Constitution of India;

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(B) That this Hon’ble Court be pleased to issue writ of mandamus or writ in the nature of mandamus or any other appropriate writ, order or direction declaring Clarification No.1(29) CLCSSClarification-11-12 dated 2-8-2012 issued in the form of Office Memorandum by the Office of Development Commissioner, Ministry of Micro, Small and Medium Enterprises, Government of India null, void, illegal, unlawful, arbitrary, discriminatory and violative of fundamental rights guaranteed under Article 14 and Article 19(1)(g) of the Constitution of India;

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(C) That this Hon’ble Court be pleased to issue writ of mandamus or writ in the nature of mandamus

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C/SCA/5458/2014 JUDGMENT

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or any other appropriate writ, order or direction commanding the Respondents herein to grant the benefit of subsidy to the Petitioners in respect of import of “CNC AC Servo Turret Punch Press” Machine under Entry XXVI of Credit Linked Capital Subsidy Scheme;

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(D) Pending admission, hearing and final disposal of this Petition, this Hon’ble Court be pleased to direct the Respondents to grant and disburse the amount of subsidy in favour of the Petitioners in respect of import of “CNC AC Servo Turret Punch Press” Machine under Entry XXVI of Credit Linked Capital Subsidy Scheme;

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(E) That this Hon’ble Court be pleased to pass such further and other orders as the nature and circumstances of the case may require;

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(F) That this Hon’ble Court be pleased to award the cost of this Petition.”

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The petitioner firm is carrying on its business at Surat for manufacturing and trading of electric switches or any of electric instruments and spares since the year 1981.

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4.1 The petitioner firm applied for registration as Small or Medium Enterprise with the District Industries Center, Surat on 21^st January 2010. The petitioner firm is allotted Entrepreneur Memorandum Number (Part-II) 24-02211-19444 categorizing as micro enterprise as manufacturer of MCB Distribution Board rewirable distribution board etc.

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4.2 It is the case of the petitioner firm that with a view to facilitate technology

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upgradation to small scale industrial units, the respondent no.1 Ministry of Micro, Small and Medium Enterprise of the Government of India issued revised guidelines on Credit Linked Capital Subsidy Scheme (for short ‘CLCSS’) for technology upgradation pertaining to various technology needs, products and sub-sectors.

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4.3 According to the petitioner, amongst the sub-sector specified in the scheme, one of the sub-sector covered is “General Engineering Work”had Entry (XXVI) of the scheme. The relevant extract of which is as follows.

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Sr. No.	Activity	Technology Need	Cost (Rs. Lakhs)	Advantages
1	General Engineering for Multiple use:- Hand tools, Surgical Equipment, Bicycle parts, Auto parts, Machine tools, Precision machined parts.	General Engineering Works for Multiple Use. CNC cut wire machine EDM, CMC, lathe along with notary table attachment, CNC mailing, CNC drilling machine etc. b) Inverter based Welding Machine.	5-55 Prevailing market price.	Modification and results in efficiency gain, greater market acceptabilit y, skill improvement and better, working environment. Better design, faster response time, extremely low ripple, smaller in size & lighter in weight hence portable, more efficient during welding, better weld quality and energy efficient operation.

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4.4 The petitioner firm with a view to upgrade its technology and with a view to introduce skill improvement and efficiency in the process of cutting of metal sheets, which is one of its main activity, applied for financial assistance in the form of term loan of Rs.95.17 Lacs from Bank of Baroda Udhna Brach, Surat, which was one of the nodal agency under the CLCSS so as to import CNC AC Servo Turret Punch Press machine. The respondent no.3 bank of Baroda by letter dated 25^th January 2012 sanctioned the term loan of Rs.95.17 Lacs under CLCSS. The petitioner firm thereafter imported the punch press machine from Japan.

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4.5 It is the case of the petitioner that as the petitioner was not given capital subsidy by the respondent no.3 though the said machinery was imported, installed and made operational since February 2012, the petitioner inquired for the same.

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4.6 It appears that the respondent no.3 by letter dated 20^th August 2012 informed the petitioner that the CLCSS claim lodged by the petitioner firm is rejected for the reason that the term loan is not sanctioned under the CLCSS as the relative clause not incorporated in the sanctioned letter and the machine imported by the

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petitioner is not approved under the head “general engineering work”.

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4.7 The petitioner thereafter, by letter 30^th August 2012 requested the respondent no.3 for disbursement of the capital subsidy as the petitioner has made an application and submitted other documents for grant of term loan under CLCSS and based on such application, the respondent no.3 bank had sanctioned the term loan. It was pointed-out in the said letter that entry related to “general engineering work” specifies the name of some machines and also specifies “etc.”along with the name of the machines which means that the machinery other than those specifically specified in the said entry is also covered if it is used for“general engineering work” for multiple use and therefore, the punch press machine installed by the petitioner firm is covered under the CLCSS.

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4.8 However, the respondent no.3 relied upon the letter dated 2^nd August 2012 issued by the respondent no.1 Ministry, whereby it was clarified that the word “etc.” in the column technology need of sub-sector (xxvi) general engineering work is deleted and therefore, the petitioner firm is not eligible for subsidy in respect of the punch press machine imported from

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Japan.

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4.9 The petitioner by letter dated 27^th September 2012 pointed-out that the petitioner has imported the machine in the month of March 2012 and therefore, the machinery purchased before 2^nd August 2012 is eligible for subsidy. But, the respondent no.3 bank relied upon the letter dated 9^th October 2012 received from the SME Banking Division from its head office at Bombay and informed the petitioner by letter dated 23^rd November 2012 that the subsidy is not admissible in respect of the capital CNC AC Servo Turret Punch Press machine as it is not included in CLCSS booklet.

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4.10 It appears that the petitioner thereafter, addressed a letter dated 23^rd November 2012 to the Deputy Director of the Development Commissioner (MSME) New Delhi to consider the claim of the petitioner for subsidy under CLCSS and to instruct the respondent no.3 nodal agency for grant of subsidy to the petitioner firm on the ground that the word “etc.” has been deleted w.e.f. 2^nd August 2012 whereas the petitioner had purchased the machinery before the said date.

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4.11 It appears that the Deputy Director of the Development Commissioner (MSME), New Delhi by

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letter dated 20^th February 2013 informed the petitioner that the machine imported by the petitioner cannot be considered for giving the subsidy under CLCSS after due consultation of the technical division.

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4.12 The petitioner thereafter, sought information with regard to the opinion given by the technical division under the Right to Information Act, 2005 and availed the copy of the office memorandum dated 2^nd August 2012 issued by the office of the Development Commissioner, Ministry of Micro, Small and Medium Enterprises, Government of India by which the word “etc.” is deleted for sub-sector (xxvi) general engineering work except the information.

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4.13 The petitioner, therefore, being aggrieved by the denial of subsidy under CLCSS has filed this petition with aforesaid prayers.

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Mr. Uday Vyas, learned advocate for the petitioners would submit that the rejection of claim of the petitioner firm for subsidy on the basis of the clarification as per the office Memorandum dated 2^nd August 2012 cannot be pressed into service as the machines imported by the petitioners was much prior to 2^nd August 2012 and therefore, the deletion of the word “etc.”from

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the scheme cannot be applied retrospectively to the case of the petitioner firm. Mr. Vyas would also submit that machines imported by the petitioners is very similar to an analogues to machine specified in entry (xxvi) of the CLCSS and perform the same functions which the machines specified in the said entry perform and though the benefit of subsidy have been extended entrepreneurs whose machine fall under the entry (xxvi), but the same have been denied to the machines imported by the petitioner which is similar and analogues to performing the same functions whereby discriminating the case of the petitioner resulting into violation of Article-14 of the Constitution of India.

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Mr. Vyas, would submit that the Micro, Small and Medium Enterprise Development Act, 2006 has been enacted with the principle objective to provide for facilitating the promotion, development and enhancing the competitiveness of micro, small and medium enterprises in India and accordingly the Government of India has framed the subsidy scheme being CLCSS. It was therefore, submitted that the rigid and literal interpretation should not be made with regard to the grant of capital subsidy to the petitioner firm.

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On the other hand, learned ASG vehemently opposed the petition. Learned ASG relied upon the averments made in affidavit-inreply filed on behalf of the respondent nos.1 and 2 and submitted that the respondent no.3 nodal agency has rejected the proposal of the petitioner and only role of the respondent nos.1 and 2 is to sent the proposal of the petitioner to the nodal agency for implementation and release the subsidy.

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It was pointed-out that the respondent no.3 nodal agency has not sent the claim of the petitioner to the respondent no.2 as the claim of the petitioner is rejected by the nodal agency and the petitioner was informed by the respondent no.2 that the machine imported by the petitioner being “CNC machine” is not eligible for subsidy under CLCSS.

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With regard to the contention that the Office Memorandum dated 2^nd August 2012 was issued subsequent to the import of the machine, it was submitted that the office memorandum dated 2^nd August 2012 was issued with reference to query received from the Canara Bank, Banglore that whether CNC punch machine is eligible under the word “etc.” under sub-sector (xxvi) general engineering work or not and in that context the

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clarification is issued that such machine is not covered by CLCSS and in order to clarify and to avoid confusion the word “etc.” is deleted. It was therefore, pointed-out that the office memorandum dated 2^nd August 2012 is clarificatory in nature and therefore, it would apply from the date of the scheme so far as the CNC punch machine imported by the petitioner firm.

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Mr. Parikh, learned advocate for the respondent no.3 submitted that as the respondent nos.1 and 2 have clarified that the machine imported by the petitioner firm is not eligible for subsidy under CLCSS, the respondent no.3 bank being nodal agency has rightly rejected the claim of the petitioner for subsidy.

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Having heard the learned advocates for the respective parties and having gone through the material on record, in order to consider as to whether the petitioner is entitled to subsidy under CLCSS, it would be necessary to refer to various clauses of the “Credit Linked Capital Subsidy Scheme”known as CLCSS for technology upgradation of small scale industry, which is produced on record by the petitioner at AnnexureB.

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“2. Objective

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2.1 The revised scheme aims at facilitating technology upgradation by

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providing 15 per cent upfront capital subsidy with effect from the 29^th September, 2005 (12 per Cent prior to 29.09.2005) to SSI units, including tine, khadi, village and coir industrial units (hereinafter referred to as SSI units), on institutional finance availed of by them for induction of well established and improved technologies in the specified sub-sectors/ products approved under the scheme.

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3. Scope of scheme

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3.1 The scheme would cover the following technology needs/ products/sub- sectors:

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xxvi) General Engineering Works

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4. Nodal Agencies

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4.1 The Small Industries Development Bank of India (SIDBI) and the National Bank for Agriculture and Rural Development (NABARD) will continue to act as the Nodal Agencies for the implementation of this scheme.

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4.2 As decided in the 5^th meeting of the Governing and Technology Approval Board (GTAB) of the Credit Linked Capital Subsidy Scheme (CLCSS) held on February 17, 2006 the following nine Public Sector Banks/ Government Agencies have also been inducted as nodal banks/agencies for implementation and released of capital subsidy under the CLCSS:

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Sr. No.	Name of Bank / Agencies
1.	State Bank of India
2.	Canara Bank
3.	Bank of Baroda
4.	Punjab National Bank
5.	Bank of India
6.	Andhra Bank
7.	State Bank of Bikaner & Jaipur
8.	Tamil Nadu Industrial Investment Corporation
9.	The National Small Industries Corporation Ltd.

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Eligible beneficiaries 6.1 The eligible beneficiaries include sole Proprietorships, Partnerships, Cooperative societies, Private and Public limited companies in the SSI sector. Priority shall be given to Women entrepreneurs.

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7. Types of units to be covered under the Scheme

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i) Existing SSI units registered with the State Directorate of Industries, which upgrade their existing plant and machinery with the state-of-the-art technology, with or without expansion.

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ii) New SSI units which are registered with the State Directorate of Industries and which have set up their facilities only with the appropriate eligible and proven technology duly approved by the GTAB/TSC.

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Eligibility Criteria i) Capital subsidy at the revised rate of 15 per cent of the eligible investment in plant and machinery under the Scheme shall be available only for such projects, where terms loans have been sanctioned by the eligible PLI on or after September 29. 2005. Machinery

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purchased under the Hire Purchase Scheme of the NSIC are also eligible for subsidy under this Scheme.

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ii) Industry graduating from small scale to medium scale on account of sanction of additional loan under CLCSS shall be eligible for assistance.

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iii) Eligibility for capital subsidy under the Scheme is not linked to any refinance Scheme of the Nodal Agency (ies). Hence, it is not necessary that the PLI will have to seek refinance in respect of the term loans sanctioned by them from any of the refinancing Nodal Agencies.

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iv) Labour intensive and/or export oriented new sectors/activities will be considered for inclusion under the scheme.

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Procedural Aspects i) All the eligible PLI (excluding the new nodal banks/ agencies) will have to execute a General Agreement (GA) for availing capital subsidy under the scheme, irrespective of the fact whether refinance is availed by them or not.

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ii) The PLI may have the flexibility to execute the GA with either of the nodal agencies or with both the nodal agencies for providing subsidy to the eligible beneficiaries under the scheme. However, in the latter case, while claiming the subsidy from one nodal agency, the PLIs will have to give the undertaking to the nodal agency that they have not claimed subsidy under CLCSS in respect of the beneficiary unit from the other nodal agency (as the case may be).

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iii) After sanction of the assistance, the eligible PLI will get an agreement executed with the concerned SSI unit on behalf of Government of India (GOI). Format of the agreement executed by the eligible PLI with the SSI unit is provided in Appendix III.

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iv) The eligible PLI would obtain application for assistance under the CLCSS in the prescribed form provided in Appendix-IV.

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xxvi) General Engineering Works.

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Sr. No.	Activity	Technology Need	Cost (Rs. Lakhs)	Advantages
1	General Engineering for Multiple use:- Hand tools, Surgical Equipment, Bicycle parts, Auto parts, Machine tools, Precision machined parts.	General Engineering Works for Multiple Use. CNC cut wire machine EDM, CMC, lathe along with notary table attachment, CNC mailing, CNC drilling machine etc. b) Inverter based Welding Machine.	5-55 Prevailing market price.	Modification and results in efficiency gain, greater market acceptability, skill improvement and better, working environment. Better design, faster response time, extremely low ripple, smaller in size & lighter in weight hence portable, more efficient during welding, better weld quality and energy efficient operation.

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Considering the above provisions of the CLCSS and considering the application made by the petitioners for financial assistance from the respondent no.3 bank for term loan of Rs.95.17 Lakhs wherein it is clearly stated that the term loan under CLCSS MSME, it is not in dispute that the petitioner sought financial assistance under the CLCSS. The stand taken by the respondents that the machine imported by the petitioner firm is not covered under the CLCSS is contrary to the provisions of the scheme. Whereas the CLCSS

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defines the scope of the scheme in clause-3 includes sub-sector “general engineering works” which is further defined in annexure to the scheme to include CNC wire cut machine, EDM, CNC lathe along with rotary table attachment, CNC milling, CNC drilling machine etc. Therefore, the CNC AC Servo Turret Punch Press Machine imported by the petitioner would be covered by the subsector general engineering works. Reliance placed by the respondent on the office memorandum dated 2^nd August 2012 cannot be applied to the case of the petitioner for deletion of the word “etc.” in the aforesaid entry no.(xxvi) as the petitioner has imported the machine in March, 2012 under the financial assistance of term loan with CLCSS for MSME.

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The contention of the respondents that the office memorandum dated 2 nd August,2012 is clarificatory and would apply from the date of implementation of CLCSS also requires to be rejected because the respondents could not have deleted words “etc.” From the scheme with retrospective effect , more particularly when the petitioner and other similarly situated persons relying up on the Scheme would have applied for capital subsidy to import machines falling under sub-sector “general engineering works”.

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In view of the above fact situation, the petitioner would be entitled to get subsidy under CLCSS for the import of the machine. The respondents are therefore, required to consider the scheme of subsidy with the objective for which such scheme is framed as stated in clause-2 of the scheme which is meant for facilitating technology upgradation by providing 15% upfront subsidy to SSI units on institution finance availed of by them for induction of well establishment and improve technology in the specified sub-sector/products approved under the scheme. It is required to be noted that at no point of time, the respondent no.3 informed the petitioner that the machine to be imported by the petitioner is not included in the specified subsectors/products approved under the scheme.

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The petitioner, therefore, is entitled to the benefit of CLCSS as according to the petitioner, similarly situated persons have also been granted such benefit under the scheme.

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In view of foregoing reasons, the petition is allowed in part. The respondents are directed to consider the case of the petitioner under the provisions of CLCSS for giving the benefit of the capital subsidy as per CLCSS in view of the observations made in this order.

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Such exercise shall be completed within three months from the date of receipt of writ of this order. Rule is made absolute to the aforesaid extent with no order as to costs.

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(BHARGAV D. KARIA, J.)

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AMAR RATHOD...

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Moti Enterprises v. Union of India

Case brief

What is this about?

What did the court decide?

Moti Enterprises v. Union of India

Case brief

What is this about?

What did the court decide?

What the court decided

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