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Special Economic Zones and Regulatory Compliance, Summaries of Law

The establishment and operation of a special economic zone (sez) in india, specifically the pharmez sez. It outlines the approval process, the roles and responsibilities of the developer and the development commissioner, and the obligations of the unit holder (the petitioner) in setting up and operating their unit within the sez. The document highlights the importance of compliance with the terms and conditions of the letter of approval, including timely execution of the bond-cum-legal undertaking, payment of lease rent and user/maintenance charges, and obtaining necessary approvals from the relevant authorities. The document also explores the legal implications of the cancellation of the letter of approval by the development commissioner due to the petitioner's failure to commence production within the stipulated time frame, and the principles of natural justice in such cases.

Typology: Summaries

2023/2024

Uploaded on 04/26/2024

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ICFAI LAW SCHOOL DEHRADUN
NAME -SHRISTI SINGH
Enrollment no-19FLICDDNO1120
BATCH- B.B.A LLB(2019-2024)
SUBJECT- FOREIGN TRADE AND EXCHANGE
CASE TOPIC- biomedical lifescience pvt vs union of india
pf3
pf4
pf5

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ICFAI LAW SCHOOL DEHRADUN

NAME -SHRISTI SINGH

Enrollment no-19FLICDDNO

BATCH- B.B.A LLB(2019-2024)

SUBJECT- FOREIGN TRADE AND EXCHANGE

CASE TOPIC- biomedical lifescience pvt vs union of india

FACT

The respondent nos.2 and 3 are statutory authorities appointed under the Special Economic ZonesAct, 2005. The respondent no.4 is a company registered under the Companies Act, 1956 and hasbeen granted approval by the Government of India, Ministry of Commerce and Industry,Department of Commerce (EPZ Section) to develop and operate Special Economic Zone forpharmaceuticals sectors at village Chacharvadi-Vasna and village Sari, Taluka Sanand, District Ahmedabad.The Special Economic Zone project of the respondent no.4 is known as Pharmez SEZ .It is the case of the petitioner that the respondent no.4 has been granted various permissions andapprovals by the Central/State Government authorities for establishment of the SEZ at the locationsreferred to above in the preceding paragraph. The object behind setting up of the SEZ schemes is to attract manufacturing and ancillary units of a particular field and/or various fields/sectors, as the case may be, at a particular location in order to generate employment inasmuch as, create an atmosphere favourable to such units which contains organized and the state-of-the-art infrastructural facilities. On the other hand, the Government gives various incentives and benefits including exemption fromtaxes, cess, duties, fees and other levies for the units which are set up in the SEZ.Under the Special Economic Zones Act, 2005, the approval for setting up of the SEZ and permission to induct a unit is done by a Board of Approval under Section 8 of the Act 2005. In order to supervise and monitor the development of the SEZ, a Development Commissioner is appointed by the Central Government under Section 11 of the Act 2005. In the instant case, the Development Commissioner of Kandla Special Economic Zone came to be appointed as the Development Commissioner of Pharmez SEZ also. The units desirous of participating in the SEZ are given various benefits of tax incentives. The petitioner was also desirous of participating in the SEZ scheme of the developer i.e. the respondent no.4 herein.In response to the application dated 3rd December 2007 of the petitioner for allotment of unit in the SEZ, the developer informed vide letter dated 11th December 2007 that it had reserved plot no.4 admeasuring 11,679 sq.meters in the Pharmez SEZ for the petitioner and further informed that the said plot would be leased to the petitioner upon the petitioner getting a Letter of Approval from the Development Commissioner. It was also confirmed that the petitioner had agreed to pay the development charges at the rate of Rs.2,220=00 per sq.meter aggregating to Rs.2,59,67,340=00 being a one-time non- refundable and non-interest bearing payment for plot no.4. The petitioner was called upon to make 50% payment of the said amount i.e. Rs.1,29,83,670=00 within two days of receipt of the said letter and the balance amount within thirty days from the date of the Letter of Approval. The petitioner was also informed that it would have to obtain a No Objection Certificate (NOC) and a Consolidated Concern and Authorization (CCA) from the Gujarat Pollution Control Board

the validity of the Letter of Approval. Considering the circumstances, the Development Commissioner, vide letter dated 1st October 2009, extended the validity of the Letter of Approval upto 31st March 2011 as provided under Rule 19(4) of the Rules 2006. However, even thereafter, the petitioner failed to commence the construction activity, as a result of which, the respondent no.2 Development Commissioner, vide order dated 2nd April 2012, cancelled the Letter of Approval. According to the petitioner, such a fact of cancellation of Letter of Approval by the Development Commissioner was not brought to their notice at the relevant point of time but, for the first time, they learnt about the same on receiving an e-mail dated 4th October 2012 from the developer altogether with an attachment containing its letter dated 3rd October

According to the petitioner, the authority took a very harsh action solely on the ground that thepetitioner Company could not commence the commercial production within the time stipulated and/or within the extended period of the validity of Letter of Approval. The grievance of the petitioner is that before passing the impugned order, the Development Commissioner had neither given any show-cause notice nor had afforded any opportunity of hearing to the petitioners. According to the petitioners, the impugned order cancelling the Letter of Approval was in clear breach of the principles of natural justice.

ISSUES

1.Whether Rule 19(5) is ultra vires the provisions of the parent Act of 2005 on the premise that ittravels beyond the rule making power as contained in Section 55 of the Act? 2.Whether Rule 19(4) which provides that if the unit has not commenced production or service activity within the validity period or the extended validity period under sub-rule (4), the Letter of Approval shall be deemed to have been lapsed with effect from the date on which its validity expired,is in any way in conflict with Section 16 of the Act, which provides that a Letter of Approval shall not be cancelled on persistent contravention of any of the terms and conditions unless the entrepreneur has been afforded a reasonable opportunity of being heard? 3.Whether in the facts of the present case, Section 16 of the Act 2005 which provides for cancellation of Letter of Approval to entrepreneur would be attracted or not? 4.Whether the authority committed any error in passing the order impugned?

JUDGMENT

The Execution of the bond-cum-legal undertaking was after a period of 9 months i.e. on 23.3.2009, which the petitioner no.1 was obliged to execute it immediately after the issuance of Letter of Approval dated 6.6.2008;

The Application for exemption from payment of the stamp duty and registration fee was filed on 2.3.2009 i.e. almost after a period of 9 months which the petitioner no.1 could have done it immediately upon the issuance of the Letter of Approval dated 6.6.2008; The petitioner no.1 as obliged under the conditions has till date not applied for the approval from the Gujarat Pollution Control Board; Till date, the petitioner no.1 has not applied to the Development Committee comprising - (i) Developer i.e. respondent no.4, (ii) Office of the Development Commissioner, and (iii) Office of the Industries Commissioner, for drawing approvals for the construction of his unit; Till this date, the petitioner no.1 has not bothered to make payment towards the lease rent and user/ maintenance charges to the respondent no.4. The petitioner Company, after a lapse of almost a period of nine months, preferred the present writ-petition challenging the communication dated 12th April 2012 issued by the office of the Development Commissioner, the respondent no.2 before this High Court. It is now well-settled that the drastic power of resumption and forfeiture should be exercised only as a last resort, but this does not mean that the statutory right conferred on the authority under the Act should never be resorted to, more particularly, in gross facts like the present case. We are not satisfied with the conduct of the petitioner. Sympathy or sentiment by itself should not be a ground for passing an order in favour of a litigant who has failed to comply with the statutory obligations, and more particularly, when such non-compliance has resulted in frustrating the very object with which a piece of legislation is enacted. It is equally well-settled that the remedy under Article 226 of the Constitution of India is discretionary in nature, and in a given case, even if some action or order challenged in the petition is found to be illegal and invalid, the High Court, while exercising its extraordinary jurisdiction thereunder, may refuse to upset with a view to doing substantial justice between the parties. For the foregoing reasons, we are of the view that there is no merit in this petition and the petition deserves to be rejected. The petition is accordingly rejected. However, in the facts and circumstances of the case, there shall be no order as to costs.