STATE OF KARNATAKA AND ANR. v. ALL INDIA MANUFACTURERS ORGANIZATION AND ORS

Citation: [2006] SUPP. 1 S.C.R. 86

Court: Supreme Court of India

Bench: RUMA PAL, B.N. SRIKRISHNA, DALVEER BHANDARI

Case summary

STATE OF KARNATAKA AND ANR. v. ALL INDIA MANUFACTURERS ORGANIZATION AND ORS.pdf

Judgment text

• STATE OF KARNATAKA AND ANR. v. ALL INDIA MANUFACTURERS ORGANIZATION AND ORS. APRIL 20, 2006 [RUMA PAL, B. N. SRIKRISHNA AND DALVEERBHANDARI,JJ. ] Constitution of India-Article 300A-Code ofCivil Procedure, 1908- Seclion 11-Karanataka Industrial Areas Development Act, 1966---Sections 2(7-a) and 28(/)-Memorandum of Understanding entered into by State wi1h a Private Consortium for an Infrastructure Corridor Project-Nodal Company set up by the Consortium to implement the Project-Framework Agreement entered into under which ! he Stale has to make available agreed acres of land lo the nodal company for the Project-State made requisite amendments in State laws for acquiring private land-Public /meres!

litigation Petition filed before High Court contending that the Agreement was viliated by rnala tides and opposed 10 public policyr--High Court dismissed the Writ Petirion--Notifications issued by the State for acquisition ofland-landowners filed Writ Petitions before High Court challenging the notifications contending rhat excess land are acquired than required for the Project--Single Judge partly allowed the Writ Petitions but the judgment was ser aside in Writ Appeals---Allegations came to be made against the nodal company for committing fraud by diverting the acquired land to its real estate business--State stalled the land acquisition proceedings and set up an Enquiry Commirtee to look into the allegations-Public Interest litigations peritions filed before High Court on the ground ! hat !

he Agreement was viliated by fraud and/or misrepresentation and that excess land are acquired for the Project-High Court dismissed the Writ Petitions on the ground ofres judicata and on facts--Correcrness of-Held, Writ petitions were barred by res judicata---On jilcls, the plea of lhe Stare offraud and misrepresentation cvmmiued by the nodal company was lacking any bona tides-Land was bemg acquired for a public purpose and hence there is no contravention of Article 300A and the Act. State conceived Bangalore-Mysore Infrastructure Corridor Project with twin objectives-firstly, to provide for an express highway linking Bangalore with Mysore and secondly for developing infrastructure along the corridor STATEOF KARNAI AKA v. ALL! NDIA MANUFACTURERS ORGN 87 )1 and in and around Bangalore city. The State entered into a Memorandum of Understanding (MOU) with a Private Consortium of three members to take up the project on a Build-Own-Operate-Transfer (BOOT) basis.

The State agreed to extend full support for the development of the Project provided commercial viability, competitiveness and feasibility of the project was established to the satisfaction of the State. A High Level Committee was formed by the State to implement the Project. The Consortium presented a Project Report to the Committee, which submitted its report to the State. The State accepted the Committee report and the Project Report of the Consortium and issued a Government Order. The members of the Consortium entered into a 'Consent and Acknowledge Agreement' (CAA) and assigned their respective rights with regard to the Project to a nodal company, which was formed to implement the Project. The nodal company and the State entered into a Framework Agreement (FWA) under which the State has to make available approximately 20, 193 acres of land to the Project.

The State made amendments in the Karnataka Industrial Areas Development Act, 1966 and the Board under the Act entered into an agreement with the nodal company for acquisition of i ' private land. A Writ Petition was filed before High Court as a Public Interest Litigation against the State and the nodal company for quashing the FWA on the ground that it was vitiated by malafides and was opposed to public policy. The High Court, after considering all the materials on record, dismissed the Writ Petition. The High Court held that the required land was necessary not only for the construction of an expressway but also for other connected developmental activities [H. T. Somashelwr Reddy v. Government ofKarnatalw and Anr. , (1999) I KLD 500 (DB)). p The State issued Notifications for acquisition of land required for the Project.

Many landowners filed Writ Petitions against the State and the nodal company before the High Court challenging the notifications on the ground that excess land were being acquired than required for the Project. Single Judge of the High Court partially allowed the petitions by holding that the acquisition of 60% of the land for the formation of roads and infrastructure development was valid and that the remaining 40% of the land meant for development of townships and convention centres were invalid. The landworkers, the State, the Board and the nodal company filed Writ Appeals. When the writ appeals came up for hearing before the High Court, the State and the Board withdrew their writ appeals, reversed their stance before the High Court and contended that excess lands were being acquired than required for the Project. The High Court allowed the Writ appeal ofthe nodal company and dismissed the writ appeals by the landlord.

Serious allegations were made against the nodal company for diverting the land acquired for its real estate business. The State stalled the land acquisition activity and set up an Expert Committee to look into the allegations. Writ Petitions by way of Public Interest Litigations were filed before High Court for restraining the State from continuing with the Project on the ground that the FWA was vitiated by fraud and/or misrepresentation. Certain Writ Petitions were also filed seeking a mandamus against the State to implement the Project. The High Court, by a common judgment, dismissed the Writ Petitions of the petitioners opposing the Project on the ground of resjudicata and directed the State and all its instrumentalities to execute the Project and implement the FWA in letter and spirit.

In appeal to this Court, the State contended that the dispute between the State and the nodal company is not barred by the principle of res judicata, constructive resjudicata or estoppel arising from the judgment in Somashekar Reddy; that the principle ofresjudicata cannot be inflexibly applied to Public Interest Litigations especially when a re-examination of decided issues might be in public interest; that fraud and misrepresentation had vitiated the entire transaction and hence there would no res judicata since the fraud was discovered subsequent to the judgment in Somashekar Reddy; that the report of the Expert Committee, which reviewed the Project, clearly demonstrated that there was excess land, which in terms showed that the FWA was not a bonafide agreement and therefore was against public interest; and that the directions by the High Court to execute the Project and implement the FWA was wholly beyond the writ jurisdiction as it would amount to granting a decree for specific performance in writ jurisdiction.

The State Industrial Development Board coptended that Article 300A of the Constitution of India and the Karnataka Industrial Development Act, 1966 would be violated ifthe excess land is acquired than required for the Project. The land owners, in their appeals, contended that no notice was served on them by the Stat;! under section 28(1) of the Act; that the notice of acquisition was vague which prejudiced them from making any effective objection to the land acquisition; and that the acquisition ofthe lands far away l l from the actual alignment of the road and periphery would not amount to a STATE OF KARNATAKA v. ALLINDIA MANUFACTURERS ORGN. 89 Cj public purpose and would be covered by the provisions of the Act.. Dismissing the appeals, the Court HELD: 1. 1. The flip-flop on the part of the State occurred only l)eca. use of. politicians, that the malafides, if any, appears to be on the par( oftheState Government.

From the facts on record, the plea was lacking any bonafides °B and that there was neither fraud nor misrepresentation on t~e part of the nodal company or any member of the Consortium. The plea of fraud and misrepresentation was clearly an afterthought and it was conveniently raised b. y the State Government through the writ petitioners, who were rightly described by the High Court as the State Government's 'mouth piece'. The contention of the State and the Writ Petitioners that the FWA was vitiated as a result of fraud and/or misrepresentation was to get over the bar of res judicata arising from the judgment in Somashekar Reddy. ! 102-F; 103-D, F, H; 104-AI 1. 2. When some interested parties raised the i. ssue in public interest that the FWA was a fraud and was nothing but a charade for a lucrative real estate business on the part of the nodal company, the State defended the Project against all the allegations.

The State woke up after seven long years and even more strangely after a change in the State's political leadership to the fact that there was fraud/misrepresentation by the nodal company or anyone else. The constitution and functioning of the Expert Committee, which was formed to go into the allegations of excess land acquired for the implementation of the Project, illustrates the ma/ajides with which the State Government has approached the Project. The utter irresponsibility with which the theory of fraud/misrepresentation was put forward is thoroughly exposed by the High Court. (104-C, F, G; 105-BI H. T. Somashekar Reddy v. Government ofKarnataka and Anr. , (1999) 1 KLD 500 (DB) affirmed. 2. 1. In a Public Interest Litigation, the petitioner is not agitating his individual rights but represents the public at large. As long as the litigation is bonafide, a judgment in a previous Public Interest Litigation would be a judgment in rem.

It binds the public at large and bars any member ofthe public from coming forward before the Court and raising any connected issue or an issue which had been raised/should have been raised on an earlier occasion by way of a Public Interest Litigation. The petitioner in Somashekar Reddy . ::_• case was acting bona fide, Thus, in principle, the Somashekar Reddy case, as a Public Interest Litigation, could bar the present litigation. (106-C, DI 2. 2. The prayers in the present writ petitions and in Somashekar Reddy 's petition are substantially the same. The cause of action in both the writ petitions is the FWA which includes the provisions for acquiring vast acres of land for the Project. In both the writ petitions, the averments was that excess land than required for the implementation of the Project was being acquired by the State Government at the behest of the nodal company and that the Project was nothing but a camouflage to carry out a real estate business by the nodal company.

The issue of excess land was specifically raised in the Writ Petition by Somashekar Reddy and was also forcefully denied by the State. In fact, in the decision in Somashekar Reddy case the High Court accorded its imprimatur to the land requirements under the FWA. In these circumstances, Explanation Ill to Section 11 CPC squarely applies. It is clear that the issue of excess land under the FWA was directly and substantially in issue in Somashekar Reddy case and hence, the findings recorded therein, having reached finality, cannot be reopened in this case. (108-F, G; 110-E, F, GI 2. 3. Explanation IV to Section 11 CPC squarely applies since in Somashekar Reddy case, all possible challenges to the validity of the FWA I. ad been exhausted, including the issue of excess land.

Merely by the claim of the writ petitioners in the present writ petitions that excess land was not identified at the stage of the litigation in Somashekar Reddy case and that the Project should be reviewed, the issue does not cease to be res judicata or covered by principle analogous thereto. If the issues that had been raised/ ought to have been raised in Somashekar Reddy case are re-examined, it would simply be an abuse of the process of the court. Hence, the cause of action, the issues raised, the prayers made, the relief sought in Somashekar Reddy case and the findings in it and the claims and arguments in the present petitions were substantially the same. Therefore, the judgment in Somashekar Reddy case operate as res judicata for the questions raised in the present petitions. (111-C, D, E( Forward Construction Co. and Ors. v. Prabhat Manda/ and Ors. , (1986( I SCC 100; State of UP. v.

Nawab Hussain, (1977( 2 SCC 806 and Direct Recruit, Class fl Engineering Officers' Association v. State ofMaharashtra, (1990( 2 sec 715, referred to. Kalipada Dev. Dwijapada Das, AIR (1930) PC 22, referred to. •• STATE OF KARNATAKA v. ALLINDIA MANUFACTURERS ORGN. 91 Henderson v. Henderson, (1843-60) All ER Rep. 378 and Greenhalgh v. ... Mallard, (1947) 2 ALL 255, referred to. P. Ramanatha Aiyer, Advanced Law Lexicon Vol. 3rd Edn. 200; and Mui/a, Code ofCivil Procedure Vol. I 15th Edn. 1995, referred to. 3. The land was not being acquired for a purpose other than a public purpose. There is no contravention of Article 300A ofthe Constitution of India. The State and its instrumentalities including the Board were enjoined by the terms and conditions of the FWA, to make best efforts to acquire the land required for the Project.

Considering the facts as a whole, since the Project had been implemented and the nodal company had invested a large amount of money and work had been carried out for more than seven years, the State Government could not be permitted to change its stand and to contend that the land allotted for the Project was in excess of what was required. [114-A-DJ 4. The High Court merely directed that the Project and the FWA, as conceived originally and upheld by the High Court in Somashekar Reddy should be implemented in letter and spirit. In other words, the High Court said that there is no scope for raising frivolous and ma/a fide objections for ulterior purposes. This, the High Court was fully entitled to do. When the State's acts of omission or commission are tainted with extreme arbitrariness and with ma/afldes, it is certainly subject to interference by the Constitutional Courts in this country. No exception could be taken to relief granted in the judgment of the High Court.

All that the High Court has done is to reaffirm and require the State Government and its instrumentalities, as "State" under the Constitution, to act without arbitrariness and ma/a fides, especially in the matter of land acquisition. In future also, while the State Government and its instrumentalities are entitled to exercise their contractual rights under the FWA, they must do so fairly, reasonably and without malafldes; in the event that they do not do so, the Court will be entitled to interfere with the same. [115-8-D; 116-E; 117-C, D[ Gujarat State Financial Corporation v. Mis. Lotus Hotels Pvt. Ltd. , [1983) 3 SCC 379; Kumari Shrilekha Vidhurthi and Ors. v. State ofU. P. and Ors. , [1991) t SCC 212; Mis Dwarkadas Marfatia and Sons v. Board of Trustees ofthe Port ofBombay, AIR (1989) SC 1642 and Biman Krishna Bose v. United India Insurance Co. Ltd. , and Anr. , [2001[ 6 SCC 477, referred to. 5.

The Project is a mega project which is in the larger public interest of the State of Karnataka and merely because there was a change in the :_ - Government, there was no necessity for reviewing all decisions taken by the C'll. previous Government, which is what appears to have happened. Such an action cannot be taken every time there is a change ofGovernment. [118-Cf State of U. P. and Anr. v. Johri Mal. 120041 4 SCC 714 and State of Haryana v. State ofPunjab and Anr. , 120021 2 SCC 507, relied on. 6. 1. The argument that no notice was served on the landowners under Section Z8(1) of the Act is factually incorrect. The notification states that the lands were being acquired for the purpose of"industrial development" i. e. establishing and developing industrial areas by the State Board. The purpose indicated in the notifications is sufficiently precise and is not affected by the vice of vagueness as alleged.

No prejudice is caused to them as a result of the wordings of the notification of acquisition. On facts, there is no substances in the contention of the appellants that the notification was vague and hence the State did not comply with the principle of natural justice. (120-C, H; 121-A-EI Ajlatoon v. Lt. Uovernur ofDelhi. 119751 4 SCC 285, referred to. 6. 2. The various changes brought about to the Act also reflect the intention of the State to provide for land acquisition for the Project. The expressions "Industrial area" and "Industrial Infrastructural facilities" as defined under the Act definitely include within their ambit, establishment of facilities that contribute to the development of industries. Further, Section 2(7-a) was added to be Act to define "Industrial Infrastructural facilities" in manner broad enough to take into its sweep the land acquisition for the Project.

The Project was an integrated project intended for public purpose and irrespective of where the land was situated so long as it arose from the terms of the FWA, there was no question of characterising it as unconnected with a public purpose. The acquisition of the entire land for the Project was carried out in consonance with the provisions of the Act for a public project of great importance for the development of the State. A Project of this magnitude and urgency cannot be held up by individuals raising frivolous and untenable objections thereto. The powers under the Act represent the powers of eminent domain vested in the State, which may need to be exerci~ed even to the detriment of individuals' property rights so long as it achieves a larger public purpose. 1122-C, D, E; 123-C, D, E( - CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3492-3494 of 2005. • From Final Judgment/Order dated 3. 5. 2005 ofthe High Court of Kamataka STATE; OFKARNATAKA i:. ALL INDIA MANUFACTURERS ORGN.

[SRIKRISHNA, J ] 93 ~ in W. P. Nos. 45334, 45386, 48981/2004. WITH · CA Nos: 349712005, 3S42c3844/2005, 3848-388412005, 3889-412712005, 4128- 4366/2005, 4575. :4576/2005, 5399~5401/2005, 5402/2005, 5746~5747/2005; 5759/ 2005, 5797,5799/2005, 6098/2005, 6099/2005, 7024-7025/2005, 7626-7028/2005, 1029-703512oos; 7036-7038/2005, 7039-704012005, 5092"509312005, 759112oos, 759212005, 73/2006, 74-76/2006; 61/2006, 2141/2006. B. Parthasarthy, AG, A. Sharan, ASG (NP), Anil B. Divan, Bhaskar Gupta, M. Rama Jois, Mahabir Singh,. K. K. Venugopal, S. S. Naganand; L. Nageshwar Rao (NP), Dushyant Dave, Rakesh Dwivedi, Mtikul Rohtagi, Ashok H. Desai, Narasimhan Murthy, Jaideep Gupta, M. L. Verma, Anil K. Mishra, A. Rohan Singh, Sanjay R. Hegde, Vivek Reddy, Balaji Srinivasan, S. R. Sharma, - V. Sudeer, MBRS Raju; S. Srinivasan, Nikhil Jain, Ms. Madhusmita Bora, . C. S. H. Saeed, Ms. Kiran Suri, Ankur Talwar, Shankar Divate, Mayur R. Shah, Rajesh Mahale, Raghavendra S. Srivastava, Naresh Kaushik, Ms.

Shilpa Chohan;D. K. Sharma, Ms. Lalita Kaushik, K. K. Venujgopal, Srinivasagowda, Gaurav Kajriwal, Ms. Vandana Jalan, P. Ramashesh, S. N. Bhat, D. P. Chaturvedi, NPS Panwar, KT Anantharaman Harris Beeran, Nikhil Goel, Tarak Damani, Vasudevan Raghavan; Gaurav, Vijay Kumar, KT Anantharaman, R. Vasudevan, N. Suresh, Ms. Richa Kapoor, Rahul Narain, Ms. Meenakshi Arora, Vikas Sharma, Ms. Anil Katiyar, P. Parmeswaran, V. K. Verma, Prashant Kumar, Ms. Triveni Potekar, Kuldip Singh, B. P. S. Patil, V. N. Raghupathy, B. S. Prasad, Rutwik Panda, Ms. Bimola Devi, CS Ashi"i, Ms. Sapna Malik, GV Chandrashekar, Ms. Anjana Chandhrashekhar, SK. Kulkarni, M. Gireesh Kumar, Radha Shyam Jena, Ms. Anjali K. Verma, Niraj Gupta, Ms. Meera Mathur, Lalit Kumar, Kh Nobin Singh and Senthil Jagadeesam for the appearing parties. The Judgment of the Court was delivered by SRIKRISHNA, J. Leave granted in Special Leave Petition (C} Nos. 1562-63/06.

Since this matter consists of two sets of distinct but related appeals, for the sake of convenience, they may be considered under the two heads of: (i) the Main Matters and (ii) the Land Acquisition Matters. . The Main Matters (Civil Appeal Nos. 3492~3494/2005, 3497/2005, 3842-3844/2005) The BackKround These appeals are directed against a common judgment of the High Court of Karnataka (dated 3. 5. 2005) by which three Public Interest Litigations being Writ Petition Nos. 45334i04 (All India Mamifacturers OrKw1isation v. State ofKarnataka and Ors. ,), 45386/04 (J. C. Madhuswamy and Ors. v. State ofKarnataka and Ors. ,) and 48981 /04 (Dakshinamurthy and Anr. v. State of Karnataka and Ors.. ) were disposed of resulting in dismissal of Mr. J. C. Madhuswamy's writ petition and a direction to the State of Karnataka to continue to implement a certain project known as the "Bangalore-Mysore Infrastructure Corridor Project" (hereinafter "the Project").

A brief statement regarding the Project: Bangalore is the capital of the State of Kamataka and a rapidly developing city, which is projected to be the IT boom town in the country. As a result of the pressures of urbanisation and industrialisation, the infrastructure in and around Bangalore was found to be inadequate. The traffic situation in Bangalore and on the roads leading into and out of the city was found to be chaotic and hardly conducive to the important role that the city is expected to play in the near future. The Government of Karnataka, realising the importance of rapidly developing the city of Bangalore, and also for developing its transport and communication systems, conceived of the Project.

The Project had twin objectives: firstly, to provide for an express highway linking Bangalore with Mysore, the former capital of the erstwhile State of Mysore, which is now coming up as an industrial town, and for developing infrastructure along the corridor and in and around Bangalore city. The Project is a massive undertaking, which requires design, construction, maintenance and operation of an Express Highway between Bangalore and Mysore. Equally, the Project is to also develop infrastructure around the periphery of Bangalore and all along the Bangalore-Mysore Express Highway, which is about hundred years old and has become incapable of handling the heavy volume of vehicular traffic. On 28. 9. 1988, the State of Kamataka invited tenders for implementation of such an Express Highway. There was no satisfactory response to the tenders called for. There was only one tenderer and the tenderer insisted on certain conditions which were not acceptable to the Government of Kamataka.

Thus, the bid of the tenderer was not accepted. A survey was conducted by the Asian Development Bank and its report pointed out that the projected population of Bangalore city would be about 8. 2 million by the year 2011 and, therefore, there was an urgent ne. ed for improvement of the Bangalore-Mysore STATEOF KARNATAKA v. ALL INDIA MANUFACTURERS ORGN. [SRIKRISHNA, J. ] 95 .... Corridor. It was also suggested that the State Government bear 20% of the project cost, along with the cost of land acquisition, if such a projectwas to be implemented. The State Government did not have sufficient means and had to look for other alternative ways for implementing this project. The State Government then decided to take up the project on a Build-Own-Operate- Transfer (hereinafter "BOOT") basis with any consortium. The consortium was to carry out the development of the project from its own resources and recoup its investment by collection of tolls along the Express Highway. On 20. 2.

1995, a Memorandum of Understanding (hereinafter "MOU") was entered into between the State Government and the Consortium ofVanasse Hangen Brustlin Inc. USA (hereinafter "VHB"), Kalyani Group ofCompanies (hereinafter "Kalyani") and SAB Engineering and Construction Inc. USA (hereinafter "SAB"). The Governor ofthe State of Massachusetts, U. S. A. , Mr. William Weld, and Mr. H. D. Deve Gowda, the then Chief Minister ofthe State of Karnataka were present and appended their signatures thereto. It was agreed that the State Government would extend support for the development of the Bangalore-Mysore Expressway, provided commercial viability, competitiveness and feasibility ofthe project was established to the satisfaction of the State Government. The Consortium submitted a Project Report for review by the State Government. .... On 5. 6. 1995, a "High Level Committee" (hereinafter "the HLC") was formed under the Chairmanship of the Minister for Public Works.

The HLC consisted of the Principal Secretary, Commerce and Industries Department; Principal Secretary, Housing and Urban Development; Secretary, Public Works Department; Chief Engineer C and B (South Zone, Bangalore). The Chairman and Managing Director, Karnataka State Industrial Investment Development Corporation, were official members and the Chairman, Technical Advisory Committee (lrrigation)/one K. C. Reddy/was a non-official member. The HLC met from time to time and reviewed the progress made in the implementation of the Project. On 26. 8. 1995, the Consortium presented the details of the Project to the HLC. After detailed consideration ofthe Project, on 12. 10. 1995 the HLC submitted its report to the Government. The Project was considered in detail by the State Cabinet Sub-Committee, which recommended that the matter be placed before the Cabinet for consideration.

The report of the HLC and the Project Report made by the Consortium was accepted by the Cabinet, subject to the mod_ification that instead of seven townships as proposed in ... the Project Report, only five townships were to be developed. . AGovernment Order (No. PWD 32 CSR 95, Bangalore, dated 20. 11. 1995) ensued, which in terms pointed out that the implementation ofthe Project was to be done by a private consortium. The Preamble to the Government Order recited that the Project work was to be completed by the Consortium with their own resources and that the Consortium would keep the Project going for thirty years, so as to get a return of the expenditure, profit, etc. through collection of tolls. It is important to note that the land acquisition expenditure was also to be borne by the Consortium. To make the Project economically viable, the Consortium had proposed development ofseven townships, which as already stated, was reduced to five by the Cabinet.

It is also important to note that the Government Order specifically permitted the development offive townships along with the construction of the Express Highway. As already stated, the Consortium was to recoup its expenditure and obtain profits through-tolls the first system of its kind in Karnataka. Consequently, it was felt that the modification of the existing laws might become necessary. The necessary legal changes were to be examined by the concerned administrative departments, who would take ".... necessary action and also extend co-operation for implementation of the Project. "' The three members ofthe Consortium-- VHB, Kalyani and SAB--entered into a "Consent and Acknowledgement Agreement" (hereinafter "the CAA") dated 9. 9. 1996, specially assigning their respective rights under the Government Order (dated 20. 11. 1995) and the MOU with regard to the Project, in favour • ofNandi Infrastructure Corridor Enterprises Ltd. (hereinafter "Nandi"). Nandi had been registered on 16.

1. 1996 as a company under the Companies Act, I956, to serve as a corporate vehicle for the development and implementation of the Project. On 21. 12. 1996, the CAA was forwarded to the State Government for necessary action. The State Government was advised by its Law Department (through Opinion No. 182 OPN 11/97 dated 3/4. 3. 1997) that since the Government was finalising a separate agreement with Nandi, there was no need to specifically consent to the CAA. Consequently, the State Government took no further action except noting it. In February 1997, Nandi submitted a draft ofthe Framework Agreement (hereinafter "the FWA") to be executed between it and the State Government. This draft FWA was considered by the Core Committee, which had been set up to negotiate the terms with Nandi. It was also referred to the Cabinet Subcommittee, which suggested certain modifications to the FWA. After due incorporation of such modifications, the Government of Karnataka approved the FWA on I7. 3.

1997 and the same was signed between Nandi and the State STATE OFKARNATAKA v. ALL INDIA MANUFACTURERS ORGN. [SR! KR! SHNA, J. ] 97 ... Government on 3. 4. 1997. · Under Clause 4. 1. 1 of the . FWA, . the State Gover. nment set. up an "Empowered. Committee" headed by the ChiefSecretary ofthe State to oversee the Project and its ·implementation keeping in mind the importance of timely completion. The Empowered ·Committee included technical experts and held . about ten meetings from time to time, the last one being on 24. 7. 2004. The main task ()f the E~powered Committee was to remove ad. ministrative bottlenecks and to ensure the smooth . exec~tion ofthe Project. The Empowered Committee was the State's a'gent of coordination and carried out the State Government's obligations under the FWA. . l ,· One ofthe key obligations ofthe State Government under the·FWA was to make available approximately 20,193 acres of land.

As set out in Schedule I to the FWA, 6,956 acr'es wa~ Gove~nrrient fand and the remaining 13,237 acres ~as. private land, which . w11s to be acquired by the State Gove~nment. There was also an. undertaking by the State Government. under the. l'. WA to carry out appropriate amendments to its laws, rules and regulations so that · the massive Project could be implemented fully and within a tiine·bound schedule. Accordingly, the provisions of the Kamataka Industrial Areas Development Act, 1966 ("the KIAD. Act") were amended ·by Aci No. I I of 1997 'so that the land required fo~ th~ Project could be acqui~ed expeditiously. The Karnataka Industrial Areas Development Board ("KIAD Board") set up . E . under the KIAD Ad, entered into an agreement with Nandi on 14. 10. 199'8 for . , . : . I ·' ;/ acquisition of private land. Notifications were issued from time to time for' acquiring lands for the Project. · . . '' ' • ,, ' ! . ' . The Lltigatio~ in Sdmashekar. Reddy . ,, ,. ' , p.

While all these frenetic activities were going on for the successful and timely implementation of the . Project, the FWA was challenged in a Public Interest Writ Petition No. 29221/97 in November 1997 (reported as HT. ·· Somashekar Reddy v. Government of Karnataka and Anr. 1) by one H. T. Somashekar Reddy, a retired Chief Engineer. The State Government and Nandi were the two respondents thereto. The FWA was challenged on all con~eivable grounds and the writ petition was vigorously opposed by the State Government . and also by Nandi. Both the Siate Government and Nandi contended that the'· FWA was valid and that it had been entered into in larger public interest. It__ ~ I. (1999) I KLD 500 (DB). was also successfully pleaded on the part of the State Government that it had agreed to provide the "minimum extent of land'" for the Project, which was 20,193 acres of land and that no excess land was being acquired.

The Division Bench of the Karnataka High Court hearing the said writ petition formulated for its consideration, the following questions:' "(a) Whether the Government has acted arbitrarily in entering into the agreement with Respondent No. 2? (b) Whether agreement is illegal as being opposed to public policy? (c) Whether the agreement contravenes any Constitutional provisions or other existing enactments? (d) Whether the agreement is vitiated by ma/a fides? (e) Whether the rights of any individual or groups of individuals is being illegally affected by the execution of the agreement? ·D (t) Scope and extent of judicial review in matters of State Policy. " For the purpose of the present litigation, it is important to note that one of the main grounds of challenge to the FWA in Somashekar Reddy (supra) was that land was being acquired far in excess of what was required for the Project.

In fact, it was specifically stated in the Writ Petition that Article 7 of the FWA (that provides for construction of townships) was the ·'most damaging provision detrimental to the owners of land". Further, it was stated in the Writ Petition that the land requirement in Schedule I of the FWA was "highly exaggerated" and would illegally create "huge profits" for Nandi. It was prayed that the FWA be quashed and further, since the FWA was purportedly the result of "offences of breach of trust", for institution of a Central Bureau of Investigation (hereinafter "CBI") enquiry into the whole project. Each of the questions was answered in favour of the respondents i. e. State of Kamataka and Nandi. It was held that the FWA was not arbitrarily entered into by the Siate Government; that it was not opposed to public policy; that it was not unconstitutional or illegal; that it was not vitiated by ma/a fides; that no rights of any individual or individuals had been illegally 2. Ibid. at p.

529 (paragraph 52), per Ashok Bhan, J. 3. ! hid. at p. 518 (paragraph 30), per Ashok Bhan, J. STATEOFKARNATAKA v. ALLINDIAMANUFACTURERS ORGN. [SRIKRISHNA,J. ] 99 affected by the execution of the agreement. Finally, the court found that it ... could not exercise its power of judicial review to interfere with the FWA which. was in reality a policy choice of the Government. Further, as' we shall discuss subsequently, the argument of excess land being acquired, was not acceded to by the High Court which found that the Project envisaged, in addition to the construction ofan expressway between l3 Bangalore and Mysore, other connected developmental activities, such as: "(i) Development of area between Bangalore-Mysore. (ii) Divergence of traffic from Mysore-Chennai;. Chennai-Bombay. ~iii) Construction of elected road from Sirsi Circle upto 9. 4 Kms. (iv) C-0nstruction of 2 truck terminals.

(v) Development 9f five identified local areas into townships with all ·infrastructure for habitation and economic activities. {vi) Utilisation of sewage water being put to no productive use by BWSSB. '(vii) Development of tourism to augment the State's revenues. "' Thus, through an exhaustive consideration ofall the background material and documents presented to it, the High Court dismissed the writ petition by holding against. the petitioner on all the contentions urged. The judgment in Somashekar Reddy (supra) was challenged before this Court (in SLP (Civil).... CC 1423/99), but was dismissed in limine on 26. 3. 1999. The judgment in Somas~ekar ~edd)J (supra) t. hus reached finality. The Present Litigation Although . the writ petition in Somashekar Reddy (supra) was dismissed . . .. ' . by t. he High . Court by its judgment dateμ 21. 9. 1998, . it is of relevance to notice that between November 1997, when this writ petition was filed, and ' • . l . ' . . when Jh!!

petition was dismissed, the work of implementing the Project was going on in view ofthe stand of the State Government and Nandi. Accordingly, I. ' , •. , . . •, i ·' . a nw;nber of notifications were issued for acquisition of the land required . . ; .. . '. unfier the F. WA.. Many landowners challenged the acquisition of thefr lands ,. ,. 4. Ibid. at p. 517 (paragraph 29), per Ash~k Bhan J. before the High Court. Although the issue of the landowners will be dealt with in the second part of our judgment, it will be useful to note that the Government supported the stand of Nandi before the Single Judge, who partially allowed the land owners' petitions. It was during the writ appeal stage that the Government reversed its stance and opposed Nandi. Even while the said writ appeals filed in the land acquisition matters were pending before the High Court, a second round of writ petitions challenging the Project itself was filed before the High Court.

Despite the High Court's go-ahead for the Project in 1997, and after seven years of implementation, suddenly in the year 2004, these petitions were filed against it in so-called "public interest" by two Members of the Legislative Assembly (hereinafter "MLAs") and a "social worker" (i. e. Mr. J. C. Madhuswamy and others). This petition prayed for a CBI enquiry and to restrain the State Government from continuing with the Project or acquiring any further land thereunder. Perhaps inspired by Mr. J. C. Madhuswamy and others, and also in the so-called "public interest", All India Manufacturer's Organisation, as well as two ex-Mayors of Mysore (Mr. Dakshinamurthy and another), moved the High Court for a direction to the State Government to implement the Project according to the FWA.

The High Court in the impugned judgment (vide Paragraph 18) raised the following two quesrions for consideration in the three writ petitions: "(I) Whether the FWA entered into between the Government of Karnataka and Nandi was a result of any fraud or misrepresentation as alleged by J. C. Madhuswamy and others and the State Government? (2) Wherher any excess land than what is required for the Project had been acquired by the State Government and whether it is open to it to raise such a plea? " The Division Bench disposed of all the writ petitions by a common judgment by which it dismissed Writ Petition No. 45386/04 filed by Mr. lC. Madhuswamy and others with costs. Writ Petition Nos. 45334/04 and 4898 ! / 04 were allowed by the Division Bench directing the State of Karnataka and all its instrumentalities, including the KIAD Board, to execute the Project as conceived originally and to implement the FWA in "letter and spirit". The High Court also directed the prosecution of K. K.

Misra, Chief Secretary of the Government of Karnataka and M. Shivalingaswamy, Under Secretary, Department of Industries and Commerce, as envisaged by Section 340 of the f STATEOF KARNATAKA v. ALLINDIA MANUFACTURERSORGN. [SRIKRISHNA,J. ] JQJ Code of Criminal Procedure, 1973, for certain offences which came to its notice as a result of the affidavits filed by them. K. K. Misra and M. Shivalingaswamy have filed separate appeals with regard to the direction of their prosecution with which we are not concerned at present. The Contentions of the Appellants The main arguments in the present Civil Appeal Nos. 3492-3494 of 2005 were addressed on behalf of the State of Karnataka by Mr. Anil B. Divan, learned Senior Counsel, whose main contentions are as under: I. That the dispute between the State of Karnataka and Nandi is not barred by the principle of res judicata, constructive res judicata or estoppel arising from the judgment and proceedings in Somashekar Reddy (supra). 2.

That the principle of res judicata cannot be inflexibly applied to Public Interest Litigations, especially when a re-examination of decided issues might be in public interest. 3. To the bar of res judicata, it would be a successful answer that fraud and misrepresentation had vitiated the entire transaction. Hence, there would be no question of res judicata since the fraud was discovered subsequent to the judgment in Somashekar Reddy (supra). 4. That the High Court erred in brushing aside the report of the Expert Committee headed by K. C. Reddy, which clearly demonstrated that there was excess land, which in terms showed that the FWA was not a bona fide agreement and, therefore, was against public interest. 5. The High Court could not have granted the final relief in the impugned judgment. The High Court's order amounted to mandamus to specifically perform the FWA, which is an extremely complex contract, and hence the order is incorrect.

We will examine the third contention first-namely of fraud, misrepresentation and ma/a . fides vitiating the entire project. Fraud and MisrepresentatirJn The main ground on which the matter was argued by the learned counsel ~ for the State of Karnataka before the Division Bench of the High Court was that there was fraud and misrepresentation on the part of Nandi, which vitiated the entire transaction. It was contended before the High Court by the State Government that this fraud came to be noticed subsequent to the judgment in Somashekar Reddy (supra). It is pertinent to note that this point was put on record through the affidavits of K. K. Misra, Chief Secretary of the Government of Karnataka, M. Shivalingaswamy, Under Secretary, Department of Industries and Commerce, which suggested that public interest was being affected as a result of the execution of the FWA. It appears that the main contention of the writ petitioners Mr. J. C.

Madhuswamy and others before the High Court was that the FWA was vitiated as a result of fraud and/or misrepresentation. Presumably, this contention was urged in order to get over the bar of res judicata arising from the judgment in Somushekar Reddy (supra). When the matter was argued before us, although Mr. Divan addressed some arguments on fraud, he quickly abandoned them and expressly gave it up. Considering that this was the main thrust of the State's argument before the High Court and has been expressly given up before us, we could have dismissed the appeals on this narrow point alone. Nonetheless, since Mr. Divan argued the question of res judicata with some persistence, we will deal with it subsequently. On the merits of the argument of fraud/misrepresentation, the High Court has gone into it at great length and has demonstrated the hollowness of this contention.

We are in complete agreement with the views expressed therein on this issue but we wish to highlight the following aspects to illustrate how the argument of mu/a fides is actually the boot on the other foot. The High Court has come to the categorical conclusion that the flipflop on the part ofthe State Government occurred only because of politicians, tliat the mala fides, if any, appears to be on the part of the State Government for political reasons. The High Court has pointed out that the FWA did not materialise out of the blue. The FWA was negotiated over several months; it came to be drafted by considering several points that the Cabinet Subcommittee had raised. As we have already highlighted, it was only thereafter, when detailed deliberations had taken place at the highest levels of the State Government that the MOU was signed and the Project Report accepted. A Government Order (dated 20. 11.

1995) was issued requiring the Public Works Department to enter into a Memorandum of Understanding with the Consortium ofthree companies, VHB, SAB and Kalyani. On 9. 9. 1996, through the CAA, the three members ofthe Consortium agreed to "..... unconditionally f' ' and irrevocably transfer and assign, jointly and severally..... " to Nandi ".... all STATEOF KARNATAKA v. ALLINDIA MANUFACTURERS ORGN. [SRIKRISHNA, ! ] 103 rights, interest and title granted to them... with respect to the Infrastructure Corridor by GOK under the Government Order and the Memorandum of Understanding''. The CAA came to be signed by the three members of the Consortium . on the one hand and Nandi on the other; the Governor of Karnataka, on behalf of the Government of Karnataka, was shown as the "Consenting Party''. A copy of this agreement was forwarded to the State Government along with a forwarding letter dated 21. 12.

1996 requesting that the Government approve of the same and advise of its approval so that the original agreement could be given to the State Government for its consent. This letter was forwarded by the Public Works Department to the Law Department through a letter dated 22. 1. 1997 (No. PWD 155 CRM 96) seeking an opinion on the issue. The State Government was advised by its Law Department (through Opinion No. 182 OPN 11/97 dated 3/4. 3. 1997) that since the Government was finalising a separate agreement with Nandi, there was. no need to specifically consent to the CAA. Thus, it would appear that the State Government had specifically been made aware of the CAA and the fact that the members of the Consortium had transferred their rights to Nandi. The argument made before the High Court that the Government was unaware ofthe CAA, was defrauded to execute the FWA is, therefore, utterly dishonest.

We concur with the decision of the High Court on this issue that the plea was lacking any bona fides and that there was neither fraud nor misrepresentation on the part of Nandi or any member of the Consortium. Subsequently, as we have already discussed, Nandi as the assignee of the Consortium, submitted a draft of the FWA to the State Government which was considered by the Core Committee that had been set up to negotiate the terms with Nandi. The Core Committee referred the draft FWA to the Cabinet. Sub-Committee which suggested various modifications to it, which were incorporated in the FWA. Finally, the FWA was approved by the State Government and came to be signed on 3. 4. 1997. Thus, it appears that the plea of fraud and misrepresentation was clearly an afterthought and it was conveniently raised by the State Government through the petitioners in Writ Petition No. 45386/04, who were rightly described by the High Court as the State Government's "mouth piece" (vide Paragraph 22).

The High Court has also totally disbelieved the affidavits of the Chief Secretary, K. K. Misra, and the Under Secretary, M. Shivalingaswamy on this issue. We have refrained from commenting on the merits of their affidavits since their appeals against prosecution for perjury are pending separately. We may, h·owever, point out that both the affidavits of the two senior bureaucrats are on the issue that certain facts which had been suppressed from the Government had come to light after the judgment in Somashekar Reddy (supra) and that these indicated fraud and misrepresentation on the part of Nandi. Indeed, this was the central argument put forward for impugning the FWA. The FWA was executed on 3. 4. 1997 and implemented by the parties for at least seven years. Several obligations under the FWA were carried out by the State Government and its instrumentalities and also by Nandi, which had invested a large amount of money in the Project.

These included monies for payment of compensation to landowners whose lands were being acquired for the Project. Soon after the FWA was entered into, some interested parties had raised the issue in "public interest" that the FWA was a fraud and was nothing but a charade for a lucrative real estate business on the part ofNandi. The Government through the then Minister for Public Works vigilantly defended the Project against all these allegations both inside and outside the Legislature. It would appear that the change of mind on the part of the State Government came about- ion Bench which is under appeal in the light of the contentions advanced at the Bar, we are not satisfied that the acquisitions were, in any way, liable to be interfered with by the High Court, even to the extent as held by the learned Single Judge.

We agree with the decision of the Division Bench that the acquisition ofthe entire land for the Project was carried out in consonance with the provisions of the KIAD Act for a public project of great importance for the development ofthe State of Kamataka. We do not think that a Project of this magnitude and urgency can be held up by individuals raising frivolous and untenable objections thereto. The powers under the KIAD Act represent the powers of eminent domain vested in the State, which may need to be exercised even to the detriment of individuals' property rights so long as it achieves a larger public purpose. Looking at the. case as a whole, we are satisfied that the Project is intended to represent the larger public interest of the State and that is why it was entered into and implemented all along. The Final Orders In the result, we find that the judgment of the High Court (dated 3. 5. 2005) impugned before us in the Main Matter, is not liable to be interfered with.

There is no merit in the appeals and they are hereby dismissed. Considering the frivolous arguments and the ma/a jides with which the State of Karnataka and its instrumentalities have conducted this litigation before the High Court and us, it shall pay N~ndi costs quantified at Rupees Five Lakhs, within four weeks of this order. Appellants in C. A. No. 3497/2005 (J. C. Madhuswamy and others), in addition to the costs already ordered by the High Court, shall pay to the Supreme Court Legal Services Authority costs quantified at Rupees Fifty Thousand within four weeks of this order. A copy of this order be sent to the A Member-Secretary ofthe Supreme Court Legal Services Authority for his/her information. In the Land Acquisition Matters, the appeals challenging the judgments of the High Court dated 28. 2. 2005, 29. 6. 2005 and 18. 11. 2005 are dismissed as without substance. However, in the circumstances, there shall be no order B as to costs. B. S. Appeals dismissed.