The Delhi High Court has held that a successor acquirer of a project through e-auction under SARFAESI cannot seek revival of capital subsidy once the underlying scheme has lapsed, and mere correspondence seeking a progress report does not extend the life of the scheme. The Court explained that a purchaser who acquires a project through a SARFAESI e-auction steps into the shoes of the erstwhile owner and cannot claim a fresh capital subsidy where the original sanction stood withdrawn and the scheme had expired.
The Court said that a letter merely requesting submission of a progress report, synchronization certificate, and extension of a bank guarantee does not amount to condonation of delay in commissioning or revival of a withdrawn subsidy. Accordingly, once a subsidy scheme has lived its stipulated life and served the purpose for which it was introduced, no benefit can be granted under it to a subsequent claimant, as doing so would amount to issuing a fresh sanction in the absence of any operative scheme.
A Single Judge Bench of Justice Amit Mahajan observed that the present petition was filed assailing letters dated Feb 27, 2019, and Sep 06, 2019, and thus the petition had been filed after a period of more than two years, with absolutely no justification given for the delay. The Court placed reliance on the Judgment of the Apex Court in Chennai Metropolitan Water Supply & Sewerage Board v. T.T. Murali Babu [(2014) 4 SCC 108], wherein it was held that the doctrine of delay and laches should not be lightly brushed aside, and a writ court is required to weigh the explanation offered and the acceptability of the same. The Court noted that while no statutory limitation period is prescribed for instituting a writ petition under Article 226 of the Constitution, undue delay and laches may nonetheless defeat the petitioner’s right to challenge the impugned order, as it could cause prejudice to the opposite party.
On merits, the Court observed that the petitioner came to acquire the project on Oct 07, 2017, pursuant to the SARFAESI proceedings, and even after taking over the project, the petitioner did not immediately approach the respondent or assert any entitlement to subsidy under the scheme. The Court further observed that the contention of the petitioner that the respondent had condoned the delay in commissioning of the project by its letter dated June 19, 2018, was misplaced, as the said letter was merely a request for a report regarding the progress of the project and compliance in relation to the Bank Guarantee, and did not extend the life of the Scheme or provide for continuation of the subsidy beyond the period prescribed under the Scheme.
The Court noted that the scheme already stood expired by the time the petitioner issued its letter dated Oct 09, 2018. The Court emphasised that such schemes are introduced with the object of facilitating the timely implementation and commissioning of such projects, and the Scheme in question had expired in 2017 and had lived its stipulated life and served the purpose for which it was introduced.
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Briefly, the petition was filed by M/s Goodwill Energy Enterprises seeking quashing of two letters issued by the Union of India, whereby the respondent refused to release capital subsidy in favour of the petitioner. The respondent had floated a Scheme for grant of Financial Assistance/Subsidy to Small Hydro Power Projects, pursuant to which an entity, namely KEPL, submitted its application for sanction of capital subsidy for setting up a 24 MW Hydro Electric Project in Villages Surru and Kut, Tehsil Rampur, Shimla, Himachal Pradesh. The respondent sanctioned a capital subsidy of Rs. 8.90 crores for the said project and released the first tranche of Rs. 4.45 crores to Punjab National Bank against submission of a bank guarantee of equal amount by KEPL.
Subsequently, the loan account of KEPL was declared as a Non-Performing Asset and action was initiated against it by Punjab National Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). Thereafter, the project was purchased by the petitioner vide e-auction. The respondent issued a letter to KEPL, requesting it to extend the Bank Guarantee and submit a progress report. KEPL informed the respondent regarding the transfer of the project to the petitioner pursuant to the SARFAESI auction. Thereafter, the respondent withdrew the sanction of the project and encashed the bank guarantee submitted by KEPL.
The petitioner applied for the capital subsidy of Rs. 8.90 crores, but the respondent informed the petitioner that even though owners of the project had changed, the project cannot be treated as a new project and hence subsidy cannot be sanctioned once again as the project was previously sanctioned subsidy but was not completed in time. The respondent reiterated its refusal, stating that the representation for claim of subsidy could not be allowed as the project was already sanctioned in 2011 and withdrawn due to the erstwhile owner’s account becoming a non-performing asset and non-commissioning of the project.
