KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION LTD. versus KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.

Citation: [2023] 12 S.C.R. 775 · Decided: 05-10-2023 · Supreme Court of India · Bench: VIKRAM NATH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

CASE DETAILS
KARNATAKA STATE ELECTRONICS DEVELOPMENT 
CORPORATION LTD.
v.
KUMAON ENTERTAINMENT AND HOSPITALITIES PVT. LTD.
(Civil Appeal No. 8073 of 2022)
OCTOBER 05, 2023
[VIKRAM NATH AND AHSANUDDIN AMANULLAH, JJ.]
HEADNOTES
Issue for consideration: Matter pertains to the demand raised by the 
State Undertaking from the allottee towards the charges for conversion of 
nature of use from IT Sector to Hospitality Sector.
Land laws – Conversion of nature of use – Payment of conversion 
charges – Allotment of plot by State undertaking to the respondent-
allottee for setting up Information Technology-IT industry on lease cum 
sale basis, but the allottee later sought conversion of nature of use from 
IT Sector to Hospitality Sector – Permission of change of use granted 
on payment of charges for change of activity, however a year later an 
audit objection raised that permission of change of use was granted 
at a much lower rate – Demand raised by the Undertaking towards 
conversion of usage charges – Allottee did not pay the same and fi led writ 
petition seeking execution of sale deed by the Undertaking – Allowed by 
the Single Judge of the High Court which was upheld by the Division 
Bench – Correctness:
Held: Any loss suff ered by the appellant being a fully owned State 
Undertaking would be a loss to the public exchequer – Allottee shifted its 
purpose of setting up an IT related industry to a hospitality sector to set up 
a hotel – If the amount for such conversion of usage is not legally recovered 
from the allottee, loss being suff ered by the Undertaking would not be in 
public interest – Also all other similarly situated allottees have paid the 
rate determined in the Board Meeting of the Undertaking – Allottee got 
undue advantage merely because the clerical staff  and the offi  cer signing the 
[2023] 12 S.C.R. 775 : 2023 INSC 871
775
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
776
demand notice applied the lower rate – Neither of them competent to override 
or deviate from the decision taken in the Board Meeting – Furthermore, the 
Board Meeting took place prior to the allottee applied for change of use and 
issuance of the demand notice for conversion, thus, no justifi cation for not 
adhering to the decision taken in the Board Meeting – Bona fi de mistake 
could always be corrected – Allotment letter as also the lease agreement 
clear that the rate was tentative and the fi nal rate was to be determined later, 
which would be binding on the allottee – Once the fi nal rate is determined 
by the Board, being the prevailing rate of the Collector, would be binding on 
the allottee – Division Bench failed to exercise its discretion vested under 
the law in condoning the delay, thereby resulting into serious prejudice and 
fi nancial loss to the Undertaking-public entity – Thus, demand notice does 
not suff er from any infi rmity and allottee liable to pay the same – Judgments 
passed by the Division Bench and the Single Judge set aside – Constitution 
of India – Art. 136. [Para 22, 21, 24, 25, 28]
LIST OF CITATIONS AND OTHER REFERENCES
Karnataka Industrial Development Board Anr. vs. M/s Prakash Dal 
Mill and Ors. (2011) 6 SCC 714 : [2011] 5 SCR 26 – distinguished.
M. Nagabhushana v. State of Karnataka (2011) 3 SCC 408 : [2011] 2 
SCR 435; Dnyandeo Sabaji Naik v. Pradnya Prakash Khadekar (2017) 5 
SCC 496 : [2017] 2 SCR 95; Vinod Kapoor v. State of Goa (2012) 12 SCC 
378 : [2012] 8 SCR 1089; Sandhya Educational Society v. Union of India 
(2014) 7 SCC 701; Union of India vs. West Coast Paper Mill (2004) 3 SCC 
458 : [2004] 2 SCR 642 – held not applicable.
Neeraj Jhanji v. Commr. of Customs & Central Excise (2015) 12 SCC 
695; Haryana State Coop L&C Federation Ltd. v. Unique Coop L&C Coop 
Society Ltd. (2018) 14 SCC 248 – referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED 
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8073 of 2022.
From the Judgment and Order dated 28.07.2017 of the High Court of 
Karnataka at Bengaluru in WA No.175 of 2017.
777
Appearances:
Ms. Aakriti Priya, Balaji Srinivasan, Devamshu Behl, Rohan Dewan, 
Advs. for the Appellant.
Gautam S. Bharadwaj, Ashwin Kumar D. S., Ms. Anagha Sharma, 
Ms. Surbhi Mehta, Advs. for the Respondent.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
VIKRAM NATH, J.
1. This appeal is directed against the judgment and order dated 
28.07.2017 passed by the Division Bench of the High Court of Karnataka 
in Writ Appeal No. 175 of 2017 titled “Karnataka State Electroni

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