CIVIL

Karnataka Industrial Areas Development Act, 1966 – Explanation

In P. Narayanappa and Another Vs. State of Karnataka and Others, , the Hon’ble Supreme Court, on noting the preamble of the Act, statement of objects as well as the reasons of the Amending Act, observed that the object of the Act is to secure establishment of industrial areas and orderly development of industries therein and to create facilities which contribute to the development of industries, which may include Technology Parks, Townships etc. Therefore, the infrastructural facilities must contribute to the development of industries in an industrial area. In the same way, an amenity would be of convenience for the efficient functioning of an industry in an industrial area. The corollary is that, an area cannot be declared to be an industrial area only for the purpose of expansion of an educational institution, although it is declared to be an amenity under the KIAD Act, in the absence of development of industries in an industrial area within which, the amenity is to be located. Thus, acquisition of land to establish or expand an educational institution as an amenity in the absence of there being any industries in the land sought to be acquired is not envisaged under the Act.

The Hon’ble Supreme Court has further observed in the aforesaid case that an entrepreneur or a company may give a proposal to the State Government for setting up an industry or infrastructural facility and the Government may thereafter, acquire the land and give it to the Board. It is also possible that after the land already acquired and developed by the Board, may be allotted to an entrepreneur or a company for setting up an industry or infrastructural facility. Therefore, setting up of an industry or an infrastructural facility must be the purpose and object of acquisition of land, in case land has to be necessarily acquired from private persons. Such acquisition can be at the instance of an entrepreneur or a company who proposes to set up an industry or an infrastructural facility in an area declared to be an industrial area by the State Government. Therefore, acquisition of land for an educational Trust for the expansion of its activities cannot come within the scope of the expression “setting up an industry or infrastructural facility”.


CHAPTER I

Preliminary

1. Short title, extent and commencement:

(1) This Act may be called the Karnataka Industrial Areas Development Act, 1966.

(2) X X X

(3) This Act except Chapter VII shall come into force at once; Chapter VII shall come into force in such area and from such date as the State Government may, from time to time, by Notification, specify in this behalf.

2. Definitions: In this Act, unless the context otherwise requires,-

(1) “Amenity” includes road, supply of water or electricity, street lighting, drainage, sewerage, conservancy, and such other convenience, as the State Government may, by Notification specify to be an amenity for the purposes of this Act;

(2) “Board” means the Industrial Areas Development Board established under this Act;

(3) “Building” means any structure or erection or part of a structure or erection, which is intended to be used for residential, industrial, commercial or other purposes, whether in actual use or not;

(4) “Deputy Commissioner” means the Deputy Commissioner of the district concerned, and includes any Officer specially appointed by the State Government to perform the functions of a Deputy Commissioner under this Act;

(5) “Development” with its grammatical variations means the carrying out of levelling, digging, building, engineering, quarrying or other operations in, on, over or under land, or the making of any material change in any building or land, and includes re-development; and “to develop” shall be construed accordingly;

(6) “Industrial area” means any area declared to be an Industrial area by the State Government by Notification which is to be developed and where industries are to be accommodated and industrial infrastructural facilities and amenities are to be provided and includes, an industrial estate;

(7) “Industrial estate” means any site selected by the State Government where factories and other buildings are built for use by any industries or class of industries;

(7a) “industrial infrastructural facilities” means facilities which contribute to the development of industries established in industrial area such as research and development, communication, transport, Banking, Marketing, Technology parks and Townships for the purpose of establishing trade and tourism centers; and any other facility as the State Government may by Notification specify to be an industrial infrastructural facility for the purposes of this Act.

(8) X X X

(9) X X X

(10) X X X

3. Declaration of industrial areas: The State Government may, by Notification, declare any area in the State to be an industrial area for the purposes of this Act.

(2) Every such Notification shall define the limits of the area to which it relates.

4. Alteration of industrial area: The State Government may at any time, by Notification, exclude from any industrial area, any area, or include therein any additional area, as may be specified in such Notification.

x x x

CHAPTER IV

Functions and Powers of the Board

13. Functions: The functions of the Board shall be,-

(i) generally to promote and assist in the rapid and orderly establishment, growth and development of industries and to provide industrial infrastructural facilities and amenity in industrial areas, and

(ii) in particular, and without prejudice to the generality of clause (i), to,-

(a) develop industrial areas declared by the State Government and make them available for undertakings to establish themselves;

(b) establish, maintain, develop, and manage industrial estates within industrial areas;

(c) undertake such schemes or programmes of works, either jointly with other corporate bodies or institutions, or with the Government or local or statutory authorities, or on an agency basis, as it considers necessary or desirable, for the furtherance of the purposes for which the Board is established and for all purposes connected therewith.

14. General powers of the Board: Subject to the provisions of the Act, the Board shall have power,-

(a) to acquire and hold such property, both movable and immovable as the Board may deem necessary for the performance of any of its activities and to lease, sell, exchange or otherwise transfer any property held by it on such conditions as may be deemed proper by the Board;

(b) to purchase by agreement or take on lease or under any form of tenancy any land, to erect such buildings and to execute such other works as may be necessary for the purpose of carrying out its duties and functions;

(c) to provide or cause to be provided amenities, industrial infrastructural facilities and amenity and common facilities in industrial areas and construct and maintain or cause to be maintained works and buildings therefore;

(d) to make available buildings on lease or sale or lease-cum-sale to industrialists or persons intending to start industrial undertakings;

(e) to construct buildings for the housing of the employees of industries;

(f)(i) to allot to suitable persons premises or parts thereof including residential tenements in the industrial areas established or developed by the Board;

(ii) to modify or rescind such allotments, including the right and power to evict the allottees concerned on breach of any of the terms or conditions of their allotment;

(iii) to resume possession of premises or part thereof including residential tenements in the industrial area, or industrial estate in the manner provided in section 34B.

(g) to delegate any of its powers generally or specially to the Executive Member;

(h) to enter into and perform all such contracts as it may consider necessary or expedient for carrying out any of its functions; and

(i) to do such other things and perform such acts as it may think necessary or expedient for the proper conduct of its functions, and the carrying into effect the purposes of this Act.

x x x

Chapter VII

Acquisition and Disposal of Land

27. Application: The provisions of this Chapter shall apply to such areas from such dates as have been notified by the State Government under sub-section (3) of section 1.

28. Acquisition of land: (1) If at any time, in the opinion of the State Government, any land is required for the purpose of development by the Board, or for any other purpose in furtherance of the objects of this Act, the State Government may by Notification, give notice of its intention to acquire such land.

(2) On publication of a Notification under sub-section (1), the State Government shall serve notice upon the owner or where the owner is not the occupier, on the occupier of the land and on all such persons known or believed to be interested therein to show cause, within thirty days from the date of service of the notice, why the land should not be acquired.

(3) After considering the cause, if any, shown by the owner of the land and by any other person interested therein, and after giving such owner and person an opportunity of being heard, the State Government may pass such orders as it deems fit.

(4) After orders are passed under sub-section (3), where the State Government is satisfied that any land should be acquired for the purpose specified in the Notification issued under sub-section (1), a declaration shall, by Notification in the official Gazette, be made to that effect.

(5) On the publication in the official Gazette of the declaration under sub-section (4), the land shall vest absolutely in the State Government free from all encumbrances.

(6) Where any land is vested in the State Government under sub-section (5), the State Government may, by notice in writing, order any person who may be in possession of the land to surrender or deliver possession thereof to the State Government or any person duly authorised by it in this behalf within thirty days of the service of the notice.

(7) If any person refuses or fails to comply with an order made under sub-section (5), the State Government or any officer authorised by the State Government in this behalf may take possession of the land and may for that purpose use such force as may be necessary.

(8) Where the land has been acquired for the Board, the State Government, after it has taken possession of the land, may transfer the land to the Board for the purpose for which the land has been acquired.


 The preamble and objects of the KIAD Act clearly pronounce that it is enacted for the specific purpose and object of (1) establishment of industrial areas, (2) promotion, establishment and orderly development of industries in such industrial areas and (3) for that purpose, establishment of a Board, and make special provisions for purposes connected with these matters. The central purpose and object of the Act is establishment and development of industries in industrial areas.

The scheme of the statutory provisions of KIAD Act, particularly relevant for the present purpose, indicates that the State Government is empowered to declare and delineate any area in the State to be an industrial area. For the purpose of securing establishment of industrial areas, promoting rapid and orderly establishment and development of industries and for providing industrial infrastructural facilities and amenities in industrial areas, a Board is established and incorporated u/s 5 of KIAD Act. The functions of that Board include promotion and assistance in orderly establishment, growth and development of industries and providing industrial infrastructural facilities and amenities in the industrial areas. The terms “industrial area”, “industrial infrastructural facilities” and “amenity” are defined for the purpose of KIAD Act. Where, for the purposes of carrying out its functions under the Act, land is required, the Board is empowered u/s 14 to purchase it by agreement or take it on lease. However, if any land is required by the Board or otherwise to be acquired, the State Government is first required to specify by notification the area in which the provisions of Chapter VII of the KIAD Act could be availed for acquisition of land.

 Section 3 states that by a Notification, the State Government may declare any area in the State to be an industrial area for the purposes of the Act defining the limitations of the area to which it relates. Section 4 enables the State Government to exclude from any industrial area, any area or include therein any additional area as may be specified in the Notification. In all cases where an area is to be declared as an industrial area, acquisition of land may not be necessary. But on declaring an area to be an industrial area, where acquisition of land therein becomes a necessity in that case, under sub-section (3) of Section 1 r/w Section 27 of the Act, a Notification would have to be issued making applicable Chapter VII which deals with acquisition of land to an area which is declared to be an industrial area. The issuance of a Notification u/s 3(1) r/w Section 1(3) need not be simultaneous as acquisition of land is not a necessary corollary to declaration of an industrial area u/s 3 of the Act.

It has to be noted that the notification of an area under Sections 1(3) and 3(1) of the KIAD Act is different and meant for different purposes. Unless and until an area is not specified by notification u/s 1(3) by the State Government, acquisition of land in that area cannot be undertaken, although the same area may have been declared by another notification u/s 3(1) to be an industrial area. “Industrial Area”, by its definition is an area declared to be so, which is to be developed and where industries are to be set up and industrial infrastructural facilities and amenities are to be provided. For such industrial area, it is within the functions and powers of the Board to promote and assist in the rapid and orderly establishment, growth and development of industries and to provide industrial infrastructural facilities and amenities.

 Acquisition of land u/s 28 of the KIAD Act is restricted to serve two specific purposes viz., (1) if, in the opinion of the State Government any land is required for the purpose of development by the Board or (2) if, in the opinion of the State Government any land is required for any other purpose in furtherance of the objects of the Act. Even as the objects of the Act are not defined in the Act itself, they have to be traced to the preamble and the statement of object. Therefore, acquisition of land for purposes other than its development by the Board can only be in furtherance of any of the aforesaid objects of the Act.

 Acquisition of land for the purpose only of providing amenity or infrastructural facility without establishment and development of any industry and declaration of an area to be an industrial area only for that purpose, without reference to any industry or for any other industrial area even in the vicinity would amount to serving a collateral purpose rather than in furtherance of the objects of the KIAD Act. Therefore, where acquisition of land in exercise of the powers conferred by Section 28 of the KIAD Act is called into question, proximate relation between acquisition of land and furtherance of the objects of the Act has to be demonstrated and established. Mere declaration of an area to be an industrial area cannot be the basis for concluding that the acquisition of land in that area is for the purpose of in furtherance of the objects of the KIAD Act. An “industrial area” by definition has to be not only notified, but must have been notified with an intention of being developed and where industries are to be accommodated and industrial infrastructural facilities and amenities are to be provided. The term “development” is also defined in Section 2(5) of the KIAD Act to mean carrying out of leveling, digging, building, engineering, quarrying or other operations in, on, over or under land, or the making of any material change in any building or land, and includes re-development; and “to develop” has to be construed accordingly. Therefore, in an area where industries are not to be established or developed, there cannot be provided any infrastructural facilities and amenities. In other words, an area does not become an “industrial area”, merely by a notification declaring it to be an industrial area u/s 3(1) of the KIAD Act. In order to be an “industrial area” proper for the purpose of the Act, besides the notification by the State Government, the intention and prospect of the area being developed where industries are to be accommodated and industrial infrastructural facilities and amenities are to be provided are essential ingredients. In absence of such requisite ingredients, in spite of a notification u/s 3(1), land comprised in the area will not require the status and attributes of “industrial area”. In that view of the matter, acquisition of land u/s 28 of the Act could legally be initiated only if, in the opinion of the State Government (1) the land is required either for the purpose of development by the Board or (2) for any other purpose in furtherance of the objects of the Act. Where the intended acquisition of land falls in the second category, it has to be directly attributable to the objects of the Act, as enumerated hereinabove. Apparently, the objects of the Act do not include establishment of any stand-alone or isolated amenity or industrial infrastructural facility. And therefore, notification of any area u/s 1(3) does not by itself authorize the State Government to initiate acquisition thereof.


The dominant activity in an industrial area is industry. In the industrial area, industrial infrastructural facilities which contribute to the development of industries as well as amenities could be provided. When there is a declaration of an area to be an industrial area, the intention of the State Government is to develop industries in that area. Thus, industrial infrastructural facilities and amenities are incidental to the development of industries in an industrial area. In certain industrial areas, there may be need for several types of industrial infrastructural facilities and amenities, whereas, in certain other industrial areas, such a need may not arise at all. It would depend upon the nature or class of industries which are allotted in an industrial area. If acquisition of land becomes a necessity upon a declaration of an industrial area, then the acquisition must be in the opinion of the State Government for the purpose of development by the Board or for any other purpose in furtherance of the object of the Act. As noted earlier, the object of the Act is to secure the establishment of industrial areas and orderly development of industries therein. Therefore, when an area is declared to be industrial area, there must be orderly development of that area for which acquisition of land may be a necessity. Thus, the object of acquisition of land under Chapter VII of KIAD Act is for the purpose of establishing an industrial area and orderly development of industries in that area. The State Government must form an opinion that the acquisition of land is to fulfill any of the aforesaid purposes. The dominant purpose of acquisition of land must be to establish orderly development of industries or infrastructural facilities and/or amenities in an industrial area. Thus, establishing industry in an industrial area in an orderly manner, is the main intention of the Act and wherever necessary, acquisition can also be resorted to under Chapter VII of the Act. For the purpose of having an orderly development of industries in an industrial area, industrial infrastructural facilities and amenities could be required. Having regard to the need for having such facilities and amenities in an industrial area, acquisition of land may be resorted to.

Thus, facilities and amenities in an industrial area are ancillary to the establishment of industries in an industrial area. Only those facilities and amenities which are specified under the Act, are ancillary and subservient to the industries that are established in an industrial area. Thus, acquisition of land must be for the purpose of establishing an industrial area within which, facilities and amenities may be provided for the efficient working of an industry or class of industries in an industrial area. Therefore, provision of facilities and amenities in an industrial area would have to be considered at the time of declaration of an area to be industrial area, as may be necessary and concomitant to an industrial area. Also, if an industrial area is already established, additional land may be acquired for providing industrial infrastructural facilities or amenities for the purpose of the industries in the industrial area. In such a case acquisition of land for the aforesaid purpose is to sub serve the industries in the industrial area and is therefore incidental thereto.

But there cannot be acquisition of land per se for the purpose of establishing Educational Institutions, Banks or other amenities notified by the State Government in its Notification dated 13/03/1991, gazetted on 09/05/1991 under the KIAD Act. In other words, KIAD Act cannot be invoked to acquire land for the purpose of establishment or expansion of educational institutions or any other amenities notified in the Gazette per se and for that purpose, an area cannot be notified to be an industrial area. We are of the view that if only an educational institution is to be established, which calls for acquisition of land, KIAD Act cannot be invoked for that purpose. On the other hand, if in an industrial area, an educational institution is to be established as an amenity, such a mandate is permitted under the provisions of the Act. Thus, the dominant object of acquisition under KIAD Act, must be for establishing industrial areas and industrial infrastructural facilities in which provision of amenities would be incidental.

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