IN THE HIGH COURT AT CALCUTTA CIVIL APPELLATE JURISDICTION [CIRCUIT BENCH AT PORT BLAIR] *** PRESENT: HON’BLE JUSTICE BISWAJIT BASU HON’BLE JUSTICE GAURANG KANTH MA/21/2021 M/s Diagnostic Solutions and another … Appellant Versus The Lieutenant Governor and others … Respondents For the Appellant : Ms. Anjili Nag, Sr. Adv. Ms. K. Bhawani For the Respondents : Mr. Rakesh Kumar Heard on : 02.09.2025 Judgment on : 08.09.2025 GAURANG KANTH, J. 1. The present matter arises out of a remand. In the present Appeal, the Appellant challenges the order dated 08.04.2021 passed by the learned Single Judge of this Court in WP 145/2020, whereby the writ petition filed by the Appellant was dismissed. By judgment dated 15.09.2021, this Court allowed the said appeal. The Respondents thereafter challenged the said judgment before the Hon’ble Supreme Court in SLP (C) No. 884/2022 which was later converted into Civil Appeal No. 5299/2022. Vide order dated 16.08.2022, the Hon’ble Supreme Court set aside the judgment dated 15.09.2021 and remitted the matter back to this Court for fresh 2 consideration, specifically directing examination of the Scheme notified by the respondent administration on 25.10.2017. 2. The facts leading to the present appeal are as follows: 3. Appellant No.1 is a proprietorship MSME engaged in the business of running a Diagnostic/Pathological Laboratory. The Directorate of Industries, Andaman & Nicobar Administration, vide Notification No. 16/2010 dated 22.01.2010, introduced the Andaman & Nicobar Islands Capital Investment Subsidy Scheme, 2010 (“2010 Scheme”) to promote the growth of Micro and Small Enterprises that commenced commercial production on or after 01.04.2007 or underwent substantial expansion on or after that date. The scheme was subsequently amended by notifications dated 13.08.2012 and 23.01.2013, extending its validity up to 31.03.2017. 4. In 2012, the Appellant applied for subsidy under the 2010 Scheme. Upon submission of all requisite documents, including the building plan for its premises, a subsidy of Rs. 23.48 lakh was sanctioned. 5. On 10.03.2017, the Appellant again submitted a claim for subsidy in respect of the substantial expansion undertaken by it, invoking the 2010 Scheme read with the amendment to the said scheme vide notification dated 23.01.2013. 3 6. While the said application was pending, the Andaman & Nicobar Administration notified a fresh scheme on 25.10.2017, titled Andaman & Nicobar Islands Infrastructure Subsidy Scheme for Micro & Small Enterprises, 2017 (“2017 Scheme”). The 2017 Scheme was applicable to all MSMEs which have been commissioned or commenced their commercial production on or after 01.04.2017 till 31.03.2020. 7. Clause 13 of the 2017 Scheme empowers the Administrator, A&N Administration, to relax any clause of the Scheme. No such relaxation provision exists under the 2010 Scheme. 8. Since the Respondents failed to take a decision on the Appellant’s application dated 10.03.2017 for grant of subsidy, the Appellant approached this Court by filing WP 74/2020, seeking a direction to the Respondent authorities to grant subsidy by invoking the relaxation clause contained in the 2017 Scheme. It was the Appellant’s contention that while its application under the 2010 Scheme was still pending consideration, the 2017 Scheme came into force, and therefore the benefit of the relaxation clause should be extended to pending applications. By order dated 24.02.2020, this Court disposed of the said writ petition by directing the Respondents to consider and dispose of the Appellant’s application within four weeks. 4 9. In compliance of the said directions, the Respondents placed the matter before the Scrutiny Committee in its meeting held on 14.07.2020. The Committee noted that the Appellant’s premises had been constructed in violation of the approved building plan, as confirmed by Port Blair Municipal Council (PBMC) vide letter dated 31.01.2017. Consequently, the firm did not satisfy Clause 5(ii) and 6(i) of the 2010 Scheme. Nevertheless, the Scrutiny Committee recommended relaxation of Clause 6(i) under the amended scheme notified on 23.01.2013. Subsequently, in consultation with the Finance and Law Departments, the competent authority decided that the Appellant’s claim must be considered strictly in terms of the notified scheme. Since the 2010 Scheme did not contain any relaxation clause, no exemption could be granted. Hence, the Petitioner's firm is not meeting the eligibility conditions as per the 2010 Scheme. It was also noted that the 2017 Scheme applied only to MSMEs set up or expanded on or after 01.04.2017. Accordingly, the Scrutiny Committee concluded that the Appellant’s claim was not admissible under either the 2010 Scheme or the 2017 Scheme. Based on this, the Director of Industries & Member Secretary passed an order dated 10.09.2020 rejecting the claim. 10. Aggrieved thereby, the Appellant filed WPA 145/2020 seeking, inter alia, the following reliefs: 5 “A) A Writ in the nature of certiorari quashing the order dated 10th September, 2020 passed by the respondent authorities. B) A Writ in the nature of certiorari quashing clause 5 (ii) of the Scheme of 2010 holding the same to be unconstitutional and impracticable to follow. C) A Writ in the nature of mandamus directing the respondent authorities to consider the claim of the applicant for subsidy without demanding no objection certificate from the Port Blair Municipal Council and ignoring the violation committed by the landlord in respect of the building in question”. 11. By order dated 08.04.2021, the learned Single Judge dismissed the writ petition. Aggrieved thereby the Appellant preferred the present appeal. Vide judgment dated 15.09.2021, a Division Bench of this Court allowed the appeal, holding that the Appellant’s application was eligible for consideration under the 2010 Scheme and directed the Respondents to decide the same within two weeks. The Respondent Administration, being aggrieved by the said Judgment dated 15.09.2021, filed SLP (C) No. 884/2022. By order dated 16.08.2022, the Hon’ble Supreme Court set aside the judgment dated 15.09.2021 and remitted the matter back to this Court for fresh consideration, with particular reference to the Scheme dated 25.10.2017. 12. In view of the same, this Court is examining the present Appeal afresh. Submission on behalf of the Appellant 13. Learned Counsel for the Appellant submits that Clause 5(ii) of the Scheme, 2010, is unconstitutional, arbitrary, and impracticable, 6 and therefore liable to be struck down. It is contended that the Appellant is a lawful tenant in the subject premises, and the area where the Appellant is carrying on its business is neither unauthorised nor in violation of building rules. Any unauthorised construction has admittedly been carried out by the landlord on the upper floors, over which the Appellant has no control. By rejecting the Appellant’s claim for subsidy on such grounds, the Respondent- Administration has acted arbitrarily and imposed an unreasonable condition upon the Appellant, thereby violating Article 14 of the Constitution. Moreover, Clause 5(ii) speaks of the land on which the enterprise is set up, and can reasonably apply only where the unit is established on self-owned land. If the said clause were to be mechanically applied to tenants, it would render the Scheme wholly impracticable, as tenants cannot possibly regulate or prevent unauthorised construction carried out by landlords. 14. Learned Counsel for the Appellant further submits that even the Scrutiny Committee, recognising the inherent impracticability of Clause 5(ii), recommended relaxation of the said clause by taking recourse to the subsequent Scheme. Once the Committee itself has found the clause to be unworkable, the Respondent-authorities were duty-bound to exercise discretion and relax its application in the case of the Appellant. Denial of subsidy in these circumstances amounts to non-application of mind, besides being unjust, since the Appellant is 7 not the violator and bears no responsibility for the alleged unauthorised construction of the landlord. 15. The Appellant has already carried out substantial expansion of its enterprise and, being an MSME squarely covered under the Scheme of 2020, is entitled to the subsidy as claimed in its application dated 10.03.2017. Any refusal to extend such benefit is contrary to the object and purpose of the Scheme itself, which is to encourage industrial growth and expansion. 16. It is further submitted that the principle of legitimate expectation clearly applies in favour of the Appellant. The Respondent- Administration, on an earlier occasion, had sanctioned subsidy to the Appellant vide order dated 16.11.2012 under the very same Scheme of 2010, without raising any objection whatsoever regarding Clause 5(ii). Having once extended the benefit, the Respondent cannot now adopt a diametrically opposite stand to the prejudice of the Appellant. Such inconsistent conduct is arbitrary, violative of Article 14, and contrary to settled principles of fairness in administrative action. Submission on behalf of the Respondent Administration 17. At the outset, it is submitted that the 2017 Scheme applies only to new MSMEs established or which underwent substantial changes between 01.04.2017 and 31.03.2020. The Appellant admittedly carried out substantial changes prior to 10.03.2017 and submitted its 8 application on 10.03.2017. The Appellant’s case therefore falls outside the scope of the 2017 Scheme. 18. The application dated 10.03.2017 is to be examined exclusively under the 2010 Scheme. Unlike Clause 13 of the 2017 Scheme, which empowers the Administrator to relax provisions, the 2010 Scheme contains no such enabling clause. 19. Clause 5(ii) of the 2010 Scheme requires that the enterprise be set up on land duly converted for commercial use, with prior approval/No Objection from the competent local authority, and that constructions conform to applicable regulations, including CRZ norms. The building housing the Appellant’s enterprise was found, by communication dated 31.01.2017 from the Port Blair Municipal Council, to be in violation of municipal norms. The object of Clause 5(ii) is to prevent enterprises from being established in structures grossly violative of building laws. The Appellant is therefore disentitled to subsidy. 20. The recommendation of the Scrutiny Committee for relaxation of Clause 5(ii) cannot be accepted, as the 2010 Scheme provides no relaxation mechanism. The relaxation power available under the 2017 Scheme cannot be imported into the 2010 Scheme. 21. Clause 5(i) of the 2010 Scheme further requires that the enterprise be located in a rented premises leased for at least five years 9 from the date of application. The Appellant’s lease, executed on 04.11.2011 for nine years, had less than five years remaining when the application was filed on 10.03.2017. This is a clear infraction of Clause 5(i). 22. The Appellant had also executed an undertaking under Clause 11 of the 2010 Scheme, binding itself not to change the location of the unit or effect substantial modifications in the project without prior approval of the competent authority. The Appellant violated this stipulation by altering the location and project without obtaining prior approval. 23. Learned Counsel for the Respondent Administration further submitted that in the year 2012, the Appellant had submitted another application along with a building plan, pursuant to which the subsidy was released to the Appellant without municipal verification. However, the Port Blair Municipal Council, vide its letter dated 31.01.2017, confirmed that the construction was in violation of the municipal regulations, as the owner had undertaken an extension of the third floor of the existing building. Consequently, a notice dated 14.01.2016 under Section 168(d) of the Andaman & Nicobar Islands (Municipal) Regulations, 1994, was issued by the PBMC to the owner of the said building. 10 24. In these circumstances, the Appellant’s application is ineligible under the 2010 Scheme. The Appeal is therefore liable to be dismissed. Legal Analysis 25. This Court has heard the submissions advanced by learned counsel for both parties and carefully examined the documents placed on record. 26. At the outset, it is noted that the present matter is before this Court on remand by the Hon’ble Supreme Court. Vide order dated 16.08.2022, the Hon’ble Supreme Court set aside the earlier judgment of this Court and directed a fresh consideration in light of the 2017 Scheme, observing, inter alia, as follows: “The High Court has not referred to the 2017 Scheme, though as per the appellant, the unit has been set up after the commencement of the scheme on 25.10.2017 and the claim of the writ Petitioner has to be examined under the said scheme only. Such aspect has not been considered by the High Court. Since none had appeared for the respondents, we deem it appropriate to set aside the order of the High Court and remit the matter to the High Court to decide the matter afresh examining the Scheme notified on 25.10.2017.” 27. However, the stand of the Respondent Administration (who was the Appellant before the Hon’ble Supreme Court) before this Court is that the 2017 Scheme has no application to the case of the Appellant. Pursuant to the remand, the Administration filed an affidavit asserting that the 2017 Scheme is confined to MSMEs set up or substantially expanded between 01.04.2017 and 31.03.2020. Since the Appellant had commenced commercial production and undertaken substantial 11 expansion prior to 01.04.2017, it was contended that the Appellant falls outside the purview of the said Scheme. It is also to be noted that the Appellant has sought subsidy under the 2010 Scheme, while also requesting that the benefit of relaxation contemplated in Clause 13 of the 2017 Scheme be extended to their application dated 10.03.2017, as the 2010 Scheme contains no such relaxation clause. As both parties are ad idem that the Appellant’s claim must be considered under the 2010 Scheme, this Court now proceeds to examine whether the Appellant’s application qualifies for consideration thereunder. 28. The Respondent Administration, rejected the Appellant’s claim under the 2010 Scheme, primarily on the ground that the Appellant’s unit is part of a building which is constructed in violation of the municipal laws. Reliance is placed on Clause 5(ii) of the 2010 Scheme. As per Clause 5 (ii) of the 2010 Scheme: ‘The land in which the enterprise is set up shall be converted for commercial use and the unit should obtain No Objection Certificate from the Municipality/Gram Panchayat/ District Administration as the case may be for site development. The construction work shall be carried out as per LR & LR Regulations, Panchayat Regulations/Municipal Regulations and CRZ norms as applicable’ 29. Clause 5(ii) of the 2010 Scheme must be read contextually. It contemplates two conditions: first, the land must be duly converted for commercial use; second, the construction must comply with the relevant municipal and CRZ norms. In the present case, the issue to 12 be considered is that whether the construction is in conformity with the building regulations or not. It is an admitted position that sanction existed for a 3 story commercial-cum-residential building. The Port Blair Municipal Council, by letter dated 31.01.2017, confirmed deviations from the sanctioned plan, thereby rendering the building unauthorised. 30. The material on record reveals that the Appellant is only a tenant of the ground floor. The sanctioned plan was for a triple-storied commercial-cum-residential building. The violation relates to the extension of the third floor by the landlord, for which the Municipal Council issued a notice dated 11.01.2016 under Section 168(d) of the A&N Islands (Municipal) Regulation, 1994. Thus, the illegality pertains solely to the unauthorised third-floor construction, and not to the ground floor premises occupied by the Appellant. 31. This Court is mindful of the importance of incorporating safeguards in subsidy schemes. However, the objective of such schemes is to incentivise and support genuine MSMEs. The claims of bona fide units cannot be denied on mere technicalities or on account of violations attributable to third parties. Development of MSMEs is critical for the economic progress of the Islands, and the interpretation of the scheme must therefore be purposive rather than hyper- technical. 13 32. The Appellant contends that they cannot be penalised for unauthorised construction carried out by the landlord in portions of the building beyond their control. Their tenancy and operations are confined to the ground floor, against which no violation has been alleged. Therefore, the Appellant’s unit ought to be treated independently for the purpose of subsidy eligibility. 33. In multi-storeyed buildings where floors are separately owned or occupied, compliance must be assessed qua the specific floor/unit concerned. To interpret otherwise would unjustly disqualify bona fide owners/tenants. 34. It is to be noted that in the present case, the allegation is deviation from the approved sanctioned plan. Hence, it is to be noted that if the demolition action is to be taken, that is only qua the unauthorised portion, not the whole building. Since there being no allegation of unauthorised construction with respect to the ground floor, it cannot be held that the Appellant’s enterprise violates Clause 5(ii). 35. The Scrutiny Committee also, upon examining the Appellant’s eligibility, recommended relaxation of Clause 5(ii) of the 2010 Scheme in the Appellant’s favour. The Respondent Administration rejected this recommendation solely on the ground that no relaxation clause exists 14 in the 2010 Scheme. The Appellant has, therefore, sought extension of Clause 13 of the 2017 Scheme to their case. 36. This Court is conscious that the 2010 Scheme does not contain any express relaxation clause, and in exercise of powers under Article 226 of the Constitution, it is not open to the Court to read into or import provisions from another scheme. However, within the framework of the 2010 Scheme itself, the Appellant’s application dated 10.03.2017 deserves to be considered by treating each unit of the building as an independent unit. The Respondent Administration shall, therefore, examine only the portion in the Appellant’s occupation and determine whether that portion suffers from any violation or illegality under municipal law, and thereafter take a final decision on the claim. 37. The second objection raised by the Respondent Administration is that, on the date of application dated 10.03.2017, the Appellant did not have a residual lease period of five years as required under the 2010 Scheme. The record, however, establishes that the Appellant had executed a lease deed dated 04.11.2011 for a term of nine years. The intent of the clause is to ensure that units are not set up on short- term leases with the object of claiming benefits and thereafter abandoning the premises. In the present case, the Appellant had already availed subsidy under the first phase of the Scheme, had undertaken substantial expansion, and had applied for further 15 subsidy under the said scheme. The objection that the residual lease period was less than five years is, therefore, hyper-technical and unsustainable. The Respondent Administration shall accordingly process the application without rejecting it on this ground. 38. The third objection raised by the Respondent Administration is that the Appellant had executed an undertaking under Clause 11 of the 2010 Scheme not to change the location of the unit or effect substantial modifications without prior approval of the competent authority, and that this condition was allegedly violated. However, no specific particular of such violation have been furnished, nor was this objection raised contemporaneously during scrutiny of the application. In any event, Clause 11 does not stipulate that subsidy claims must be rejected outright for carrying out substantial expansion without prior intimation. In the absence of any concrete material or explicit penal consequence under the Scheme, this vague and unsubstantiated objection cannot disentitle the Appellant from the benefits otherwise available under the 2010 Scheme. 39. In view of the foregoing discussion, the impugned order dated 08.04.2021 passed by the learned Single Judge in WPA 145/2020 is set aside. The present writ appeal is disposed of with a direction to the Respondent Administration to consider and process the Appellant’s application dated 10.03.2017 under the 2010 Scheme, within a period 16 of four weeks, after affording the Appellant an opportunity of hearing. While undertaking such consideration, the Administration shall treat the ground floor premises occupied by the Appellant as an independent unit for the purposes of Clause 5(ii) of the 2010 Scheme, and shall pass a reasoned and speaking order within the stipulated period. 40. No order as to cost. I agree. (GAURANG KANTH, J.) (BISWAJIT BASU, J.)