Supreme Court Blocks Arbitrary Rent Collection Attempts from Industrialists in Industrial Areas

June 18, Kathmandu — The Supreme Court has halted the government’s effort to arbitrarily collect rent from industrialists in industrial areas.

Despite an earlier Supreme Court order prohibiting such actions, the government-owned Industrial Area Management Limited sought to increase rent with retroactive effect, disregarding the earlier judgment. After the company filed a review petition, the Supreme Court registered the case again for consideration.

After dismissing the review petition of Industrial Area Management Limited, the Supreme Court has ended this dispute.

Industrialists are now required to pay rent only according to rent hikes effective from the fiscal year 2022/23 onward, while rent for previous years will remain at the old rates.

During the court proceedings, the company cut electricity and water lines in various industrial areas to pressurize businesses. Following instructions from the Minister of Industry, Commerce and Supplies, Gauri Kumari Yadav, the company issued a notice demanding rent payment within seven days.

Beginning Wednesday, the company started disconnecting electricity to industries failing to pay rent.

It is reported that approximately 700 industries nationwide have long been using government-owned land, buildings, and infrastructure without paying rent or dues. The company claims to have cut electricity lines for 63 industries on Wednesday alone; eight of those have paid outstanding dues and had power restored.

On December 17, 2018, the company had increased rents effective from July 16, 2018, with hikes reaching up to 700%.

Industrial Area Management Limited asserts that approximately NPR 890 million remains unpaid, of which around NPR 215 million has been collected so far.

What is the dispute about?

Due to a longstanding dispute over rent hikes and court proceedings delaying recovery, Industrial Area Management Limited recently took a stringent approach by disconnecting electricity lines.

According to Basudev Sodari, spokesperson for Industrial Area Management Limited, out of 705 institutions and industries, about 635 operate in 10 industrial areas. Over NPR 500 million remains unpaid in land rent alone, and total outstanding dues including electricity and water amount to NPR 890 million.

The company decided on December 17, 2018, to increase rent effective from July 16, 2018, with increases up to 700%.

However, industrialists opposed the hike and requested then-Minister Matrika Prasad Yadav to hold the increase. The minister instructed a freeze and ordered an investigation.

After two years of research, in 2021 the ministry declared the Board’s decision appropriate, paving the way for implementation. On July 6, 2022, the company’s management committee again requested implementation of the 2018 rent increase, prompting industrialists to file a case with the Patan High Court.

The High Court approved the Board’s decision, after which industrialists appealed to the Supreme Court. On March 26, the Supreme Court ruled that although the rent increase is valid, it would apply only from July 7, 2022. This led to claimed losses of around NPR 160 million in rent revenue for the company from 2018 to 2022.

The company filed a review petition on January 9, and today’s ruling affirms rent hikes apply only after 2022, maintaining previous rent rates for earlier periods.

Ejaz Alam, President of Nepal Industrial Area Industries Federation, stated that the prolonged rent dispute has finally been resolved with the Supreme Court’s order.

“We were prepared to comply with whatever decision the court made, but the government suddenly issued a seven-day notice demanding rent payment. After the notice, we were ready to proceed based on the Supreme Court ruling,” Mr. Alam said.

Industrialists consider cutting electricity lines during an ongoing court case illegal. Mr. Alam accused the company of acting unlawfully by disconnecting power without due process.

The ruling noted that Industrial Area Management Limited suffered an approximate NPR 160 million loss from rent revenue between 2018 and 2022.

“Electricity can only be cut when electricity bills are unpaid; similarly, water can be disconnected if dues are pending. But disconnecting lines abruptly at 6 a.m. without informing industries is unacceptable,” he added.

The Federation stated industries have been paying new rent since 2022, noting that 63 industries had their electricity disconnected on Wednesday alone, with power cuts to around 100 industries continuing on Thursday.

Earlier, FNCCI called for an immediate halt to electricity disconnections and administrative force, urging resolution through legal procedures, dialogue, and consensus.

Electricity Disconnections Escalate in Hetauda Industrial Area Affecting 131 Industries

Hetauda, the country’s largest industrial area, witnessed electricity cuts beginning December 19 to 131 industries and offices following directives from Industrial Area Management Limited.

On Wednesday, 15 industries faced disconnections, with operations continuing on Thursday, official Himalaya Bhandari reported.

The company had issued a seven-day notice on June 8 demanding outstanding payments from 131 industries and offices in Hetauda. On June 18, technicians were dispatched to disconnect electricity for non-paying units.

Industrial Area Management Limited claims NPR 200 million in outstanding rent and dues from industries in Hetauda.

Hetauda Industrial Area spans 3,228 ropani and hosts various industries including food, beverage, Gorkha Brewery, Asian Paints, animal feed, and carton production.

Government offices such as Hetauda Dairy Distribution Project, Food Quality Control Office, Seed Company, Soil Testing Office, District Police Office, and Nepal Bank Limited Hetauda Branch also operate there.

Of Hetauda Industrial Area’s total land, 2,178 ropani is leased out, 26.52 ropani remains vacant, and 597 ropani is allocated for utility services and infrastructure.

There are 10 industrial buildings, 11 warehouses, and 34 other structures.

The Industrial Area Management Office charges rent based on the demand for buildings, warehouses, quarters, and land.

Following widespread electricity cuts, industrialists have become alarmed, the Industries Association of Makwanpur reported.

President Shrihari Maske criticized the approach, saying the strict measures are causing panic among industrialists despite ongoing court proceedings. He accused the government of breaching Supreme Court orders by acting on High Court rulings to intimidate the industry.

Former presidents of the Makwanpur Industries Association, Swagtaraj Pyakurel and Lekharaj Pokhrel, complained about increased harassment of industrialists and expressed that the government is failing to create an industry-friendly environment.