The Bengal government has begun the process of taking back 395 acres of land from the C.K. Birla Group-owned Hindustan Motors in Uttarpara, the decision coming at a time the cash-strapped administration is planning to monetise assets, including land sale.

Bengal faces a financial crisis with the Centre stopping funds release under various welfare schemes citing alleged corruption and other reasons, and the state’s own revenues yet to return to pre-pandemic levels.

“The process for taking back the land from Hindustan Motors (which used to make Ambassador cars) has been initiated following instructions from the top levels of the government,” a senior official said.

The land is being taken back because of the company’s failure to meet certain government guidelines, sources in Nabanna said.

“The company breached several state government guidelines over the past 15 years,” a bureaucrat said, adding that the plant had been non-functional for several years.

Hindustan Motors had declared suspension of work at the Uttarpara plant in 2014. “There’s no activity at the site; so there’s nothing wrong in taking the land back,” the bureaucrat said.

Company sources said they were not aware of the development and would not comment. The company may, however, evaluate its legal options if the state carries out its decision, they added.

The sources said the state’s decision had come as a surprise as the company was trying to revive operations at Uttarpara.

Hindustan Motors has informed shareholders in its annual report that it is in initial discussions with another company in the electric vehicle segment for a joint venture and hopes to finalise the term sheets soon.

The company had been allowed to retain a 702-acre government plot under a 1954 law that abolished the zamindari system but permitted mills, factories and workshops to retain their land.

Sources said the state cabinet had in 2006 allowed the company to sell off 307 acres of land to generate Rs 85 crore as part of a revival bid.

But years later, it was found that the plot had been sold to Bengal Shriram for about Rs 300 crore, they added.

Following an audit report in 2014, the Bengal government asked the company to deposit with the state treasury the additional amount it had generated by selling the land, the sources said.

“But the amount was not deposited. Nor did the company invest the money to modernise or revive the plant,” a bureaucrat said.

A hearing was conducted by the land and land reforms department where the company was asked why the land would not be taken back.

Sources said the carmaker’s representative told the hearing that the company was planning to produce e-vehicles at the site, but could not furnish documents to back up its claim.

Hindustan Motors also requested the government to allow it to hand over more than 100 acres of land to a Mumbai-based company to set up warehouses and an IT park.

“The government did not find anything concrete in these proposals. It’s clear that the company is no longer interested in running the factory. So, the land can be taken back,” an official said.

Some officials said the government was aware that such action might invite a legal battle, but it was determined to go ahead for two reasons.

First, it wants to monetise the land at a time it faces a funds crunch. The plot is at a prime location near Calcutta, and may be added to a list of 32 plots the government plans to sell to scoop up around Rs 8,000 crore that will fund its welfare schemes.

Second, the administration wants to send out a strong message that government land has to be properly utilised.

“Whenever an investor is given land, we usually set a deadline for completion of the project. The government usually gives a window of three years,” the bureaucrat said.

“If the investor fails to utilise the land within the deadline, it’s common to take the land back. Hindustan Motors has left the plot idle for years and violated the government’s directions.”

Additional reporting by our business bureau