BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS PVT. LTD. AND ORS.
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Headnote — Supreme Court Reports (editorial summary, not part of the judgment)
A (Civil Appeal No. 2963 of 2023 Etc.) Industrial Development – Industrial land – Appeals from judgment passed by the High Court whereby the Writ Petition filed by Respondent No.1 was allowed – As a corollary, the decision by the Cabinet Committee of the State of Rajasthan, and resulting instructions issued to the Rajasthan State Industrial Development and Investment Corporation Ltd. (“RIICO”) to cancel a series of permissions and approvals granted/awarded to Respondent No.1 in respect of industrial land in Kota, Rajasthan, were set aside – D Whether the Large-Scale Industrial Area (LIA), Kota has been always under the management and control of the State Government or it was transferred to RIICO pursuant to Government Order dated 18.09.1979 – Whether the 1979 Rules of RIICO are statutory in nature – Whether failure to observe Principles of Natural Justice by the State Government vitiated its decision to annul the permissions E /approvals granted by RIICO in favour of Respondent No.1 – Whether the State Government could have exercised its powers under Article 138 of the AoA of RIICO to direct cancellation – Whether the Rules of Business were not followed – Does the Doctrine of Legitimate Expectations and Promissory Estoppel apply in favour of Respondent No. 1 – Whether the Appellant Unions are entitled to relief –
Held
There was an uninterrupted and subsisting relationship of lessor and lessee between the State Government and either JKSL or Respondent No. 1, in the context of LIA, Kota – From the first lease deed executed in 1967, till date, the State Government has maintained the position of lessor – The lease with JKSL, and all leases thereafter with JKSL and/or Respondent No. 1, have been signed under the 1959 Rules – The terms of the lease are clearly in compliance with the 1959 Rules – The land in LIA, Kota was never transferred to RIICO under the Government Order dated 18.09.1979 – The State Government has always maintained title and ownership of the area – The land was also never allotted to RIICO on a 230
A 2007, after it stepped into the shoes of JKSL – The leases with JKSL were executed under the 1959 Rules which remained applicable and there was no authority ever vested in RIICO to have issued the permissions for conversion and sub-division of plots in the LIA, Kota, and for signing the supplementary lease deeds with Respondent No.1 – There is no legal infirmity in the action of the B Appellants in setting aside the decisions taken by RIICO or in directing to cancel the supplementary leases of 2018 – Hence, the cancellation of the supplementary deeds and quashing of the approvals for conversion of land and sub-division of plots is upheld – This shall, however, not preclude Respondent No.1 from re- C approaching the State Government and seeking conversion of the usage of land and attendant approvals under the 1959 Rules – The State Government shall be at liberty to consider such a proposal in public interest and in accordance with the 1959 Rules – With regard to the Appellant Unions, it would be open for them to seek their remedies under law from the Appropriate Government, and judicial forums – Rajasthan Land Revenue Act, 1956 – s.100 – Rajasthan Industrial Areas Allotment Rules, 1959 – rr.11A and 12 – RIICO Disposal of Land Rules, 1979 – rr.20A, 20B and 20C – Constitution of India – Art.166 – Sick Industrial Companies (Special Provisions) Act, 1985 – s.18. E Company Law – Distinction between companies that are brought into being “by” an Act, and those created “under” an Act –
Held
A company incorporated under the Companies Act is not a creation of the said Act but it has come into existence in accordance with the provisions of the Companies Act. F Rules and Regulations – Statutory rules – The status of “statutory rules” cannot be accorded to regulations that are brought into existence under the Articles of a non-statutory company. Doctrines / Principles – Principle of natural justice – Steps taken which are themselves vitiated, cannot form the basis for principles of natural justice to be applied. Doctrines / Principles – Promissory estoppel – Supervening public interest acts as a veto against the invocation of promissory estoppel.
Disposing of the appeals, the Court
Held
Whether the LIA, Kota has been always under the management and control of the State Government or it was transferred to RIICO pursuant to Government Order dated 18.09.1979? B
Reporter's headnote (continued) and case details
230 [2023] SUPREME COURT 7 S.C.R. 230 REPORTS [2023] 7 S.C.R.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 231 PVT. LTD. AND ORS.
leasehold basis under Rule 11A of the 1959 Rules – Thus, RIICO A was never expressly given any leasehold rights, and had no authority to further sub-lease the land, along with other corresponding powers, under Rule 12 of the 1959 Rules – In any case, Rule 11A of the 1959 Rules is of no importance, as there had to be an express allotment of the land to RIICO on a leasehold basis after the coming into force of Rules 11A and 12 – No such express allocation was ever made in favour of RIICO – The 1979 Rules are not statutory in nature – The reference to the 1979 Rules in Rule 12 of the 1959 Rules, does not accord any statutory recognition to the former – There was no violation of the Principles of Natural Justice in this case – The entire basis for granting permission for conversion of the land, and subdivision of the plots, was on an incorrect assumption of power by RIICO under the 1979 Rules, to act as the lessor of LIA, Kota – RIICO was never given any leasehold rights over the land – When the basis for a benefit received by a party is itself invalid, there is no question of giving the party a chance to be heard – The State Government was competent to issue directions under Art.138 of the AoA of RIICO, to cancel the supplementary lease deeds and attendant permissions – This fell squarely within the ambit of Art.138 of the Articles of Association – There was no violation of the Rajasthan Rules of Business as the sub-committee which recommended the cancellation of the permissions /approvals to Respondent No.1, was acting for and on behalf of the entire Council of Ministers – Hence, the Rules of Business were complied with – There was no legitimate expectation nor promissory estoppel that could operate to the benefit of Respondent No. 1, as, once again, no such defences could be raised on the back of RIICO’s F own erroneous utilization of powers that vest only with the rightful lessor of LIA, Kota, which is the State Government – Further, public interest overrides both these doctrines, and cannot come to the aid of a private party, when the larger interests of society are involved – The supplementary leases signed between Respondent No.1 and RIICO are unsustainable – RIICO did not possess the authority to G enter into these agreements, as the land in LIA, Kota remained under the ownership and control of the State Government uninterruptedly from the first lease signed with JKSL, till the present date – Respondent No.1 was also cognizant of this fact as evinced by it entering into the 7 transfer lease deeds with the Collector, Kota, in H
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BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 233 PVT. LTD. AND ORS.
1. The relationship of lessor and lessee between State of Rajasthan and JKSL continued uninterruptedly till JKSL was declared a ‘sick company’. Respondent No.1 then stepped into the shoes of JKSL under the orders of AAIFR, and by virtue of the tripartite agreements executed with the labour unions, for C the land at LIA, Kota. It is also an admitted fact that neither under the tripartite settlements dated 9.10.2002 and 22.10.2002, nor under the sanctioned rehabilitation scheme dated 23.1.2003, the relationship of lessor and lessee between State, JKSL, or Respondent No.1, as the case may be, was ever disrupted. There D is no cessation in the relationship of lessor and lessee between the State and Respondent No. 1, or its predecessor JKSL. This contractual relationship duly governed under the 1956 Act read with the 1959 Rules, was never terminated expressly or otherwise and neither was it substituted by a supplementary conveyance deed. A relationship of lessor–lessee between State Government E and JKSL/RIICO continued to subsist and has not been affected in any manner by virtue of Government order dated 18.09.1979. [Paras 40, 41 and 48][282-E-G; 283-A-B; 284-F] Whether the 1979 Rules of RIICO are statutory in nature? F 2.1. The plain wording of Rule 11A of the Rajasthan Industrial Areas Allotment Rules, 1959 clearly shows that the Corporation can have merely managerial power over the land that is allocated to it. As laid down very clearly under Rule 11A, the allotment to RIICO is done purely on a leasehold basis, and ownership and title remain unequivocally with the State G Government. RIICO acts as nothing but an agent of the State in its efforts to increase industrial production and further economic progress. The State remains the overarching power in this dynamic and RIICO remains subservient to it. The relationship of lessor and lessee between State and Respondent No. 1 has H
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A been validly subsisting at all times and RIICO was never authorised either by Government order dated 18.09.1979 or under Rules 11A and 12 of the 1959 Rules, to bypass the State Government and assume the self – styled role of the lessor in respect of LIA, Kota. Since, the 1967 and 2007 lease deeds in favour of JKSL and Respondent No. 1, respectively, were executed by the State Government in terms of Rule 2 of the 1959 Rules, RIICO had no authority whatsoever to permit Respondent No. 1 to change the land use or allow for the sub – division of plot without the prior approval of the State Government, which is the sole competent authority to accord such permission in exercise of its power under Rule 8 of the 1959 Rules. The contrary view taken by the High Court is plainly erroneous in law and is based on a misconstruction of the provisions of 1959 Rules read with the binding bilateral contracts between the parties. [Paras 50, 52 and Para 58][284-H; 287-E-H; 285-F-G] D 2.2. RIICO is not a statutory body. The Company was brought into being under the Companies Act, 1956 by the State of Rajasthan, which holds 100% shares in it. RIICO does not owe its existence to a statute, but is rather created under the Companies Act and is subject to its provisions. It is only governed by the provisions of the Companies Act and not created by it. E Rule 12 of the 1959 Rules merely states that lands allotted to RIICO will be further dealt with by the Corporation as per its 1979 Rules. At best, this imposes an obligation upon RIICO to abide by its own guidelines, which it had issued under Article 93 of its AoA. The obligation for RIICO to abide by the 1979 Rules F stems from its own AoA under which those Rules came into being. By no stretch, does this make the 1979 Rules statutory in nature. [Paras 61, and 67][288-E-F; 291-F-G] Whether failure to observe Principles of Natural Justice by the State Government vitiated its decision to annul the G permissions/approvals granted by RIICO in favour of Respondent No.1?
3. The Principles of Natural Justice entailed giving Respondent No.1 an opportunity to defend its rights. However, the most decisive and crucial factor is whether any legally vested H ‘right’ ever accrued in favour of Respondent No. 1, which the
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 235 PVT. LTD. AND ORS.
State Government could not have despoiled behind its back. A RIICO had no authority whatsoever to accord permission for conversion and sub – division of the industrial land allotted to Respondent No. 1. State Government has always retained its authority as lessor and was the only competent authority to grant such permissions to Respondent No. 1 within the framework of B the 1959 Rules. The irresistible conclusion would be that the self – styled power exercised by RIICO, was without any sanction in law; it lacked inherent competence and RIICO acted beyond its jurisdiction in respect of LIA, Kota. The permissions accorded by RIICO in favour of Respondent No. 1 did not confer any rights whatsoever, much less any enforceable right in the eyes of law. C RIICO usurped the powers vested in the State Government and passed palpably illegal orders in favour of Respondent No.1. The agreements between RIICO and Respondent No. 1 are nothing but brutum fulmen. Steps taken which are themselves vitiated, cannot form the basis for principles of natural justice to be applied. D The supplementary lease deeds were signed by RIICO without any authority to do so. It similarly lacked the capacity to grant the permission for conversion of use for the land to commercial, and the allowance to sub – divide the plot. Thus, no legally vested right of Respondent No.1 has been infringed and it has no legitimate ground to seek an opportunity to be heard in a matter E strictly between RIICO and State Government. [Paras 74 and 78][295-B-E; 297-B-C] Whether the State Government could have exercised its powers under Article 138 of the AoA of RIICO to direct cancellation? F
4. The State Government has directed RIICO to recall its permission for conversion of the usage of land, sub – division of plots and supplementary lease deeds executed in favour of Respondent No. 1. All these actions of RIICO pertained to its business affairs. Since RIICO took these decisions exceeding G its powers and in a completely unauthorised and illegal manner, the State Government was well within its rights to invoke Article 138 of AoA and nullify the unauthorised and unlawful decisions taken by RIICO. The very objective behind reposing power in the State Government under Article 138 of the AoA is to enable H
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A it to undo and annul the decisions taken by RIICO in the conduct of its business affairs, which the State Government may find is derogating from public interest or in conflict with its own policy. The State Government is entitled to resort to Article 138 where it finds that the business affairs have been conducted by RIICO detrimental to the State’s interest as a Principal stake holder. B [Para 81][298-B-D] Whether the Rules of Business were not followed?
5. It appears to this Court that the Rules of Business have been substantially complied with. The entire Cabinet was called on 29.12.2018 to consider various decisions taken by RIICO during the previous regime. Among these were the supplementary leases and connected permissions to Respondent No. 1 by RIICO. The Cabinet, which included the Minister for Industries, then proceeded to constitute three subcommittees to investigate these alleged irregularities, along with an inter – departmental committee. The Minister for Industries is not expected to look into each individual matter pertaining to RIICO as this would render the entire working of government unviable. It was a collective decision of the Council of Ministers to constitute the Committees to look into irregularities of various kinds. The E specific committee that was authorized to investigate RIICO and its alleged misuse of non – existent powers in favor of Respondent No. 1, was a creation of the entire Council, including the Minister for Industries. The sub – committee’s actions in this context were completely validated and backed by the Minister and the rest of the Council. It is, thus, difficult to hold that Rules of Business F have not been followed by the State Government in the course of its decision making process. [Para 85 and 90][300-H; 301-A-B; 302-E-G] Does the Doctrine of Legitimate Expectations and Promissory Estoppel apply in favour of Respondent No. 1? G
6. It is clear that no legitimate expectation could have arisen in favor of Respondent No. 1. There was no implicit or explicit representation made by the State Government in favour of its request for conversion of the land, nor for sub – division of plots. RIICO, in completely untenable fashion, took over the role of H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 237 PVT. LTD. AND ORS.
the lessor without there being any right to do so, and issued the A requisite permissions. Evidently, such approvals had no legs to stand on as they were devoid of any force of law. The lessor of LIA, Kota, was the State Government. When the entity purporting to exercise the powers of a lessor, RIICO in this case, does so without having the requisite legal status to act in this manner, B Respondent No. 1 as the beneficiary of these wrongful actions, cannot seek any legitimate expectation or promissory estoppel in its favour. Supervening public interest acts as a veto against the invocation of promissory estoppel. Respondent No. 1 cannot claim any right to the continuation of the supplementary lease deeds. [Paras 93 and 96][304-D-F; 305-F] C Conclusion 7.1. The supplementary leases signed between Respondent No. 1 and RIICO are unsustainable. RIICO did not possess the authority to enter into these agreements, as the land in LIA, Kota remained under the ownership and control of the State D Government uninterruptedly from the first lease signed with JKSL, till the present date. Respondent No. 1 was also cognizant of this fact as evinced by it entering into the 7 transfer lease deeds with the Collector, Kota, in 2007, after it stepped into the shoes of JKSL. [Para 104][307-E-F] E 7.2. The leases with JKSL were executed under the 1959 Rules which remained applicable and there was no authority ever vested in RIICO to have issued the permissions for conversion and sub-division of plots in the LIA, Kota, and for signing the supplementary lease deeds with Respondent No. 1. There is no F legal infirmity in the action of the Appellants in setting aside the decisions taken by RIICO or in directing to cancel the supplementary leases of 2018. Hence, we uphold the cancellation of the supplementary deeds and quashing of the approvals for conversion of land and sub-division of plots. [Para 105][307-F- H] G 7.3. This shall, however, not preclude Respondent No. 1 from reapproaching the State Government and seeking conversion of the usage of land and attendant approvals under the 1959 Rules. The State Government shall be at liberty to consider such a H
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A proposal in public interest and in accordance with the 1959 Rules. With regard to the Appellant Unions, it is not considered expedient by this Court to enter into the demands made by the labour unions for the dues of JKSL’s employees. No views are expressed on the content of the prayers by the Appellant Unions, and it is left open for them to seek their remedies under law from B the Appropriate Government, and judicial forums. [Para 107, 106][308-A-C] 7.4. The overall conclusions are summarized in the following points: – C A. There has been an uninterrupted and subsisting relationship of lessor and lessee between the State Government and either JKSL or Respondent No. 1, in the context of LIA, Kota. From the first lease deed executed in 1967, till date, the State Government has maintained the position of lessor;
D B. The lease with JKSL, and all leases thereafter with JKSL and/or Respondent No. 1, have been signed under the 1959 Rules. The terms of the lease are clearly in compliance with the 1959 Rules; C. The land in LIA, Kota was never transferred to RIICO E under the Government Order dated 18.09.1979. The State Government has always maintained title and ownership of the area; D. The land was also never allotted to RIICO on a leasehold basis under Rule 11A of the 1959 Rules. Thus, RIICO was never F expressly given any leasehold rights, and had no authority to further sub – lease the land, along with other corresponding powers, under Rule 12 of the 1959 Rules; E. In any case, Rule 11A of the 1959 Rules is of no importance, as there had to be an express allotment of the land to RIICO on a leasehold basis after the coming into force of Rules G 11A and 12. No such express allocation was ever made in favour of RIICO; F. The 1979 Rules are not statutory in nature. The reference to the 1979 Rules in Rule 12 of the 1959 Rules, does not accord any statutory recognition to the former; H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 239 PVT. LTD. AND ORS.
G. There was no violation of the Principles of Natural Justice A in this case. The entire basis for granting permission for conversion of the land subdivision of the plots, was on an incorrect assumption of power by RIICO under the 1979 Rules, to act as the lessor of LIA, Kota. RIICO was never given any leasehold rights over the land. When the basis for a benefit received by a party is itself invalid, there is no question of giving the party a B chance to be heard; H. The State Government was competent to issue directions under Article 138 of the AoA of RIICO, to cancel the supplementary lease deeds and attendant permissions. This fell squarely within the ambit of Article 138 of the Articles of C Association; I. There was no violation of the Rajasthan Rules of Business as the sub – committee which recommended the cancellation of the permissions/approvals to Respondent No. 1, was acting for and on behalf of the entire Council of Ministers. Hence, the Rules D of Business were complied with; J. There was no legitimate expectation nor promissory estoppel that could operate to the benefit of Respondent No. 1, as, once again, no such defences could be raised on the back of RIICO’s own erroneous utilization of powers that vest only with the rightful lessor of LIA, Kota, which is the State Government. E Further, public interest overrides both these doctrines, and cannot come to the aid of a private party, when the larger interests of society are involved; K. The Appellant Unions and workers are at liberty to approach the Appropriate Government and various judicial forums to pursue their remedies in accordance with law. The Appeals by the State of Rajasthan and RIICO are accordingly allowed; the impugned judgment dated 20.07.2021 passed by the High Court of Judicature for Rajasthan at Jaipur, is set aside. Consequently, the Writ Petition filed by Respondent No.1 before the High Court is dismissed save and except the liberty granted. [Paras 104, 108 and 109][308-D-H; 309-A-H; 310- A-B] M.G. Pandke & Ors. v. Municipal Council, Hinganghat, Dist. Wardha & Ors.1993 Supp (1) SCC 708 : [1992] 1 Suppl. SCR 464 and Sachidananda Pandey v. State of H
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A West Bengal & Ors. (1987) 2 SCC 295 : [1987] 2 SCR 223 – distinguished. S.L. Kapoor v. Jagmohan & Ors. (1980) 4 SCC 379 : [1981] 1 SCR 746 and K. Balasubramanian (Ex. Capt.) v. State of Tamil Nadu (1991) 2 SCC 708 : [1991] 1 B SCR 845 – relied on. Mohinder Singh Gill v. The Chief Election Officer (1978) 1 SCC 405 : [1978] 2 SCR 272; Krishna Ballav Sahay & Ors. v. Commission of Enquiry & Ors. [1969] 1 SCR 387; Management of Fertilizer Corporation of C India v. Their Workmen [1969] 2 SCR 706; Sukhdev Singh & Ors. v. Bhagat Ram & Ors. (1975) 1 SCC 421 : [1975] 3 SCR 619; Motilal Padampat v. State of Uttar Pradesh (1979) 2 SCC 409 : [1979] 2 SCR 641; State of Tamil Nadu v. Shyam Sunder (2011) 8 SCC 737 : [2011] 11 SCR 1094; MRF v. Manohar Parrikar & Ors. D (2010) 11 SCC 374 : [2010] 5 SCR 1081; B. Rajagopala Naidu v. State Transport Appellate Tribunal, Madras & Ors. (1964) 7 SCR 1; Kalabharati Advertising v. Hemant Vimalnath Narichania & Ors. (2010) 9 SCC 437 : [2010] 10 SCR 971; Swadeshi E Cotton Mills v. Union of India (1981) 1 SCC 664 : [1981] 2 SCR 533; Life Insurance Corporation of India v. Escorts Ltd. & Ors. (1986) 1 SCC 264 : [1985] 3 Suppl. SCR 909; S.S. Dhanoa v. Municipal Corporation, Delhi & Ors. 1981 (3) SCC 431 : [1981] 3 SCR 864; Executive Committee of Vaish Degree F College v. Lakshmi Narain 1976 (2) SCC 58 : [1976] 2 SCR 1006; Union of India v. P.K. Roy (1968) 2 SCR 186; A.K. Kraipak v. Union of India (1969) 2 SCC 262 : [1970] 1 SCR 457; Gulabrao Keshavrao Patil & Ors. v. State of Gujarat (1996) 2 SCC 26 : [1995] 6 Suppl. G SCR 97; Lalaram and Ors. vs. Jaipur Development Authority and Ors. (2016) 11 SCC 31 : [2015] 14 SCR 403; Bannari Amman Sugars Ltd. vs. Commercial Tax Officer and Ors. (2005) 1 SCC 625 : [2004] 6 Suppl. SCR 264; Food Corporation of India v. Kamdhenu Cattle Feed Industries (1993) 1 SCC 71 : [1992] 2 H Suppl. SCR 322 – referred to.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 241 PVT. LTD. AND ORS.
Case Law Reference A [1978] 2 SCR 272 referred to Para 31 [1969] 1 SCR 387 referred to Para 32 [1969] 2 SCR 706 referred to Para 32 [1975] 3 SCR 619 referred to Para 32 B [1979] 2 SCR 641 referred to Para 32 [2011] 11 SCR 1094 referred to Para 33 [2010] 5 SCR 1081 referred to Para 33 C (1964) 7 SCR 1 referred to Para 33 [2010] 10 SCR 971 referred to Para 33 [1981] 2 SCR 533 referred to Para 33 [1987] 2 SCR 223d istinguished Para 34 D [1985] 3 Suppl. SCR 909 referred to Para 34 [1981] 3 SCR 864 referred to Para 62 [1976] 2 SCR 1006 referred to Para 63 [1992] 1 Suppl. SCR 464 distinguished Para 65 E (1968) 2 SCR 186 referred to Para 72 [1970] 1 SCR 457 referred to Para 73 [1981] 1 SCR 746 relied on Para 76 [1991] 1 SCR 845 relied on Para 77 F [1995] 6 Suppl. SCR 97 referred to Para 85 [2015] 14 SCR 403 referred to Para 86 [2004] 6 Suppl. SCR 264 referred to Para 91 [1992] 2 Suppl. SCR 322 referred to Para 92 G CIVIL APPELLATE JURISDICTION : Civil Appeal No.2963 of 2023 From the Judgment and Order dated 20.07.2021 of the High Court of Judicature for Rajasthan at Jaipur in DBCWP No.3410 of 2020. H
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A With Civil Appeal No.2965, 2964, 2966 And 2967 of 2023. Dushyant Dave, Dr. Manish Singhvi, Mukul Rohatgi, Atmaram NS Nadkarni, Sr. Advs., Ms. Nilofar Khan, Anjum Parvez, Khushi Mohammed, Yogesh Kumar Sharma, Sandeep Kumar Jha, Ashok B Basoya, Ms. Shruti Jose, Rameshwar Prasad Goyal, Uday Gupta, Ms. Shivani M. Lal, Ms. Sanam Singh, S. S. Sisodia, M. K. Tripathi, Harish Dasan, Rajiv Ranjan, Rajeev Kumar Gupta, Hiren Dasan, Arpit Parkash, Ms. Shubangi Agarwal, Vivek Jain, Siddhant Buxy, Ankur Sehgal, Mrs. Suchitra Kumbhat, Abhinav Jain, Rajat Jain, Ms. Honey Kumbhat, C Salvador Santosh Rebello, Ms. Arju Paul, Arju Paul, Ms. Deepti Arya, Ms. Manisha Gupta, Advs. for the appearing parties.
Judgment
The Judgment of the Court was delivered by SURYA KANT, J.
11. Leave granted. D
22. This batch of appeals arises from the judgment dated 20.07.2021 passed by the Jaipur Bench of the High Court of Judicature for Rajasthan whereby the Writ Petition filed by Respondent No. 1 – M/s. Arfat Petrochemicals Pvt. Ltd. in all connected matters was allowed. As a corollary, the decision by the Cabinet Committee of the State of Rajasthan, E and resulting instructions issued to the Rajasthan State Industrial Development and Investment Corporation Ltd. (“RIICO”) to cancel a series of permissions and approvals granted/awarded to Respondent No. 1 in respect of industrial land in Kota, Rajasthan, were set aside.
33. There are different Appellants before us in the respective SLPs. F They include the State of Rajasthan (hereinafter, “State of Rajasthan” or “State Government”), RIICO, and various workers unions (hereinafter, “Appellant Unions”). As the nature and type of relief sought by both the State of Rajasthan and RIICO, stand on a slightly different footing to that of the Appellant Unions, we will address the State of Rajasthan and RIICO (collectively, “Appellants”) separately, to maintain the distinction G between the reliefs sought by them as compared to the Appellant Unions. A. FACTS
44. The dispute originates from the allotment of approximately 271.39 acres of land by the State of Rajasthan through the District Collector, Kota, in the Large-Scale Industrial Area, Kota (“LIA, Kota”) H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 243 PVT. LTD. AND ORS. [SURYA KANT, J.]
to J.K. Synthetics Ltd. (“JKSL”) on 12.09.1958. Following the allotment, A a lease deed was executed with JKSL by the Collector, Kota, and permission was granted for setting up its industrial units in the area. JKSL’s retention of the property was facilitated over the following decades through the execution of fresh lease deeds with respect to the same area, as and when the period specified in the earlier lease lapsed. B
55. Just after the first allotment was initially made, the State Government exercised its powers under Section 100 of the Rajasthan Land Revenue Act, 1956 and formulated the Rajasthan Industrial Areas Allotment Rules, 1959 (“1959 Rules”) to regulate the allocation of land to entrepreneurs and the development of industrial areas across the State. Section 100 of the Rajasthan Land Revenue Act is provided below: C “100. Sale of land in Industrial and Commercial Areas – The State Government may make rules regulating sales of lands in industrial and commercial areas and may also impose an annual assessment of such lands, wherever necessary.” D
66. Similarly, Rules 2, 8 and 9 of the 1959 Rules are also of some relevance and the same are reproduced below: “2. Period for which land may be allotted.- Land in industrial area may be allotted on lease-hold basis for a period of 99 years- (a) for setting of a large-scale industry anywhere in the state, E by the State Government in the Industries Department and in the case of large-scale tourism unit, the allotment shall be made by the Government in the Revenue Department and (b) for setting up of other industries – F (i) in Jaipur District, by the Director of Industries, Rajasthan Jaipur provided that in case of a tourism unit the allotment shall be made by the Government in the Revenue Department, and G (ii) in any other district, by the Collector concerned. (bb) for the setting up of IT Industries Government land shall be allotted by the State Government in the Revenue Department on the recommendation of the Department of Information Technology and Communication. H
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A (c) all allotment of land under clause (a) shall be made within a period of 60 days and under clause (b) within a period of 30 days from the date of receipt of the completed application in Form-B. In case applicants submit complete application electronically in Single window System Portal, it shall be disposed as per the provisions of the Rajasthan Enterprises B Single Window Enabling and Clearance Rules, 2011. Provided that the allotment of land for the purpose of setting up of Common Effluent Treatment Plant and related activities, anywhere in the State, shall be made by the State Government in the Revenue Department for a period of 10 years which shall be extendable for a period of 5 years. xxx xxx xxx
8. Land not to be used for other purpose. – (1) The land given for industrial purposes shall not be used for any other purpose except constructing factory premises and such other residential quarters as are required for those engaged in that industry. No constructions shall be permitted which may have the object of using it as a commercial undertaking other than the industry permitted to be established.
E Provided that the State Government, on the application of the lessee for establishment of industry other than the industry for which the was given, may grant permission for establishment of such industry. But in case of government land allotted under these rules, such permission shall not be granted for establishment of tourism units. F (2) The permission for construction of the labour colony shall be given if required at the time of the establishment of an industry. (3) The industrialist shall be free to use an area upto 200 sq. meter for his own residential purpose on first floor of the factory premises. G
9. Lessee debarred from sale of land etc. – The lessee shall have the limited ownership on the land leased till the lease subsists and shall have the right of assignment only for the purpose of taking a loan for the development of the industry or for pledging as collateral security for a loan taken by the lessee or some other H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 245 PVT. LTD. AND ORS. [SURYA KANT, J.]
industry owned by the same management. The lessee shall have A no right to sell the land: (i) Provided that the land can be pledged as collateral security only in favour of Industrial Financial Corporation of India, Rajasthan Finance Corporation, IDBI, ICICI, LIC, IRBI, HDFC, SIDBI, EXIM Bank, Co-operative Banks and any B Public Financial Institution as defined in the Public Financial Institute Act or Scheduled Banks or private lending agencies subject to ensuring that the lessee has cleared all the outstanding dues of the lessor and the lessee creates first charge in favour of the State Government and second to the financing body or bodies. C (ii) Provided further that once the land has been utilised for the purpose for which it was allotted within the period specified in rule 7, the lessee may, with the permission of the Allotting Authority transfer his right or interest in the whole land, so leased out, on the following conditions:- D (a) In case of government land allotted under these rules, he shall pay 50% of prevailing market price of land after deducting allotment price charged under rule 3A and the transferee shall pay 50% of excess amount of yearly lease land mentioned in rule 5 and E other conditions of lease shall be remained unchanged. (b) In case of converted Khatedari land allotted under these rules for industrial purpose, the transferee shall pay 50% excess amount of yearly lease rent mentioned in rule 5 and other conditions of lease shall be remained unchanged. F (iia) Provided also that if after grant of permission the transferee has failed to execute the lease deed and further transferred the allotted land without prior permission of allotting authority, such transfer may be regularised by the allotting authority on payment of penalty of Rs.3000/- for each transfer. The lease deed may be G executed in favour of such transferee for the remaining period of lease may be executed in favour of such transferee for the remaining period of lease. The transferee shall pay 50% excess amount of the yearly lease rent mentioned in rule 5 on such transfer. H
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A (iii) Provide also that in case an industrial plot is proposed to be divided or sub-divided for any purpose, whatsoever, prior permission of the State Government in the Revenue Department shall be obtained by the allotting authority. (iiia) Provide also that if any industrial plot is divided or sub- B divided without obtaining prior permission of the State Government, the lessee shall apply for permission of division or sub-division to the allotting authority along with a copy of the challan depositing an amount of Rs.3000/-. The allotting authority, with prior approval of the State Government, may regularise the division or sub-division. C (iv) Provide also that, in case of sick unit as per RBI guidelines, the lessee with the prior permission of the State Government, may transfer his right or interest in the leased land sub- divided under the above proviso on the following conditions:- (a) That NOC from Financial Institutions/Bank shall be obtained, in case land is mortgaged. (b) that the conditions of lease shall remain unchanged. (c) that the transferee shall pay additional 100 percent excess amount of the proportionate yearly lease rent applicable from the date of transfer of right or interest in leased land. (d) that the transferee shall use the land for the industrial purpose only. (e) that in case of government land allotted under these rules, the transferee shall pay 50% of prevailing market price of land after deducting allotment price charged under rule 3A. (v) Provided also that no permission of transfer under the above proviso, shall be allowed in case of a Government land unless the unit is declared sick by Board of Industrial and Financial Reconstruction (BIFR). (vi) Provided also that in case of any doubt of any kind the allotting authority shall refer the matter to the State Government in the Revenue Department whose decision shall be final.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 247 PVT. LTD. AND ORS. [SURYA KANT, J.]
Provided also that the developer of micro, small and medium enterprises clusters, as per approved plan, may transfer his right or interest in the whole land, so leased out to entrepreneurs. The conditions of lease remaining unchanged. The transferee shall pay 50% excess amount of the yearly lease rent mentioned in rule 5 on such transfer.” B
77. The first lease deed of 11.08.1967 which governed the terms and conditions of allotment of land to JKSL, contained, amongst others, the following conditions:- “xxx xxx xxx NOW THIS INDENTURE WITNESSETH AS FOLLOWS: C
… iv) The lessee shall set up on the said plot of land Nylon industry for which land has been leased to him by the lessor within a period of two years from the date of talking over the possession of the land as above mentioned and in case of his failure to do so the said plot shall revert to the lessor unless the period of two years is extended by the lessor on valid grounds. v) The lessee shall set up, construct, erect and build on the said plot of land, only such buildings, sheds, and structures as are required by him for setting up the industry aforesaid and also such other residential quarters e.g. watch & ward quarters as are required for those engaged or to be engaged in the said factor. vi) The lessee agrees not to construct or build any structures or building on the said plot of land or on a portion of it which may have the object of using it as a commercial undertaking other than for the industries aforesaid for which the said plot has been leased to the lessee. …” As is evident from the lease, the object behind the allocation of the land was for a specific purpose and no other usage was permissible. Subsequent leases executed between JKSL and the District Collector contained pari materia clauses.
88. While the above stated leases were subsisting, the Rajasthan State Industrial and Mineral Development Corporation Ltd. (“RSIMDC”) H
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A was incorporated for carrying out development projects across the State. The Corporation was subsequently split into two entities, with RIICO acting as its direct successor. To regulate RIICO’s activities in respect of the lands over which it would have control, the RIICO Disposal of Land Rules, 1979 (“1979 Rules”), were issued under Article 93(xv) of the Articles of Association (“AoA”) of the Company. The Rules provided B a mechanism by which RIICO could grant different types of approvals and permissions in relation to industrial lands and their utilization. On 18.09.1979, an Order was passed by the State Government to allot all industrial lands within its territory to RIICO. Thus, the Corporation would, from that point onwards, step into the shoes of the state government in overseeing further development of the areas under its supervision. Whether or not this included the LIA, Kota, is a point of contention among the parties. The Joint Director of the Department of Industries at Kota, also issued an Order on 28.09.1979, according to which a number of industrial areas would be transferred to RSIMDC in compliance with the Government decision of 18.09.1979. LIA, Kota, was listed among the areas to be entrusted to RSIMDC in the said communication.
99. The Government Order dated 18.09.1979 and Joint Director’s Order dated 28.09.1979, warrant reproduction: “Government of Rajasthan E Industry Group-2 Department No.P-4 56/Industry/1/79Jaipur, Dated: 18.9.79 Order It has been decided in the meeting dated 18.09.1979 of Rajasthan State Level Planning andDevelopment Coordination F Committee that all the industrial areas of Rajasthan shall only be developed through Rajasthan State Industrial and Mining Development Corporation. Further, it has also been decided that the industrial areas operated by the Department of Industry shall be handed over to Rajasthan State Industrial and Mining G Development Corporation Ltd., Jaipur w.e.f. 01.10.1979. Therefore, the State Government hereby issues order to transfer the handing over of industrial areas operated by the Department of Industry to Rajasthan State Industrial and Mining Development Corporation Ltd., Jaipur w.e.f. 01.10.1979.” H x---------------------------------x--------------------------------------x
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 249 PVT. LTD. AND ORS. [SURYA KANT, J.]
“Office of Joint Director, District Industrial Centre, Kota A Dated: 28.09.1979 Order With reference to the State Government Order No. Industry (Group-I) Department, A.P.4 (56) Industry/1/79 dated 18.09.1979 B and Director, Department of Industry, Rajasthan, Jaipur DO letter No.F.2 (182) 9A/2305 dated 21.09.1979, the following Industrial Areas (Departmental) are hereby transferred to Rajasthan State Industrial and Mining Development Corporation Ltd., Jaipur w.e.f. 28.09.1979 (Afternoon): C
1. Large Scale Industrial Area, Kota
2. Small Scale Industrial Area, Kota
3. Lakhava Industrial Area, Kota
4. Nanta Industrial Area, Kota” D x---------------------------------x--------------------------------------x
1010. The contents of the 1979 Rules, under which RIICO would carry out its activities in terms of industrial areas allotted to it, that are important for our purposes may also be noted at this stage: “20-A. The Managing Director shall have full powers with regard to the following:
1. Approval of layout plan of the industrial areas and changes/ modification / revision /subsequent changes therein and all related matters. F
2. Changes in status of any of the land at any industrial area e.g. conversion from industrial land to open land, service land, commercial land, residential land, conversion from open land to industrial land, commercial land, residential land, services land, conversion from service land to industrial, open, commercial, residential and for other purposes etc., and vice-versa. G 20-B. Sr. DGM / SRMs / RMs are authorized for: (i) sub-division of plots. (ii) reconstitution of plots. (iii) … H
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A 20-C xxx xxx xxx (A) Following riders/conditions will be observed while considering the change in land use: B i) No change in land use of allotted plots will be permitted for residential purpose. ii) No change in land use of vacant industrial plot would be allowed. In other words, the allottees of industrial plot who have not set up an industry will not be permitted C change in land use for non-industrial purposes. However, change in land use of part vacant sub-divided plot would be allowed subject to condition that the leasehold rights of the sub-divided plot are held by the allottee of integrated plot.
D iii) No change in land use of allotted institutional plots will be allowed in the dedicated Institutional Areas for any other purpose. iv) No change in land use of plots allotted under the provisions of Rule 3(E) and 3(W) of RIICO Disposal of Land Rules, 1979 will be permitted. E v) Change in land use of plot allotted for non-industrial use will be allowed for vacant plot subject to payment of 15% of the prevailing rate of allotment as additional charges. F vi) Change of land use of the allotted plots for commercial/ institutional purposes as permitted under this rule will be considered only for the plots located on the roads having right of way of 18.00 mtr. and above (total road width). However, in the land use conversion cases wherein the criterion of minimum road width of 24 mtr. or above is G specified in the building regulations/parameters then the same will be observed while considering the cases of the land use conversions. vii) …”
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 251 PVT. LTD. AND ORS. [SURYA KANT, J.]
1111. Even after the Govt. Order dated 18.09.1979, JKSL continued to deal directly with the District Collector, Kota. Another lease, extending JKSL’s utilization of the land in LIA, Kota, was signed in 06.10.1982 between the Collector and JKSL, and not RIICO. During the same period, the 1959 Rules were amended to introduce provisions that would effectuate the allocation of industrial areas to RIICO, and to then facilitate the Company administering these lands under the 1979 Rules. Relevant sub-clauses of Rule 11A inserted on 23.12.1983, and Rule 12 added in 13.07.1982, are particularly important in this context: “11-A. Allotment of land to the Rajasthan State Industrial Development and Investment Corporation Ltd. or Rajasthan Tourism Development Corporation- C
Land shall be allotted to the Rajasthan State Industrial Development and Investment Corporation Ltd. or Rajasthan Tourism Development Corporation for setting up and developing Industrial Areas, on the following terms and conditions :- D (i) The land shall be allotted on lease hold basis for a period of 99 years; (ii) The premium to be charged for the allotment of government land for industrial purposes shall be equivalent to the prevailing market price of the same class of agricultural land in the vicinity and shall be determined accordingly by the Colonization Commissioner in the Rajasthan Canal Project Colony Area and by the Collector concerned in other areas: Provided that no premium for allotment shall be charged from Rajasthan State Industrial Development and Investment Corporation where the land has been purchased by the Rajasthan State Industrial Development and Investment Corporation or acquired for Rajasthan State Industrial Development and Investment Corporation after its incorporation and the compensation is paid by the G Rajasthan State Industrial Development and Investment Corporation. (iii) …. (iv) The Rajasthan State Industrial Development and Investment Corporation Ltd. [or Rajasthan Tourism Development H
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A Corporation] may sub-lease the leased land or part thereof, for industrial purposes including essential welfare and supporting services, provided that in the case of Diamond and Gem Development Corporation to who the land has already been leased out by RIICO for 99 years, the sub- lessee i.e. DGDC may further sublet and the terms and conditions and other provisions contained in the rules in so far as they relate to RIICO shall mutatis mutandis apply to DGDC also as if the land in question has been let out to them by State Government and rule 11-A ibid. Provided further that where land was allotted and converted in favour of Rajasthan State Industrial Development and Investment Corporation Ltd. [or Rajasthan Tourism Development Corporation] after its incorporation for industrial purpose but land was used for essential welfare and supporting services, such allotment [xxx] shall be deemed to be for industrial purpose. (iv-a) The sub-lessee of the Rajasthan State Industrial Development and Investment Corporation Limited may further sub-lease the sub-leased land or part thereof on such terms and conditions as may be mutually agreed between such sub-lessee and subsequent sub-lessee. The terms and conditions applicable to sub-lessee shall also mutatis mutandis apply to such subsequent sub-lessee. (v) The Rajasthan State Industrial Development and Investment Corporation Ltd. [or Rajasthan Tourism Development F Corporation] may levy and recover such lease rent and other charges as may be determined by it, in respect of the lands sub-leased by it; (vi) The periods of the sub-leases by the Rajasthan State Industrial Development and Investment Corporation Ltd. G [or Rajasthan Tourism Development Corporation] shall be determined by it, but shall not exceed 99 years, in all, in any case; (vii) The land shall revert to the Government free of all encumbrances and without payment of any compensation in case the Rajasthan State Industrial Development and H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 253 PVT. LTD. AND ORS. [SURYA KANT, J.]
Investment Corporation Ltd. [or Rajasthan Tourism A Development Corporation] or any of its sub-lessees, use it for any purpose other than industrial [including essential welfare and supporting services], or commit breach of any other condition of the lease or sub-leases; (viii) The sub-lessees of the Rajasthan State Industrial B Development and Investment Corporation Ltd. [or Rajasthan Tourism Development Corporation shall continue to be governed by all other terms and conditions prescribed in these rules, and any other analogues rules that may be promulgated or orders that may be issued, in this behalf by the State Government. C
1212. Allotment of land by Rajasthan State Industrial Development and Investment Corporation Ltd. [or Rajasthan Tourism Development Corporation. The Rajasthan State Industrial Development and Investment Corporation Ltd. Jaipur or Rajasthan Tourism Development D Corporation shall be empowered to make allotment in accordance with the Rajasthan State Industrial Development and Investment Corporation Disposal of Land Rules, 1979 [or any other rules framed by the RIICO and RTDC for the purpose] of vacant plots to entrepreneurs in the Industrial Areas notified by the State E Government and transferred to the said Corporation. The Corporation shall also be authorised to execute lease deeds, realize development charges, lease rent and other dues from the entrepreneurs to whom plots have already been allotted in accordance with the provision of these rules, and to take any consequential or residuary action in regard to the plots allotted the entrepreneur. Provided that the Rajasthan State Industrial Development and Investment Corporation Ltd. or Rajasthan Tourism Development Corporation shall be empowered to grant written permission to the lessee for transfer of rights or interest in the land in respect of the plots/land located in the Industrial Areas notified by the State Government and transferred to the said corporation: Provided further that any permission granted or action taken for transfer of rights or interest in the plots/land by the Rajasthan State Industrial Development and Investment Corporation Ltd. or H
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A Rajasthan Tourism Development Corporation. after 13-07-1982 in respect of the plots/land saturated in the Industrial Areas and transferred to the said Corporation shall be deemed to be valid under the first proviso to this rule.”
12. In the backdrop of these amendments, confusion arose regarding whether Rules 11A and 12 of the 1959 Rules would be applicable prospectively or retrospectively. In this context, a clarification was sought by the District Collector, Kota, through a letter dated 15.05.1986. The Collector was referring in this context to the deposit of lease rent and to whom the rent in question should go: “Therefore, guide in this regard that the above-mentioned notification dated 13-07-1982, the lease rent etc. of the land allotted to the factory will be deposited by RIICO or deposited in the erstwhile tehsil itself s a state item. Please send guidance in this regard soon. Till the guidance is received the decision has been taken to deposit the lease amount in the Tehsil. Photocopy of the form letter is also being sent from M/s J K Synthetic in this regard. Signature District collector, Kota Number:- F-8 (198) Revenue/4435-38 E Dt. 15-05-86" x---------------------------------x--------------------------------------x
1313. In response to this, a notification was issued by the State Government on 23.05.1987, clarifying that Rule 12 of the 1959 Rules, F added on 13.07.1982, would not apply retrospectively and the lease rent and other items pertaining to different deeds would remain a state subject. “Rajasthan Government Revenue (Group-4) Department Sr. No. 2 (242) Rajasthan/3/86Jaipur, G Dated 23.05.1987 Sent:- District Collector, Kota. Sub:- Regarding development fee, lease rent and service charge of land allottee to M/s JK Synthetic Ltd. Kota. Ref:- Your letter 4434 dated 15-05-1986. H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 255 PVT. LTD. AND ORS. [SURYA KANT, J.]
Sir, A According to the above subject, it is written that the notification dated 13-07-1982 of this department has not been implemented with retrospective effect and in earlier cases the amount of lease rent etc. should be deposited in the tehsil as a state item. Yours Faithfully B Katara Deputy Government Secretary” x---------------------------------x--------------------------------------x
1414. This seemed to remove whatever doubts, if any, and clarified explicitly that the amendments to the 1959 Rules, of which Rules 11A and 12 are important for us to keep in mind, were prospectively applicable. The management and control of the lands leased out under the 1959 Rules, were apparently not handed over to RIICO. This understanding was enunciated in a Government Circular dated 12.01.1995 which indicates that revenue records would reflect that ownership and the right to administer the land remained with the State Government. Further, documents in this regard would be retained by the District Industries Centre, and not RIICO: “Government of Rajasthan Industries (Group-1) Department E
1. Director Industries Department Jaipur, Rajasthan
2. All District Collector F
3. All General Manager District Industries Centre Sr. No. 1(75) Industries/1/94 Jaipur, Dated 12th January, 1995
1. Land reserved for industrial area Under section 92 of Rajasthan Land Revenue Act, 1956 land allotted under G Rajasthan Industrial Area Allotment Rules, 1959 all records to be kept with District Industrial Centre. At present files with RIICO should also be taken back and kept with District Industrial Centre. In all these cases compliance of terms of lease deed and monitoring of the same to be under supervision of District Industrial Centre. H
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A 2. Before lease deeds are signed for Land allotted under Rajasthan Industrial Area Allotment Rules, 1959 entry of change of land use and ownership should be entered into the revenue records and only then the land should be allotted under Rajasthan Industrial Area Allotment Rules, 1959.
B 3. After the signing of lease deed the same should be entered into the revenue records and files pertaining to it should be kept with District Industries Centre.
4. Lease deed of the allotted land under Rajasthan Industrial Area Allotment Rules, 1959 is to be executed by District Collector/ General Manager, District Industries Centre. As C District Collector/ Managing Director has to initiate action in cases of violation of terms of lease deed, General Manager, District Industries Centre to be directly responsible to bring any or all violations in the notice of Director, District Industries Centre and District Collector. D Sincerely, Special Secretary Industry” x---------------------------------x--------------------------------------x
1515. A circular by RIICO itself, on 27.01.1995, gave RIICO’s own interpretation of the content and meaning of the Circular issued by E Industries Department, Government of Rajasthan on 12.01.1995. It concurred with the stand that files pertaining to lands for which allotment and leases had been executed under the 1959 Rules, would be retained by the State Government and not the Corporation: “Rajasthan State Industrial Development and Investment F Corporation Ltd. Udyog Bhawan, Tilak Marg, Jaipur- 302005 Sr. IPI/P-3(24)47/95 Dated:- 27-01-1995 Circular G Sub:- Proceeding in respect of land under Rajasthan Industrial Area Allocation Rules, 1959. In the industrial areas of the corporation (and those industrial areas which were later transferred from the Department of H Industries to the Corporation) in violation of the terms of the lease
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 257 PVT. LTD. AND ORS. [SURYA KANT, J.]
of land allotment. Action is taken by the unit office under the A Corporation’s Land Disposal Rules. Some such cases (especially in Bhilwara) have come to notice in which land allocation to Industrial Units at the state level or district level was done under the Rajasthan Industrial Area Allocation Rules, 1959 and whose lease deed was also executed by the District Collector (Industry). B But their files were transferred to the unit offices of the corporation in some such cases proceedings were initiated by the unit office of the corporation in cases of violation of the terms of the lease deed. Such proceedings are irregular. In the above context, the State Government has recently issued circular dated 12-01-1995, a copy of which is being attached for your information. It will be clear from this that under the Rajasthan Industrial Area Allocation Rules, 1959 the District Industry Center/ Collector (Industry) will have the right and responsibility to take action in respect of violation of the terms of the lease deed. If you have any documents under consideration in this regard, please return them to the District Industries Centre. Enclosed Circular Dated 12-01-1995. Copy:-
1. All Unit offices For information. E
2. RIICO (Headquarters) Officers for information (S S Chaturvedi) Advisor (Infra)” x---------------------------------x--------------------------------------x F
1616. In this background, JKSL was continuing its operations in the leased-out area for several years. However, in the 1990s, JKSL encountered financial difficulties and was eventually declared a “sick company” by the Board for Industrial and Financial Reconstruction (“BIFR”) on 02.04.1998, under the Sick Industrial Companies (Special G Provisions) Act, 1985 (“SICA”). Following the classification of JKSL as a sick company, the matter was referred to the Appellate Authority for Industrial and Financial Reconstruction (“AAIFR”). During this period, JKSL signed a Memorandum of Understanding with Respondent No. 1 as part of its plan to sell the Kota unit of its operations. Section 18 of H
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A SICA1 envisages certain measures being taken for revival of the company that has fallen on difficult times and been declared a “sick” company.
1717. The prospect of a demerger of the certain units owned by JKSL became the preferred strategy for effectuating the recuperation of the company. Respondent No. 1 emerged as the favoured entity to B take over these units and also entered into two tripartite settlements on 09.10.2002 and 22.10.2002, involving JKSL and two worker’s unions, to pay off part of the dues of the former labourers of JKSL, as well as offer them employment under Respondent No. 1. The relevant terms and conditions of the agreement dated 09.10.2002, are as follows: C “IV. TERMS AND CONDITIONS xxx xxx xxx
1 18.Preparation and Sanction of Schemes — (1) Where an order is made under sub-section (3) of section 17 in relation to any sick D industrial company, the operating agency specified in the order shall prepare, as expeditiously as possible and ordinarily within a period of ninety days from the date of such order, a scheme with respect to such company providing for any one or more of the following measures, namely:— [(a) the financial reconstruction of the sick industrial company;] (b) the proper management of the sick industrial company by change in, or take over of, management of the sick industrial company; E [(c) the amalgamation of— (i) the sick industrial company with any other company, or (ii) any other company with the sick industrial company; (hereafter in this section, in the case of sub-clause (i), the other company, and in the case of sub-clause (ii), the sick industrial company, referred to as “transferee company”;] (d) the sale or lease of a part or whole of any industrial undertaking of the sick industrial company; [(da) the rationalisation of managerial personnel, supervisory staff and workmen in accordance with law;] (e) such other preventive, ameliorative and remedial measures as may be appropriate; (f) such incidental, consequential or supplemental measures as may be necessary or expedient in connection with or for the purposes of the measures specified in clauses (a) to (e). … (6A) Where a sanctioned scheme provides for the transfer of any property or liability of the sick industrial company in favour of any other company or person or where such scheme provides for the transfer of any property or liability of any other company or person in favour of the sick industrial company, then, by virtue of, and to the extent provided in, the scheme, on and from the date of coming into operation of the sanctioned scheme or any provision thereof, the property shall be transferred to, and vest in, and the liability shall become the liability of, such other company or person or, as the case may be, the sick industrial company.]
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 259 PVT. LTD. AND ORS. [SURYA KANT, J.]
2. It is further agreed that while APPL will take over all the liabilities pertaining the workmen/employees of Sir Padampat Research Centre, as determined as per Annexure B even though the SPRC unit will not be transferred to APPL and will be retained by JKSL.
3. The APPL will operate the Kota Complex .in the name and style of Arfat petrochemical Pvt. Ltd. (APPL) as a new company and new employer. They will issue their appointment letters as per requirements in a phased manner subject to suitability and covering terms of employment etc. The dues of employment under JKSL would be settled as full and final payment as summarized in Annexure-A. C xxx xxx xxx” The rest of the agreement contains numerous clauses that are in furtherance of the absorption of the workers into Respondent No. 1’s operations that were to start after the demerger of defunct units owned by JKSL. The second agreement of 22.10.2002 also contained similar provisions.
1818. Eventually, AAIFR sanctioned a rehabilitation scheme for JKSL on 23.01.2003. The scheme referred to and validated the tripartite agreements/settlements entered into by JKSL, Respondent No. 1, and the different labour unions. It was noted that the liabilities of the workers had been taken on by Respondent No. 1, alongside its obligation under those agreements to revive the industrial operations at Kota. A Joint Venture & Shareholder Agreement (hereinafter, “JV”) was signed between Respondent No. 1 and JKSL on 13.05.2003, which cemented the former’s obligation to discharge the liabilities outstanding on LIA, Kota, as well as the dues of the labourers. The AAIFR scheme was finalized on 07.01.2005, and it included an obligation on the part of Respondent No. 1 to honour the earlier tripartite agreements with the JKSL workers unions. Part of the rehabilitation scheme involved hiving off 227.15 acres of the land in the LIA, Kota, away from JKSL and to Respondent No. 1. G
1919. Respondent No. 1, as part of the aforementioned JV between itself and JKSL, continued to coordinate with the State Government on shifting the lease on LIA, Kota, away from JKSL and to itself. A letter to this effect was sent by Respondent No. 1 to the State Government on 07.01.2006, seeking the demarcation and transfer of the lease over LIA, H
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A Kota, to Respondent No. 1 solely, in light of the AAIFR scheme. The relevant part of this letter is reproduced below: “…This has reference to meeting with your goodself on 04/01/2006 regarding Bifurcation and Transfer of Lease Hold Land of J.K. Synthetics Limited, Kota to M/s Arafat Petrochemical B Pvt. Ltd… … We request your goodself for an expeditious approval- (c) for split of lease deed dated 06/10/1982 in to 2 portions C – one covering area of 37.16 acres pertaining to SPRC which is not to be transferred as the same will continue in the name of JKSL and another for balance land. (d) Permission to transfer to APPL all the remaining land except the aforesaid 37.16 Acres. D We once again request your good self to kind accord you approval in the above matter…”
2020. As per AAIFR’s recommendations, the State Government through the Collector proceeded to execute 7 fresh lease deeds on the same date in favour of Respondent No. 1. The 7 deeds signed on 17.03.2007, collectively handed over the leasehold on the land to E Respondent No. 1, in the following segments: i) 1st Deed: Plot No. 5A of 48.40 acres, meant for setting up a nylon plant and colony; ii) 2nd Deed: Plot No. 5B of 7.15 acres, for conducting R&D F on acrylic fibre; iii) 3rd Deed: Plot No. 5C of 14.45 acres, for setting up a nylon tyre and cord plant; iv) 4th Deed: Plot Nos. 16, 17, & D of 30.56 acres, for setting up a polyester staple fibre plant; G v) 5 th Deed: Plot Nos. 23-30, A-C, of 70.66 acres, for construction of CDPH roads; vi) 6th Deed: Plot Nos. 19-21B, 32B, 33, 34 & F of 26,16 acres, for setting up another acrylic/staple fibre plant; vii) 7th Deed: Plot Nos. 19-21A, 22, 31, 32A & F1 of 29.77 H acres, for setting up a synthetic staple fibre plant.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 261 PVT. LTD. AND ORS. [SURYA KANT, J.]
The terms of the lease deeds were largely pari materia. The A relevant portion, contained in each of these fresh leases granting the land to Respondent No. 1, and relevant for our purposes, are as follows: “NOW THIS INDENTURE WITNESSETH as follows: … B (iii) That the lessee shall set up, construct, erect and build on the plot only such buildings, sheds and structures as are required by him for setting up the industry aforesaid and also such other residentialquarters as are required for those: engaged or to be engaged in the said factory. (iv) The lessee agrees not to construct or build any structures or buildings on the said plot of land or on a portion of it which may have the object. of using it as a commercial undertaking other than for the industry promotion aforesaid of or which the said plot has been leased to the lessee.” What is clear from this series of documents is the paramountcy of using the land for its specific intended purpose, and for there to be no deviation from that industrial purpose for putting up commercial structures of any kind. The overall objective behind the lease, despite having changed hands from JKSL to Respondent No. 1, remained unaltered.
2121. The AAIFR scheme contained various requirements that E Respondent No. 1 was mandated to fulfil. Among these included the revival of the industrial units at the site which JKSL had no longer been in sufficient financial health to operate. Further, as also necessitated by the scheme, the aforementioned tripartite settlement agreements between Respondent No. 1, JKSL, and the workers unions was to be given effect F to. The settlement agreements fixed the compensation payable to the workers at Rs. 40.42 Crores, and also envisaged that the workers in question would receive employment in the industrial units that would, henceforth, be managed by Respondent No. 1. The relevant portions of the AAIFR scheme are worth reproduction: G “9 Identification of JV Partner 9.1 The Arfat Group are identified by JKSL after an extensive search undertaken by the Company with the help of M/s Access International (Access) a Boston based consultancy Company… H
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A 9.2 Disposal of individual assets of Kota units was not possible or practical without resolution of the on-going labour disputes and settlement of labour liabilities. One the important consideration for revival was assumption of the labour liability by the prospective buyer as workers dues were very high and without settlement of the same revival was not possible. Therefore, in order to evaluate B the offers received. It was decided by the Company in consultation with Access to analyse them on the basis of Quantum offer no. of units being restarted total no. of jobs being created and willingness of the higher regarding resolution of labour disputes and assumption of labour liabilities.”
2222. Pursuant to the AAIFR scheme, Respondent No. 1 initially restarted one of the units for manufacture of acrylic fibre. The remaining 6 units remained comatose. Unfortunately, the sole unit that was rejuvenated suffered a purported fire in October, 2007, after only a brief period of operation and just 6 months after the transfer lease deeds D were signed, which resulted in the shutdown of the factory. Consequently, the overall objective of reviving the industrial units in the LIA, Kota, was frustrated. The offshoot of this was a decade of litigation primarily involving the workers unions and Respondent No. 1, regarding the latter’s failure to revive the industrial units as contemplated in the AAIFR scheme. E
2323. The workmen initiated proceedings before multiple forums including the National Company Law Tribunal, the Rajasthan High Court, the BIFR and AAIFR, in their attempt to recover their dues and have the rehabilitation scheme implemented. Among these litigations was an SLP, and resultant Review Petitions filed before this Court concerning directions issued by AAIFR to Respondent No. 1. The directions were in favour of the workmen and in furtherance of the rehabilitation scheme that AAIFR had previously approved. However, in appeal, the Rajasthan High Court ruled that AAIFR had no jurisdiction over Respondent No. 1 as it was not a “sick company” under SICA. This was further appealed to the Supreme Court. The SLP by the Appellant Unions and others, was dismissed by this Court on 18.11.2016, and the subsequent Review Petitions were also rejected on 17.08.2017 and 06.03.2018, respectively, affirming that no directions could be issued to Respondent No. 1 but also noting that the AAIFR plan should be executed. Some of the other proceedings by individuals or groups of workers, remain pending in various H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 263 PVT. LTD. AND ORS. [SURYA KANT, J.]
forums and do not require recounting for our purposes. The relevant part of the order dismissing the SLP on 18.11.20162 is as follows: “12. Several contentions have been raised by both sides during the course of hearing of these Appeals which we have not adverted to as they are not relevant for adjudication of the dispute in these appeals. We express no opinion on the jurisdiction of BIFR under other provisions of the Act. It is open to the BIFR to review the implementation of the Sanctioned Scheme and pass suitable directions.”
2424. In the midst of the legal tussle between Respondent No. 1 and the different workers unions, the former made an attempt to have an affordable housing scheme developed on the LIA, Kota, under the Chief C Minister Jan Aavas Yojana. This application was made, once again, to the District Collector, Kota. By this point, the industrial units in the area had been lying dormant for over 10 years. However, this application to be considered under the Jan Aavas Yojana was unsuccessful.
2525. Subsequently, after having dealt directly with the Collector for D over a decade on matters pertaining to LIA, Kota, Respondent No. 1 eventually sought a change of land use from industrial to commercial, to the extent of 23% of the land it possessed under the lease. However, this proposal was submitted to RIICO instead of the Collector. Respondent No. 1 shifted its position, having previously liaised with the E District Collector for the execution of lease deeds in 2007 or for the Jan Aavas Yojana, to now coordinating with RIICO instead. The proposals were meant to effectuate the sub-division and change of land under the 1979 Rules. The proposals were considered by the Land Planning Committee constituted by RIICO on 03.10.2018 and approval was granted in-principle for the sub-division and conversion, as recorded in the Minutes F of the Meeting issued by RIICO on 05.10.2018. One day after this, on 06.10.2018, the Rajasthan State Assembly Elections process began and the Model Code of Conduct came into effect. The Infrastructure Development Committee of RIICO followed suit on 08.10.2018 and issued its own approval in this respect. G
2626. Following the completion of the process, supplementary lease agreements were executed between RIICO and Respondent No. 1 on 22.11.2018. Another supplementary deed for merger of plots was also signed between these parties on 13.12.2018. The conversion subsequently 2 CA Nos. 8597-8599 of 2010. H
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A came under scrutiny after the change of government in the 2018 Rajasthan elections. The newly elected Council of Ministers constituted a Cabinet Committee on 01.01.2019 to review decisions made by the prior ruling government in the 6 months period preceding the elections. While this internal consideration was unfolding, RIICO directed its unit offices to cease grant of permissions for conversion of use of land under B Rule 20(c) of the 1979 Rules on 27.05.2019, until further notice. The Kota branch of RIICO, however, proceeded to allow sub-division of the LIA, Kota, as requested by Respondent No. 1, on 05.07.2019. The mistake became clear only after the sub-division was sanctioned, necessitating the issuance of withdrawal orders by the office at Kota in respect of both the conversion of land and the sub-division of the plot, on 22.07.2019 and 25.07.2019, respectively.
2727. Meanwhile, the internal deliberations by the Cabinet Committee set up by the State Government extended till 03.08.2019, when the Committee resolved to cancel all the permissions and approvals granted to Respondent No. 1 in respect of conversion of the property at LIA, Kota.
2828. The State Government directed RIICO, by exercising the powers it believed were vested in it under Article 138 of RIICO’s Articles of Association, to carry out the requisite steps to annul the approvals provided to Respondent No. 1. RIICO issued orders on 11.10.2019 and E 14.10.2019, to finally cancel the permission for conversion of land, as well as cancel the supplementary leases themselves that had been subsisting in the name of Respondent No. 1.
2929. Respondent No. 1 was aggrieved by these actions and made various representations to the State Government, as well as RIICO, F seeking to have its lease and possession over the land restored. Eventually, it filed a Writ Petition before the High Court challenging the cancellation of its lease and the permission for conversion of the use of the land. The arguments raised included: (a) Article 138 of the AoA of RIICO did not have statutory force and a third party could not be adversely impacted by decisions made or directions issued under it; (b) Even if Article 138 had statutory force, the manner in which the approvals and permissions accorded to Respondent No. 1 were quashed and set aside, was arbitrary, unreasoned, and unconstitutional due to falling afoul of Article 14 of the Constitution;
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 265 PVT. LTD. AND ORS. [SURYA KANT, J.]
(c) Respondent No. 1 had not even been issued a show cause notice nor given a chance to defend itself. Thus, the Principles of Natural Justice had not been followed in the process of cancelling the allotment; (d) The procedure under the 1979 Rules had to be followed, as the LIA, Kota had been transferred to RIICO under the 18.09.1979 B Order.
3030. The State Government and its authorities objected to the maintainability of the petition on the ground that Article 138 of the AoA of RIICO were not statutory in nature and, hence, a Writ could not be filed in this regard. Further contentions were raised defending the C cancellation of the allotment and permission for conversion of the land, on the ground that the decision was taken in contravention of the Model Code of Conduct that had come into effect during the period when the Land Planning Committee and Infrastructure Development Committee of RIICO had decided to allow Respondent No. 1 to convert 23% of the land to commercial use. D
3131. While the matter was initially placed before a learned Single Judge, the then Chief Justice of the High Court decided to transfer the file to a Division Bench presided over by him. The various Appellant Unions which had been aggrieved by the non-implementation of the AAIFR scheme were impleaded into the proceedings. Eventually, the E Division Bench heard detailed arguments and passed the impugned judgment, concurring with Respondent No. 1’s position. It held: i) The question as to whether RIICO could be directed under Article 138 of the AoA to carry out actions which may abrogate the fundamental rights of a third party was of vital F importance. It required the Division Bench to adjudicate the dispute, rather than a Single Judge; ii) The decision made by the State Government to direct RIICO to cancel the allotment of land to Respondent No. 1 was without following due procedure, and hence, a Writ G under Article 226 of the Constitution was maintainable against this measure; iii) The Government Order dated 18.09.1979, allocated all industrial areas in the State of Rajasthan to RIICO for the purpose of overseeing and facilitating their development. H
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A Whatever course of action was taken in respect of these lands from this point onwards would have to be under the 1979 Rules. These Rules had been completely ignored by the State Government and its authorities while quashing the supplementary leases and the conversion; B iv) The conversion of land was permissible under the Master Plan for the LIA, Kota. RIICO, given it was now in charge of these lands, had the authority under the 1979 Rules read with the Master Plan to allow conversion of land, if it was deemed necessary and appropriate; v) There was no reason assigned by the Cabinet Committee C for its conclusion on 03.08.2019 that the leases required cancellation. The Supreme Court in Mohinder Singh Gill v. The Chief Election Officer3 had laid down that reasons behind certain actions had to be included in the final decision itself and could not be subsequently supplemented via affidavits. A change of government could not be a permissible catalyst for abrogation of the decisions made by the previous government. Further, Respondent No. 1 was kept in the dark about the deliberations throughout and had no forum to advocate its case for why the allotment and conversion of land were legally sound; vi) The claim that the permission for conversion of the land from industrial use to commercial use violated the Model Code of Conduct was suspect, as no other similarly granted approvals had been set aside on this basis. It appeared that Respondent No. 1 had been specifically singled out and targeted; vii) Respondent No. 1 had already spent significant amounts on the development of land, based on the supplementary lease deed and conversion that had been granted earlier. Hence, the doctrine of legitimate expectations and estoppel would operate against the State and its authorities from reneging on this arrangement; viii) The workers unions had failed to put in an appearance during the arguments, and their submissions could not be considered as a result. 3 H (1978) 1 SCC 405.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 267 PVT. LTD. AND ORS. [SURYA KANT, J.]
Consequently, the High Court quashed the decision of the Cabinet A Committee and the steps taken by RIICO to cancel the allotment to Respondent No. 1. The Appellant Unions, RIICO, and the State, have now come before us in appeal in this batch of matters. B. ARGUMENTS
3232. We have heard submissions from learned Senior Counsels, B Mr. Dushyant Dave and Dr. Manish Singhvi, representing the State of Rajasthan and RIICO, respectively. They sought to point out the flaws in the impugned judgment through the following arguments:- i) The land allotted to Respondent No. 1 in LIA, Kota, always remained with the State Government and was never C allocated to RIICO despite the Order dated 18.09.1979 regarding industrial lands being moved under the control of RIICO. Various communications and activities by RIICO over the years indicate that it was also aware of this fact. Hence, RIICO had no authority to consider the proposal by D Respondent No. 1 for changing the usage of the land from industrial to commercial; ii) When the fresh set of lease were executed with Respondent No. 1 pursuant to the AAIFR scheme and rehabilitation plan for JKSL, the agreements were signed by the District E Collector, Kota. RIICO was not involved in this process. Respondent No. 1 had, in fact, acted all along in a manner which acknowledged the District Collector and the state revenue authorities were always managing the affairs of the subject - area; F iii) The land in question was to be regulated through the 1959 Rules rather than the 1979 Rules. This was because, as RIICO and Respondent No. 1 had already accepted through their conduct over decades, that the State Government retained control over LIA, Kota. Hence, only the State of Rajasthan through the District Collector, Kota, and not G RIICO, could have considered the proposal for conversion of the land and the execution of supplementary lease deeds. Rule 12 of the 1979 Rules clearly envisaged that the newly inserted provisions would be applicable only to leases that were signed prospectively. In this instance, JKSL had H
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A already been put in charge of the area in LIA, Kota, under the 1959 Rules; iv) Rule 8 of the 1959 Rules clearly states that the land in question is not to be used for any purpose other than the objective of industrial development. It is only with express B authorization of the State Government that the usage can be changed. Rule 9 of the 1959 Rules mandates that permission of the government be taken when seeking subdivision of plots as well. Hence, this procedure had to be followed mandatorily by Respondent No. 1 if it desired the alteration of use of land and corresponding subdivision; C v) RIICO has never raised any demand for lease rent or service charges from Respondent No. 1. From the series of documents and communications, as already reproduced earlier, it is evident that RIICO had the same opinion regarding its own lack of authority and jurisdiction over the land in question. The land remained with the State Government at all times; vi) Respondent No. 1 had abjectly failed to fulfil its obligation to revive the industrial units at LIA, Kota. The mandatory terms of the rehabilitation plan by AAIFR had not been complied with and, as per SICA, the consequence of this default had to be the winding up of the company; vii) The permission for conversion of the land from industrial to commercial was meant to benefit Respondent No. 1 and frustrate the purpose for which the land had been allotted in the first place. The prior government and Respondent No. 1 had acted in concert to hastily push through the process for changing the usage of the land, in defiance of the AAIFR scheme as well as the Model Code of Conduct, causing a loss to the public exchequer and stymying the industrial development of the Kota region; viii) The new government was well within its rights to examine the decisions by the previous ruling class, as held by this Court in Krishna Ballav Sahay & Ors. v. Commission of Enquiry & Ors.4 Further, Article 138 of the AoA of RIICO 4 H [1969] 1 SCR 387.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 269 PVT. LTD. AND ORS. [SURYA KANT, J.]
explicitly gave power to the State of Rajasthan to issue directions to it for carrying out certain measures. This included the cancellation of the supplementary lease deed with Respondent No. 1 and the setting aside of the permission to convert the land’s usage. A similar clause to Article 138 is contained in the Articles/Memorandum of almost every government controlled entity, and has been upheld in Management of Fertilizer Corporation of India v. Their Workmen 5 and subsequently affirmed by a Constitution Bench in Sukhdev Singh & Ors. v. Bhagat Ram & Ors.6; ix) As an arguendo, even if the land was deemed to be allocated to RIICO as per the Order dated 18.09.1979 and the Corporation was the competent authority to issue approvals and permissions vis-à-vis LIA, Kota, there was still no infirmity in the directions issued by the State of Rajasthan under Article 138 of the AoA. The State Government D retained complete discretion to order RIICO to act according to its diktats in public interest; x) RIICO itself had subsequently taken a decision to not allow any conversion in terms of the usage of land. This deliberation took place following the filing of Public Interest E Litigations before the Rajasthan High Court. The final decision to freeze any further conversions of this nature was issued on 05.07.2019 to the State Government and all RIICO unit offices across the state. Following this, the permissions granted to Respondent No. 1 for changing the land to commercial utilization and sub-division of the plot for this purpose, were both withdrawn on 22.07.2019 and 25.07.2019, respectively. The supplementary lease deed was then cancelled on 11.10.2019; xi) There is no guarantee contained anywhere in the 1959 Rules, or even the 1979 Rules for that matter, against a change in policy by the Government. It is entirely permissible for the government to act in accordance with changing realities, especially when there is a clear case of public property 5 [1969] 2 SCR 706. 6 (1975) 1 SCC 421. H
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A being utilized for private gain, with the collusion of the erstwhile Executive Authorities and the management of RIICO; xii) There can be no question of estoppel against statute. The money spent by Respondent No. 1 on the land would not validate the contravention of the Master Plan for the LIA, Kota. The Plan clearly contemplated a purely industrial area which was undermined by Respondent No. 1’s desire to set up commercial enterprises instead. xiii) Respondent No. 1 had failed to show in concrete terms, the exact investments it had carried out on the land. Its equitable entitlement to seek restoration of the earlier decision permitting conversion of the land had not been proved from the records. Even if there was some merit to such claim, this Court in Motilal Padampat v. State of Uttar Pradesh7 had ruled that estoppel would be overridden by supervening public interest and provisions of binding statutes and/or rules; xiv) The transfer of the case from the Single Judge to the Division Bench by the then-Learned Chief Justice was unjustified and irregular under the Rules of the High Court of Judicature E for Rajasthan, 1952. On this procedural ground as well, the impugned judgment was unsustainable.
3333. On the contrary, learned Senior Counsels, Mr. Mukul Rohatgi and Mr. A.N.S. Nadkarni, appearing for Respondent No. 1, have attempted to rebuff the submissions by the State of Rajasthan and RIICO F in the following terms: - i) The Cabinet Committee decision dated 03.08.2019 was solely taken to single out Respondent No. 1 and cancel the permissions/approval accorded by RIICO during the regime of the earlier government. The reasons for the cancellation G were never provided and do not exist in either the file or the final decision. The grounds for cancellation were never mentioned subsequently either. All the reasons eventually cited by the Appellants before the High Court, were merely afterthoughts, such as: 7 H (1979) 2 SCC 409.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 271 PVT. LTD. AND ORS. [SURYA KANT, J.]
a) The Model Code of Conduct being in force; A b) The sub-division of plots of change of use could not have been granted by RIICO and the Corporation did not possess the ability to transfer lands; c) Only the Collector had the power to grant permissions. B ii) The Model Code of Conduct is irrelevant, as the application for conversion of the land to commercial, and permission for sub-division, was filed in August 2018, much before the election process even began. In between, there were several other decisions taken by the same Land Planning Committee and Infrastructure Development Committee none of which C were cancelled. Even in regard to the Land Planning Committee, several other proposals were considered and granted during the same period when Respondent No. 1’s application was pending. There were around 70 cases approved in September 2018, as well as December 2018, D apart from Respondent No. 1’s. None of these have been subsequently annulled by the Appellants, clearly showing that this is an act of pure arbitrariness and the arguments raised on the Model Code of Conduct are nothing but a lame excuse; iii) There are 30 other instances of conversion in which RIICO has acted as the competent authority to grant permission, from 1996 to 2019. Out of these 30, 3 of the cases are from LIA, Kota. These three cases involved conversion of 100% of the land to commercial usage, as opposed to Respondent No. 1 which only sought conversion of 23%. The residential colonies that have been raised by Respondent No. 1 have not been objected to by the State. Further, as recently as in 2022, RIICO has been demanding lease rent and service charges from Respondent No. 1, clearly showing that it is in charge; iv) The Collector had only signed the initial transfer lease deeds of 2007 with Respondent No. 1 because the lease deeds in question were not fresh leases, but were executed for the remainder of the term of the already subsisting lease in favour of JKSL. The AAIFR scheme referred to the consent H
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A of the state government, which also necessitated the Collector’s participation. This was the only reason for the 2007 deeds to have been executed with the Collector and not RIICO; v) It is very clear that the land in LIA, Kota, had been B transferred and allotted to RIICO and the Corporation was considered to be the sole authority, even by the State Government, which was capable of dealing with the land. The Order dated 18.09.1979 by the State Government states that industrial areas are to be transferred, pursuant to which the Joint Director of Industries allotted the land to RIICO C on 28.09.1979 by an order. vi) Under Section 100 of the Rajasthan Land Revenue Act, the State Government had framed the 1959 Rules, which were meant to govern the allotment of industrial plots across the state and the grant of leases over these areas. The D 1959 Rules, were purposefully amended with insertion of Rules 11A & 12. Rule 11A states that industrial lands are to be allocated to RIICO for industrial development, and under Rule 12, the Company is empowered to further distribute land via leases to different entrepreneurs for development. E Therefore, the allotment to RIICO is a statutory allotment, validated by the Rajasthan Land Revenue Act, and the 1959 Rules; vii) Respondent No. 1 acted pursuant to the approvals granted by RIICO and, hence, Appellants are now bound by the F principles of Promissory Estoppel and Legitimate Expectations. Respondent No. 1 has invested around Rs. 137.75 Crores in the LIA, Kota, and has also paid off the labour dues of the Appellant Unions, as agreed upon in the tripartite settlement agreements;
G viii) As Respondent No. 1 has acted on the presumption that RIICO had validly approved the conversion of land and the sub-division of the plots, there is no scope for cancellation subsequently. Promissory estoppel squarely applies in favour of Respondent No. 1, and the Motilal Padampat (Supra) decision cited by Appellants is, on the contrary, beneficial to Respondent No. 1’s position;
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 273 PVT. LTD. AND ORS. [SURYA KANT, J.]
ix) The alteration in the ruling government cannot be the reason behind the cancellation of a decision taken by the earlier government. Such behaviour is arbitrary, discriminatory, and untenable in law. This Court in State of Tamil Nadu v. Shyam Sunder8 had held that an instrumentality of the State cannot have a case whereby it pleads contrary to the position adopted by the State itself. Policies adopted in regard to certain projects should not keep altering as per changing governments. In a matter of governance of a State or with the execution of a decision taken by the prior ruling establishment, when the decision in question does not involve political philosophy, the succeeding government is required to see it through to its logical conclusion; x) Governments cannot blow hot and cold and are not permitted to approbate and reprobate. RIICO had already taken a detailed decision, in compliance with the 1979 Rules which are the applicable regulations. They cannot resile from this on flimsy grounds which are merely afterthoughts. Governance is a continuous process and under the Constitution, there is no general power of review available to any government to examine, set aside, and recall the decisions of the earlier government. The Appellants’ reliance on Krishna Ballav Sahay (Supra) is also misplaced as that case concerned an inquiry being conducted on the basis of serious allegations of corruption against government officers/ministers. It was only after these facts were ascertained did the government reverse the decision by the earlier ruling party. In the present scenario, no such allegations have been made and no inquiry was conducted either; xi) The Appellants were also obliged to follow the Rules of Business framed under Article 166(3) of the Constitution when implementing their policies, which was once again bypassed entirely. Rule 5 of the Rules states that the Governor, acting on advice from the Chief Minister, will allocate business of the government to various Ministers and assign specific departments to their portfolio. Rule 9 8 (2011) 8 SCC 737. H
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A goes on to require the Minster in charge of a particular department to be primarily responsible of carrying out business under that department. Under Schedule I of the Rules of Business, the Minister for Industries is to take decisions in matters connected to RIICO and industrial matters such as the cancellation of the supplementary lease B deeds and/or revocation of permissions. The final decision of 03.08.2019 which directed the cancellation in question did not include participation by the Minister for Industries. Further, the decision needed to be placed before the Chief Minister for authentication before it was finally issued. This C Court, in MRF v. Manohar Parrikar & Ors.9 has cemented the mandatory nature of the Rules of Business; xii) Article 138 of the AoA of RIICO could not have been resorted to for directing cancellation of the supplementary lease deed and permission for using the land for commercial purposes. Such clauses in the Articles are for generally setting out the policy of the Company and not to make decisions that affect the rights of third parties. The cases relied upon by the Appellants to uphold the ability to issue orders to RIICO under Article 138 of its AoA, are unhelpful as the facts in those instances dealt with indoor management of the corporations in question. The action(s) taken in the present case do not concern an internal matter of RIICO, but rather the abrogation of validly procured permissions and vested rights that had accrued to Respondent No. 1. An elaborate procedure for cancellation is already provided under the 1979 Rules, which needed to be followed if such drastic measures were to be taken. Unbridled and unfettered powers cannot be granted to the State Government to issue instructions to RIICO in this manner as it may be used brazenly and without paying heed to any procedure under law. The State Government has abused this alleged power which it claims to have been always vested in it; xiii) This Court has already held in B. Rajagopala Naidu v. State Transport Appellate Tribunal, Madras & Ors.10 9 (2010) 11 SCC 374. H 10 (1964) 7 SCR 1.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 275 PVT. LTD. AND ORS. [SURYA KANT, J.]
that powers such as those provided under Article 138 of A RIICO’s AoA cannot be used as appellate powers to take vengeance against specific entities. Such provisions do not accord a carte blanche authority to quash earlier decisions taken by RIICO, for oblique and unspecified reasons. Moreover, such an action is clear evidence of malice in law, as it is blatantly arbitrary and discriminatory, as described by this Court in Kalabharati Advertising v. Hemant Vimalnath Narichania & Ors.11; xiv) The Order of 18.09.1979 had stated, in unequivocal language, that all industrial areas would be transferred to RIICO and this included the LIA, Kota. This decision was given effect to by the Joint Director on 28.09.1979 and the area over which Respondent No. 1 retained a lease came under the control of RIICO. The 1979 Rules were brought into force in the same year, and were meant to provide guidelines on the basis of which RIICO would carry out its functions, including permissions for sub-division, change of land use, and allotment of industrial areas. xv) The State Government has, in fact, taken a stand in SLP (Civil) No. 8552 of 2021, filed in respect of neighbouring land situated in the same industrial area, whereby it accepts the transfer of such lands to RIICO has already taken place. It has acknowledged that RIICO has stepped into the shoes of the State Government and the Corporation provides services that are similar to that of a civic body or municipal corporation in the areas managed by it. That is why Rule 12 was specifically inserted into the 1959 Rules, to accord all powers that the State Government would have had, to RIICO as well. Hence, the Corporation steps into the shoes of the government; xvi) Further, as the 1979 Rules were mentioned in the 1959 Rules in Rule 12, the 1979 Rules were specifically incorporated into them. The 1979 Rules were not only given statutory recognition by virtue of this mention in the 1959 Rules, but additionally, all the allotments done under the 1979 Rules also received statutory endorsement and recognition; 11 (2010) 9 SCC 437. H
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