BISHAMBHAR PRASAD versus M/S. ARFAT PETROCHEMICALS PVT. LTD. AND ORS on 20 April 2023

SUPREME COURT REPORTS

[2023] 7 S.C.R.

A

BISHAMBHAR PRASAD

v.

M/s. ARFAT PETROCHEMICALS PVT. LTD. AND ORS.

(Civil Appeal No. 2963 of 2023 Etc.)

B

APRIL 20, 2023

[SURYA KANT AND VIKRAM NATH, JJ.]

Industrial Development – Industrial land – Appeals fromjudgment passed by the High Court whereby the Writ Petition filedby Respondent No.1 was allowed – As a corollary, the decision byCthe Cabinet Committee of the State of Rajasthan, and resultinginstructions issued to the Rajasthan State Industrial Developmentand Investment Corporation Ltd. (“RIICO”) to cancel a series ofpermissions and approvals granted/awarded to Respondent No.1in respect of industrial land in Kota, Rajasthan, were set aside –DWhether the Large-Scale Industrial Area (LIA), Kota has been alwaysunder the management and control of the State Government or itwas transferred to RIICO pursuant to Government Order dated18.09.1979 – Whether the 1979 Rules of RIICO are statutory innature – Whether failure to observe Principles of Natural Justiceby the State Government vitiated its decision to annul the permissionsE/approvals granted by RIICO in favour of Respondent No.1 –Whether the State Government could have exercised its powers underArticle 138 of the AoA of RIICO to direct cancellation – Whetherthe Rules of Business were not followed – Does the Doctrine ofLegitimate Expectations and Promissory Estoppel apply in favourFof Respondent No. 1 – Whether the Appellant Unions are entitled torelief – Held: There was an uninterrupted and subsisting relationshipof lessor and lessee between the State Government and either JKSLor Respondent No. 1, in the context of LIA, Kota – From the firstlease deed executed in 1967, till date, the State Government hasmaintained the position of lessor – The lease with JKSL, and allGleases thereafter with JKSL and/or Respondent No. 1, have beensigned under the 1959 Rules – The terms of the lease are clearly incompliance with the 1959 Rules – The land in LIA, Kota was nevertransferred to RIICO under the Government Order dated 18.09.1979– The State Government has always maintained title and ownershipHof the area – The land was also never allotted to RIICO on a

leasehold basis under Rule 11A of the 1959 Rules – Thus, RIICOwas never expressly given any leasehold rights, and had no authorityto further sub-lease the land, along with other correspondingpowers, under Rule 12 of the 1959 Rules – In any case, Rule 11A ofthe 1959 Rules is of no importance, as there had to be an expressallotment of the land to RIICO on a leasehold basis after the cominginto force of Rules 11A and 12 – No such express allocation wasever made in favour of RIICO – The 1979 Rules are not statutory innature – The reference to the 1979 Rules in Rule 12 of the 1959Rules, does not accord any statutory recognition to the former –There was no violation of the Principles of Natural Justice in thiscase – The entire basis for granting permission for conversion ofthe land, and subdivision of the plots, was on an incorrect assumptionof power by RIICO under the 1979 Rules, to act as the lessor ofLIA, Kota – RIICO was never given any leasehold rights over theland – When the basis for a benefit received by a party is itselfinvalid, there is no question of giving the party a chance to beheard – The State Government was competent to issue directionsunder Art.138 of the AoA of RIICO, to cancel the supplementarylease deeds and attendant permissions – This fell squarely withinthe ambit of Art.138 of the Articles of Association – There was noviolation of the Rajasthan Rules of Business as the sub-committeewhich recommended the cancellation of the permissions /approvalsto Respondent No.1, was acting for and on behalf of the entireCouncil of Ministers – Hence, the Rules of Business were compliedwith – There was no legitimate expectation nor promissory estoppelthat could operate to the benefit of Respondent No. 1, as, onceagain, no such defences could be raised on the back of RIICO’sown erroneous utilization of powers that vest only with the rightfullessor of LIA, Kota, which is the State Government – Further, publicinterest overrides both these doctrines, and cannot come to the aidof a private party, when the larger interests of society are involved– The supplementary leases signed between Respondent No.1 andRIICO are unsustainable – RIICO did not possess the authority toenter into these agreements, as the land in LIA, Kota remained underthe ownership and control of the State Government uninterruptedlyfrom the first lease signed with JKSL, till the present date –Respondent No.1 was also cognizant of this fact as evinced by itentering into the 7 transfer lease deeds with the Collector, Kota, in A

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A2007, after it stepped into the shoes of JKSL – The leases withJKSL were executed under the 1959 Rules which remained applicableand there was no authority ever vested in RIICO to have issued thepermissions for conversion and sub-division of plots in the LIA,Kota, and for signing the supplementary lease deeds withRespondent No.1 – There is no legal infirmity in the action of theBAppellants in setting aside the decisions taken by RIICO or indirecting to cancel the supplementary leases of 2018 – Hence, thecancellation of the supplementary deeds and quashing of theapprovals for conversion of land and sub-division of plots is upheld– This shall, however, not preclude Respondent No.1 from re-Capproaching the State Government and seeking conversion of theusage of land and attendant approvals under the 1959 Rules – TheState Government shall be at liberty to consider such a proposal inpublic interest and in accordance with the 1959 Rules – With regardto the Appellant Unions, it would be open for them to seek theirremedies under law from the Appropriate Government, and judicialDforums – Rajasthan Land Revenue Act, 1956 – s.100 – RajasthanIndustrial Areas Allotment Rules, 1959 – rr.11A and 12 – RIICODisposal of Land Rules, 1979 – rr.20A, 20B and 20C – Constitutionof India – Art.166 – Sick Industrial Companies (Special Provisions)Act, 1985 – s.18.

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Company Law – Distinction between companies that arebrought into being “by” an Act, and those created “under” an Act– Held: A company incorporated under the Companies Act is not acreation of the said Act but it has come into existence in accordancewith the provisions of the Companies Act.

F

Rules and Regulations – Statutory rules – The status of“statutory rules” cannot be accorded to regulations that are broughtinto existence under the Articles of a non-statutory company.

Doctrines / Principles – Principle of natural justice – Stepstaken which are themselves vitiated, cannot form the basis forGprinciples of natural justice to be applied.

Doctrines / Principles – Promissory estoppel – Superveningpublic interest acts as a veto against the invocation of promissoryestoppel.

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Disposing of the appeals, the Court

HELD:

Whether the LIA, Kota has been always under themanagement and control of the State Government or it wastransferred to RIICO pursuant to Government Order dated18.09.1979?

1. The relationship of lessor and lessee between State ofRajasthan and JKSL continued uninterruptedly till JKSL wasdeclared a ‘sick company’. Respondent No.1 then stepped intothe shoes of JKSL under the orders of AAIFR, and by virtue ofthe tripartite agreements executed with the labour unions, forthe land at LIA, Kota. It is also an admitted fact that neitherunder 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, orRespondent No.1, as the case may be, was ever disrupted. Thereis no cessation in the relationship of lessor and lessee betweenthe State and Respondent No. 1, or its predecessor JKSL. Thiscontractual relationship duly governed under the 1956 Act readwith the 1959 Rules, was never terminated expressly or otherwiseand neither was it substituted by a supplementary conveyancedeed. A relationship of lessor–lessee between State Governmentand JKSL/RIICO continued to subsist and has not been affectedin 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?

2.1. The plain wording of Rule 11A of the RajasthanIndustrial Areas Allotment Rules, 1959 clearly shows that theCorporation can have merely managerial power over the landthat is allocated to it. As laid down very clearly under Rule 11A,the allotment to RIICO is done purely on a leasehold basis, andownership and title remain unequivocally with the StateGovernment. RIICO acts as nothing but an agent of the State inits efforts to increase industrial production and further economicprogress. The State remains the overarching power in thisdynamic and RIICO remains subservient to it. The relationshipof lessor and lessee between State and Respondent No. 1 has A

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Abeen validly subsisting at all times and RIICO was neverauthorised either by Government order dated 18.09.1979 orunder Rules 11A and 12 of the 1959 Rules, to bypass the StateGovernment and assume the self – styled role of the lessor inrespect of LIA, Kota. Since, the 1967 and 2007 lease deeds infavour of JKSL and Respondent No. 1, respectively, wereBexecuted by the State Government in terms of Rule 2 of the 1959Rules, RIICO had no authority whatsoever to permit RespondentNo. 1 to change the land use or allow for the sub – division of plotwithout the prior approval of the State Government, which is thesole competent authority to accord such permission in exerciseCof its power under Rule 8 of the 1959 Rules. The contrary viewtaken by the High Court is plainly erroneous in law and is basedon a misconstruction of the provisions of 1959 Rules read withthe binding bilateral contracts between the parties. [Paras 50, 52and Para 58][284-H; 287-E-H; 285-F-G]

D2.2. RIICO is not a statutory body. The Company wasbrought into being under the Companies Act, 1956 by the Stateof Rajasthan, which holds 100% shares in it. RIICO does notowe its existence to a statute, but is rather created under theCompanies Act and is subject to its provisions. It is only governedby the provisions of the Companies Act and not created by it.ERule 12 of the 1959 Rules merely states that lands allotted toRIICO will be further dealt with by the Corporation as per its1979 Rules. At best, this imposes an obligation upon RIICO toabide by its own guidelines, which it had issued under Article 93of its AoA. The obligation for RIICO to abide by the 1979 RulesFstems 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 Justiceby the State Government vitiated its decision to annul theGpermissions/approvals granted by RIICO in favour of RespondentNo.1?

3. The Principles of Natural Justice entailed givingRespondent No.1 an opportunity to defend its rights. However,the most decisive and crucial factor is whether any legally vestedH‘right’ ever accrued in favour of Respondent No. 1, which the State Government could not have despoiled behind its back.RIICO had no authority whatsoever to accord permission forconversion and sub – division of the industrial land allotted toRespondent No. 1. State Government has always retained itsauthority as lessor and was the only competent authority to grantsuch permissions to Respondent No. 1 within the framework ofthe 1959 Rules. The irresistible conclusion would be that theself – styled power exercised by RIICO, was without any sanctionin law; it lacked inherent competence and RIICO acted beyondits jurisdiction in respect of LIA, Kota. The permissions accordedby RIICO in favour of Respondent No. 1 did not confer any rightswhatsoever, much less any enforceable right in the eyes of law.RIICO usurped the powers vested in the State Government andpassed palpably illegal orders in favour of Respondent No.1. Theagreements between RIICO and Respondent No. 1 are nothingbut brutum fulmen. Steps taken which are themselves vitiated,cannot form the basis for principles of natural justice to be applied.The supplementary lease deeds were signed by RIICO withoutany authority to do so. It similarly lacked the capacity to grantthe permission for conversion of use for the land to commercial,and the allowance to sub – divide the plot. Thus, no legally vestedright of Respondent No.1 has been infringed and it has nolegitimate ground to seek an opportunity to be heard in a matterstrictly between RIICO and State Government. [Paras 74 and78][295-B-E; 297-B-C]

Whether the State Government could have exercised itspowers under Article 138 of the AoA of RIICO to directcancellation?

4. The State Government has directed RIICO to recall itspermission for conversion of the usage of land, sub – division ofplots and supplementary lease deeds executed in favour ofRespondent No. 1. All these actions of RIICO pertained to itsbusiness affairs. Since RIICO took these decisions exceedingits powers and in a completely unauthorised and illegal manner,the State Government was well within its rights to invoke Article138 of AoA and nullify the unauthorised and unlawful decisionstaken by RIICO. The very objective behind reposing power inthe State Government under Article 138 of the AoA is to enable AB

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Ait to undo and annul the decisions taken by RIICO in the conductof its business affairs, which the State Government may find isderogating from public interest or in conflict with its own policy.The State Government is entitled to resort to Article 138 whereit finds that the business affairs have been conducted by RIICOdetrimental 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 havebeen substantially complied with. The entire Cabinet was calledCon 29.12.2018 to consider various decisions taken by RIICOduring the previous regime. Among these were the supplementaryleases and connected permissions to Respondent No. 1 byRIICO. The Cabinet, which included the Minister for Industries,then proceeded to constitute three subcommittees to investigatethese alleged irregularities, along with an inter – departmentalDcommittee. The Minister for Industries is not expected to lookinto each individual matter pertaining to RIICO as this wouldrender the entire working of government unviable. It was acollective decision of the Council of Ministers to constitute theCommittees to look into irregularities of various kinds. TheEspecific committee that was authorized to investigate RIICO andits alleged misuse of non – existent powers in favor of RespondentNo. 1, was a creation of the entire Council, including the Ministerfor Industries. The sub – committee’s actions in this context werecompletely validated and backed by the Minister and the rest ofthe Council. It is, thus, difficult to hold that Rules of BusinessFhave not been followed by the State Government in the course ofits decision making process. [Para 85 and 90][300-H; 301-A-B;302-E-G]

Does the Doctrine of Legitimate Expectations andPromissory Estoppel apply in favour of Respondent No. 1?G

6. It is clear that no legitimate expectation could have arisenin favor of Respondent No. 1. There was no implicit or explicitrepresentation made by the State Government in favour of itsrequest for conversion of the land, nor for sub – division of plots.RIICO, in completely untenable fashion, took over the role ofH

the lessor without there being any right to do so, and issued therequisite permissions. Evidently, such approvals had no legs tostand on as they were devoid of any force of law. The lessor ofLIA, Kota, was the State Government. When the entity purportingto exercise the powers of a lessor, RIICO in this case, does sowithout having the requisite legal status to act in this manner,Respondent No. 1 as the beneficiary of these wrongful actions,cannot seek any legitimate expectation or promissory estoppelin its favour. Supervening public interest acts as a veto againstthe invocation of promissory estoppel. Respondent No. 1 cannotclaim any right to the continuation of the supplementary leasedeeds. [Paras 93 and 96][304-D-F; 305-F]

Conclusion

7.1. The supplementary leases signed between RespondentNo. 1 and RIICO are unsustainable. RIICO did not possess theauthority to enter into these agreements, as the land in LIA,Kota remained under the ownership and control of the StateGovernment uninterruptedly from the first lease signed withJKSL, till the present date. Respondent No. 1 was also cognizantof this fact as evinced by it entering into the 7 transfer leasedeeds with the Collector, Kota, in 2007, after it stepped into theshoes of JKSL. [Para 104][307-E-F]

7.2. The leases with JKSL were executed under the 1959Rules which remained applicable and there was no authority evervested in RIICO to have issued the permissions for conversionand sub-division of plots in the LIA, Kota, and for signing thesupplementary lease deeds with Respondent No. 1. There is nolegal infirmity in the action of the Appellants in setting aside thedecisions taken by RIICO or in directing to cancel thesupplementary leases of 2018. Hence, we uphold the cancellationof the supplementary deeds and quashing of the approvals forconversion of land and sub-division of plots. [Para 105][307-F-H]

7.3. This shall, however, not preclude Respondent No. 1from reapproaching the State Government and seeking conversionof the usage of land and attendant approvals under the 1959 Rules.The State Government shall be at liberty to consider such a A

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Aproposal in public interest and in accordance with the 1959 Rules.With regard to the Appellant Unions, it is not consideredexpedient by this Court to enter into the demands made by thelabour unions for the dues of JKSL’s employees. No views areexpressed on the content of the prayers by the Appellant Unions,and it is left open for them to seek their remedies under law fromBthe Appropriate Government, and judicial forums. [Para 107,106][308-A-C]

7.4. The overall conclusions are summarized in the followingpoints: –CA. There has been an uninterrupted and subsistingrelationship of lessor and lessee between the State Governmentand either JKSL or Respondent No. 1, in the context of LIA,Kota. From the first lease deed executed in 1967, till date, theState Government has maintained the position of lessor; DB. The lease with JKSL, and all leases thereafter with JKSLand/or Respondent No. 1, have been signed under the 1959Rules. The terms of the lease are clearly in compliance with the1959 Rules;

C. The land in LIA, Kota was never transferred to RIICOunder the Government Order dated 18.09.1979. The StateEGovernment has always maintained title and ownership of thearea;

D. The land was also never allotted to RIICO on a leaseholdbasis under Rule 11A of the 1959 Rules. Thus, RIICO was neverFexpressly given any leasehold rights, and had no authority tofurther sub – lease the land, along with other correspondingpowers, under Rule 12 of the 1959 Rules;

E. In any case, Rule 11A of the 1959 Rules is of noimportance, as there had to be an express allotment of the landto RIICO on a leasehold basis after the coming into force of RulesG11A and 12. No such express allocation was ever made in favourof RIICO;

F. The 1979 Rules are not statutory in nature. The referenceto the 1979 Rules in Rule 12 of the 1959 Rules, does not accordany statutory recognition to the former;H

G. There was no violation of the Principles of Natural Justicein this case. The entire basis for granting permission forconversion of the land subdivision of the plots, was on an incorrectassumption of power by RIICO under the 1979 Rules, to act asthe lessor of LIA, Kota. RIICO was never given any leaseholdrights over the land. When the basis for a benefit received by aparty is itself invalid, there is no question of giving the party achance to be heard;

H. The State Government was competent to issuedirections under Article 138 of the AoA of RIICO, to cancel thesupplementary lease deeds and attendant permissions. This fellsquarely within the ambit of Article 138 of the Articles ofAssociation;

I. There was no violation of the Rajasthan Rules of Businessas the sub – committee which recommended the cancellation ofthe permissions/approvals to Respondent No. 1, was acting forand on behalf of the entire Council of Ministers. Hence, the Rulesof Business were complied with;

J. There was no legitimate expectation nor promissoryestoppel that could operate to the benefit of Respondent No. 1,as, once again, no such defences could be raised on the back ofRIICO’s own erroneous utilization of powers that vest only withthe rightful lessor of LIA, Kota, which is the State Government.Further, public interest overrides both these doctrines, and cannotcome to the aid of a private party, when the larger interests ofsociety are involved;

K. The Appellant Unions and workers are at liberty toapproach the Appropriate Government and various judicial forumsto pursue their remedies in accordance with law.

The Appeals by the State of Rajasthan and RIICO areaccordingly allowed; the impugned judgment dated 20.07.2021passed by the High Court of Judicature for Rajasthan at Jaipur,is set aside. Consequently, the Writ Petition filed by RespondentNo.1 before the High Court is dismissed save and except theliberty 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] 1Suppl. SCR 464 and Sachidananda Pandey v. State of A

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West Bengal & Ors. (1987) 2 SCC 295 : [1987] 2 SCR223 – 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] 1SCR 845 – relied on.

Mohinder Singh Gill v. The Chief Election Officer(1978) 1 SCC 405 : [1978] 2 SCR 272;Krishna BallavSahay & Ors. v. Commission of Enquiry & Ors.[1969]1 SCR 387;Management of Fertilizer Corporation ofIndia v. Their Workmen[1969] 2 SCR 706;SukhdevSingh & Ors. v. Bhagat Ram & Ors. (1975) 1 SCC 421: [1975] 3 SCR 619;Motilal Padampat v. State of UttarPradesh (1979) 2 SCC 409 : [1979] 2 SCR 641;Stateof Tamil Nadu v. Shyam Sunder(2011) 8 SCC 737 :[2011] 11 SCR 1094; MRF v. Manohar Parrikar & Ors.(2010) 11 SCC 374 : [2010] 5 SCR 1081;B.Rajagopala Naidu v. State Transport Appellate Tribunal,Madras & Ors. (1964) 7 SCR 1;KalabharatiAdvertising v. Hemant Vimalnath Narichania & Ors.(2010) 9 SCC 437 : [2010] 10 SCR 971;SwadeshiCotton Mills v. Union of India(1981) 1 SCC 664 :[1981] 2 SCR 533;Life Insurance Corporation of Indiav. Escorts Ltd. & Ors.(1986) 1 SCC 264 : [1985] 3Suppl. SCR 909;S.S. Dhanoa v. MunicipalCorporation, Delhi & Ors. 1981 (3) SCC 431 : [1981]3 SCR 864; Executive Committee of Vaish DegreeCollege v. Lakshmi Narain 1976 (2) SCC 58 : [1976] 2SCR 1006;Union of India v. P.K. Roy (1968) 2 SCR186;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.SCR 97;Lalaram and Ors. vs. Jaipur DevelopmentAuthority and Ors.(2016) 11 SCC 31 : [2015] 14 SCR403;Bannari Amman Sugars Ltd. vs. Commercial TaxOfficer and Ors.(2005) 1 SCC 625 : [2004] 6 Suppl.SCR 264; Food Corporation of India v. KamdhenuCattle Feed Industries(1993) 1 SCC 71 : [1992] 2Suppl. SCR 322 – referred to.

BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALSPVT. LTD. AND ORS.

CIVIL APPELLATE JURISDICTION : Civil Appeal No.2963of 2023

From the Judgment and Order dated 20.07.2021 of the High Courtof Judicature for Rajasthan at Jaipur in DBCWP No.3410 of 2020.

AWith

Civil Appeal No.2965, 2964, 2966 And 2967 of 2023.

Dushyant Dave, Dr. Manish Singhvi, Mukul Rohatgi, AtmaramNS Nadkarni, Sr. Advs., Ms. Nilofar Khan, Anjum Parvez, KhushiMohammed, Yogesh Kumar Sharma, Sandeep Kumar Jha, AshokBBasoya, Ms. Shruti Jose, Rameshwar Prasad Goyal, Uday Gupta, Ms.Shivani M. Lal, Ms. Sanam Singh, S. S. Sisodia, M. K. Tripathi, HarishDasan, 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,CSalvador Santosh Rebello, Ms. Arju Paul, Arju Paul, Ms. Deepti Arya,Ms. Manisha Gupta, Advs. for the appearing parties.

The Judgment of the Court was delivered by SURYA KANT, J.1. Leave granted.D

2. This batch of appeals arises from the judgment dated 20.07.2021passed by the Jaipur Bench of the High Court of Judicature for Rajasthanwhereby the Writ Petition filed by Respondent No. 1 – M/s. ArfatPetrochemicals Pvt. Ltd. in all connected matters was allowed. As acorollary, the decision by the Cabinet Committee of the State of Rajasthan,Eand resulting instructions issued to the Rajasthan State IndustrialDevelopment and Investment Corporation Ltd. (“RIICO”) to cancel aseries of permissions and approvals granted/awarded to Respondent No.1 in respect of industrial land in Kota, Rajasthan, were set aside.

3. There are different Appellants before us in the respective SLPs.FThey 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 theState of Rajasthan and RIICO, stand on a slightly different footing tothat of the Appellant Unions, we will address the State of Rajasthan andRIICO (collectively, “Appellants”) separately, to maintain the distinctionGbetween the reliefs sought by them as compared to the Appellant Unions.

A. FACTS

4. The dispute originates from the allotment of approximately271.39 acres of land by the State of Rajasthan through the DistrictCollector, Kota, in the Large-Scale Industrial Area, Kota (“LIA, Kota”)H

to J.K. Synthetics Ltd. (“JKSL”) on 12.09.1958. Following the allotment,a lease deed was executed with JKSL by the Collector, Kota, andpermission was granted for setting up its industrial units in the area.JKSL’s retention of the property was facilitated over the followingdecades through the execution of fresh lease deeds with respect to thesame area, as and when the period specified in the earlier lease lapsed.

5. Just after the first allotment was initially made, the StateGovernment exercised its powers under Section 100 of the RajasthanLand Revenue Act, 1956 and formulated the Rajasthan Industrial AreasAllotment Rules, 1959 (“1959 Rules”) to regulate the allocation of landto entrepreneurs and the development of industrial areas across the State.Section 100 of the Rajasthan Land Revenue Act is provided below:

“100. Sale of land in Industrial and Commercial Areas –The State Government may make rules regulating sales of landsin industrial and commercial areas and may also impose an annualassessment of such lands, wherever necessary.”

6. Similarly, Rules 2, 8 and 9 of the 1959 Rules are also of somerelevance and the same are reproduced below:

“2. Period for which land may be allotted.- Land in industrialarea 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,by the State Government in the Industries Department andin the case of large-scale tourism unit, the allotment shallbe made by the Government in the Revenue Departmentand (b)for setting up of other industries –

(i) in Jaipur District, by the Director of Industries,Rajasthan Jaipur provided that in case of a tourismunit the allotment shall be made by the Governmentin the Revenue Department, and

(ii) in any other district, by the Collector concerned.

(bb) for the setting up of IT Industries Government land shall beallotted by the State Government in the RevenueDepartment on the recommendation of the Department ofInformation Technology and Communication.

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(c) all allotment of land under clause (a) shall be made within aperiod of 60 days and under clause (b) within a period of 30days from the date of receipt of the completed applicationin Form-B. In case applicants submit complete applicationelectronically in Single window System Portal, it shall bedisposed as per the provisions of the Rajasthan EnterprisesSingle Window Enabling and Clearance Rules, 2011.

Provided that the allotment of land for the purpose of setting up ofCommon Effluent Treatment Plant and related activities, anywherein the State, shall be made by the State Government in the RevenueDepartment for a period of 10 years which shall be extendablefor a period of 5 years.

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8. Land not to be used for other purpose. – (1) The landgiven for industrial purposes shall not be used for any other purposeexcept constructing factory premises and such other residentialquarters as are required for those engaged in that industry. Noconstructions shall be permitted which may have the object ofusing it as a commercial undertaking other than the industrypermitted to be established.

Provided that the State Government, on the application of thelessee for establishment of industry other than the industry forwhich the was given, may grant permission for establishment ofsuch industry. But in case of government land allotted under theserules, such permission shall not be granted for establishment oftourism units.

(2) The permission for construction of the labour colony shall begiven 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 factorypremises.

9. Lessee debarred from sale of land etc. – The lessee shallhave the limited ownership on the land leased till the lease subsistsand shall have the right of assignment only for the purpose oftaking a loan for the development of the industry or for pledgingas collateral security for a loan taken by the lessee or some other A

industry owned by the same management. The lessee shall haveno right to sell the land:

(i) Provided that the land can be pledged as collateral securityonly in favour of Industrial Financial Corporation of India,Rajasthan Finance Corporation, IDBI, ICICI, LIC, IRBI,HDFC, SIDBI, EXIM Bank, Co-operative Banks and anyBPublic Financial Institution as defined in the Public FinancialInstitute Act or Scheduled Banks or private lending agenciessubject to ensuring that the lessee has cleared all theoutstanding dues of the lessor and the lessee creates firstcharge in favour of the State Government and second tothe financing body or bodies.C

(ii) Provided further that once the land has been utilised for thepurpose for which it was allotted within the period specifiedin rule 7, the lessee may, with the permission of the AllottingAuthority transfer his right or interest in the whole land, soleased 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 landafter deducting allotment price charged under rule3A and the transferee shall pay 50% of excessamount of yearly lease land mentioned in rule 5 andother conditions of lease shall be remained unchanged.

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(b) In case of converted Khatedari land allotted underthese rules for industrial purpose, the transferee shallpay 50% excess amount of yearly lease rentmentioned in rule 5 and other conditions of lease shallbe remained unchanged.

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(iia) Provided also that if after grant of permission the transfereehas failed to execute the lease deed and further transferred theallotted land without prior permission of allotting authority, suchtransfer may be regularised by the allotting authority on paymentof penalty of Rs.3000/- for each transfer. The lease deed may beexecuted in favour of such transferee for the remaining period oflease may be executed in favour of such transferee for theremaining period of lease.

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The transferee shall pay 50% excess amount of the yearlylease rent mentioned in rule 5 on such transfer.

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A(iii)Provide also that in case an industrial plot is proposed to bedivided or sub-divided for any purpose, whatsoever, priorpermission of the State Government in the RevenueDepartment shall be obtained by the allotting authority.

(iiia)Provide also that if any industrial plot is divided or sub-Bdivided without obtaining prior permission of the StateGovernment, the lessee shall apply for permission of divisionor sub-division to the allotting authority along with a copyof the challan depositing an amount of Rs.3000/-. Theallotting authority, with prior approval of the StateGovernment, 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 beDobtained, in case land is mortgaged.

(b) that the conditions of lease shall remain unchanged.(c)that the transferee shall pay additional 100 percentexcess amount of the proportionate yearly lease rentEapplicable from the date of transfer of right or interestin leased land.

(d) that the transferee shall use the land for the industrialpurpose only.

(e) that in case of government land allotted under theseFrules, the transferee shall pay 50% of prevailingmarket price of land after deducting allotment pricecharged under rule 3A.

(v) Provided also that no permission of transfer under the aboveproviso, shall be allowed in case of a Government land unlessGthe unit is declared sick by Board of Industrial and FinancialReconstruction (BIFR).

(vi) Provided also that in case of any doubt of any kind theallotting authority shall refer the matter to the StateGovernment in the Revenue Department whose decisionHshall be final.

Provided also that the developer of micro, small and mediumenterprises clusters, as per approved plan, may transfer hisright or interest in the whole land, so leased out toentrepreneurs. The conditions of lease remaining unchanged.The transferee shall pay 50% excess amount of the yearlylease rent mentioned in rule 5 on such transfer.”

7. The first lease deed of 11.08.1967 which governed the termsand conditions of allotment of land to JKSL, contained, amongst others,the following conditions:- “xxx xxx xxx NOW THIS INDENTURE WITNESSETH AS FOLLOWS:

…

iv) The lessee shall set up on the said plot of land Nylon industryfor which land has been leased to him by the lessor within a periodof two years from the date of talking over the possession of theland as above mentioned and in case of his failure to do so thesaid plot shall revert to the lessor unless the period of two years isextended by the lessor on valid grounds.

v) The lessee shall set up, construct, erect and build on the saidplot of land, only such buildings, sheds, and structures as arerequired by him for setting up the industry aforesaid and also suchother residential quarters e.g. watch & ward quarters as arerequired for those engaged or to be engaged in the said factor.

vi) The lessee agrees not to construct or build any structures orbuilding on the said plot of land or on a portion of it which mayhave the object of using it as a commercial undertaking other thanfor the industries aforesaid for which the said plot has been leasedto the lessee.

…”

As is evident from the lease, the object behind the allocation ofthe land was for a specific purpose and no other usage was permissible.Subsequent leases executed between JKSL and the District Collectorcontained pari materia clauses.

8. While the above stated leases were subsisting, the RajasthanState Industrial and Mineral Development Corporation Ltd. (“RSIMDC”)

A

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D

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Awas incorporated for carrying out development projects across the State.The Corporation was subsequently split into two entities, with RIICOacting as its direct successor. To regulate RIICO’s activities in respectof the lands over which it would have control, the RIICO Disposal ofLand Rules, 1979 (“1979 Rules”), were issued under Article 93(xv) ofthe Articles of Association (“AoA”) of the Company. The Rules providedBa mechanism by which RIICO could grant different types of approvalsand permissions in relation to industrial lands and their utilization. On18.09.1979, an Order was passed by the State Government to allot allindustrial lands within its territory to RIICO. Thus, the Corporation would,from that point onwards, step into the shoes of the state government inCoverseeing further development of the areas under its supervision.Whether or not this included the LIA, Kota, is a point of contentionamong the parties. The Joint Director of the Department of Industries atKota, also issued an Order on 28.09.1979, according to which a numberof industrial areas would be transferred to RSIMDC in compliance withthe Government decision of 18.09.1979. LIA, Kota, was listed amongDthe areas to be entrusted to RSIMDC in the said communication.

9. The Government Order dated 18.09.1979 and Joint Director’sOrder dated 28.09.1979, warrant reproduction:

“Government of Rajasthan

EIndustry Group-2 Department

No.P-4 56/Industry/1/79Jaipur, Dated: 18.9.79Order It has been decided in the meeting dated 18.09.1979 ofRajasthan State Level Planning andDevelopment CoordinationFCommittee that all the industrial areas of Rajasthan shall only bedeveloped through Rajasthan State Industrial and MiningDevelopment Corporation. Further, it has also been decided thatthe industrial areas operated by the Department of Industry shallbe handed over to Rajasthan State Industrial and MiningGDevelopment Corporation Ltd., Jaipur w.e.f. 01.10.1979.

Therefore, the State Government hereby issues order to transferthe handing over of industrial areas operated by theDepartmentof Industry to Rajasthan State Industrial and Mining DevelopmentCorporation Ltd., Jaipur w.e.f. 01.10.1979.”

Hx---------------------------------x--------------------------------------x “Office of Joint Director, District Industrial Centre, Kota 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 18.09.1979and Director, Department of Industry, Rajasthan, Jaipur DO letterNo.F.2 (182) 9A/2305 dated 21.09.1979, the following IndustrialAreas (Departmental) are hereby transferred to Rajasthan StateIndustrialand Mining Development Corporation Ltd., Jaipur w.e.f.28.09.1979 (Afternoon):

1. Large Scale Industrial Area, Kota

2. Small Scale Industrial Area, Kota

3. Lakhava Industrial Area, Kota

4. Nanta Industrial Area, Kota”

x---------------------------------x--------------------------------------x

10. The contents of the 1979 Rules, under which RIICO wouldcarry out its activities in terms of industrial areas allotted to it, that areimportant for our purposes may also be noted at this stage:

“20-A. The Managing Director shall have full powers withregard to the following:

1. Approval of layout plan of the industrial areas and changes/modification / revision /subsequent changes therein and all relatedmatters.

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 toindustrial land, commercial land, residential land, services land,conversion from service land to industrial, open, commercial,residential and for other purposes etc., and vice-versa.

20-B. Sr. DGM / SRMs / RMs are authorized for:

(i) sub-division of plots.

(ii) reconstitution of plots.

(iii) …

A

B

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D

E

F

G

H

A20-C

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(A) Following riders/conditions will be observed whileconsidering the change in land use:

i)No change in land use of allotted plots will be permittedfor residential purpose.

B

ii)No change in land use of vacant industrial plot would beallowed. In other words, the allottees of industrial plotwho have not set up an industry will not be permittedchange in land use for non-industrial purposes. However,change in land use of part vacant sub-divided plot wouldbe allowed subject to condition that the leasehold rightsof the sub-divided plot are held by the allottee ofintegrated plot.

C

iii)No change in land use of allotted institutional plots willbe allowed in the dedicated Institutional Areas for anyother purpose.

D

iv)No change in land use of plots allotted under theprovisions of Rule 3(E) and 3(W) of RIICO Disposal ofLand Rules, 1979 will be permitted.E

v)Change in land use of plot allotted for non-industrial usewill be allowed for vacant plot subject to payment of15% of the prevailing rate of allotment as additionalcharges.

Fvi)Change of land use of the allotted plots for commercial/institutional purposes as permitted under this rule will beconsidered only for the plots located on the roads havingright of way of 18.00 mtr. and above (total road width).However, in the land use conversion cases wherein thecriterion of minimum road width of 24 mtr. or above isGspecified in the building regulations/parameters then thesame will be observed while considering the cases ofthe land use conversions.

vii)…”

H

11. Even after the Govt. Order dated 18.09.1979, JKSL continuedto deal directly with the District Collector, Kota. Another lease, extendingJKSL’s utilization of the land in LIA, Kota, was signed in 06.10.1982between the Collector and JKSL, and not RIICO. During the same period,the 1959 Rules were amended to introduce provisions that wouldeffectuate the allocation of industrial areas to RIICO, and to then facilitatethe Company administering these lands under the 1979 Rules. Relevantsub-clauses of Rule 11A inserted on 23.12.1983, and Rule 12 added in13.07.1982, are particularly important in this context:

“11-A. Allotment of land to the Rajasthan State IndustrialDevelopment and Investment Corporation Ltd. or RajasthanTourism Development Corporation- Land shall be allotted to the Rajasthan State Industrial Developmentand Investment Corporation Ltd. or Rajasthan TourismDevelopment Corporation for setting up and developing IndustrialAreas, on the following terms and conditions :-

(i) The land shall be allotted on lease hold basis for a period of99 years;

(ii) The premium to be charged for the allotment of governmentland for industrial purposes shall be equivalent to theprevailing market price of the same class of agriculturalland in the vicinity and shall be determined accordingly bythe Colonization Commissioner in the Rajasthan CanalProject Colony Area and by the Collector concerned in otherareas:

Provided that no premium for allotment shall be chargedfrom Rajasthan State Industrial Development andInvestment Corporation where the land has been purchasedby the Rajasthan State Industrial Development andInvestment Corporation or acquired for Rajasthan StateIndustrial Development and Investment Corporation afterits incorporation and the compensation is paid by theRajasthan State Industrial Development and InvestmentCorporation.

(iii) ….

(iv) The Rajasthan State Industrial Development and InvestmentCorporation Ltd. [or Rajasthan Tourism Development A

B

C

D

E

F

G

H

A

Corporation] may sub-lease the leased land or part thereof,for industrial purposes including essential welfare andsupporting services, provided that in the case of Diamondand Gem Development Corporation to who the land hasalready been leased out by RIICO for 99 years, the sub-lessee i.e. DGDC may further sublet and the terms andconditions and other provisions contained in the rules in sofar as they relate to RIICO shall mutatis mutandis applyto DGDC also as if the land in question has been let out tothem by State Government and rule 11-A ibid.

B

Provided further that where land was allotted and convertedCin favour of Rajasthan State Industrial Development andInvestment Corporation Ltd. [or Rajasthan TourismDevelopment Corporation] after its incorporation forindustrial purpose but land was used for essential welfareand supporting services, such allotment [xxx] shall beDdeemed to be for industrial purpose.

(iv-a) The sub-lessee of the Rajasthan State IndustrialDevelopment and Investment Corporation Limited mayfurther sub-lease the sub-leased land or part thereof on suchterms and conditions as may be mutually agreed betweensuch sub-lessee and subsequent sub-lessee. The terms andconditions applicable to sub-lessee shall also mutatismutandis apply to such subsequent sub-lessee.

E

(v) The Rajasthan State Industrial Development and InvestmentCorporation Ltd. [or Rajasthan Tourism DevelopmentCorporation] may levy and recover such lease rent and othercharges as may be determined by it, in respect of the landssub-leased by it; F

(vi) The periods of the sub-leases by the Rajasthan StateIndustrial Development and Investment Corporation Ltd.[or Rajasthan Tourism Development Corporation] shall bedetermined by it, but shall not exceed 99 years, in all, in anycase; G

(vii) The land shall revert to the Government free of allencumbrances and without payment of any compensationin case the Rajasthan State Industrial Development and H

Investment Corporation Ltd. [or Rajasthan TourismDevelopment Corporation] or any of its sub-lessees, use itfor any purpose other than industrial [including essentialwelfare and supporting services], or commit breach of anyother condition of the lease or sub-leases;

(viii) The sub-lessees of the Rajasthan State IndustrialDevelopment and Investment Corporation Ltd. [orRajasthan Tourism Development Corporation shall continueto be governed by all other terms and conditions prescribedin these rules, and any other analogues rules that may bepromulgated or orders that may be issued, in this behalf bythe State Government.

12. Allotment of land by Rajasthan State IndustrialDevelopment and Investment Corporation Ltd. [orRajasthan Tourism Development Corporation.

The Rajasthan State Industrial Development and InvestmentCorporation Ltd. Jaipur or Rajasthan Tourism DevelopmentCorporation shall be empowered to make allotment in accordancewith the Rajasthan State Industrial Development and InvestmentCorporation Disposal of Land Rules, 1979 [or any other rulesframed by the RIICO and RTDC for the purpose] of vacant plotsto entrepreneurs in the Industrial Areas notified by the StateGovernment and transferred to the said Corporation. TheCorporation shall also be authorised to execute lease deeds, realizedevelopment charges, lease rent and other dues from theentrepreneurs to whom plots have already been allotted inaccordance with the provision of these rules, and to take anyconsequential or residuary action in regard to the plots allotted theentrepreneur.

Provided that the Rajasthan State Industrial Development andInvestment Corporation Ltd. or Rajasthan Tourism DevelopmentCorporation shall be empowered to grant written permission tothe lessee for transfer of rights or interest in the land in respect ofthe plots/land located in the Industrial Areas notified by the StateGovernment and transferred to the said corporation:

Provided further that any permission granted or action taken fortransfer of rights or interest in the plots/land by the RajasthanState Industrial Development and Investment Corporation Ltd. or A

BC

D

EF

G

H

ARajasthan Tourism Development Corporation. after 13-07-1982in respect of the plots/land saturated in the Industrial Areas andtransferred to the said Corporation shall be deemed to be validunder the first proviso to this rule.”

12. In the backdrop of these amendments, confusion aroseBregarding whether Rules 11A and 12 of the 1959 Rules would beapplicable prospectively or retrospectively. In this context, a clarificationwas sought by the District Collector, Kota, through a letter dated15.05.1986. The Collector was referring in this context to the deposit oflease rent and to whom the rent in question should go:

“Therefore, guide in this regard that the above-mentionedCnotification dated 13-07-1982, the lease rent etc. of the land allottedto the factory will be deposited by RIICO or deposited in theerstwhile tehsil itself s a state item. Please send guidance in thisregard soon. Till the guidance is received the decision has beentaken to deposit the lease amount in the Tehsil. Photocopy of theDform 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"

District collector,

Kota

Number:- F-8 (198) Revenue/4435-38

E

Dt. 15-05-86"

x---------------------------------x--------------------------------------x

13. In response to this, a notification was issued by the StateGovernment on 23.05.1987, clarifying that Rule 12 of the 1959 Rules,Fadded on 13.07.1982, would not apply retrospectively and the lease rentand other items pertaining to different deeds would remain a state subject.

“Rajasthan GovernmentRevenue (Group-4) DepartmentSr. No. 2 (242) Rajasthan/3/86Jaipur, Dated 23.05.1987

G

Sent:- District Collector, Kota.

Sub:- Regarding development fee, lease rent and service chargeof land allottee to M/s JK Synthetic Ltd. Kota.

Ref:- Your letter 4434 dated 15-05-1986.

H

Sir,

According to the above subject, it is written that the notificationdated 13-07-1982 of this department has not been implementedwith retrospective effect and in earlier cases the amount of leaserent etc. should be deposited in the tehsil as a state item.

Yours Faithfully

Katara

Deputy Government Secretary”

x---------------------------------x--------------------------------------x

14. This seemed to remove whatever doubts, if any, and clarifiedexplicitly that the amendments to the 1959 Rules, of which Rules 11Aand 12 are important for us to keep in mind, were prospectively applicable.The management and control of the lands leased out under the 1959Rules, were apparently not handed over to RIICO. This understandingwas enunciated in a Government Circular dated 12.01.1995 whichindicates that revenue records would reflect that ownership and the rightto administer the land remained with the State Government. Further,documents in this regard would be retained by the District IndustriesCentre, and not RIICO:

“Government of Rajasthan

Industries (Group-1) Department

1. Director

Industries DepartmentJaipur, Rajasthan2. All District Collector3. 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 ofRajasthan Land Revenue Act, 1956 land allotted underRajasthan Industrial Area Allotment Rules, 1959 all recordsto be kept with District Industrial Centre. At present fileswith RIICO should also be taken back and kept with DistrictIndustrial Centre. In all these cases compliance of terms oflease deed and monitoring of the same to be undersupervision of District Industrial Centre.

A

B

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D

E

F

G

H

A2.Before lease deeds are signed for Land allotted underRajasthan Industrial Area Allotment Rules, 1959 entry ofchange of land use and ownership should be entered intothe revenue records and only then the land should be allottedunder Rajasthan Industrial Area Allotment Rules, 1959.

B3.After the signing of lease deed the same should be enteredinto the revenue records and files pertaining to it should bekept with District Industries Centre.

4. Lease deed of the allotted land under Rajasthan IndustrialArea Allotment Rules, 1959 is to be executed by DistrictCollector/ General Manager, District Industries Centre. AsCDistrict Collector/ Managing Director has to initiate actionin cases of violation of terms of lease deed, GeneralManager, District Industries Centre to be directly responsibleto bring any or all violations in the notice of Director, DistrictIndustries Centre and District Collector.

Sincerely,

D

Special Secretary Industry”

x---------------------------------x--------------------------------------x

15. A circular by RIICO itself, on 27.01.1995, gave RIICO’s owninterpretation of the content and meaning of the Circular issued byEIndustries Department, Government of Rajasthan on 12.01.1995. Itconcurred with the stand that files pertaining to lands for which allotmentand leases had been executed under the 1959 Rules, would be retainedby the State Government and not the Corporation:

“Rajasthan State Industrial Development and InvestmentFCorporation Ltd.

Udyog Bhawan, Tilak Marg, Jaipur- 302005Sr. IPI/P-3(24)47/95

Dated:- 27-01-1995

Circular

G

Sub:- Proceeding in respect of land under Rajasthan IndustrialArea Allocation Rules, 1959.

In the industrial areas of the corporation (and those industrialareas which were later transferred from the Department ofHIndustries to the Corporation) in violation of the terms of the lease of land allotment. Action is taken by the unit office under theCorporation’s Land Disposal Rules. Some such cases (especiallyin Bhilwara) have come to notice in which land allocation toIndustrial Units at the state level or district level was done underthe Rajasthan Industrial Area Allocation Rules, 1959 and whoselease deed was also executed by the District Collector (Industry).But their files were transferred to the unit offices of the corporationin some such cases proceedings were initiated by the unit officeof the corporation in cases of violation of the terms of the leasedeed. Such proceedings are irregular.

In the above context, the State Government has recently issuedcircular dated 12-01-1995, a copy of which is being attached foryour information. It will be clear from this that under the RajasthanIndustrial Area Allocation Rules, 1959 the District Industry Center/Collector (Industry) will have the right and responsibility to takeaction in respect of violation of the terms of the lease deed. If youhave any documents under consideration in this regard, pleasereturn them to the District Industries Centre.

Enclosed Circular Dated 12-01-1995.

Copy:-

1. All Unit offices For information.

2. RIICO (Headquarters) Officers for information (S S Chaturvedi)

Advisor (Infra)”

x---------------------------------x--------------------------------------x

16. In this background, JKSL was continuing its operations in theleased-out area for several years. However, in the 1990s, JKSLencountered financial difficulties and was eventually declared a “sickcompany” by the Board for Industrial and Financial Reconstruction(“BIFR”) on 02.04.1998, under the Sick Industrial Companies (SpecialProvisions) Act, 1985 (“SICA”). Following the classification of JKSL asa sick company, the matter was referred to the Appellate Authority forIndustrial and Financial Reconstruction (“AAIFR”). During this period,JKSL signed a Memorandum of Understanding with Respondent No. 1as part of its plan to sell the Kota unit of its operations. Section 18 of A

B

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D

E

F

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H

ASICA[1 ]envisages certain measures being taken for revival of the companythat has fallen on difficult times and been declared a “sick” company.

17. The prospect of a demerger of the certain units owned byJKSL became the preferred strategy for effectuating the recuperationof the company. Respondent No. 1 emerged as the favoured entity toBtake over these units and also entered into two tripartite settlements on09.10.2002 and 22.10.2002, involving JKSL and two worker’s unions, topay off part of the dues of the former labourers of JKSL, as well asoffer them employment under Respondent No. 1. The relevant termsand conditions of the agreement dated 09.10.2002, are as follows:

C“IV. TERMS AND CONDITIONS

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1 —18.Preparation and Sanction of Schemes

(1) Where an order is made under sub-section (3) of section 17 in relation to any sickDindustrial company, the operating agency specified in the order shall prepare, asexpeditiously as possible and ordinarily within a period of ninety days from the date ofsuch order, a scheme with respect to such company providing for any one or more ofthe 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 overof, 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, inthe case of sub-clause (i), the other company, and in the case of sub-clause (ii), the sickindustrial company, referred to as “transferee company”;]

(d) the sale or lease of a part or whole of any industrial undertaking of the sickindustrial company; [(da) the rationalisation of managerial personnel, supervisory staff and workmen inFaccordance 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 orexpedient 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 liabilityGof the sick industrial company in favour of any other company or person or where suchscheme provides for the transfer of any property or liability of any other company orperson in favour of the sick industrial company, then, by virtue of, and to the extentprovided in, the scheme, on and from the date of coming into operation of the sanctionedscheme or any provision thereof, the property shall be transferred to, and vest in, andthe liability shall become the liability of, such other company or person or, as the caseHmay be, the sick industrial company.]

2. It is further agreed that while APPL will take over all the liabilitiespertaining the workmen/employees of Sir Padampat ResearchCentre, as determined as per Annexure B even though the SPRCunit will not be transferred to APPL and will be retained by JKSL.

3. The APPL will operate the Kota Complex .in the name andstyle of Arfat petrochemical Pvt. Ltd. (APPL) as a new companyand new employer. They will issue their appointment letters asper requirements in a phased manner subject to suitability andcovering terms of employment etc. The dues of employment underJKSL would be settled as full and final payment as summarized inAnnexure-A.

xxxxxxxxx”

The rest of the agreement contains numerous clauses that are infurtherance of the absorption of the workers into Respondent No. 1’soperations that were to start after the demerger of defunct units ownedby JKSL. The second agreement of 22.10.2002 also contained similarprovisions.

18. Eventually, AAIFR sanctioned a rehabilitation scheme for JKSLon 23.01.2003. The scheme referred to and validated the tripartiteagreements/settlements entered into by JKSL, Respondent No. 1, andthe different labour unions. It was noted that the liabilities of the workershad been taken on by Respondent No. 1, alongside its obligation underthose agreements to revive the industrial operations at Kota. A JointVenture & Shareholder Agreement (hereinafter, “JV”) was signedbetween Respondent No. 1 and JKSL on 13.05.2003, which cementedthe former’s obligation to discharge the liabilities outstanding on LIA,Kota, as well as the dues of the labourers. The AAIFR scheme wasfinalized on 07.01.2005, and it included an obligation on the part ofRespondent No. 1 to honour the earlier tripartite agreements with theJKSL workers unions. Part of the rehabilitation scheme involved hivingoff 227.15 acres of the land in the LIA, Kota, away from JKSL and toRespondent No. 1.

19. Respondent No. 1, as part of the aforementioned JV betweenitself and JKSL, continued to coordinate with the State Government onshifting the lease on LIA, Kota, away from JKSL and to itself. A letterto this effect was sent by Respondent No. 1 to the State Government on07.01.2006, seeking the demarcation and transfer of the lease over LIA, A

B

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AKota, to Respondent No. 1 solely, in light of the AAIFR scheme. Therelevant part of this letter is reproduced below:

“…This has reference to meeting with your goodself on04/01/2006 regarding Bifurcation and Transfer of Lease Hold Landof J.K. Synthetics Limited, Kota to M/s Arafat PetrochemicalBPvt. Ltd…

…

We request your goodself for an expeditious approval-

(c) for split of lease deed dated 06/10/1982 in to 2 portions– one covering area of 37.16 acres pertaining to SPRC which isCnot to be transferred as the same will continue in the name ofJKSL and another for balance land.

(d) Permission to transfer to APPL all the remaining landexcept the aforesaid 37.16 Acres.

DWe once again request your good self to kind accord youapproval in the above matter…”

20. As per AAIFR’s recommendations, the State Governmentthrough the Collector proceeded to execute 7 fresh lease deeds on thesame date in favour of Respondent No. 1. The 7 deeds signed on17.03.2007, collectively handed over the leasehold on the land toERespondent No. 1, in the following segments:

i)1[st] Deed: Plot No. 5A of 48.40 acres, meant for setting upa nylon plant and colony; ii)2[nd] Deed: Plot No. 5B of 7.15 acres, for conducting R&DFon acrylic fibre; iii)3[rd] Deed: Plot No. 5C of 14.45 acres, for setting up a nylontyre and cord plant; iv)4[th] Deed: Plot Nos. 16, 17, & D of 30.56 acres, for settingup a polyester staple fibre plant; G

v)5[th] Deed: Plot Nos. 23-30, A-C, of 70.66 acres, forconstruction of CDPH roads; vi)6[th] Deed: Plot Nos. 19-21B, 32B, 33, 34 & F of 26,16 acres,for setting up another acrylic/staple fibre plant; vii)7[th] Deed: Plot Nos. 19-21A, 22, 31, 32A & F1 of 29.77Hacres, for setting up a synthetic staple fibre plant.

The terms of the lease deeds were largely pari materia. Therelevant portion, contained in each of these fresh leases granting theland to Respondent No. 1, and relevant for our purposes, are as follows:

“NOW THIS INDENTURE WITNESSETH as follows:

…

(iii) That the lessee shall set up, construct, erect and build on theplot only such buildings, sheds and structures as are required byhim for setting up the industry aforesaid and also such otherresidentialquarters as are required for those: engaged or to beengaged in the said factory.

(iv) The lessee agrees not to construct or build any structures orbuildings on the said plot of land or on a portion of it which mayhave the object. of using it as a commercial undertaking otherthan for the industry promotion aforesaid of or which the said plothas been leased to the lessee.”

What is clear from this series of documents is the paramountcyof using the land for its specific intended purpose, and for there to be nodeviation from that industrial purpose for putting up commercial structuresof any kind. The overall objective behind the lease, despite havingchanged hands from JKSL to Respondent No. 1, remained unaltered.

21. The AAIFR scheme contained various requirements thatRespondent No. 1 was mandated to fulfil. Among these included therevival of the industrial units at the site which JKSL had no longer beenin sufficient financial health to operate. Further, as also necessitated bythe scheme, the aforementioned tripartite settlement agreements betweenRespondent No. 1, JKSL, and the workers unions was to be given effectto. The settlement agreements fixed the compensation payable to theworkers at Rs. 40.42 Crores, and also envisaged that the workers inquestion would receive employment in the industrial units that would,henceforth, be managed by Respondent No. 1. The relevant portions ofthe AAIFR scheme are worth reproduction:

“9 Identification of JV Partner

9.1 The Arfat Group are identified by JKSL after an extensivesearch undertaken by the Company with the help of M/s AccessInternational (Access) a Boston based consultancy Company…

A

B

C

D

E

F

G

H

A

9.2 Disposal of individual assets of Kota units was not possible orpractical without resolution of the on-going labour disputes andsettlement of labour liabilities. One the important considerationfor revival was assumption of the labour liability by the prospectivebuyer as workers dues were very high and without settlement ofthe same revival was not possible. Therefore, in order to evaluatethe offers received. It was decided by the Company in consultationwith Access to analyse them on the basis of Quantum offer no. ofunits being restarted total no. of jobs being created and willingnessof the higher regarding resolution of labour disputes and assumptionof labour liabilities.”

B

C

22. Pursuant to the AAIFR scheme, Respondent No. 1 initiallyrestarted one of the units for manufacture of acrylic fibre. The remaining6 units remained comatose. Unfortunately, the sole unit that wasrejuvenated suffered a purported fire in October, 2007, after only a briefperiod of operation and just 6 months after the transfer lease deedsDwere signed, which resulted in the shutdown of the factory. Consequently,the overall objective of reviving the industrial units in the LIA, Kota, wasfrustrated. The offshoot of this was a decade of litigation primarilyinvolving the workers unions and Respondent No. 1, regarding the latter’sfailure to revive the industrial units as contemplated in the AAIFRscheme.E

23. The workmen initiated proceedings before multiple forumsincluding the National Company Law Tribunal, the Rajasthan High Court,the BIFR and AAIFR, in their attempt to recover their dues and havethe rehabilitation scheme implemented. Among these litigations was anSLP, and resultant Review Petitions filed before this Court concerningFdirections issued by AAIFR to Respondent No. 1. The directions werein favour of the workmen and in furtherance of the rehabilitation schemethat AAIFR had previously approved. However, in appeal, the RajasthanHigh Court ruled that AAIFR had no jurisdiction over Respondent No. 1as it was not a “sick company” under SICA. This was further appealedGto the Supreme Court. The SLP by the Appellant Unions and others,was dismissed by this Court on 18.11.2016, and the subsequent ReviewPetitions were also rejected on 17.08.2017 and 06.03.2018, respectively,affirming that no directions could be issued to Respondent No. 1 but alsonoting that the AAIFR plan should be executed. Some of the otherproceedings by individuals or groups of workers, remain pending in various H

forums and do not require recounting for our purposes. The relevantpart of the order dismissing the SLP on 18.11.2016[2] is as follows:

“12. Several contentions have been raised by both sides duringthe course of hearing of these Appeals which we have notadverted to as they are not relevant for adjudication of thedispute in these appeals. We express no opinion on thejurisdiction of BIFR under other provisions of the Act. It isopen to the BIFR to review the implementation of theSanctioned Scheme and pass suitable directions.”

24. In the midst of the legal tussle between Respondent No. 1 andthe different workers unions, the former made an attempt to have anaffordable housing scheme developed on the LIA, Kota, under the ChiefMinister Jan Aavas Yojana. This application was made, once again, tothe District Collector, Kota. By this point, the industrial units in the areahad been lying dormant for over 10 years. However, this application tobe considered under the Jan Aavas Yojana was unsuccessful.

25. Subsequently, after having dealt directly with the Collector forover a decade on matters pertaining to LIA, Kota, Respondent No. 1eventually sought a change of land use from industrial to commercial, tothe 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 theDistrict Collector for the execution of lease deeds in 2007 or for the JanAavas Yojana, to now coordinating with RIICO instead. The proposalswere meant to effectuate the sub-division and change of land under the1979 Rules. The proposals were considered by the Land PlanningCommittee constituted by RIICO on 03.10.2018 and approval was grantedin-principle for the sub-division and conversion, as recorded in the Minutesof the Meeting issued by RIICO on 05.10.2018. One day after this, on06.10.2018, the Rajasthan State Assembly Elections process began andthe Model Code of Conduct came into effect. The InfrastructureDevelopment Committee of RIICO followed suit on 08.10.2018 andissued its own approval in this respect.

26. Following the completion of the process, supplementary leaseagreements were executed between RIICO and Respondent No. 1 on22.11.2018. Another supplementary deed for merger of plots was alsosigned between these parties on 13.12.2018. The conversion subsequently 2 CA Nos. 8597-8599 of 2010.

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Acame under scrutiny after the change of government in the 2018Rajasthan elections. The newly elected Council of Ministers constituteda Cabinet Committee on 01.01.2019 to review decisions made by theprior ruling government in the 6 months period preceding the elections.While this internal consideration was unfolding, RIICO directed its unitoffices to cease grant of permissions for conversion of use of land underBRule 20(c) of the 1979 Rules on 27.05.2019, until further notice. TheKota branch of RIICO, however, proceeded to allow sub-division of theLIA, Kota, as requested by Respondent No. 1, on 05.07.2019. Themistake became clear only after the sub-division was sanctioned,necessitating the issuance of withdrawal orders by the office at Kota inCrespect of both the conversion of land and the sub-division of the plot, on22.07.2019 and 25.07.2019, respectively.

27. Meanwhile, the internal deliberations by the Cabinet Committeeset up by the State Government extended till 03.08.2019, when theCommittee resolved to cancel all the permissions and approvals grantedDto Respondent No. 1 in respect of conversion of the property at LIA,Kota.

28. The State Government directed RIICO, by exercising thepowers it believed were vested in it under Article 138 of RIICO’s Articlesof Association, to carry out the requisite steps to annul the approvalsprovided to Respondent No. 1. RIICO issued orders on 11.10.2019 andE14.10.2019, to finally cancel the permission for conversion of land, aswell as cancel the supplementary leases themselves that had beensubsisting in the name of Respondent No. 1.

29. Respondent No. 1 was aggrieved by these actions and madevarious representations to the State Government, as well as RIICO,Fseeking to have its lease and possession over the land restored. Eventually,it filed a Writ Petition before the High Court challenging the cancellationof its lease and the permission for conversion of the use of the land. Thearguments raised included:

(a) Article 138 of the AoA of RIICO did not have statutory forceGand a third party could not be adversely impacted by decisionsmade or directions issued under it; (b) Even if Article 138 had statutory force, the manner in whichthe approvals and permissions accorded to Respondent No. 1 werequashed and set aside, was arbitrary, unreasoned, andHunconstitutional due to falling afoul of Article 14 of the Constitution;

A

(c) Respondent No. 1 had not even been issued a show causenotice nor given a chance to defend itself. Thus, the Principles ofNatural Justice had not been followed in the process of cancellingthe allotment; (d) The procedure under the 1979 Rules had to be followed, asthe LIA, Kota had been transferred to RIICO under the 18.09.1979Order.

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30. The State Government and its authorities objected to themaintainability of the petition on the ground that Article 138 of the AoAof RIICO were not statutory in nature and, hence, a Writ could not befiled in this regard. Further contentions were raised defending thecancellation of the allotment and permission for conversion of the land,on the ground that the decision was taken in contravention of the ModelCode of Conduct that had come into effect during the period when theLand Planning Committee and Infrastructure Development Committeeof RIICO had decided to allow Respondent No. 1 to convert 23% of theland to commercial use.

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31. While the matter was initially placed before a learned SingleJudge, the then Chief Justice of the High Court decided to transfer thefile to a Division Bench presided over by him. The various AppellantUnions which had been aggrieved by the non-implementation of theAAIFR scheme were impleaded into the proceedings. Eventually, theDivision Bench heard detailed arguments and passed the impugnedjudgment, concurring with Respondent No. 1’s position. It held:

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i)The question as to whether RIICO could be directed underArticle 138 of the AoA to carry out actions which mayabrogate the fundamental rights of a third party was of vitalimportance. It required the Division Bench to adjudicatethe dispute, rather than a Single Judge; F

ii)The decision made by the State Government to directRIICO to cancel the allotment of land to Respondent No. 1was without following due procedure, and hence, a WritGunder Article 226 of the Constitution was maintainableagainst this measure;

iii)The Government Order dated 18.09.1979, allocated allindustrial areas in the State of Rajasthan to RIICO for thepurpose of overseeing and facilitating their development.

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AWhatever course of action was taken in respect of theselands from this point onwards would have to be under the1979 Rules. These Rules had been completely ignored bythe State Government and its authorities while quashing thesupplementary leases and the conversion; Biv)The conversion of land was permissible under the MasterPlan for the LIA, Kota. RIICO, given it was now in chargeof these lands, had the authority under the 1979 Rules readwith the Master Plan to allow conversion of land, if it wasdeemed necessary and appropriate;

v)There was no reason assigned by the Cabinet CommitteeCfor its conclusion on 03.08.2019 that the leases requiredcancellation. The Supreme Court in Mohinder Singh Gillv. The Chief Election Officer[3 ]had laid down that reasonsbehind certain actions had to be included in the final decisionitself and could not be subsequently supplemented viaDaffidavits. A change of government could not be apermissible catalyst for abrogation of the decisions madeby the previous government. Further, Respondent No. 1was kept in the dark about the deliberations throughout andhad no forum to advocate its case for why the allotmentand conversion of land were legally sound;E

vi)The claim that the permission for conversion of the landfrom industrial use to commercial use violated the ModelCode of Conduct was suspect, as no other similarly grantedapprovals had been set aside on this basis. It appeared thatRespondent No. 1 had been specifically singled out andFtargeted;

vii)Respondent No. 1 had already spent significant amountson the development of land, based on the supplementarylease deed and conversion that had been granted earlier.Hence, the doctrine of legitimate expectations and estoppelGwould operate against the State and its authorities fromreneging on this arrangement;

viii)The workers unions had failed to put in an appearance duringthe arguments, and their submissions could not be consideredas a result.

H3 (1978) 1 SCC 405.

Consequently, the High Court quashed the decision of the CabinetCommittee and the steps taken by RIICO to cancel the allotment toRespondent No. 1. The Appellant Unions, RIICO, and the State, havenow come before us in appeal in this batch of matters.

B. ARGUMENTS

32. We have heard submissions from learned Senior Counsels,Mr. Dushyant Dave and Dr. Manish Singhvi, representing the State ofRajasthan and RIICO, respectively. They sought to point out the flawsin the impugned judgment through the following arguments:-

i)The land allotted to Respondent No. 1 in LIA, Kota, alwaysremained with the State Government and was neverallocated to RIICO despite the Order dated 18.09.1979regarding industrial lands being moved under the control ofRIICO. Various communications and activities by RIICOover the years indicate that it was also aware of this fact.Hence, RIICO had no authority to consider the proposal byRespondent No. 1 for changing the usage of the land fromindustrial to commercial;

ii)When the fresh set of lease were executed with RespondentNo. 1 pursuant to the AAIFR scheme and rehabilitationplan for JKSL, the agreements were signed by the DistrictCollector, Kota. RIICO was not involved in this process.Respondent No. 1 had, in fact, acted all along in a mannerwhich acknowledged the District Collector and the staterevenue authorities were always managing the affairs ofthe subject - area;

iii)The land in question was to be regulated through the 1959Rules rather than the 1979 Rules. This was because, asRIICO and Respondent No. 1 had already accepted throughtheir conduct over decades, that the State Governmentretained control over LIA, Kota. Hence, only the State ofRajasthan through the District Collector, Kota, and notRIICO, could have considered the proposal for conversionof the land and the execution of supplementary lease deeds.Rule 12 of the 1979 Rules clearly envisaged that the newlyinserted provisions would be applicable only to leases thatwere signed prospectively. In this instance, JKSL had A

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Aalready been put in charge of the area in LIA, Kota, underthe 1959 Rules;

iv)Rule 8 of the 1959 Rules clearly states that the land inquestion is not to be used for any purpose other than theobjective of industrial development. It is only with expressBauthorization of the State Government that the usage canbe changed. Rule 9 of the 1959 Rules mandates thatpermission of the government be taken when seekingsubdivision of plots as well. Hence, this procedure had tobe followed mandatorily by Respondent No. 1 if it desiredthe alteration of use of land and corresponding subdivision; C

v)RIICO has never raised any demand for lease rent or servicecharges from Respondent No. 1. From the series ofdocuments and communications, as already reproducedearlier, it is evident that RIICO had the same opinionregarding its own lack of authority and jurisdiction over theDland in question. The land remained with the StateGovernment at all times;

vi)Respondent No. 1 had abjectly failed to fulfil its obligationto revive the industrial units at LIA, Kota. The mandatoryterms of the rehabilitation plan by AAIFR had not beenEcomplied with and, as per SICA, the consequence of thisdefault had to be the winding up of the company;

vii)The permission for conversion of the land from industrial tocommercial was meant to benefit Respondent No. 1 andfrustrate the purpose for which the land had been allottedFin the first place. The prior government and RespondentNo. 1 had acted in concert to hastily push through theprocess for changing the usage of the land, in defiance ofthe AAIFR scheme as well as the Model Code of Conduct,causing a loss to the public exchequer and stymying theGindustrial development of the Kota region;

viii)The new government was well within its rights to examinethe decisions by the previous ruling class, as held by thisCourt in Krishna Ballav Sahay & Ors. v. Commission ofEnquiry & Ors.[4] Further, Article 138 of the AoA of RIICO

H4 [1969] 1 SCR 387.

explicitly gave power to the State of Rajasthan to issuedirections to it for carrying out certain measures. Thisincluded the cancellation of the supplementary lease deedwith Respondent No. 1 and the setting aside of thepermission to convert the land’s usage. A similar clause toArticle 138 is contained in the Articles/Memorandum ofalmost every government controlled entity, and has beenupheld in Management of Fertilizer Corporation of Indiav. Their Workmen[5]and subsequently affirmed by aConstitution Bench in Sukhdev Singh & Ors. v. BhagatRam & Ors.[6];

ix)As an arguendo, even if the land was deemed to be allocatedto RIICO as per the Order dated 18.09.1979 and theCorporation was the competent authority to issue approvalsand permissions vis-à-vis LIA, Kota, there was still noinfirmity in the directions issued by the State of Rajasthanunder Article 138 of the AoA. The State Governmentretained complete discretion to order RIICO to act accordingto its diktats in public interest;

x)RIICO itself had subsequently taken a decision to not allowany conversion in terms of the usage of land. Thisdeliberation took place following the filing of Public InterestLitigations before the Rajasthan High Court. The finaldecision to freeze any further conversions of this naturewas issued on 05.07.2019 to the State Government and allRIICO unit offices across the state. Following this, thepermissions granted to Respondent No. 1 for changing theland to commercial utilization and sub-division of the plotfor this purpose, were both withdrawn on 22.07.2019 and25.07.2019, respectively. The supplementary lease deed wasthen 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 inpolicy by the Government. It is entirely permissible for thegovernment 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.

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Abeing utilized for private gain, with the collusion of theerstwhile Executive Authorities and the management ofRIICO;

xii)There can be no question of estoppel against statute. Themoney spent by Respondent No. 1 on the land would notBvalidate the contravention of the Master Plan for the LIA,Kota. The Plan clearly contemplated a purely industrial areawhich was undermined by Respondent No. 1’s desire toset up commercial enterprises instead.

xiii)Respondent No. 1 had failed to show in concrete terms,Cthe exact investments it had carried out on the land. Itsequitable entitlement to seek restoration of the earlierdecision permitting conversion of the land had not beenproved from the records. Even if there was some merit tosuch claim, this Court in Motilal Padampat v. State ofUttar Pradesh[7 ]had ruled that estoppel would be overriddenDby supervening public interest and provisions of bindingstatutes and/or rules;

xiv)The transfer of the case from the Single Judge to the DivisionBench by the then-Learned Chief Justice was unjustifiedand irregular under the Rules of the High Court of JudicatureEfor Rajasthan, 1952. On this procedural ground as well, theimpugned judgment was unsustainable.

33. On the contrary, learned Senior Counsels, Mr. Mukul Rohatgiand Mr. A.N.S. Nadkarni, appearing for Respondent No. 1, haveattempted to rebuff the submissions by the State of Rajasthan and RIICOFin the following terms: -

i)The Cabinet Committee decision dated 03.08.2019 wassolely taken to single out Respondent No. 1 and cancel thepermissions/approval accorded by RIICO during the regimeof the earlier government. The reasons for the cancellationGwere never provided and do not exist in either the file orthe final decision. The grounds for cancellation were nevermentioned subsequently either. All the reasons eventuallycited by the Appellants before the High Court, were merelyafterthoughts, such as:

H7 (1979) 2 SCC 409.

PVT. LTD. AND ORS. [SURYA KANT, J.]

a) The Model Code of Conduct being in force;

b) The sub-division of plots of change of use could not havebeen granted by RIICO and the Corporation did not possessthe ability to transfer lands; c) Only the Collector had the power to grant permissions.

ii)The Model Code of Conduct is irrelevant, as the applicationfor conversion of the land to commercial, and permissionfor sub-division, was filed in August 2018, much before theelection process even began. In between, there were severalother decisions taken by the same Land Planning Committeeand Infrastructure Development Committee none of whichwere cancelled. Even in regard to the Land PlanningCommittee, several other proposals were considered andgranted during the same period when Respondent No. 1’sapplication was pending. There were around 70 casesapproved in September 2018, as well as December 2018,apart from Respondent No. 1’s. None of these have beensubsequently annulled by the Appellants, clearly showingthat this is an act of pure arbitrariness and the argumentsraised on the Model Code of Conduct are nothing but alame excuse;

iii)There are 30 other instances of conversion in which RIICOhas acted as the competent authority to grant permission,from 1996 to 2019. Out of these 30, 3 of the cases are fromLIA, Kota. These three cases involved conversion of 100%of the land to commercial usage, as opposed to RespondentNo. 1 which only sought conversion of 23%. The residentialcolonies that have been raised by Respondent No. 1 havenot been objected to by the State. Further, as recently as in2022, RIICO has been demanding lease rent and servicecharges from Respondent No. 1, clearly showing that it isin charge;

iv)The Collector had only signed the initial transfer lease deedsof 2007 with Respondent No. 1 because the lease deeds inquestion were not fresh leases, but were executed for theremainder of the term of the already subsisting lease infavour of JKSL. The AAIFR scheme referred to the consent A

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of the state government, which also necessitated theCollector’s participation. This was the only reason for the2007 deeds to have been executed with the Collector andnot RIICO;

v)It is very clear that the land in LIA, Kota, had beenBtransferred and allotted to RIICO and the Corporation wasconsidered to be the sole authority, even by the StateGovernment, which was capable of dealing with the land.The Order dated 18.09.1979 by the State Government statesthat industrial areas are to be transferred, pursuant to whichthe Joint Director of Industries allotted the land to RIICOCon 28.09.1979 by an order.

vi)Under Section 100 of the Rajasthan Land Revenue Act,the State Government had framed the 1959 Rules, whichwere meant to govern the allotment of industrial plots acrossthe state and the grant of leases over these areas. TheD1959 Rules, were purposefully amended with insertion ofRules 11A & 12. Rule 11A states that industrial lands are tobe allocated to RIICO for industrial development, and underRule 12, the Company is empowered to further distributeland via leases to different entrepreneurs for development.ETherefore, the allotment to RIICO is a statutory allotment,validated by the Rajasthan Land Revenue Act, and the 1959Rules;

vii)Respondent No. 1 acted pursuant to the approvals grantedby RIICO and, hence, Appellants are now bound by theprinciples of Promissory Estoppel and LegitimateExpectations. Respondent No. 1 has invested around Rs.137.75 Crores in the LIA, Kota, and has also paid off thelabour dues of the Appellant Unions, as agreed upon in thetripartite settlement agreements; F

Gviii)As Respondent No. 1 has acted on the presumption thatRIICO had validly approved the conversion of land and thesub-division of the plots, there is no scope for cancellationsubsequently. Promissory estoppel squarely applies in favourof Respondent No. 1, and the Motilal Padampat (Supra)decision cited by Appellants is, on the contrary, beneficialHto Respondent No. 1’s position; ix)The alteration in the ruling government cannot be the reasonAbehind the cancellation of a decision taken by the earliergovernment. Such behaviour is arbitrary, discriminatory, anduntenable in law. This Court in State of Tamil Nadu v.Shyam Sunder[8 ]had held that an instrumentality of the Statecannot have a case whereby it pleads contrary to the positionBadopted by the State itself. Policies adopted in regard tocertain projects should not keep altering as per changinggovernments. In a matter of governance of a State or withthe execution of a decision taken by the prior rulingestablishment, when the decision in question does not involvepolitical philosophy, the succeeding government is requiredCto see it through to its logical conclusion;

x)Governments cannot blow hot and cold and are not permittedto approbate and reprobate. RIICO had already taken adetailed decision, in compliance with the 1979 Rules whichare the applicable regulations. They cannot resile from thison flimsy grounds which are merely afterthoughts.Governance is a continuous process and under theConstitution, there is no general power of review availableto any government to examine, set aside, and recall thedecisions of the earlier government. The Appellants’reliance on Krishna Ballav Sahay (Supra) is alsomisplaced as that case concerned an inquiry beingconducted on the basis of serious allegations of corruptionagainst government officers/ministers. It was only afterthese facts were ascertained did the government reversethe decision by the earlier ruling party. In the presentscenario, no such allegations have been made and no inquirywas conducted either; D

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xi)The Appellants were also obliged to follow the Rules ofBusiness framed under Article 166(3) of the Constitutionwhen implementing their policies, which was once againbypassed entirely. Rule 5 of the Rules states that theGovernor, acting on advice from the Chief Minister, willallocate business of the government to various Ministersand assign specific departments to their portfolio. Rule 9

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Agoes on to require the Minster in charge of a particulardepartment to be primarily responsible of carrying outbusiness under that department. Under Schedule I of theRules of Business, the Minister for Industries is to takedecisions in matters connected to RIICO and industrialmatters such as the cancellation of the supplementary leaseBdeeds and/or revocation of permissions. The final decisionof 03.08.2019 which directed the cancellation in questiondid not include participation by the Minister for Industries.Further, the decision needed to be placed before the ChiefMinister for authentication before it was finally issued. ThisCCourt, in MRF v. Manohar Parrikar & Ors.[9 ] has cementedthe mandatory nature of the Rules of Business;

xii)Article 138 of the AoA of RIICO could not have beenresorted to for directing cancellation of the supplementarylease deed and permission for using the land for commercialDpurposes. Such clauses in the Articles are for generallysetting out the policy of the Company and not to makedecisions that affect the rights of third parties. The casesrelied upon by the Appellants to uphold the ability to issueorders to RIICO under Article 138 of its AoA, are unhelpfulas the facts in those instances dealt with indoorEmanagement of the corporations in question. The action(s)taken in the present case do not concern an internal matterof RIICO, but rather the abrogation of validly procuredpermissions and vested rights that had accrued toRespondent No. 1. An elaborate procedure for cancellationFis already provided under the 1979 Rules, which needed tobe followed if such drastic measures were to be taken.Unbridled and unfettered powers cannot be granted to theState Government to issue instructions to RIICO in thismanner as it may be used brazenly and without paying heedto any procedure under law. The State Government hasGabused this alleged power which it claims to have beenalways vested in it; D

xiii)This Court has already held in B. Rajagopala Naidu v.State Transport Appellate Tribunal, Madras & Ors.[10]

9 (2010) 11 SCC 374.H10 (1964) 7 SCR 1.

that powers such as those provided under Article 138 ofRIICO’s AoA cannot be used as appellate powers to takevengeance against specific entities. Such provisions do notaccord a carte blanche authority to quash earlier decisionstaken by RIICO, for oblique and unspecified reasons.Moreover, such an action is clear evidence of malice inlaw, as it is blatantly arbitrary and discriminatory, as describedby this Court in Kalabharati Advertising v. HemantVimalnath Narichania & Ors.[11];

xiv)The Order of 18.09.1979 had stated, in unequivocallanguage, that all industrial areas would be transferred toRIICO and this included the LIA, Kota. This decision wasgiven effect to by the Joint Director on 28.09.1979 and thearea over which Respondent No. 1 retained a lease cameunder the control of RIICO. The 1979 Rules were broughtinto force in the same year, and were meant to provideguidelines on the basis of which RIICO would carry out itsfunctions, including permissions for sub-division, change ofland 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 neighbouringland situated in the same industrial area, whereby it acceptsthe transfer of such lands to RIICO has already taken place.It has acknowledged that RIICO has stepped into the shoesof the State Government and the Corporation providesservices that are similar to that of a civic body or municipalcorporation in the areas managed by it. That is why Rule12 was specifically inserted into the 1959 Rules, to accordall powers that the State Government would have had, toRIICO as well. Hence, the Corporation steps into the shoesof the government;

xvi)Further, as the 1979 Rules were mentioned in the 1959 Rulesin Rule 12, the 1979 Rules were specifically incorporatedinto them. The 1979 Rules were not only given statutoryrecognition by virtue of this mention in the 1959 Rules, butadditionally, all the allotments done under the 1979 Rulesalso received statutory endorsement and recognition; A

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SUPREME COURT REPORTS

xvii)In a similar matter concerning the Bharatpur Industrial Area,an allotment had been made by the Collector to PerfectPotteries. The lease stated that no use other than industrialuse would be permissible. However, subsequently, theindustrial area was transferred to RIICO and theCorporation granted permission for subdivision andconversion of the land. The Collector had terminated thelease as a result. The matter was referred to a High-LevelCommittee of the State of Rajasthan presided over by theChief Secretary and comprising of the Advocate General,Principal Secretary of Law, Principal Secretary ofIndustries, and others. The Committee held that by virtueof the insertion of Rule 12 of the 1959 Rules, the actionstaken by RIICO were valid and the Collector’s order oftermination was to be set aside. The relevant extracts ofthe Committee’s decision are as follows:

“DECISION OF THE COMMITEE

After due deliberations, Members of the Committeewere of the opinion that RIICO Is having undisputedjurisdiction. In the matter of all those industrial areaswhich were notified/developed by the State Governmentand came to be transferred to RIICO vide order dated18.09.1979 and in view of subsequent amendment inRajasthan Industrial Area Amendment Rule, 1959 videnotification dated 13.07.1982 by Insertion of rule 12.

In view of the above, it was decided by thecommittee that the order dated 22.08.2019 of CollectorBharatpur needs to be set aside. For this purpose, RIICOshould file a revision petition before the Govt. ofRajasthan in Revenue Department through Pr. Secretary,Revenue for consideration of the matter.

The meeting ended with a vote of thanks to the chair.

Sd/-

(Hukam Singh Rajpurohit)

Secretary to Government& Member Secretary”

x----------------------------x-------------------------------x xviii) There has also been an admission on oath before theARajasthan High Court in another similar matter.[12] Theaffidavit submitted before the High Court lays out thefollowing in terms of the State’s position: a) RIICO hasbeen authorized to act in accordance with the 1979 Rulesin respect to industrial plots. The Rules themselves haveBacquired statutory force by virtue of reference to theseRules in statutory legislations/enactments. Given this, noother authority would be able to interfere in the sphere ofactivities that are regulated under the 1979 Rules; b)RIICO’s own authority derives from Rules 11A and 12 ofthe 1959 Rules, by virtue of which the State GovernmentChad vested the responsibility to develop industrial areas uponthe Corporation; (c) RIICO, as a public sector undertaking,would not have been able to function in the manner in whichit does if express authorization had not been provided.

xix)The change of use of the land was permitted under theDMaster Plan. As the 1979 Rules were applicable by virtueof the 18.09.1979 Order transferring industrial lands toRIICO, the Corporation’s only obligation was to ensure thatthe sub-division and alteration of the utilization of the landwas in consonance with said Rules read with the MasterEPlan. Moreover, the State of Rajasthan itself issued a circularon 19.03.2003 allowing conversion of industrial land forother purposes in order to promote economic growth, inlight of the recession that had taken hold at the time;

xx)The initial agreement for transfer of the lands from JKSLto Respondent No. 1 was signed by the Collector, notbecause the State Government still had control, but ratherbecause those were the requirements under SICA and theAAIFR scheme. Rule 9(iv) of the 1959 Rules had requireda lessee which was declared a “sick company” under SICA,at that time JKSL, to seek permission from the StateGovernment for transfer of its lease rights to a third entity.The permission was manifested through the DistrictCollector, Kota, under the aegis of the AAIFR scheme.

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12 Annex. R-47: D.B. WP (Civil) No. 19102 of 2018, “Ravindra Sharma v. State ofRajasthan & Ors.” – Add. Affidavit on behalf of Respondents, by Mr. Rajendra Singh,Dy. Comm., JDA, Jodhpur.

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This was not a fresh lease, but only an extension of thealready existing period of the subsisting lease. Hence, thiswas not an acknowledgement of any kind by RespondentNo. 1 that the State of Rajasthan retained control over theland and was merely a procedural requirement that wasbeing fulfilled under the 1959 Rules, due to JKSL’s statusas a sick company. Respondent No. 1 has consistently actedin consonance with the approach that RIICO has controlover the land and the corresponding power to take furthermeasures in respect of it, such as for conversion of use andsub-division of plots; B

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xxi)The letter dated 12.01.1995 relied upon by Appellants as aproof that the title over the land was retained by the StateGovernment was later overridden by a letter dated31.03.1995. By virtue of this letter, the files of transferredlands were directed to remain with RIICO; D

xxii)The Jan Aavas Yojana scheme under which RespondentNo. 1 had applied to the Collector, was purely because itwas mandatory to do so under the Scheme itself. In noway does this act as an acceptance that the Collector andthe State Government were in charge of the land in LIA,EKota. In fact, the Collector had sought the opinion of RIICOin the matter, clearly showing the Collector’s own convictionthat consent needed to be sought from the Corporation;

xxiii) The lack of a show cause notice or an opportunity toRespondent No. 1 to defend itself is fatal to the Appellants’case. Swadeshi Cotton Mills v. Union of India[13 ]had madeclear the need for principles of natural justice to be followedeven for administrative decisions. A process for cancellationwas provided already under Rule 24(1) of the 1979 Rules,which had to be adhered to.[14]

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G13 (1981) 1 SCC 664.14 24. CANCELLATION

The Corporation shall have the right to cancel the plot allotment after issuing a 45 daysregistered AD show cause notice to the allottee by the concerned Sr. DGM / SeniorRegional Manager / Regional Manager for breach of any of these rules, condition ofallotment letter or terms of lease agreement. The powers of plot cancellation shall vestwith the Unit Head for all categories of the land/plot allotments except for the land/Hplots allotted under Rule 3(W).

xxiv) The Appellants are making unfounded allegations regardingplacement of the Writ Petition filed by respondent No.1before Division Bench of the High Court. The Chief Justicebeing Master being Master of the Roster, was competentto enlist any matter before a Single or Division Bench.Challenge to Article 138 of AoA was an issue of paramountpublic importance, hence the case was rightly placed beforea Division Bench.

xxv) The arguments regarding the failure of the AAIFR schemewere irrelevant and beside the point. This Court in its earlierorder in the context of the petitions filed by the workersunions had already affirmed that SICA would not apply toRespondent No. 1, given it was not a “sick company”. Theland in question had been obtained as part of the AAIFRscheme by way of auction, but that did not mean that theBIFR or AAIFR itself would have jurisdiction overRespondent No. 1.

xxvi) As far as the SLPs filed by the Appellant Unions wereconcerned, the Supreme Court’s earlier orders on 17.08.2017and 06.03.2018 dismissing their Review Petitions had put aquietus to that issue. Respondent No. 1 had paid the workerstheir agreed upon dues under the AAIFR scheme and nofurther directions could be issued to it in terms of therehabilitation plan.

34. Learned Senior Counsels, Mr. Dave & Dr. Singhvi, providedthe following rebuttals in their rejoinder, besides reiterating their earlierarguments once again: - i)The act of the new government, following elections, goinginto the decisions of the earlier ruling party is legally In show cause notice the allottee would be asked to show cause why the plot allotmentshould not be cancelled, lease deed of the plot should not be terminated and plot shouldnot be taken in possession, in view of the default committed by the allottee. In thenotice it would also be clarified that, the said default shall be condoned only on paymentof interest/retention charges or removal of breach of terms and conditions/ itsregularisation. In case of no response or reply to the show cause notice withoutcommitment for deposition of dues, for regularisation of delay / default or removal ofbreach of terms and conditions by the allottee, allotment of plot should be cancelledterminating the lease-deed of plot.

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acceptable. Respondent No. 1 had failed to prove thealleged mala fide intent behind the cancellation of thesupplementary lease deed and the quashing of the approvalfor sub-division and conversion of the usage of land;

ii)There is no fetter on the power provided under Article 138Bof the AoA of RIICO to issue directions to the Corporation.In terms of the requirement for reasons to be provided,Justice Chinnappa Reddy’s opinion in SachidanandaPandey v. State of West Bengal & Ors.[15 ]outlined that theprocess, deliberations, and minutes of the meeting precedinga decision would be taken into account when ascertainingCthe reason for a particular measure to be taken. Contraryto Respondent No. 1’s position, the entire rationale did nothave to be laid out in the conveyance of the final verdict;

iii)It is only the subsequent government that is competent andcapable of looking into the decisions taken by the previousDregime. The current government had all the authority andrights to examine earlier decisions, and annul them ifirregularities were discovered. The State Government hasacted in pursuance of its mandate and obligation in thismatter;

iv)RIICO is nothing more than a company and the 1979 RulesEare framed under its AoA. These Rules are subject tostatutory mandates and requirements. The 1979 Rules arenothing more than a set of internal regulations of RIICOand are not comparable to the 1959 Rules that were enactedunder the Rajasthan Land Revenue Act, 1956. This CourtFin Life Insurance Corporation of India v. Escorts Ltd.& Ors.[16 ]has emphasized the character of such companiesand the conduct of their business via the AoA and internalrules made in furtherance of the Articles;

v)Rule 11A is the appropriate provision in the 1959 Rules togovern the usage and utilization of the land. Since the landin question was never transferred to RIICO, RIICO couldnot have acted under the 1979 Rules at all. The StateGovernment always continued to manage and control thesubject land under the 1959 Rules.

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15 (1987) 2 SCC 295.H16 (1986) 1 SCC 264.

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35. The Appellant Unions have also made the following submissionsin support of the rights of the former employees of JKSL:-

i)The unions have challenged the initial transfer lease deedto Respondent No. 1 signed in 2007. This petition has beenpending before the HC and its outcome will have a knock-on effect on all other proceedings initiated thereafter. ThisBincludes the SLPs before us;

ii)The Appellant Unions had accepted the AAIFR schemeonly on the basis that the industrial units at LIA, Kota, wouldbe restarted. The workers had been owed over Rs. 250Crores in dues, of which they had agreed to take only asmall portion as the rehabilitation plan envisaged therestarting of the units and consequent employment for them.As the plan had abjectly failed and Respondent No. 1 wasunsuccessful in restarting production, the labourers wereowed the entirety of their dues.

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C. ANALYSIS

36. With the assistance of the exhaustive and thorough submissionsbefore us, we may now proceed to examine the controversy before us.

C.1. Whether the LIA, Kota has been always under themanagement and control of the State Government or it wastransferred to RIICO pursuant to Government Order dated18.09.1979?

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37. From the recounting of the arguments raised on behalf of allthe parties, the first question that arises for our determination is whetherthe LIA, Kota continued under the uninterrupted administrative controlof the State Government, or whether it was transferred to RIICO. Touncover the answer, it is necessary to recapitulate the facts which havealready been referred to in extenso. There is broadly no dispute thatGovernment land was allotted to JKSL on a leasehold basis in the year1958. The said allotment was made by the State Government infurtherance of its industrial policy, read with the power traceable to theRajasthan Land Revenue Act, 1956. Section 100 of the said Actempowers the State Government to frame rules for regulating the salesof land in industrial and commercial areas, as well as the power to imposeother conditions like annual assessment etc. In exercise of that power,the State Government formulated the 1959 Rules. The allotment of land F

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Ato JKSL, thus, for all intents and purposes, came to be regulated underthe 1956 Act read with the 1959 Rules. As an offshoot of the allotmentof land, the State Government and JKSL entered into a bilateral relationshipof lessor and lessee, respectively. It may be beneficial to refer to Rule 2of the 1959 Rules at this stage which provides that the land in industrialarea may be allotted on lease hold basis for 99 years “…by the StateBGovernment in the industrialist department….”. Rule 4 contemplatesthat every such lease may be renewed for further period of 99 years atthe option of the lessee.

38. We may now advert to Rule 8 of the 1959 rules, as reproducedin para 6, which mandates that the land given for industrial purposesCshall not be used for any other purpose except constructing factorypremises and such other residential quarters as are required for thoseengaged in that industry. Rule 8 further empowers the State Governmentto grant permission for establishment of industry other than for whichthe land was initially allotted.

D39. In this context, the stipulations contained in the first leasedeed executed by State Government in favour of JKSL in 1967 arerelevant. Under this lease, the lessee was obligated to use the allottedland for the prescribed industrial purpose, failing which the land wasliable to be reverted “to the lessor”. This leads to the inescapableconclusion that the first formal lease of 1967 was strictly in conformityEwith provisions of the 1959 Rules.

40. The relationship of lessor and lessee between State of Rajasthanand JKSL continued uninterruptedly till JKSL was declared a ‘sickcompany’. Respondent No. 1 then stepped into the shoes of JKSL underthe orders of AAIFR, and by virtue of the tripartite agreements executedFwith the labour unions, for the land at LIA, Kota. It is also an admittedfact that neither under the tripartite settlements dated 9.10.2002 and22.10.2002, nor under the sanctioned rehabilitation scheme dated23.1.2003, the relationship of lessor and lessee between State, JKSL, orRespondent No.1, as the case may be, was ever disrupted. This juralrelationship was further cemented between the State and RespondentGNo.1 when 7 fresh lease deeds were executed in favour of RespondentNo.1 by the State Government through the Collector, Kota. The detailsof these 7 leases have been provided in para 20 of this order. It is pertinentto mention that the terms and conditions contained in these fresh leasedeed executed on 17.3.2007 were broadly the same as were incorporatedHwhile leasing out the subject land originally to JKSL.

41. What clearly emerges from this sequence of events is thatfrom 1958 to 2007, and further onwards till the present date, there is nocessation in the relationship of lessor and lessee between the State andRespondent No. 1, or its predecessor JKSL. This contractual relationshipduly governed under the 1956 Act read with the 1959 Rules, was neverterminated expressly or otherwise and neither was it substituted by asupplementary conveyance deed.

42. We may now address some of the important interveningcircumstances, events and Government Orders and circulars, heavilyrelied upon by Respondent No. 1. It is a matter of record that Governmentof Rajasthan issued an order on 18.09.1979 (reproduced in para 9) whereunder it was decided that “all the industrial areas of Rajasthan shall onlybe developed through Rajasthan State Industrial and Mining DevelopmentCorporation”. The Government Order further declared that “the industrialareas operated by the Department of Industry shall be handed over toRajasthan State Industrial and Mining Development Corporation Limited,Jaipur w.e.f. 1.10.1979”. In purported compliance of the above-mentionedGovernment Order dated 18.09.1979, the Joint Director, District IndustrialCentre, Kota issued an Order on 28.09.1979 (also reproduced in para 9)thereby transferring certain industrial areas to the Corporation including“Large Scale Industrial Area, Kota”.

43. There is an unending debate between the parties with respectto the scope and import of Government Order dated 18.09.1979 andwhether it was given effect to qua the land allotted to JKSL in LIA,Kota. It should be remembered that Respondent No. 1 had not appearedon the scene at the time when the Government Order in question waspassed.

44. Firstly, we propose to analyse the purpose and effect ofGovernment Order dated 18.09.1979. As we have been able tounderstand, all the industrial areas of Rajasthan were to be transferredto RSIMDC for the purpose of “development” of those areas. Theindustrial areas were to be handed over only for this specific purpose. Inother words, RSIMDC was entrusted with the task of a Local Authorityto carry out development activities in the industrial areas like “(a)construction of roads; (b) supply of electricity; (c) supply of water; (d)sewerage system; (e) all related amenities for the workers employed inindustrial areas” etc. etc.

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A45. It is equally relevant here to appreciate that a lessee is liableto pay Development Charges for the allotted industrial land under Rule 3of 1959 Rules. After subjecting the allottees with the levy of DevelopmentCharges, the State Government as a lessor was obligated to provide allamenities in the industrial area on the principle of quid pro quo. Whethersuch services and amenities are developed by the State Government atBits own expense or through an agency hired for that purpose, is completelyinconsequential, insofar as the subsistence of the relationship of lessor –lessee is concerned.

46. We say so also for the plain reason that the expression ‘handedover’ contained in the Government Order dated 18.09.1979 does notCand cannot be construed as the transfer of ownership of the industrialland from State Government to RSIMDC or RIICO. The word “transfer”used by the Joint Director in his Order of 28.09.1979 has to be read inconjunction with the Government Order dated 18.09.1979 whichunequivocally says that handing over of the industrial areas was only forDdevelopment purposes.

47. It appears to us that ownership or title of an immovable propertycannot be transferred save and except by way of an act of legislation ora validly executed instrument of transferring such ownership rights. Theomnibus administrative order issued for a purpose specified therein cannotEbe stretched to construe an implied transfer of ownership. There is nohidden treasure lying underneath Government Order dated 18.09.1979to infer a non-existent consequence like vesting of lessor’s rights in RIICOin respect of LIA, Kota.

48. Thus, we have no hesitation to hold that a relationship of lessor- lessee between State Government and JKSL/RIICO continued to subsistFand has not been affected in any manner by virtue of Government orderdated 18.09.1979.

49. Another strong plank of argumentation advanced on behalf ofRespondent No.1 is founded upon Rules 11A and 12 of the 1959 RulesGwhich came to be inserted by way of amendment in the years 1982 &1983. We accordingly propose to minutely analyse both the Rules.

50. Rule 11A says that land “shall be allotted” to RIICO andRajasthan Tourism Development Corporation “for setting up anddeveloping industrial areas” on the terms and conditions prescribedtherein. The Rule provides that the land shall be allotted to RIICO on aH

leasehold basis and RIICO shall be free to sub-lease the land on agreedterms and conditions. RIICO has been further authorised to levy andrecover such lease rent and other charges as may be determined by it, inrespect of lands sub-leased by it. The period of sub-leases shall notexceed 99 years. Clause (viii) of Rule 11A noticeably states that theland shall revert to the State Government, free from all encumbrancesand without payment of any compensation, in case RIICO or its sub-lessees use it for any purpose other than industrial, or commit breach ofany other than condition of the lease or sub-leases. Rule 11A,contemplates allotment of land to RIICO on lease hold basis for a periodof 99 years, with further authorization to execute sub-leases strictly forindustrial purposes. The State Government has expressly reserved itsrights to secure the land back free from all encumbrances if RIICO orits sub-lessees fail to use the allotted land for industrial purposes or commita breach of any other condition. The expression “shall be” signifiesallotment of land to RIICO in the future. Rule 11A is not attracted inrespect of the lands which had already been leased out prior to insertionof this rule on 23.12.1983.

51. We have no reason to doubt that Rule 11A, per se, does notadvance the cause of Respondent No. 1 for the reason that RespondentNo. 1 has merely stepped into the shoes of JKSL and lease deeds wereexecuted in the year 2007 directly by the State Government in favour ofRespondent No.1, without resorting to Rule 11A, namely, through RIICO.Had it been a case of execution of fresh lease deeds in favour ofRespondent No. 1 by RIICO in 2007, it could be convincingly arguedthat such allotment was in furtherance of the authorization conferred onRIICO under Rule 11A. The facts do not bear out such an eventuality.

52. That apart, the plain wording of Rule 11A clearly shows thatthe Corporation can have merely managerial power over the land that isallocated to it. As laid down very clearly under Rule 11A, the allotmentto RIICO is done purely on a leasehold basis, and ownership and titleremain unequivocally with the State Government. RIICO acts as nothingbut an agent of the State in its efforts to increase industrial productionand further economic progress. The State remains the overarching powerin this dynamic and RIICO remains subservient to it.

53. As regard to Rule 12 (reproduced in para 11 of this order), itmay be seen that the same is compartmentalised in two parts. The firstpart is a consequence of Rule 11A, namely, if the State Government has A

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Aallotted land to RIICO on lease hold basis under Rule 11A, in that case,this segment of Rule 12 empowers RIICO “to make allotment” inaccordance with its 1979 rules of “vacant plots” to entrepreneurs in theindustrial areas notified by the State Government and transferred tothe said Corporation.

B54. To be more specific, the first part of Rule 12 authorises RIICOto execute sub-leases in respect of land which has been leased out to itby the State Government under Rule 11A of the 1959 Rules.

55. The second part of Rule 12 says that RIICO “shall also beauthorised” to execute lease deeds, realize development charges, leaseCrent and other dues from the entrepreneurs to whom plots had alreadybeen allotted under the 1959 Rules. In our considered opinion, the secondpart is an enabling provision whereunder RIICO has been authorised toexecute lease deeds or realize development charges/lease rents and otherdues from pre-1982 group of allottees. A plain reading of this provisionmakes it abundantly clear that RIICO would execute lease deeds only inDa case where land had been principally allotted but a formal agreementbetween a lessor and lessee or lessee and sub-lessee is yet to beexecuted. If a piece of land had already been allotted and a formal leasedeed stood executed between the State and such an allottee, there arisesno occasion to execute a second lease deed in respect of the sameEleased out land. In that case, only development charges and lease rentetc. are to be recovered by RIICO for the reasons which we havealready explained, and which is merely a cost factor towards thedevelopment activities to be undertaken by RIICO as per the Governmentorder dated 18.09.1979. The second part of Rule 12 also does not fortifythe claim of Respondent No. 1 for the reasons that:-F(a) lease deeds in favour of JKSL had been already executed inthe year 1967 before Rule 12 came into force; (b) no part of the land in dispute was ever allotted to RIICOunder Rule 11A of the 1959 Rules; G(c) Respondent No. 1 is a substitute of JKSL and that is whyfresh lease deeds were executed in favour of Respondent No. 1only for the remainder of the period of the already subsisting lease; (d) There was no independent lessor – lessee relationship betweenthe State Government and Respondent No. 1 except thatHRespondent No. 1 substituted JKSL pursuant to AAIFR order; (e) the non-applicability of second part of Rule 12 was reinforcedwhen transfer lease deeds were executed in favour of RespondentNo.1 in 2007 by the State Government through the Collector andnot by RIICO; (f) We are informed that even lease rent has also been depositedby Respondent No. 1 continuously for years post 2007 with theTehsildar, Kota, and not with RIICO; and (g) There has been no formal agreement as lessee and sub-lesseebetween RIICO and Respondent No. 1 with the concurrence ofState Government.

56. Another argument raised by Respondent No. 1 was that thetransfer lease deeds were signed pursuant to the requirement of Rule9(iv) of the 1959 Rules, which necessitates a sign off by the StateGovernment for transfer of land from one company to another, whenthe entity that possessed the lease is declared a sick company. Rule 9 inits entirety has been reproduced in para 6 of this Order.

57. We are, once again, unmoved by this submission. If the 1959Rules were not even applicable to begin with, there would have been noneed to comply with Rule 9(iv) at all. Rather, the very fact that compliancewith this provision was necessary, is sufficient indication that RespondentNo. 1 was fully aware that the State Government had ownership, title,and control of LIA, Kota.

58. Having held so, there is no alternative but to conclude that therelationship of lessor and lessee between State and Respondent No. 1has been validly subsisting at all times and RIICO was never authorisedeither by Government order dated 18.09.1979 or under Rules 11A and12 of the 1959 Rules, to by-pass the State Government and assume theself-styled role of the lessor in respect of LIA, Kota. Since, the 1967and 2007 lease deeds in favour of JKSL and Respondent No. 1,respectively, were executed by the State Government in terms of Rule 2of the 1959 Rules, RIICO had no authority whatsoever to permitRespondent No. 1 to change the land use or allow for the sub-division ofplot without the prior approval of the State Government, which is thesole competent authority to accord such permission in exercise of itspower under Rule 8 of the 1959 Rules. The contrary view taken by theHigh Court is plainly erroneous in law and is based on a misconstructionof the provisions of 1959 Rules read with the binding bilateral contractsbetween the parties.

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A59. Not that we are dependent in any manner upon theunderstanding of the Government Order dated 18.09.1979 or Rules 8, 9,11A and 12 of the 1959 Rules, by the State Government or RIICO.Irrespective of their inconsistent stand taken before different forumswith respect to the status of RIICO qua LIA, Kota, we have drawn ourconclusion primarily on the basis of plain reading of the said GovernmentBOrder and the 1959 Rules. We, however, hasten to add that thecorrespondence/circulars issued by the State Government and RIICOsubsequently, which we have reproduced and discussed in paragraphs12 to 15 of this judgment, unambiguously fortify our construction of boththe Government Order and the 1959 Rules, referred to above.CC-2. Whether the 1979 Rules of RIICO are statutory innature?

60. The question regarding whether the 1979 Rules formulatedby RIICO are of statutory character, is more or less rendered academicas the fate of these appeals does not hinge upon this issue in view of ourDholding in Part C-I. Nevertheless, since the High Court has opined onthis issue, we propose to answer the question so that there remains nouncertainty in the minds of State authorities, RIICO or the leaseholders.

61. It must be noticed at the outset that RIICO is not a statutorybody. The Company was brought into being under the Companies Act,E1956 by the State of Rajasthan, which holds 100% shares in it. Thedistinction between companies that are brought into being “by” an Act,and those created “under” an Act, is that a company incorporated underthe Companies Act is not a creation of the said Act but it has come intoexistence in accordance with the provisions of the Companies Act.F62. This was fleshed out further in S.S. Dhanoa v. MunicipalCorporation, Delhi & Ors.[17]which held:

“9. Corporation, in its widest sense, may mean any associationof individuals entitled to act as an individual. But that certainlyis not the sense in which it is used here. Corporation establishedGby or under an Act of Legislature can only mean a bodycorporate which owes its existence, and not merely itscorporate status, to the Act. For example, a Municipality, aZilla Parishad or a Gram Panchayat owes its existence andstatus to an Act of Legislature. On the other hand, an H17 1981 (3) SCC 431.

association of persons constituting themselves into a Companyunder the Companies Act or a Society under the SocietiesRegistration Act owes its existence not to the Act of Legislaturebut to acts of parties though, it may owe its status as a bodycorporate to an Act of Legislature.”

63. The importance of this difference in our context wassummarized concisely in Executive Committee of Vaish Degree Collegev. Lakshmi Narain[18]:

“10…In other words the position seems to be that the institutionconcerned must owe its very existence to a statute which wouldbe the fountainhead of its powers. The question in such caseto be asked is, if there is no statute, would the institution haveany legal existence. If the answer is in the negative, thenundoubtedly it is a statutory body, but if the institution has aseparate existence of its own without any reference to thestatute concerned but is merely governed by the statutory”provisions it cannot be said to be a statutory body…

64. What we have, very clearly, is a company incorporated “under”the Companies Act, 1956. RIICO does not owe its existence to a statute,but is rather created under the Companies Act and is subject to itsprovisions. It is only governed by the provisions of the Companies Actand not created by it. The 1979 Rules, which learned Senior CounselMr. Rohatgi had argued contained a “statutory flavour” were issuedpursuant to Article 93 of RIICO’s AoA. It is difficult to see how thestatus of “statutory rules” may be accorded to regulations that are broughtinto existence under the Articles of a non-statutory company.

65. Respondents have cited M.G. Pandke & Ors. v. MunicipalCouncil, Hinganghat, Dist. Wardha & Ors.[19 ]to make their caseregarding the 1979 Rules being statutory in nature. In that case, theState of Maharashtra had come out with the “Secondary School Code”via executive directions. The State then promulgated the MaharashtraSecondary Education Boards Act, 1965, and the associated MaharashtraSecondary Education Boards Regulations, 1966. Within the latter, areference had been made to the Secondary School Code and it wasmandated that schools comply with the Code under Regulation 19(7)(xvi).When a conflict between the Secondary School Code and the bylaws of 18 1976 (2) SCC 58.19 1993 Supp (1) SCC 708.

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Athe Respondent Municipal Council arose, this Court had to determinethe legal status of the Code and proceeded to conclude as follows:

“12. Learned Counsel for the appellants has raised thefollowing contentions in support of his case:

1. Regulation 19(7)(xvi) of Maharashtra Regulations whichis a statutory regulation makes it obligatory for the MunicipalCouncil to follow the provisions of the Code. The Code itselfmay be non-statutory but the mandate to follow the Code flowsfrom Regulations 19(7)(xvi) of the Maharashtra Regulationswhich is mandatory. The field having been occupied by theCode under the statutory-mandate, no bye-law to the contrarycould be framed by the Municipal Council.

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13. When the Code was enforced in the year 1963, the Actand Regulations were holding the field in Vidarbha Division.Under the Act and the Regulations the age of superannuationbeing 60 years, the Code, while fixing 58 years as the age ofsuperannuation for rest of Maharashtra, permitted theVidarbha teachers to superannuate on attaining the age of60 years. The Maharashtra Act which came into force onJanuary 1, 1966 repealed the Act and the regulations. InBaboolal’s case (AIR 1974 Bom 219) the High Court referredto the repealing and saving section of the Maharashtra Actand came to the conclusion that there was no provisionthereunder to save the regulations. Assuming that theRegulations under the Act stood repealed, the Code whichwas framed by the Maharashtra Government continued tohold the field. It is not disputed by the learned Counsel forthe appellants that the Code by itself is not statutory and is inthe nature of executive instructions. But he strongly relies onRegulation 19(7)(xvi) of Maharashtra Regulations andcontends that the said Regulation makes it obligatory for theMunicipal Council Hinganghat to follow the provisions, ofthe Code. It is for the State Government to frame the Code inwhatever’ manner it likes but once the Code is in operationits provisions have to be followed by the Municipal CouncilHinganghat under the mandate of Regulation 19(7)(xvi) ofMaharashtra Regulations. We see considerable force in the D

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argument of the learned Counsel. The Code has been framedwith the purpose of bringing security of service, uniformity,efficiency and discipline in the working of non-GovernmentHigh Schools. It has to be applied uniformly to the schoolsrun by various Municipal Councils in the State. It is no doubtcorrect that the Municipal Councils have the power to framebye-laws under the Maharashtra Municipalities Act, 1965 butif the field is already occupied under the mandate of statutoryMaharashtra Regulations, the Municipal Council cannotframe bye-laws to the contrary rendering the mandate of theMaharashtra Regulations Nugatory. We are of the view thatthe Municipal Council Hinganghat has out stepped itsjurisdiction in framing bye-law 4 of the bye-laws. We,therefore, direct that the conditions of service of the appellantsshall be governed by the Code as enforced by Regulation19(7)(xvi) of the Maharashtra Regulations. Bye-law 4 of thebye-laws shall not be applicable to the appellants.”

66. We fail to see how this decision assists Respondent No. 1.There was a reference made to the Secondary School Code in theMaharashtra Regulations but at no point of time was there an indicationthat the Code was designated as “statutory”. In fact, the legal force ofthe Code was bestowed upon it by the reference in Regulation 19(7)(xvi)of the Maharashtra Regulations, which were statutory in nature.

67. This cannot, in any way, be extrapolated to affirm the propositionthat references in legislations and statutory rules, infuses a “statutoryflavour” to regulations that are not of such character. In the presentcase, Rule 12 of the 1959 Rules merely states that lands allotted toRIICO will be further dealt with by the Corporation as per its 1979Rules. At best, this imposes an obligation upon RIICO to abide by itsown guidelines, which it had issued under Article 93 of its AoA. Theobligation for RIICO to abide by the 1979 Rules stems from its ownAoA under which those Rules came into being. By no stretch, does thismake the 1979 Rules statutory in nature, as was accepted even in M.G.Pandke (Supra).

68. Thus, it is clear to us that no statutory force underpins the1979 Rules and there is no question of them prevailing over or governingthe subject area.

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AC.3 Whether failure to observe Principles of Natural Justiceby the State Government vitiated its decision to annul thepermissions/approvals granted by RIICO in favour ofRespondent No.1?

69. Respondent No. 1, while vehemently objecting to the usage ofBArticle 138 of RIICO’s AoA to issue directions to the Corporation forcancellation of the supplementary lease deeds and attendant approvals/permissions, has equated such directions by the State Government to a“farman” whereby any semblance of procedure and due process areabandoned to its own prejudice. It was asserted that the method ofundertaking these measures had to be followed and an opportunity ofChearing needed to be provided to Respondent No. 1. This was furtherelaborated upon by emphasizing on the failure to provide RespondentNo. 1 with a show cause notice, and blatant non-adherence to Principlesof Natural Justice.

70. Both sides have raised contentions on the need for reasonsDbehind the cancellation to be specified in the order itself or not. LearnedSenior Counsel, Mr. Dave, had cited the judgement in SachidanandaPandey (Supra) to argue that the consideration of whether reasonswere provided would include the internal deliberations within the StateGovernment, and not be confined merely to the order itself. The exactEpassage relied upon by him read as follows:

“27. Dr. Singhvi cited before us the well-known decisions ofthis Court… to urge that even an administrative decision mustbe arrived at after taking into account all relevantconsiderations and eschewing irrelevant considerations andFthat the reasons for an order must find a place in the orderitself and those reasons cannot be supplemented later by freshreasons in the shape of an affidavit or otherwise. Thesubmission was that neither the Cabinet memorandum ofJanuary 7, 1981 nor the Cabinet Memorandum of September9, 1981 revealed that relevant considerations had been takenGinto account. What was not said in either of the CabinetMemoranda, it was said, could not later be supplemented byconsiderations which were never present to the mind of thedecision making authority. We do not agree with thesubmission of Dr. Singhvi. The proposition that a decisionHmust be arrived at after taking into account all relevant

Analysis

considerations, eschewing all irrelevant considerations cannotfor a moment be doubted. We have already pointed out thatrelevant considerations were not ignored and, indeed, weretaken into account by the Government of West Bengal. It isnot one of those cases where the evidence is first gatheredand a decision is later arrived at one fine morning and thedecision is incorporated in a reasoned order. This is a casewhere discussions have necessarily to stretch over a longperiod of time. Several factors have to be independently andseparately weighed and considered. This is a case where thedecision and the reasons for the decisions can only be gatheredby looking at the entire course of events and circumstancesstretching over the period from the initiation of the proposalto the taking of the final decision. It is important to note thatunlike Mohinder Singh Gill’s case where that Court wasdealing with a Statutory Order made by a statutory functionarywho could not therefore, be allowed to supplement the groundsof this order by later explanations, the present is a case whereneither a statutory functions nor a statutory functionary isinvolved but the transaction bears a commercial though publiccharacter which can only be settled after protracteddiscussion, clarification and consultation with all interestedpersons. The principle of Mohinder Singh Gill’s case has noapplication to the factual situation here.”

71. We have no qualms with the logic employed by this Court inSachidananda Pandey (Supra). However, this citation may not behelpful to the appellants in the present instance. The extracted passagerefers to “consultation with all interested persons” and the earlier part ofthe judgment give the complete details regarding how representationsand objections had been sent with regard to the construction of a hotel inthe area in question, especially in the context of its impact on the ecologyand migratory birds. It was in this factual background, coupled with thefact that the deliberations had been going on for around 2 years, that theCourt was satisfied that relevant considerations had been appropriatelyaccounted for. In our scenario, on the other hand, the deliberations bythe Cabinet Committee which proceeded for around 7-8 months, do notindicate that Respondent No. 1 was ever heard or involved in the process.

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A72. The importance of Principles of Natural Justice, among whichwe are concerned with audi alterem partem in this case, have beendeliberated upon by this Court numerous times in the past. As far backas in Union of India v. P.K. Roy[20 ]the Court held:

“12…But the extent and application of the doctrine of naturalBjustice cannot be imprisoned within the strait-jacket of a rigidformula. The application of the doctrine depends upon thenature of the jurisdiction conferred on the administrativeauthority, upon the character of the rights of the personsaffected, the scheme and policy of the statute and otherrelevant circumstances disclosed in the particular case…”C73. Further, in A.K. Kraipak v. Union of India[21] the nature of anadministrative power and the obligations reposed upon the State to functionin a just and fair manner was explained:

“13. The dividing line between an administrative power andDa quasi-judicial power is quite thin and is being graduallyobliterated. For determining whether a power is anadministrative power or a quasi-judicial power one has tolook to the nature of the power conferred, the person orpersons on whom it is conferred, the framework of the lawconferring that power, the consequences ensuing from theEexercise of that power and the manner in which that power isexpected to be exercised. Under our Constitution the rule oflaw pervades over the entire field of administration. Everyorgan of the State under our Constitution is regulated andcontrolled by the rule of law. In a welfare State like ours it isFinevitable that the jurisdiction of the administrative bodies isincreasing at a rapid rate. The concept of rule of law wouldlose its vitality if the instrumentalities of the State are notcharged with the duty of discharging their functions in a fairand just manner. The requirement of acting judicially inessence is nothing but a requirement to act justly and fairlyGand not arbitrarily or capriciously. The procedures which areconsidered inherent in the exercise of a judicial power aremerely to facilitate if not ensure a just and fair decision. Inrecent years the concept of quasi-judicial power has been 20 (1968) 2 SCR 186.21 (1969) 2 SCC 262.H

undergoing a radical change. What was considered as anadministrative power some years back is now being consideredas a quasi-judicial power…”

74. In this context, it may be true that the Principles of NaturalJustice entailed giving Respondent No. 1 an opportunity to defend itsrights. However, the most decisive and crucial factor is whether anylegally vested ‘right’ ever accrued in favour of Respondent No. 1, whichthe State Government could not have despoiled behind its back. It hasalready been held by us categorically that RIICO had no authoritywhatsoever to accord permission for conversion and sub-division of theindustrial land allotted to Respondent No. 1. We have further opined thatthe State Government has always retained its authority as lessor andwas the only competent authority to grant such permissions to RespondentNo. 1 within the framework of the 1959 Rules. The irresistible conclusionwould be that the self-styled power exercised by RIICO, was withoutany sanction in law; it lacked inherent competence and RIICO actedbeyond its jurisdiction in respect of LIA, Kota. The permissions accordedby RIICO in favour of Respondent No. 1 did not confer any rightswhatsoever, much less any enforceable right in the eyes of law. RIICOusurped the powers vested in the State Government and passed palpablyillegal orders in favour of Respondent No.1. The agreements betweenRIICO and Respondent No. 1 are nothing but brutum fulmen.

75. On the face of these findings, the question that arises is whetherRespondent No. 1, which actively participated in RIICO’s decision makingprocess and secured benefits without any authority in law, can bepermitted to complain of a deprivation of the opportunity of being heard.We are of the considered opinion that the principle of audi altrempartemshould not be an empty formality nor a compulsory ritual that must alwaysbe performed. The principal issue that arose for consideration beforethe Cabinet Committee pertained to the legitimacy of the power assumedby RIICO in respect of LIA, Kota, and not whether the permissionsgranted to Respondent No. 1 suffered from any propriety or legality. Itis true that the issue was raked up with a political flavour, but eventuallythe final resolution centred around the RIICO’s lack of authority. We donot think that Respondent No. 1 could render any assistance to the CabinetCommittee in the formation of their views. In any case, we have carriedout an in-depth analysis of the entire gamut of documents and statutoryrules, and have come to a firm conclusion that it was the State Government A

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Aalone which was competent to accord necessary permissions toRespondent No. 1 under the 1959 Rules, and not RIICO in purportedexercise of its powers under the 1979 Rules. Our holding is not confinedto the decisions taken in favour of Respondent No. 1 alone, and shallencompass all other similarly placed lease-holders, with no discretion to the State Government to blow hot and cold and/or to take ad hoc decisionsBon a pick and choose basis. The only exception can be in a case whereland has been expressly leased out to RIICO under Rule 11A of 1959Rules and RIICO has further sub-leased the same land as per the schemeenvisaged under clause (viii) of the said Rule.

76. We may at this stage refer to the observations made by thisCCourt in S.L. Kapoor v. Jagmohan & Ors.[22 ]where the non-observanceof Principles of Natural Justice was not condoned, but nonethelessforgone, on the following basis:

“17. Linked with this question is the question whether thefailure to observe natural justice does at all matter if theDobservance of natural justice would have made no difference,the admitted or indisputable facts speaking for themselves.Where on the admitted or indisputable facts only oneconclusion is possible and under the law only one penalty ispermissible, the Court may not issue its writ to compel theEobservance of natural justice, not because it approves the non-observance of natural justice but because Courts do not issuefutile writs. But it will be a pernicious principle to apply inother situations where conclusions are controversial, however,slightly, and penalties are discretionary.”F77. Further affirmation on this point is found in K.Balasubramanian (Ex. Capt.) v. State of Tamil Nadu[23]:

“9…This High Court, has in our opinion rightly held that thedirections contained in orders dated November 16, 1976, andJune 15, 1977, were invalid being contrary to the provisionsGcontained in Rule 35 of the General Rules. Since the saidorders were invalid, the petitioners would not claim any righton the basis of the said orders and, there was, therefore, no 22 (1980) 4 SCC 379.23 (1991) 2 SCC 708.H

question of affording them an opportunity of a hearing beforepassing the order dated March 3, 1980…”

78. These decisions fortify our conclusion that steps taken whichare themselves vitiated, cannot form the basis for principles of naturaljustice to be applied. The supplementary lease deeds were signed byRIICO without any authority to do so. It similarly lacked the capacity togrant the permission for conversion of use for the land to commercial,and the allowance to sub-divide the plot. Thus, no legally vested right ofRespondent No. 1 has been infringed and it has no legitimate ground toseek an opportunity to be heard in a matter strictly between RIICO andState Government.

C. 4 Whether the State Government could have exercisedits powers under Article 138 of the AoA of RIICO to directcancellation?

79. It has already been noted that RIICO is a 100% Governmentowned company incorporated under the Companies Act, 1956. RIICO,in deference to the statutory requirements of the Companies Act, hasformulated its own Articles of Association (AoA). Article 138 of theseArticles reads as follows:

“138. Directions and instruction of the Governor.

Notwithstanding anything contained in any of these articles, theState Government may from time to time, issue such directions orinstructions as he may consider necessary in regard to the affairsof the conduct of the business of the Company or Directors thereofand in like manner may vary and annul any such direction orinstruction. The Directors shall duly comply with and giveimmediate effect to director instruction so issued.”

80. It is a matter of common knowledge that clauses of this natureare invariably inserted in AoAs of most Public Sector Undertakings and/or Corporations owned and controlled by the State. The State Governmentbeing the sole investor, its overriding powers have been acceded to byRIICO through Article 138 of its AoA. It is pertinent to note that Article138 opens with a non obstante clause and, thus, the power given toState Government to issue directions under this provision cannot becurtailed and is not subject to any other provision within the Articles. It iscategorically provided in Article 138 that the State Government mayissue “such directions or instructions……in regard to the affairs of the A

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Aconduct of the business of the Company or Directors thereof…”. Article138 also empowers the State Government to “vary and annul any suchdirection or instruction”. The Directors are obligated to comply with theGovernment directions/instructions.

81. In the present case, the State Government has directed RIICOBto recall its permission for conversion of the usage of land, sub-divisionof plots and supplementary lease deeds executed in favour of RespondentNo. 1. All these actions of RIICO pertained to its business affairs. SinceRIICO took these decisions exceeding its powers and in a completelyunauthorised and illegal manner, the State Government, in our consideredopinion, was well within its rights to invoke Article 138 of AoA andCnullify the unauthorised and unlawful decisions taken by RIICO. Thevery objective behind reposing power in the State Government underArticle 138 of the AoA is to enable it to undo and annul the decisionstaken by RIICO in the conduct of its business affairs, which the StateGovernment may find is derogating from public interest or in conflictDwith its own policy. The State Government is entitled to resort to Article138 where it finds that the business affairs have been conducted byRIICO detrimental to the State’s interest as a Principal stake holder.

C. 5 Whether the Rules of Business were not followed?

82. Respondent No. 1 has heavily relied upon the Rules of BusinessEto urge that failure to comply with the procedure provided therein wouldlead to invalidation of the government decision. This Court’s earlierpronouncement in MRF (Supra) was cited in support of this contention.The relevant extract of the judgment addressing this aspect of the matteris to the following effect:F“67… In the case on hand, we are required to examine thecontentions of the appellants on this issue with reference tothe Business Rules framed by Governor of Goa under Article166(3) of the Constitution of India.

68. Rule 7(2) of the Business Rules of the Government of GoaGstates, that, no proposal which requires previous concurrenceof Finance Department under the said Rule, but in whichFinance Department has not concurred, may not be proceededwith, unless the Council of Ministers has taken a decision tothat effect. The wordings of this Rule are different from theprovisions of Rule 9 of the Business Rules of MaharashtraH

and have to be read in context with the provisions of Rule 3of the Business Rules of Government of Goa which states thatthe business of the Government shall be transacted inaccordance with the Business Rules. Under Rule 7(2) thereof,the concurrence of the Finance Department is a conditionprecedent.

69. Likewise Rule 6 of the Business Rules states, that, theCouncil of Minister shall be collectively responsible for allexecutive orders passed by any Department in the name ofthe Governor or contract made in exercise of the powerconferred on the Governor or any other officer subordinateto him in accordance with the Rules, whether such orders orcontracts are authorized by an individual minister on a matterpertaining to the Department under his charge or as the resultof discussion at a meeting of the Council of Minister orotherwise. This Rule requires that an executive order issuedfrom any department in the name of the Governor of the Stateshould be known to the Council of Ministers so as to fulfilthe collective responsibility of the Council of Ministers.

70. Further Rule 7 of the Business Rules requires that noDepartment shall without the concurrence of the FinanceDepartment issue any order which may involve anyabandonment of revenue or involve expenditure for whichno provisions have been made in the Appropriation Act orinvolve any grant of land or assignment of revenue orconcession, grant, lease or licence in respect of minerals orforest rights or rights to water, power or any easement orprivilege or otherwise have a financial implications whetherinvolving expenditure or not.

71. From a combined reading of the provisions of Rules 7, 3and 6 of the Business Rules of the Government of Goa theconclusion would be irresistible that any proposal which islikely to be converted into a decision of the State Governmentinvolving expenditure or abandonment of revenue for whichthere is no provision made in the Appropriation Act or anissue which involves concession or otherwise has a financialimplication on the State is required to be processed only after A

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Athe concurrence of the Finance Department and cannot befinalized merely at the level of the Minister in charge…”

83. Learned Senior Counsel, Mr. Nadkarni, has emphasized onSchedule I of the Rules of Business, under which the matters related toRIICO would be addressed by the Industries Department. By extension,Bthe Minister for Industries would be the nodal authority responsible forfinalizing decisions that impact RIICO’s functioning. Since the Ministerfor Industries was not included in the Cabinet Committee and was notinvolved while taking the final decision, his absence vitiates the decisiontaken on 03.08.2019.

C84. The relevant portions of the Rules of Business relief upon byRespondent No.1 are as follows:

“PART-II ALLOCATION AND DISPOSAL OF BUSINESS

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85. We are, however, unable to agree with the contentions placedby Respondent No. 1. It appears to us that the Rules of Business havebeen substantially complied with. The entire Cabinet was called on29.12.2018 to consider various decisions taken by RIICO during theprevious regime. Among these were the supplementary leases and H

connected permissions to Respondent No. 1 by RIICO. The Cabinet,which included the Minister for Industries, then proceeded to constitutethree sub-committees to investigate these alleged irregularities, alongwith an inter-departmental committee. The Minister for Industries is notexpected to look into each individual matter pertaining to RIICO as thiswould render the entire working of government unviable. The intentionbehind Article 166(3) under which the Rules of Business are framed,have been succinctly set out by this Court in Gulabrao Keshavrao Patil& Ors. v. State of Gujarat [24]:

“7…Article 166(1) and (2) expressly envisage authenticationof all the executive action and shall be expressed to be takenin the name of the Governor and shall be authenticated insuch manner specified in the rules made by the Governor.Under Article 166(3), the Governor is authorised to make therules for the more convenient transaction of the business ofthe Government of the State, and for the allocation amongMinisters of the said business insofar as it is not a businesswith respect to which the Governor is by or under theConstitution required to act in his discretion...”

86. Another decision in Lalaram and Ors. vs. JaipurDevelopment Authority and Ors.[25]also laid down the following:

“104…Thus, Article 166(3) mandates the making of the Rulesof Business for more convenient transactions of the affairs ofthe Government. Clause (1) stipulates the mode of expressionof an executive action taken in conformity therewith andClause (2) ordains the manner of authentication of theconsequential orders and instruments. Having regard to therole assigned to the Council of Ministers with the Chief Ministerat the summit, the Rules of Business framed Under Article166(3) meant for convenient transaction of the affairs of theGovernment, by allocation thereof among the Ministers,secures their collective participation in the administration ofthe governance of the State. This scheme of executivefunctioning, assuredly thus, is in assonance with theconstitutional edict with regard thereto, modelling the steelframe of the State machinery.”

24 (1996) 2 SCC 26.

25 (2016) 11 SCC 31.

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A87. The purpose behind Article 166(3) is to form regulations forthe convenient administration of government. The Minister of Industrieswas not, at any point, missing from the overall decision to review theactions taken by RIICO and to take necessary steps thereafter. Thecabinet sub-committee was merely acting on behalf of the entire Councilof Ministers, when carrying out the exhaustive fact-finding enquiries.B

88. We must not overlook the overall objective of ensuring thatgovernance is carried out in a convenient and efficient manner. Rule 7of the Rules of Business embodies this spirit as well, in that it advocatesfor collective governance by the Council of Ministers in terms ofrecommendations made to the Governor. The Council was collectivelyCinvolved in the decision to have sub-committees set up to revisit differentdecisions taken by the prior government, including with respect to actionsby RIICO.

89. The judgment in MRF (Supra) formulated its final conclusionon the basis of a construction of the Rules of Business of Goa and onlyDafter interpreting the Rules, was the mandatory nature of the sign offfrom the Finance Department distilled. In our case, the sign off from theMinister for Industries is clear from the authorization granted on01.01.2019 to the sub-committee to look into the decisions of the priorgovernment and RIICO. Therefore, the spirit behind the Rules of BusinessEstand complied with in the present case.

90. We hasten to emphasize once more that it was a collectivedecision of the Council of Ministers to constitute the Committees to lookinto irregularities of various kinds. The specific committee that wasauthorized to investigate RIICO and its alleged misuse of non-existentFpowers in favour of Respondent No. 1, was a creation of the entireCouncil, including the Minister for Industries. The sub-committee’s actionsin this context were completely validated and backed by the Ministerand the rest of the Council. It is, thus, difficult to hold that Rules ofBusiness have not been followed by the State Government in the courseof its decision making process.G

C.6 Does the Doctrine of Legitimate Expectations andPromissory Estoppel apply in favour of Respondent No. 1?

91. An additional point in this regard is the inapplicability of principlesof estoppel and legitimate expectations. In line with our analysis on whythe principles of natural justice will not be of relevance, these defences,H

similarly, cannot be raised by Respondent No. 1 on the strength of illegalactions or orders passed by RIICO. Moreover, there is no governmentalaction or order in favour of Respondent No.1 which can give rise to anylegitimate expectations. The execution of the supplementary lease deedby RIICO in favour of Respondent No. 1, along with the attendantpermissions in its favour for converting the usage of the land and sub-division, are actions taken between them. This Court has clearly laid outthe contours of legitimate expectations on numerous occasions, alongwith commenting on the scenarios where they are inapplicable. InBannari Amman Sugars Ltd. vs. Commercial Tax Officer and Ors.[26]it was opined that:

“8…It is generally agreed that ‘legitimate expectation’ givesthe applicant sufficient locus standi for judicial review andthat the doctrine of legitimate expectation to be confined mostlyto right of a fair hearing before a decision which results innegativing a promise or withdrawing an undertaking is taken.The doctrine does not give scope to claim relief straightwayfrom the administrative authorities as no crystallized right assuch is involved. The protection of such legitimate expectationdoes not require the fulfilment of the expectation where anoverriding public interest requires otherwise. In other words,where a person’s legitimate expectation is not fulfilled bytaking a particular decision then decision maker should justifythe denial of such expectation by showing some overridingpublic interest.”

92. In Food Corporation of India v. Kamdhenu Cattle FeedIndustries[27], this Court also noted that legitimate expectations may notthemselves give rise to defensible rights, but merely act as a bulwarkagainst arbitrator decision making that does not take into account theseinterests. The Court outlined:

“8. The mere reasonable or legitimate expectation of a citizen,in such a situation, may not by itself he distinct enforceableright, but failure to consider and give due weight to it mayrender the decision arbitrary, and this is how the requirementof due consideration of a legitimate expectation forms part of 26 (2005) 1 SCC 625.

27 (1993) 1 SCC 71.

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Athe principle of non-arbitrariness, a necessary concomitantof the rule of law. Every legitimate expectation is a relevantfactor requiring due consideration in a fair decision makingprocess. Whether the expectation of the claimant is reasonableor legitimate in the context is a question of fact in each case.Whenever the question arises, it is to be determined notBaccording to the claimant’s perception but in larger publicinterest wherein other more important considerations mayoutweigh what would otherwise have been the legitimateexpectation of the claimant. A bona fide decision of the publicauthority reached in this manner would satisfy theCrequirement of non-arbitrariness and withstand judicialscrutiny. The doctrine of legitimate expectation gets assimilatedin the rule of law and operates in our legal system in thismanner and to this extent.”

93. From this encapsulation of the law, it is clear to us that noDlegitimate expectation could have arisen in favour of Respondent No. 1.

There was no implicit or explicit representation made by the StateGovernment in favour of its request for conversion of the land, nor forsub-division of plots. RIICO, in completely untenable fashion, took overthe role of the lessor without there being any right to do so, and issuedthe requisite permissions. Evidently, such approvals had no legs to standEon as they were devoid of any force of law. The lessor of LIA, Kota,was the State Government. When the entity purporting to exercise thepowers of a lessor, RIICO in this case, does so without having the requisitelegal status to act in this manner, Respondent No. 1 as the beneficiary ofthese wrongful actions, cannot seek any legitimate expectation orFpromissory estoppel in its favour.

94. Furthermore, this Court in Food Corporation of India (Supra)had noted that other overriding public interests could outweigh theconsideration of legitimate expectations in favour of a private party. Thus,even if we were to consider Respondent No. 1’s arguments at theirGhighest, the objectives of a private entity such as Respondent No. 1could not outweigh the larger public interest behind the industrialdevelopment of the land. Respondent No. 1 cannot be permitted to actin defiance of the 1959 Rules, which are applicable to the land and whichmandate the utilization of the land for industrial purposes, subject to thevariations as may be permitted by the State Government.H

95. On the very same logic, there can be no promissory estoppelworking against the Appellants. In this regard, the view taken by thisCourt in Motilal Padampat (Supra) is worthy of reproduction:

“24… But it is necessary to point out that since the doctrine ofpromissory estoppel is an equitable doctrine, it must yield whenthe equity so requires. If it can be shown by the Governmentthat having regard to the facts as they have transpired, itwould be inequitable to hold the Government to the promisemade by it, the Court would not raise an equity in favour ofthe promise and enforce the promise against the Government.The doctrine of promissory estoppel would be displaced insuch a case because, on the facts, equity would not requirethat the Government should be held bound by the promisemade by it. When the Government is able to show that in viewof the facts as have transpired, public interest would beprejudiced if the Government were required to carry out thepromise, the Court would have to balance the public interestin the Government carrying out a promise made to a citizenwhich has induced the citizen to act upon it and after thisposition and the public interest likely to suffer if the promisewere required to be carried out by the Government anddetermine which way the equity lies. It would not be enoughfor the Government just to say that public interest requiresthat the Government should not be compelled to carry out thepromise or that the public interest would suffer if theGovernment were required to honour it…”

96. Hence, supervening public interest, as we have alreadyelaborated upon above, acts as a veto against the invocation of promissoryestoppel. On these grounds as well, Respondent No. 1 cannot claim anyright to the continuation of the supplementary lease deeds.

97. Our conclusion, incontrovertibly, is that Respondent No. 1cannot lay claim to any legitimate expectation or promissory estoppel.The supplementary lease deeds and corresponding permissions wereexecuted with/by RIICO which had no authority and power to do so.This, combined with the overriding public interest in having the land inLIA, Kota utilized for industrial purposes for the economic progressionof the state or any revised purpose, as may be permitted by the StateGovernment in public interest, leaves us in no doubt that Respondent

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ANo. 1 has no further valid defences against the cancellation of thesupplementary lease deeds.

C.7 Whether the Appellant Unions are entitled to relief?

98. The one issue that remains for our consideration is with regardto the Appellant Unions. We are receptive and sensitive to the interestsBof the workers in this regard, especially given that a significant part ofthe AAIFR scheme remains unimplemented. We have been informedby learned counsels appearing for the Appellant Unions that an earlierpetition challenging the transfer lease deeds of 2007, whereby the landwas handed over to Respondent No. 1, is still pending before the RajasthanCHigh Court. This proceeding would, naturally, have a knock-on effectwith regard to everything that happens subsequently, if the High Courtwere to ascertain that the transfer leases were invalid.

99. Regardless, we do not have the requisite material before us tocomment on this point, and it would be inappropriate for us to do so inDany case, especially when the matter is sub-judice before the High Court.Thus, the High Court will consider the workers’ petition on its own merits,uninfluenced by anything that we have held in this judgment in the contextof the dispute between the State Government, RIICO and RespondentNo. 1. In the same breath, we also abstain from commenting on theother petitions filed by individual workers before various forums. TheseEproceedings may continue and be decided eventually in accordance withlaw.

100. We note that despite the passage of 21 years since thetripartite agreements were signed between JKSL, Respondent No. 1and the workers unions in 2002, and 16 years since the transfer leaseFdeeds were signed in 2007, the LIA, Kota has remained dormant. Theobjective of restarting industrial production in the area, as envisaged bythe AAIFR rehabilitation plan and required by virtue of the settlementsof 2002, remains out of reach. The damage this causes to the formeremployees of JKSL, as well as the industrial and economic growth ofGthe State, cannot be underestimated. While we are not in a position todirect or order the implementation of the AAIFR plan, we recall theearlier orders of this Court which had dismissed the workers unions’SLP, and the subsequent Review Petitions on 17.08.2017 and 06.03.2018,but with a note that the rehabilitation plan should be implemented.

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101. Given that the earlier orders of the Supreme Court havealready held that Respondent No. 1 is not a sick industrial company andthat judgment has become final with the dismissal of the Review Petitions,there is no point reverting to SICA any longer. However, we re-emphasizethe importance of finding a viable solution to this complex issue.

102. We reiterate the earlier observations made by this Courtregarding implementation of the AAIFR scheme. The objective of theoriginal transfer lease deeds of 2007 that were signed for the purpose ofusing the land for industrial development should be carried out, subjectto altering the usage of the land under the 1959 Rules.

103. However, at the same time, our sympathy for the AppellantUnions cannot translate into any concrete relief in the context of thedues they seek. We are not appropriately positioned to consider theirprayers in this context. Instead, we grant liberty to the Appellant Unionsto approach the appropriate government and other forums as permittedby law, to seek their respective dues. We clarify once again that wehave expressed no opinion on the merits of this segment of thecontroversy.

D. CONCLUSION

104. Our final analysis is that the supplementary leases signedbetween Respondent No. 1 and RIICO are unsustainable. RIICO didnot possess the authority to enter into these agreements, as the land inLIA, Kota remained under the ownership and control of the StateGovernment uninterruptedly from the first lease signed with JKSL, tillthe present date. Respondent No. 1 was also cognizant of this fact asevinced by it entering into the 7 transfer lease deeds with the Collector,Kota, in 2007, after it stepped into the shoes of JKSL.

105. The leases with JKSL were executed under the 1959 Ruleswhich remained applicable and there was no authority ever vested inRIICO to have issued the permissions for conversion and sub-divisionof plots in the LIA, Kota, and for signing the supplementary lease deedswith Respondent No. 1. There is no legal infirmity in the action of theAppellants in setting aside the decisions taken by RIICO or in directingto cancel the supplementary leases of 2018. Hence, we uphold thecancellation of the supplementary deeds and quashing of the approvalsfor conversion of land and sub-division of plots.

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A106. This shall, however, not preclude Respondent No. 1 fromreapproaching the State Government and seeking conversion of the usageof land and attendant approvals under the 1959 Rules. The StateGovernment shall be at liberty to consider such a proposal in public interestand in accordance with the 1959 Rules.

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B107. With regard to the Appellant Unions, we do not consider itexpedient for us to enter into the demands made by the labour unions forthe dues of JKSL’s employees. We express no views on the content ofthe prayers by the Appellant Unions, and leave it open for them to seektheir remedies under law from the Appropriate Government, and judicialforums.C

108. We may summarize our overall conclusions in the followingpoints:-

A.There has been an uninterrupted and subsisting relationshipof lessor and lessee between the State Government andDeither 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; B.The lease with JKSL, and all leases thereafter with JKSLand/or Respondent No. 1, have been signed under the 1959ERules. The terms of the lease are clearly in compliancewith the 1959 Rules;

C.The land in LIA, Kota was never transferred to RIICOunder the Government Order dated 18.09.1979. The StateFGovernment has always maintained title and ownership ofthe area; D.The land was also never allotted to RIICO on a leaseholdbasis under Rule 11A of the 1959 Rules. Thus, RIICO wasnever expressly given any leasehold rights, and had noGauthority to further sub-lease the land, along with othercorresponding 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 RIICOon a leasehold basis after the coming into force of Rules H

11A and 12. No such express allocation was ever made infavour of RIICO; F.The 1979 Rules are not statutory in nature. The referenceto the 1979 Rules in Rule 12 of the 1959 Rules, does notaccord any statutory recognition to the former; G.There was no violation of the Principles of Natural Justicein this case. The entire basis for granting permission forconversion of the land, and subdivision of the plots, was onan incorrect assumption of power by RIICO under the 1979Rules, to act as the lessor of LIA, Kota. RIICO was nevergiven any leasehold rights over the land. When the basisfor a benefit received by a party is itself invalid, there is noquestion of giving the party a chance to be heard; H.The State Government was competent to issue directionsunder Article 138 of the AoA of RIICO, to cancel thesupplementary lease deeds and attendant permissions. Thisfell squarely within the ambit of Article 138 of the Articlesof Association;

I.There was no violation of the Rajasthan Rules of Businessas the sub-committee which recommended the cancellationof the permissions/approvals to Respondent No. 1, wasacting for and on behalf of the entire Council of Ministers.Hence, the Rules of Business were complied with; J.There was no legitimate expectation nor promissory estoppelthat could operate to the benefit of Respondent No. 1, as,once again, no such defences could be raised on the backof RIICO’s own erroneous utilization of powers that vestonly with the rightful lessor of LIA, Kota, which is the StateGovernment. Further, public interest overrides both thesedoctrines, 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 approachthe Appropriate Government and various judicial forums topursue their remedies in accordance with law.

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A109. The Appeals by the State of Rajasthan and RIICO areaccordingly allowed; the impugned judgment dated 20.07.2021 passedby the High Court of Judicature for Rajasthan at Jaipur, is set aside.Consequently, the Writ Petition filed by Respondent No.1 before theHigh Court is dismissed save and except the liberty granted in Para 106of this judgment.

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110. Pending interlocutory applications, if any, also stand disposed of.

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Bibhuti Bhushan Bose

(Assisted by : Shubhanshu Das, LCRA)

Appeals disposed of.

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