Summary
The Court upheld the setting aside of CIDCO’s cancellation of land allotment and related permissions. The cancellation followed a predetermined inquiry, relied on technical objections already known to the authority, and failed to establish substantive illegality or public loss. The contract permitted discretionary change of use and transfer; the approved changes reflected material commercial circumstances. Public interest required evidence rather than an assertion of potentially higher revenue, particularly after the allottees had paid substantial sums and relied on official permissions.
Issues
- Whether CIDCO’s cancellation complied with natural justice and rested on sustainable contractual grounds.
- Whether the approved change of use, subdivision and transfer justified annulment of the allotment.
- Whether asserted public interest displaced the allottees’ reliance and promissory estoppel.
Provisions considered
- Article 14, Constitution of IndiaFairness, proportionality and freedom from arbitrariness govern public authorities in awarding and performing contracts as well as reviewing earlier decisions. (¶¶ 25, 26, 67, 68, 69, 70, 71)
Held
- The inquiry recommended cancellation and the State accepted that recommendation before an effective hearing of the allottees. The later show-cause process merely sought to sanctify a predetermined result and failed natural justice. The cancellation had to stand on its recorded reasons rather than later additions. (¶¶ 31, 32, 33, 34, 35, 36, 37, 38, 39)
- CIDCO had accepted the bid knowing registration was pending and had received substantial payments. Its legal officers had examined technical objections. No identified legal or contractual prohibition, concrete cartel finding or reasoned harm supported cancellation merely because a partner also submitted a bid. These grounds did not justify annulment here. (¶¶ 40, 41, 42, 43, 44, 45)
- Read harmoniously, the tender and allotment terms allowed a lessee to apply for a discretionary change of use, rather than demand it as of right. Airport delay, economic conditions and comparable hotel losses were material considerations supporting the authorised change. The transfer’s execution sequence was not a fundamental breach warranting cancellation in these circumstances. (¶¶ 46, 47, 49, 50, 51, 52)
- A prospect of additional revenue does not alone establish public interest sufficient to escape contractual obligations. Government must substantiate overriding public interest; estoppel cannot compel an unlawful or unauthorised promise, but no such substantial illegality or proven loss was shown here. The allottees had materially relied on permissions and borrowing. (¶¶ 53, 54, 56, 59, 60, 61, 63, 64, 65)
- Public bodies remain bound by fairness and good faith when officeholders change. Unsupported claims of public loss could not undo the previous authority’s lawful undertakings; cancellation on these extraneous, technical grounds was disproportionate. (¶¶ 57, 58, 67, 68, 69, 70, 71, 72)
Result
Civil appeals dismissed with costs. The High Court judgment setting aside CIDCO’s cancellation remained in force; pending applications disposed of.