Summary
Industrial land at Kota leased by the State of Rajasthan under the Industrial Areas Allotment Rules, 1959 passed from J.K. Synthetics to Arfat Petrochemicals under an AAIFR scheme, with fresh leases executed by the Collector in 2007. In 2018 RIICO, acting as lessor under its own 1979 Rules, permitted conversion of 23% of the land to commercial use, sub-division and supplementary leases; the State Government had these cancelled under Article 138 of RIICO's Articles of Association and the High Court quashed the cancellation. The Supreme Court restored it: the land never passed to RIICO under the 1979 Government Order or Rule 11A, only the State could permit a change of use under Rule 8, RIICO's 1979 Rules are not statutory, and no plea of natural justice, legitimate expectation or estoppel could rest on RIICO's unauthorised acts.
Issues
- Whether the Large Scale Industrial Area, Kota passed to RIICO under the Government Order of 18 September 1979 or Rules 11A and 12 of the 1959 Rules, so that RIICO could permit change of land use and sub-division and execute supplementary leases.
- Whether the RIICO Disposal of Land Rules, 1979, framed under its Articles of Association, are statutory.
- Whether cancellation of the permissions without notice to the lessee violated natural justice, whether the State could direct RIICO under Article 138 of its Articles of Association, and whether the Rules of Business were followed.
- Whether legitimate expectation or promissory estoppel protected the lessee, and whether the workers' unions were entitled to relief.
Provisions considered
- Section 100, Rajasthan Land Revenue Act, 1956Source of the State's power to frame the Rajasthan Industrial Areas Allotment Rules, 1959 regulating allotment of land in industrial areas; the Kota land was allotted and leased under those Rules. (¶¶ 5, 37)
- Rules 2, 8, 9, 11A and 12, Rajasthan Industrial Areas Allotment Rules, 1959Rule 8 bars non-industrial use without State permission; Rule 9(iv) required State consent to transfer from a sick company, which was in fact obtained; Rule 11A contemplates future leasehold allotment to RIICO and does not apply to land leased before its insertion; Rule 12 authorises RIICO only over land allotted to it or where no lease deed yet exists. (¶¶ 38, 50, 51, 52, 53, 54, 55, 57, 58)
- Rules 20-A, 20-C and 24, RIICO Disposal of Land Rules, 1979Framed under Article 93 of RIICO's Articles of Association; being rules of a company incorporated under the Companies Act, they have no statutory force and a reference to them in Rule 12 of the 1959 Rules does not confer it. (¶¶ 61, 64, 67, 68)
- Article 138, Articles of Association of RIICOA non obstante power of the State Government to issue directions on the conduct of the company's business, properly invoked to annul RIICO's unauthorised permissions and supplementary leases. (¶¶ 79, 80, 81)
- Article 166(3) and the Rajasthan Rules of Business, Rules 4, 7 and 9, Constitution of IndiaThe Rules exist for convenient transaction of business; the Cabinet sub-committee acted for the whole Council of Ministers including the Minister for Industries, so the Rules were substantially complied with. (¶¶ 85, 87, 89, 90)
Held
- The Government Order of 18 September 1979 handed over industrial areas to the Corporation only for development, in the role of a local authority providing amenities; the expression 'handed over' cannot be construed as transfer of ownership, which can pass only by legislation or a valid instrument, so the lessor-lessee relationship between the State and JKSL, and later Arfat, subsisted throughout. (¶¶ 41, 44, 45, 46, 47, 48)
- Rule 11A, using the words 'shall be allotted', contemplates future leasehold allotment to RIICO and is not attracted to land leased before its insertion in 1983; Rule 12 empowers RIICO to sub-lease vacant plots in areas allotted to it and to execute lease deeds only where none yet exists, and neither applies where the 2007 leases were executed by the State through the Collector and rent was paid to the Tehsildar. The need to comply with Rule 9(iv) for the transfer from a sick company itself shows the lessee knew the State retained control. RIICO therefore had no authority to permit change of land use or sub-division without the State's prior approval under Rule 8. (¶¶ 50, 51, 52, 53, 54, 55, 57, 58, 59)
- RIICO is a company incorporated under, not created by, the Companies Act, and rules made under its Articles of Association are not statutory; the mention of the 1979 Rules in Rule 12 of the 1959 Rules at best obliges RIICO to follow its own guidelines and does not infuse a statutory flavour. (¶¶ 61, 64, 66, 67, 68)
- Audi alteram partem is not an empty formality to be performed where no legally vested right exists; the permissions granted by RIICO without competence conferred no enforceable right, the Cabinet Committee's inquiry concerned RIICO's lack of authority rather than the lessee's conduct, and a hearing would have been futile. The same holding applies to all similarly placed lease-holders, the State having no discretion to pick and choose, except where land was expressly leased to RIICO under Rule 11A and sub-leased by it. (¶¶ 74, 75, 76, 77, 78)
- Article 138 of the Articles of Association, with its non obstante clause, empowers the State as sole shareholder to annul decisions taken by RIICO in the conduct of its business that derogate from public interest; the direction to cancel the permissions and supplementary leases fell squarely within it. The Rules of Business were substantially complied with because the sub-committee was constituted by the whole Council of Ministers, including the Minister for Industries. (¶¶ 80, 81, 85, 87, 88, 89, 90)
- No legitimate expectation or promissory estoppel can arise from RIICO's illegal acts, there being no representation by the State Government itself; in any event supervening public interest in the industrial use of the land, as held in Motilal Padampat and Food Corporation of India, overrides both doctrines. (¶¶ 91, 93, 94, 95, 96, 97)
- The Court expressed no opinion on the workers' unions' claims for dues or on the pending challenge to the 2007 transfer leases, reiterating that the AAIFR scheme's object of restarting industrial production should be carried out, and granted the unions liberty to pursue their remedies. (¶¶ 98, 99, 100, 102, 103, 107)
Result
Appeals by the State of Rajasthan and RIICO allowed; High Court judgment dated 20.07.2021 set aside and the writ petition of Arfat Petrochemicals dismissed; cancellation of the 2018 supplementary lease deeds and of the approvals for conversion of land use and sub-division upheld, with liberty to the lessee to apply afresh to the State Government under the 1959 Rules and to the workers' unions to pursue their remedies; pending applications disposed of.