# BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS PVT. LTD. AND ORS

- **Citation:** [2023] 7 S.C.R. 230
- **Court:** Supreme Court of India
- **Decided:** 2023-04-20
- **Case number:** Civil Appeal No. 2963 of 2023
- **Bench:** Surya Kant, Vikram Nath
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bishambhar-prasad-v-m-s-arfat-petrochemicals-pvt-ltd-and-ors-37473
- **Pages:** 81

## Headnote

Industrial Development - Industrial land - Appeals from
judgment passed by the High Court whereby the Writ Petition filed
by Respondent No.1 was allowed - As a corollary, the decision by
the Cabinet Committee of the State of Rajasthan, and resulting
instructions issued to the Rajasthan State Industrial Development
and Investment Corporation Ltd. ("RIICO") to cancel a series of
permissions and approvals granted/awarded to Respondent No.1
in respect of industrial land in Kota, Rajasthan, were set aside -
Whether the Large-Scale Industrial Area (LIA), Kota has been always
under the management and control of the State Government or it
was transferred to RIICO pursuant to Government Order dated
18.09.1979 - Whether the 1979 Rules of RIICO are statutory in
nature - Whether failure to observe Principles of Natural Justice
by the State Government vitiated its decision to annul the permissions
/approvals granted by RIICO in favour of Respondent No.1 -
Whether the State Government could have exercised its powers under
Article 138 of the AoA of RIICO to direct cancellation - Whether
the Rules of Business were not followed - Does the Doctrine of
Legitimate Expectations and Promissory Estoppel apply in favour
of Respondent No. 1 - Whether the Appellant Unions are entitled to
relief - Held: There was an uninterrupted and subsisting relationship
of lessor and lessee between the State Government and either JKSL
or Respondent No. 1, in the context of LIA, Kota - From the first
lease deed executed in 1967, till date, the State Government has
maintained the position of lessor - The lease with JKSL, and all
leases thereafter with JKSL and/or Respondent No. 1, have been
signed under the 1959 Rules - The terms of the lease are clearly in
compliance with the 1959 Rules - The land in LIA, Kota was never
transferred to RIICO under the Government Order dated 18.09.1979
- The State Government has always maintained title and ownership
of the area - The land was also never allotted to RIICO on a
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leasehold basis under Rule 11A of the 1959 Rules - Thus, RIICO
was never expressly given any leasehold rights, and had no authority
to further sub-lease the land, along with other corresponding
powers, under Rule 12 of the 1959 Rules - In any case, Rule 11A of
the 1959 Rules is of no importance, as there had to be an express
allotment of the land to RIICO on a leasehold basis after the coming
into force of Rules 11A and 12 - No such express allocation was
ever made in favour of RIICO - The 1979 Rules are not statutory in
nature - The reference to the 1979 Rules in Rule 12 of the 1959
Rules, does not accord any statutory recognition to the former -
There was no violation of the Principles of Natural Justice in this
case - The entire basis for granting permission for conversion of
the land, and subdivision of the plots, was on an incorrect assumption
of power by RIICO under the 1979 Rules, to act as the lessor of
LIA, Kota - RIICO was never given any leasehold rights over the
land - When the basis for a benefit received by a party is itself
invalid, there is no question of giving the party a chance to be
heard - The State Government was competent to issue directions
under Art.138 of the AoA of RIICO, to cancel the supplementary
lease deeds and attendant permissions - This fell squarely within
the ambit of Art.138 of the Articles of Association - There was no
violation of the Rajasthan Rules of Business as the sub-committee
which recommended the cancellation of the permissions /approvals
to Respondent No.1, was acting for and on behalf of the entire
Council of Ministers - Hence, the Rules of Business were complied
with - There was no legitimate expectation nor promissory estoppel
that could operate to the benefit of Respondent No. 1, as, once
again, no such defences could be raised on the back of RIICO's
own erroneous utilization of powers that vest only with the rightful
lessor of LIA, Kota, which is the State Government - Further, public
inte

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SUPREME COURT REPORTS
[2023] 7 S.C.R.
 [2023] 7 S.C.R. 230
230
BISHAMBHAR PRASAD
v.
M/s. ARFAT PETROCHEMICALS PVT. LTD. AND ORS.
(Civil Appeal No. 2963 of 2023 Etc.)
APRIL 20, 2023
[SURYA KANT AND VIKRAM NATH, JJ.]
Industrial Development - Industrial land - Appeals from
judgment passed by the High Court whereby the Writ Petition filed
by Respondent No.1 was allowed - As a corollary, the decision by
the Cabinet Committee of the State of Rajasthan, and resulting
instructions issued to the Rajasthan State Industrial Development
and Investment Corporation Ltd. ("RIICO") to cancel a series of
permissions and approvals granted/awarded to Respondent No.1
in respect of industrial land in Kota, Rajasthan, were set aside -
Whether the Large-Scale Industrial Area (LIA), Kota has been always
under the management and control of the State Government or it
was transferred to RIICO pursuant to Government Order dated
18.09.1979 - Whether the 1979 Rules of RIICO are statutory in
nature - Whether failure to observe Principles of Natural Justice
by the State Government vitiated its decision to annul the permissions
/approvals granted by RIICO in favour of Respondent No.1 -
Whether the State Government could have exercised its powers under
Article 138 of the AoA of RIICO to direct cancellation - Whether
the Rules of Business were not followed - Does the Doctrine of
Legitimate Expectations and Promissory Estoppel apply in favour
of Respondent No. 1 - Whether the Appellant Unions are entitled to
relief - Held: There was an uninterrupted and subsisting relationship
of lessor and lessee between the State Government and either JKSL
or Respondent No. 1, in the context of LIA, Kota - From the first
lease deed executed in 1967, till date, the State Government has
maintained the position of lessor - The lease with JKSL, and all
leases thereafter with JKSL and/or Respondent No. 1, have been
signed under the 1959 Rules - The terms of the lease are clearly in
compliance with the 1959 Rules - The land in LIA, Kota was never
transferred to RIICO under the Government Order dated 18.09.1979
- The State Government has always maintained title and ownership
of the area - The land was also never allotted to RIICO on a
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leasehold basis under Rule 11A of the 1959 Rules - Thus, RIICO
was never expressly given any leasehold rights, and had no authority
to further sub-lease the land, along with other corresponding
powers, under Rule 12 of the 1959 Rules - In any case, Rule 11A of
the 1959 Rules is of no importance, as there had to be an express
allotment of the land to RIICO on a leasehold basis after the coming
into force of Rules 11A and 12 - No such express allocation was
ever made in favour of RIICO - The 1979 Rules are not statutory in
nature - The reference to the 1979 Rules in Rule 12 of the 1959
Rules, does not accord any statutory recognition to the former -
There was no violation of the Principles of Natural Justice in this
case - The entire basis for granting permission for conversion of
the land, and subdivision of the plots, was on an incorrect assumption
of power by RIICO under the 1979 Rules, to act as the lessor of
LIA, Kota - RIICO was never given any leasehold rights over the
land - When the basis for a benefit received by a party is itself
invalid, there is no question of giving the party a chance to be
heard - The State Government was competent to issue directions
under Art.138 of the AoA of RIICO, to cancel the supplementary
lease deeds and attendant permissions - This fell squarely within
the ambit of Art.138 of the Articles of Association - There was no
violation of the Rajasthan Rules of Business as the sub-committee
which recommended the cancellation of the permissions /approvals
to Respondent No.1, was acting for and on behalf of the entire
Council of Ministers - Hence, the Rules of Business were complied
with - There was no legitimate expectation nor promissory estoppel
that could operate to the benefit of Respondent No. 1, as, once
again, no such defences could be raised on the back of RIICO's
own erroneous utilization of powers that vest only with the rightful
lessor of LIA, Kota, which is the State Government - Further, public
interest overrides both these doctrines, and cannot come to the aid
of a private party, when the larger interests of society are involved
- The supplementary leases signed between Respondent No.1 and
RIICO are unsustainable - RIICO did not possess the authority to
enter into these agreements, as the land in LIA, Kota remained under
the ownership and control of the State Government uninterruptedly
from the first lease signed with JKSL, till the present date -
Respondent No.1 was also cognizant of this fact as evinced by it
entering into the 7 transfer lease deeds with the Collector, Kota, in
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2007, after it stepped into the shoes of JKSL - The leases with
JKSL were executed under the 1959 Rules which remained applicable
and there was no authority ever vested in RIICO to have issued the
permissions for conversion and sub-division of plots in the LIA,
Kota, and for signing the supplementary lease deeds with
Respondent No.1 - There is no legal infirmity in the action of the
Appellants in setting aside the decisions taken by RIICO or in
directing to cancel the supplementary leases of 2018 - Hence, the
cancellation of the supplementary deeds and quashing of the
approvals for conversion of land and sub-division of plots is upheld
- This shall, however, not preclude Respondent No.1 from reapproaching the State Government and seeking conversion of the
usage of land and attendant approvals under the 1959 Rules - The
State Government shall be at liberty to consider such a proposal in
public interest and in accordance with the 1959 Rules - With regard
to the Appellant Unions, it would be open for them to seek their
remedies under law from the Appropriate Government, and judicial
forums - Rajasthan Land Revenue Act, 1956 - s.100 - Rajasthan
Industrial Areas Allotment Rules, 1959 - rr.11A and 12 - RIICO
Disposal of Land Rules, 1979 - rr.20A, 20B and 20C - Constitution
of India - Art.166 - Sick Industrial Companies (Special Provisions)
Act, 1985 - s.18.
Company Law - Distinction between companies that are
brought into being "by" an Act, and those created "under" an Act
- Held: A company incorporated under the Companies Act is not a
creation of the said Act but it has come into existence in accordance
with the provisions of the Companies Act.
Rules and Regulations - Statutory rules - The status of
"statutory rules" cannot be accorded to regulations that are brought
into existence under the Articles of a non-statutory company.
Doctrines / Principles - Principle of natural justice - Steps
taken which are themselves vitiated, cannot form the basis for
principles of natural justice to be applied.
Doctrines / Principles - Promissory estoppel - Supervening
public interest acts as a veto against the invocation of promissory
estoppel.
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Disposing of the appeals, the Court
HELD:
Whether the LIA, Kota has been always under the
management and control of the State Government or it was
transferred to RIICO pursuant to Government Order dated
18.09.1979?
1. The relationship of lessor and lessee between State of
Rajasthan and JKSL continued uninterruptedly till JKSL was
declared a 'sick company'. Respondent No.1 then stepped into
the shoes of JKSL under the orders of AAIFR, and by virtue of
the tripartite agreements executed with the labour unions, for
the land at LIA, Kota. It is also an admitted fact that neither
under the tripartite settlements dated 9.10.2002 and 22.10.2002,
nor under the sanctioned rehabilitation scheme dated 23.1.2003,
the relationship of lessor and lessee between State, JKSL, or
Respondent No.1, as the case may be, was ever disrupted. There
is no cessation in the relationship of lessor and lessee between
the State and Respondent No. 1, or its predecessor JKSL. This
contractual relationship duly governed under the 1956 Act read
with the 1959 Rules, was never terminated expressly or otherwise
and neither was it substituted by a supplementary conveyance
deed. A relationship of lessor-lessee between State Government
and JKSL/RIICO continued to subsist and has not been affected
in any manner by virtue of Government order dated 18.09.1979.
[Paras 40, 41 and 48][282-E-G; 283-A-B; 284-F]
Whether the 1979 Rules of RIICO are statutory in nature?
2.1. The plain wording of Rule 11A of the Rajasthan
Industrial Areas Allotment Rules, 1959 clearly shows that the
Corporation can have merely managerial power over the land
that is allocated to it. As laid down very clearly under Rule 11A,
the allotment to RIICO is done purely on a leasehold basis, and
ownership and title remain unequivocally with the State
Government. RIICO acts as nothing but an agent of the State in
its efforts to increase industrial production and further economic
progress. The State remains the overarching power in this
dynamic and RIICO remains subservient to it. The relationship
of lessor and lessee between State and Respondent No. 1 has
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS
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been validly subsisting at all times and RIICO was never
authorised either by Government order dated 18.09.1979 or
under Rules 11A and 12 of the 1959 Rules, to bypass the State
Government and assume the self - styled role of the lessor in
respect of LIA, Kota. Since, the 1967 and 2007 lease deeds in
favour of JKSL and Respondent No. 1, respectively, were
executed by the State Government in terms of Rule 2 of the 1959
Rules, RIICO had no authority whatsoever to permit Respondent
No. 1 to change the land use or allow for the sub - division of plot
without the prior approval of the State Government, which is the
sole competent authority to accord such permission in exercise
of its power under Rule 8 of the 1959 Rules. The contrary view
taken by the High Court is plainly erroneous in law and is based
on a misconstruction of the provisions of 1959 Rules read with
the binding bilateral contracts between the parties. [Paras 50, 52
and Para 58][284-H; 287-E-H; 285-F-G]
2.2. RIICO is not a statutory body. The Company was
brought into being under the Companies Act, 1956 by the State
of Rajasthan, which holds 100% shares in it. RIICO does not
owe its existence to a statute, but is rather created under the
Companies Act and is subject to its provisions. It is only governed
by the provisions of the Companies Act and not created by it.
Rule 12 of the 1959 Rules merely states that lands allotted to
RIICO will be further dealt with by the Corporation as per its
1979 Rules. At best, this imposes an obligation upon RIICO to
abide by its own guidelines, which it had issued under Article 93
of its AoA. The obligation for RIICO to abide by the 1979 Rules
stems from its own AoA under which those Rules came into being.
By no stretch, does this make the 1979 Rules statutory in nature.
[Paras 61, and 67][288-E-F; 291-F-G]
Whether failure to observe Principles of Natural Justice
by the State Government vitiated its decision to annul the
permissions/approvals granted by RIICO in favour of Respondent
No.1?
3. The Principles of Natural Justice entailed giving
Respondent No.1 an opportunity to defend its rights. However,
the most decisive and crucial factor is whether any legally vested
'right' ever accrued in favour of Respondent No. 1, which the
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State Government could not have despoiled behind its back.
RIICO had no authority whatsoever to accord permission for
conversion and sub - division of the industrial land allotted to
Respondent No. 1. State Government has always retained its
authority as lessor and was the only competent authority to grant
such permissions to Respondent No. 1 within the framework of
the 1959 Rules. The irresistible conclusion would be that the
self - styled power exercised by RIICO, was without any sanction
in law; it lacked inherent competence and RIICO acted beyond
its jurisdiction in respect of LIA, Kota. The permissions accorded
by RIICO in favour of Respondent No. 1 did not confer any rights
whatsoever, much less any enforceable right in the eyes of law.
RIICO usurped the powers vested in the State Government and
passed palpably illegal orders in favour of Respondent No.1. The
agreements between RIICO and Respondent No. 1 are nothing
but brutum fulmen. Steps taken which are themselves vitiated,
cannot form the basis for principles of natural justice to be applied.
The supplementary lease deeds were signed by RIICO without
any authority to do so. It similarly lacked the capacity to grant
the permission for conversion of use for the land to commercial,
and the allowance to sub - divide the plot. Thus, no legally vested
right of Respondent No.1 has been infringed and it has no
legitimate ground to seek an opportunity to be heard in a matter
strictly between RIICO and State Government. [Paras 74 and
78][295-B-E; 297-B-C]
Whether the State Government could have exercised its
powers under Article 138 of the AoA of RIICO to direct
cancellation?
4. The State Government has directed RIICO to recall its
permission for conversion of the usage of land, sub - division of
plots and supplementary lease deeds executed in favour of
Respondent No. 1. All these actions of RIICO pertained to its
business affairs. Since RIICO took these decisions exceeding
its powers and in a completely unauthorised and illegal manner,
the State Government was well within its rights to invoke Article
138 of AoA and nullify the unauthorised and unlawful decisions
taken by RIICO. The very objective behind reposing power in
the State Government under Article 138 of the AoA is to enable
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS
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it to undo and annul the decisions taken by RIICO in the conduct
of its business affairs, which the State Government may find is
derogating from public interest or in conflict with its own policy.
The State Government is entitled to resort to Article 138 where
it finds that the business affairs have been conducted by RIICO
detrimental to the State's interest as a Principal stake holder.
[Para 81][298-B-D]
Whether the Rules of Business were not followed?
5. It appears to this Court that the Rules of Business have
been substantially complied with. The entire Cabinet was called
on 29.12.2018 to consider various decisions taken by RIICO
during the previous regime. Among these were the supplementary
leases and connected permissions to Respondent No. 1 by
RIICO. The Cabinet, which included the Minister for Industries,
then proceeded to constitute three subcommittees to investigate
these alleged irregularities, along with an inter - departmental
committee. The Minister for Industries is not expected to look
into each individual matter pertaining to RIICO as this would
render the entire working of government unviable. It was a
collective decision of the Council of Ministers to constitute the
Committees to look into irregularities of various kinds. The
specific committee that was authorized to investigate RIICO and
its alleged misuse of non - existent powers in favor of Respondent
No. 1, was a creation of the entire Council, including the Minister
for Industries. The sub - committee's actions in this context were
completely validated and backed by the Minister and the rest of
the Council. It is, thus, difficult to hold that Rules of Business
have not been followed by the State Government in the course of
its decision making process. [Para 85 and 90][300-H; 301-A-B;
302-E-G]
Does the Doctrine of Legitimate Expectations and
Promissory Estoppel apply in favour of Respondent No. 1?
6. It is clear that no legitimate expectation could have arisen
in favor of Respondent No. 1. There was no implicit or explicit
representation made by the State Government in favour of its
request for conversion of the land, nor for sub - division of plots.
RIICO, in completely untenable fashion, took over the role of
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the lessor without there being any right to do so, and issued the
requisite permissions. Evidently, such approvals had no legs to
stand on as they were devoid of any force of law. The lessor of
LIA, Kota, was the State Government. When the entity purporting
to exercise the powers of a lessor, RIICO in this case, does so
without having the requisite legal status to act in this manner,
Respondent No. 1 as the beneficiary of these wrongful actions,
cannot seek any legitimate expectation or promissory estoppel
in its favour. Supervening public interest acts as a veto against
the invocation of promissory estoppel. Respondent No. 1 cannot
claim any right to the continuation of the supplementary lease
deeds. [Paras 93 and 96][304-D-F; 305-F]
Conclusion
7.1. The supplementary leases signed between Respondent
No. 1 and RIICO are unsustainable. RIICO did not possess the
authority to enter into these agreements, as the land in LIA,
Kota remained under the ownership and control of the State
Government uninterruptedly from the first lease signed with
JKSL, till the present date. Respondent No. 1 was also cognizant
of this fact as evinced by it entering into the 7 transfer lease
deeds with the Collector, Kota, in 2007, after it stepped into the
shoes of JKSL. [Para 104][307-E-F]
7.2. The leases with JKSL were executed under the 1959
Rules which remained applicable and there was no authority ever
vested in RIICO to have issued the permissions for conversion
and sub-division of plots in the LIA, Kota, and for signing the
supplementary lease deeds with Respondent No. 1. There is no
legal infirmity in the action of the Appellants in setting aside the
decisions taken by RIICO or in directing to cancel the
supplementary leases of 2018. Hence, we uphold the cancellation
of the supplementary deeds and quashing of the approvals for
conversion of land and sub-division of plots. [Para 105][307-FH]
7.3. This shall, however, not preclude Respondent No. 1
from reapproaching the State Government and seeking conversion
of the usage of land and attendant approvals under the 1959 Rules.
The State Government shall be at liberty to consider such a
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proposal in public interest and in accordance with the 1959 Rules.
With regard to the Appellant Unions, it is not considered
expedient by this Court to enter into the demands made by the
labour unions for the dues of JKSL's employees. No views are
expressed on the content of the prayers by the Appellant Unions,
and it is left open for them to seek their remedies under law from
the Appropriate Government, and judicial forums. [Para 107,
106][308-A-C]
7.4. The overall conclusions are summarized in the following
points: -
A. There has been an uninterrupted and subsisting
relationship of lessor and lessee between the State Government
and either JKSL or Respondent No. 1, in the context of LIA,
Kota. From the first lease deed executed in 1967, till date, the
State Government has maintained the position of lessor;
B. The lease with JKSL, and all leases thereafter with JKSL
and/or Respondent No. 1, have been signed under the 1959
Rules. The terms of the lease are clearly in compliance with the
1959 Rules;
C. The land in LIA, Kota was never transferred to RIICO
under the Government Order dated 18.09.1979. The State
Government has always maintained title and ownership of the
area;
D. The land was also never allotted to RIICO on a leasehold
basis under Rule 11A of the 1959 Rules. Thus, RIICO was never
expressly given any leasehold rights, and had no authority to
further sub - lease the land, along with other corresponding
powers, under Rule 12 of the 1959 Rules;
E. In any case, Rule 11A of the 1959 Rules is of no
importance, as there had to be an express allotment of the land
to RIICO on a leasehold basis after the coming into force of Rules
11A and 12. No such express allocation was ever made in favour
of RIICO;
F. The 1979 Rules are not statutory in nature. The reference
to the 1979 Rules in Rule 12 of the 1959 Rules, does not accord
any statutory recognition to the former;
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G. There was no violation of the Principles of Natural Justice
in this case. The entire basis for granting permission for
conversion of the land subdivision of the plots, was on an incorrect
assumption of power by RIICO under the 1979 Rules, to act as
the lessor of LIA, Kota. RIICO was never given any leasehold
rights over the land. When the basis for a benefit received by a
party is itself invalid, there is no question of giving the party a
chance to be heard;
H. The State Government was competent to issue
directions under Article 138 of the AoA of RIICO, to cancel the
supplementary lease deeds and attendant permissions. This fell
squarely within the ambit of Article 138 of the Articles of
Association;
I. There was no violation of the Rajasthan Rules of Business
as the sub - committee which recommended the cancellation of
the permissions/approvals to Respondent No. 1, was acting for
and on behalf of the entire Council of Ministers. Hence, the Rules
of Business were complied with;
J. There was no legitimate expectation nor promissory
estoppel that could operate to the benefit of Respondent No. 1,
as, once again, no such defences could be raised on the back of
RIICO's own erroneous utilization of powers that vest only with
the rightful lessor of LIA, Kota, which is the State Government.
Further, public interest overrides both these doctrines, and cannot
come to the aid of a private party, when the larger interests of
society are involved;
K. The Appellant Unions and workers are at liberty to
approach the Appropriate Government and various judicial forums
to pursue their remedies in accordance with law.
The Appeals by the State of Rajasthan and RIICO are
accordingly allowed; the impugned judgment dated 20.07.2021
passed by the High Court of Judicature for Rajasthan at Jaipur,
is set aside. Consequently, the Writ Petition filed by Respondent
No.1 before the High Court is dismissed save and except the
liberty granted. [Paras 104, 108 and 109][308-D-H; 309-A-H; 310A-B]
M.G. Pandke & Ors. v. Municipal Council, Hinganghat,
Dist. Wardha & Ors.1993 Supp (1) SCC 708 : [1992] 1
Suppl. SCR 464 and Sachidananda Pandey v. State of
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS
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West Bengal & Ors. (1987) 2 SCC 295 : [1987] 2 SCR
223 - distinguished.
S.L. Kapoor v. Jagmohan & Ors. (1980) 4 SCC 379 :
[1981] 1 SCR 746 and K. Balasubramanian (Ex. Capt.)
v. State of Tamil Nadu (1991) 2 SCC 708 : [1991] 1
SCR 845 - relied on.
Mohinder Singh Gill v. The Chief Election Officer
(1978) 1 SCC 405 : [1978] 2 SCR 272; Krishna Ballav
Sahay & Ors. v. Commission of Enquiry & Ors. [1969]
1 SCR 387; Management of Fertilizer Corporation of
India v. Their Workmen [1969] 2 SCR 706; Sukhdev
Singh & Ors. v. Bhagat Ram & Ors. (1975) 1 SCC 421
: [1975] 3 SCR 619; Motilal Padampat v. State of Uttar
Pradesh (1979) 2 SCC 409 : [1979] 2 SCR 641; State
of Tamil Nadu v. Shyam Sunder (2011) 8 SCC 737 :
[2011] 11 SCR 1094; MRF v. Manohar Parrikar & Ors.
(2010) 11 SCC 374 : [2010] 5 SCR 1081; B.
Rajagopala Naidu v. State Transport Appellate Tribunal,
Madras & Ors. (1964) 7 SCR 1; Kalabharati
Advertising v. Hemant Vimalnath Narichania & Ors.
(2010) 9 SCC 437 : [2010] 10 SCR 971; Swadeshi
Cotton Mills v. Union of India (1981) 1 SCC 664 :
[1981] 2 SCR 533; Life Insurance Corporation of India
v. Escorts Ltd. & Ors. (1986) 1 SCC 264 : [1985] 3
Suppl. SCR 909; S.S. Dhanoa v. Municipal
Corporation, Delhi & Ors. 1981 (3) SCC 431 : [1981]
3 SCR 864; Executive Committee of Vaish Degree
College v. Lakshmi Narain 1976 (2) SCC 58 : [1976] 2
SCR 1006; Union of India v. P.K. Roy (1968) 2 SCR
186; A.K. Kraipak v. Union of India (1969) 2 SCC 262
: [1970] 1 SCR 457; Gulabrao Keshavrao Patil & Ors.
v. State of Gujarat (1996) 2 SCC 26 : [1995] 6 Suppl.
SCR 97; Lalaram and Ors. vs. Jaipur Development
Authority and Ors. (2016) 11 SCC 31 : [2015] 14 SCR
403; Bannari Amman Sugars Ltd. vs. Commercial Tax
Officer and Ors. (2005) 1 SCC 625 : [2004] 6 Suppl.
SCR 264; Food Corporation of India v. Kamdhenu
Cattle Feed Industries (1993) 1 SCC 71 : [1992] 2
Suppl. SCR 322 - referred to.
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Case Law Reference
[1978] 2 SCR 272
referred to
Para 31
[1969] 1 SCR 387
referred to
Para 32
[1969] 2 SCR 706
referred to
Para 32
[1975] 3 SCR 619
referred to
Para 32
[1979] 2 SCR 641
referred to
Para 32
[2011] 11 SCR 1094
referred to
Para 33
[2010] 5 SCR 1081
referred to
Para 33
(1964) 7 SCR 1
referred to
Para 33
[2010] 10 SCR 971
referred to
Para 33
[1981] 2 SCR 533
referred to
Para 33
[1987] 2 SCR 223d
istinguished
Para 34
[1985] 3 Suppl. SCR 909
referred to
Para 34
[1981] 3 SCR 864
referred to
Para 62
[1976] 2 SCR 1006
referred to
Para 63
[1992] 1 Suppl. SCR 464
distinguished
Para 65
(1968) 2 SCR 186
referred to
Para 72
[1970] 1 SCR 457
referred to
Para 73
[1981] 1 SCR 746
relied on
Para 76
[1991] 1 SCR 845
relied on
Para 77
[1995] 6 Suppl. SCR 97
referred to
Para 85
[2015] 14 SCR 403
referred to
Para 86
[2004] 6 Suppl. SCR 264
referred to
Para 91
[1992] 2 Suppl. SCR 322
referred to
Para 92
CIVIL APPELLATE JURISDICTION : Civil Appeal No.2963
of 2023
From the Judgment and Order dated 20.07.2021 of the High Court
of Judicature for Rajasthan at Jaipur in DBCWP No.3410 of 2020.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS
PVT. LTD. AND ORS.
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SUPREME COURT REPORTS
[2023] 7 S.C.R.
With
Civil Appeal No.2965, 2964, 2966 And 2967 of 2023.
Dushyant Dave, Dr. Manish Singhvi, Mukul Rohatgi, Atmaram
NS Nadkarni, Sr. Advs., Ms. Nilofar Khan, Anjum Parvez, Khushi
Mohammed, Yogesh Kumar Sharma, Sandeep Kumar Jha, Ashok
Basoya, Ms. Shruti Jose, Rameshwar Prasad Goyal, Uday Gupta, Ms.
Shivani M. Lal, Ms. Sanam Singh, S. S. Sisodia, M. K. Tripathi, Harish
Dasan, Rajiv Ranjan, Rajeev Kumar Gupta, Hiren Dasan, Arpit Parkash,
Ms. Shubangi Agarwal, Vivek Jain, Siddhant Buxy, Ankur Sehgal, Mrs.
Suchitra Kumbhat, Abhinav Jain, Rajat Jain, Ms. Honey Kumbhat,
Salvador 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.
2. This batch of appeals arises from the judgment dated 20.07.2021
passed by the Jaipur Bench of the High Court of Judicature for Rajasthan
whereby the Writ Petition filed by Respondent No. 1 - M/s. Arfat
Petrochemicals Pvt. Ltd. in all connected matters was allowed. As a
corollary, the decision by the Cabinet Committee of the State of Rajasthan,
and resulting instructions issued to the Rajasthan State Industrial
Development and Investment Corporation Ltd. ("RIICO") to cancel a
series of permissions and approvals granted/awarded to Respondent No.
1 in respect of industrial land in Kota, Rajasthan, were set aside.
3. There are different Appellants before us in the respective SLPs.
They include the State of Rajasthan (hereinafter, "State of Rajasthan"
or "State Government"), RIICO, and various workers unions (hereinafter,
"Appellant Unions"). As the nature and type of relief sought by both the
State of Rajasthan and RIICO, stand on a slightly different footing to
that of the Appellant Unions, we will address the State of Rajasthan and
RIICO (collectively, "Appellants") separately, to maintain the distinction
between the reliefs sought by them as compared to the Appellant Unions.
A. FACTS
4. The dispute originates from the allotment of approximately
271.39 acres of land by the State of Rajasthan through the District
Collector, Kota, in the Large-Scale Industrial Area, Kota ("LIA, Kota")
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to J.K. Synthetics Ltd. ("JKSL") on 12.09.1958. Following the allotment,
a lease deed was executed with JKSL by the Collector, Kota, and
permission was granted for setting up its industrial units in the area.
JKSL's retention of the property was facilitated over the following
decades through the execution of fresh lease deeds with respect to the
same area, as and when the period specified in the earlier lease lapsed.
5. Just after the first allotment was initially made, the State
Government exercised its powers under Section 100 of the Rajasthan
Land Revenue Act, 1956 and formulated the Rajasthan Industrial Areas
Allotment Rules, 1959 ("1959 Rules") to regulate the allocation of land
to entrepreneurs and the development of industrial areas across the State.
Section 100 of the Rajasthan Land Revenue Act is provided below:
"100. Sale of land in Industrial and Commercial Areas -
The State Government may make rules regulating sales of lands
in industrial and commercial areas and may also impose an annual
assessment of such lands, wherever necessary."
6. Similarly, Rules 2, 8 and 9 of the 1959 Rules are also of some
relevance and the same are reproduced below:
"2. Period for which land may be allotted.- Land in industrial
area may be allotted on lease-hold basis for a period of 99 years-
(a)
for setting of a large-scale industry anywhere in the state,
by the State Government in the Industries Department and
in the case of large-scale tourism unit, the allotment shall
be made by the Government in the Revenue Department
and
(b)
for setting up of other industries -
(i)
in Jaipur District, by the Director of Industries,
Rajasthan Jaipur provided that in case of a tourism
unit the allotment shall be made by the Government
in the Revenue Department, and
(ii)
in any other district, by the Collector concerned.
(bb)
for the setting up of IT Industries Government land shall be
allotted by the State Government in the Revenue
Department on the recommendation of the Department of
Information Technology and Communication.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS
PVT. LTD. AND ORS. [SURYA KANT, J.]
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(c)
all allotment of land under clause (a) shall be made within a
period of 60 days and under clause (b) within a period of 30
days from the date of receipt of the completed application
in Form-B. In case applicants submit complete application
electronically in Single window System Portal, it shall be
disposed as per the provisions of the Rajasthan Enterprises
Single Window Enabling and Clearance Rules, 2011.
Provided that the allotment of land for the purpose of setting up of
Common Effluent Treatment Plant and related activities, anywhere
in the State, shall be made by the State Government in the Revenue
Department for a period of 10 years which shall be extendable
for a period of 5 years.
xxx
xxx
xxx
8. Land not to be used for other purpose. - (1) The land
given for industrial purposes shall not be used for any other purpose
except constructing factory premises and such other residential
quarters as are required for those engaged in that industry. No
constructions shall be permitted which may have the object of
using it as a commercial undertaking other than the industry
permitted to be established.
Provided that the State Government, on the application of the
lessee for establishment of industry other than the industry for
which the was given, may grant permission for establishment of
such industry. But in case of government land allotted under these
rules, such permission shall not be granted for establishment of
tourism units.
(2) The permission for construction of the labour colony shall be
given if required at the time of the establishment of an industry.
(3) The industrialist shall be free to use an area upto 200 sq.
meter for his own residential purpose on first floor of the factory
premises.
9. Lessee debarred from sale of land etc. - The lessee shall
have the limited ownership on the land leased till the lease subsists
and shall have the right of assignment only for the purpose of
taking a loan for the development of the industry or for pledging
as collateral security for a loan taken by the lessee or some other
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industry owned by the same management. The lessee shall have
no right to sell the land:
(i)
Provided that the land can be pledged as collateral security
only in favour of Industrial Financial Corporation of India,
Rajasthan Finance Corporation, IDBI, ICICI, LIC, IRBI,
HDFC, SIDBI, EXIM Bank, Co-operative Banks and any
Public Financial Institution as defined in the Public Financial
Institute Act or Scheduled Banks or private lending agencies
subject to ensuring that the lessee has cleared all the
outstanding dues of the lessor and the lessee creates first
charge in favour of the State Government and second to
the financing body or bodies.
(ii)
Provided further that once the land has been utilised for the
purpose for which it was allotted within the period specified
in rule 7, the lessee may, with the permission of the Allotting
Authority transfer his right or interest in the whole land, so
leased out, on the following conditions:-
(a)
In case of government land allotted under these rules,
he shall pay 50% of prevailing market price of land
after deducting allotment price charged under rule
3A and the transferee shall pay 50% of excess
amount of yearly lease land mentioned in rule 5 and
other conditions of lease shall be remained unchanged.
(b)
In case of converted Khatedari land allotted under
these rules for industrial purpose, the transferee shall
pay 50% excess amount of yearly lease rent
mentioned in rule 5 and other conditions of lease shall
be remained unchanged.
(iia) Provided also that if after grant of permission the transferee
has failed to execute the lease deed and further transferred the
allotted land without prior permission of allotting authority, such
transfer may be regularised by the allotting authority on payment
of penalty of Rs.3000/- for each transfer. The lease deed may be
executed in favour of such transferee for the remaining period of
lease may be executed in favour of such transferee for the
remaining period of lease.
The transferee shall pay 50% excess amount of the yearly
lease rent mentioned in rule 5 on such transfer.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS
PVT. LTD. AND ORS. [SURYA KANT, J.]
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(iii)
Provide also that in case an industrial plot is proposed to be
divided or sub-divided for any purpose, whatsoever, prior
permission of the State Government in the Revenue
Department shall be obtained by the allotting authority.
(iiia)
Provide also that if any industrial plot is divided or subdivided without obtaining prior permission of the State
Government, the lessee shall apply for permission of division
or sub-division to the allotting authority along with a copy
of the challan depositing an amount of Rs.3000/-. The
allotting authority, with prior approval of the State
Government, may regularise the division or sub-division.
(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 subdivided under the above proviso on the following conditions:-
(a)
That NOC from Financial Institutions/Bank shall be
obtained, in case land is mortgaged.
(b)
that the conditions of lease shall remain unchanged.
(c)
that the transferee shall pay additional 100 percent
excess amount of the proportionate yearly lease rent
applicable from the date of transfer of right or interest
in leased land.
(d)
that the transferee shall use the land for the industrial
purpose only.
(e)
that in case of government land allotted under these
rules, the transferee shall pay 50% of prevailing
market price of land after deducting allotment price
charged under rule 3A.
(v)
Provided also that no permission of transfer under the above
proviso, shall be allowed in case of a Government land unless
the unit is declared sick by Board of Industrial and Financial
Reconstruction (BIFR).
(vi)
Provided also that in case of any doubt of any kind the
allotting authority shall refer the matter to the State
Government in the Revenue Department whose decision
shall be final.
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Provided also that the developer of micro, small and medium
enterprises clusters, as per approved plan, may transfer his
right or interest in the whole land, so leased out to
entrepreneurs. The conditions of lease remaining unchanged.
The transferee shall pay 50% excess amount of the yearly
lease rent mentioned in rule 5 on such transfer."
7. The first lease deed of 11.08.1967 which governed the terms
and conditions of allotment of land to JKSL, contained, amongst others,
the following conditions:-
"xxx
xxx
 xxx
NOW THIS INDENTURE WITNESSETH AS FOLLOWS:
...
iv) The lessee shall set up on the said plot of land Nylon industry
for which land has been leased to him by the lessor within a period
of two years from the date of talking over the possession of the
land as above mentioned and in case of his failure to do so the
said plot shall revert to the lessor unless the period of two years is
extended by the lessor on valid grounds.
v) The lessee shall set up, construct, erect and build on the said
plot of land, only such buildings, sheds, and structures as are
required by him for setting up the industry aforesaid and also such
other residential quarters e.g. watch & ward quarters as are
required for those engaged or to be engaged in the said factor.
vi) The lessee agrees not to construct or build any structures or
building on the said plot of land or on a portion of it which may
have the object of using it as a commercial undertaking other than
for the industries aforesaid for which the said plot has been leased
to the lessee.
..."
As is evident from the lease, the object behind the allocation of
the land was for a specific purpose and no other usage was permissible.
Subsequent leases executed between JKSL and the District Collector
contained pari materia clauses.
8. While the above stated leases were subsisting, the Rajasthan
State Industrial and Mineral Development Corporation Ltd. ("RSIMDC")
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS
PVT. LTD. AND ORS. [SURYA KANT, J.]
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was incorporated for carrying out development projects across the State.
The Corporation was subsequently split into two entities, with RIICO
acting as its direct successor. To regulate RIICO's activities in respect
of the lands over which it would have control, the RIICO Disposal of
Land Rules, 1979 ("1979 Rules"), were issued under Article 93(xv) of
the Articles of Association ("AoA") of the Company. The Rules provided
a mechanism by which RIICO could grant different types of approvals
and permissions in relation to industrial lands and their utilization. On
18.09.1979, an Order was passed by the State Government to allot all
industrial lands within its territory to RIICO. Thus, the Corporation would,
from that point onwards, step into the shoes of the state government in
overseeing further development of the areas under its supervision.
Whether or not this included the LIA, Kota, is a point of contention
among the parties. The Joint Director of the Department of Industries at
Kota, also issued an Order on 28.09.1979, according to which a number
of industrial areas would be transferred to RSIMDC in compliance with
the Government decision of 18.09.1979. LIA, Kota, was listed among
the areas to be entrusted to RSIMDC in the said communication.
9.