# ITC LTD v. STATE OF UTTAR PRADESH & ORS

- **Citation:** [2011] 7 S.C.R. 66
- **Court:** Supreme Court of India
- **Decided:** 2011-07-05
- **Case number:** Civil Appeal No. 4561 of 2008
- **Bench:** R. V. Raveendran, B. Sudershan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/itc-ltd-v-state-of-uttar-pradesh-ors-27850
- **Pages:** 88

## Headnote

Uttar Pradesh Urban Planning and Development Act,
c 1973:
s.41(3) rlw ss.12 and 14 -Allotment of commercial plots
in commercial area for construction of 5 star, 4 star and 3 star
hotels on 90 years lease - Plots allotted at industrial rates -
D Later on, allotments cancelled as the same were made
without following the procedure of auction, and the allotment
on fixed industrial rates caused loss to government
exchequer - HELD: Under private law, a lease governed
exclusively by the provisions of Transfer of Property Act could
E be cancelled only by filing a civil suit for its cancellation or
for a declaration that it is illegal, null and void and for the
consequential relief of delivery back of possession - Where
the grant of lease is governed by a statute or statutory
regulations, and if such statute expressly reserves the power
of cancellation or revocation to the lessor, it will be
F permissible for an Authority, as the lessor, to cancel a duly
executed and registered lease deed, even if possession has
been delivered, on the specific grounds of cancellation
provided in the statute - In the instant case, NO/DA is a
statutory authority and it has not alleged or made out any
G default in payment or breach of conditions of the lease or
breach of rules and regulations - Nor is it the case of NO/DA
that any of the allottees is guilty_ of any suppression or
misstatement of fact, misrepresentation or fraud - Therefore,
the allotment of commercial plots by NO/DA to the allottees
H
66
ITC LTD. v. STATE OF UTIAR PRADESH & ORS.
67
for setting up hotels is valid -There is no violation of the
A
regulations or policies of NO/DA in allotting commercial plots
for hotels -
Therefore, cancellation of allotment is
unsustainable.
ss. 41(3) - Allotment of plots - Cancellation of- HELD:
8
When valuable rights had vested in the a/lottees, by reason
of the allotments and grant of leases, such rights could not
be interfered with or adversely affected, without a hearing to
the affected parties - Natural justice - Opportunity of hearing.
Administrative Law:
c
Allotment of commercial plots for hotels - Cancellation
order - Judicial review of - HELD: In the instant case, the ·
allotments of plots for hotel projects were challenged in writ
petitions and in compliance with the direction of the High
D
Court, the state government had a relook at the matter and
found some irregularities in allotment - The decision of the
state government in revision, is not based on any different
policy, but based on its finding that the existing regulations
and policies of NO/DA were violated - The policy of the state
E
government cannot override the NO/DA Regulations - If any
policy is made, intending to give different meaning to the words
'commercial use' and 'industrial use', that can be given effect
only if the regulations are suitably amended -
The fact that
the tourism or hotels have been given the status of 'industry'
F
will not convert them into industries, for the purpose of
allotment of plots, nor will the use of land by such tourism or
hotel industry, will be an industrial use - Allotment of plots
for hotels in a commercial area is wholly in consonance with
the NO/DA Regulations and Master plan which earmarks
areas for specific land uses like industrial, residential,
G
commercial, institutiona·I, public, semi-public, etc - Therefore,
the allotment of plots situated in commercial areas earmarked
for commercial use, to hotels did not violate any provisions
of the Act or the NO/DA Regulations - NO/DA (Preparation
H
68
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A and Finalisation of Plan) 1991 Regulations, 1991 - Policy
dated 22.5.2006 of Government of Uttar Pradesh - Uttar
Pradesh Urban Planning and Development Act, 1973.
Public law - Breach of statutory provisions or procedural
8
irregularities - Allotment of plots for hotels on 90 years lease
- Cancellation of - Remedial action - Explained.
TOURISM:
Running a hotel/boarding house/restaurant - HELD: Is
c a commercial act

## Text

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A
B
[2011] 7 S.C.R. 66
ITC LTD.
V.
STATE OF UTTAR PRADESH & ORS.
(Civil Appeal No. 4561 of 2008)
JULY 5, 2011
[R. V. RAVEENDRAN AND
B. SUDERSHAN REDDY, JJ.]
Uttar Pradesh Urban Planning and Development Act,
c 1973:
s.41(3) rlw ss.12 and 14 -Allotment of commercial plots
in commercial area for construction of 5 star, 4 star and 3 star
hotels on 90 years lease - Plots allotted at industrial rates -
D Later on, allotments cancelled as the same were made
without following the procedure of auction, and the allotment
on fixed industrial rates caused loss to government
exchequer - HELD: Under private law, a lease governed
exclusively by the provisions of Transfer of Property Act could
E be cancelled only by filing a civil suit for its cancellation or
for a declaration that it is illegal, null and void and for the
consequential relief of delivery back of possession - Where
the grant of lease is governed by a statute or statutory
regulations, and if such statute expressly reserves the power
of cancellation or revocation to the lessor, it will be
F permissible for an Authority, as the lessor, to cancel a duly
executed and registered lease deed, even if possession has
been delivered, on the specific grounds of cancellation
provided in the statute - In the instant case, NO/DA is a
statutory authority and it has not alleged or made out any
G default in payment or breach of conditions of the lease or
breach of rules and regulations - Nor is it the case of NO/DA
that any of the allottees is guilty_ of any suppression or
misstatement of fact, misrepresentation or fraud - Therefore,
the allotment of commercial plots by NO/DA to the allottees
H
66
ITC LTD. v. STATE OF UTIAR PRADESH & ORS.
67
for setting up hotels is valid -There is no violation of the
A
regulations or policies of NO/DA in allotting commercial plots
for hotels -
Therefore, cancellation of allotment is
unsustainable.
ss. 41(3) - Allotment of plots - Cancellation of- HELD:
8
When valuable rights had vested in the a/lottees, by reason
of the allotments and grant of leases, such rights could not
be interfered with or adversely affected, without a hearing to
the affected parties - Natural justice - Opportunity of hearing.
Administrative Law:
c
Allotment of commercial plots for hotels - Cancellation
order - Judicial review of - HELD: In the instant case, the ·
allotments of plots for hotel projects were challenged in writ
petitions and in compliance with the direction of the High
D
Court, the state government had a relook at the matter and
found some irregularities in allotment - The decision of the
state government in revision, is not based on any different
policy, but based on its finding that the existing regulations
and policies of NO/DA were violated - The policy of the state
E
government cannot override the NO/DA Regulations - If any
policy is made, intending to give different meaning to the words
'commercial use' and 'industrial use', that can be given effect
only if the regulations are suitably amended -
The fact that
the tourism or hotels have been given the status of 'industry'
F
will not convert them into industries, for the purpose of
allotment of plots, nor will the use of land by such tourism or
hotel industry, will be an industrial use - Allotment of plots
for hotels in a commercial area is wholly in consonance with
the NO/DA Regulations and Master plan which earmarks
areas for specific land uses like industrial, residential,
G
commercial, institutiona·I, public, semi-public, etc - Therefore,
the allotment of plots situated in commercial areas earmarked
for commercial use, to hotels did not violate any provisions
of the Act or the NO/DA Regulations - NO/DA (Preparation
H
68
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A and Finalisation of Plan) 1991 Regulations, 1991 - Policy
dated 22.5.2006 of Government of Uttar Pradesh - Uttar
Pradesh Urban Planning and Development Act, 1973.
Public law - Breach of statutory provisions or procedural
8
irregularities - Allotment of plots for hotels on 90 years lease
- Cancellation of - Remedial action - Explained.
TOURISM:
Running a hotel/boarding house/restaurant - HELD: Is
c a commercial activity - By no stretch of imagination, use of
a plot for a hotel can be considered as use of such land for
an industrial purpose - It was not necessary for NO/DA to
change the land use of plots_ to be allotted to hotels, from
commercial to industrial use.
D
Urban Development:
Allotment of commercial plots for 5 star, 4 star and 3 star
hotels - Requirement of inviting tenders - Commercial plots
in commercial area allotted at fixed industrial rate without
E inviting tenders - HELD: Allotment of commercial plots is
governed by the NO/DA Policies and Procedures for
Commercial Property Management, 2004 - Under the said
policy, commercial properties of NO/DA can be allotted only
on sealed tender basis or by way of public auction - The
F allotment of commercial plots at fixed rate was, therefore,
clearly contrary to the said regulations of NO/DA - The failure
to follow the procedure prescribed in the NO/DA Commercial
Property Management Policy is a violation of the policy and
such violation has resulted in loss to the public exchequer -
G Therefore, the state government can certainly interfere under
its revisiona/ jurisdiction - As the allotment is of commercial
plots governed by NO/DA Commercial Property Management
Policy, and as the reserve rate itself was Rs.300001- per sq.m.,
allotment at Rs. 7,400 per sq.m. caused loss and violated the
H regulations and policy of NO/DA - However, the violation
ITC LTD. v. STATE OF UTTAR PRADESH & ORS.
69
occurred on account of a mistake on the part of the officers
A
of NO/DA in misinterpreting the government policy dated
22.5.2006 - The a/lottees are given the option to continue
their respective leases by paying the premium (allotment rate)
at Rs. 70,0001- per sq.m. (with corresponding increase in yearly
rent/one time lease rent}, without any location benefit charges
8
- NO/DA Policies and Procedures for Commercial Property
Management, 2004 - Uttar Pradesh Urban Planning and
Development Act, 1973 - s.41.
Words and Phrases:
Expression 'industry' used in the context of tourism/hotel
- Connotation of.
c
Keeping in view the Common Wealth Games 2010
and pursuant to a meeting with the Secretary, Sports and o
Youth Affairs, Government of India, the NOIDA, on
17.10.2006, invited applications for allotment of plots of
industrial land at industrial rates of Rs. 7,4001- per sq. mts.
plus location charges for 5 star, 4 star and 3 star hotels
on 90 years lease ha.sis. Allotments of 9 plots for 5 star E
hotels 2 plots for 4 star hotel and 3 plots for 3 star hotels
were made on 12.01.2007. The Government scheme
dated 22.05.2006 was approved on 05.06.2006 and the
lease deeds were registered in two cases and in other
cases, the registration was kept pending on the ground
of under valuation stating that as against circle rate of
F
Rs.70,0001- per sq. mt., the premium for the sale was only
Rs. 7,400 per sq. mts. Writ petitions were filed in the High
Court on the ground that the allotment of the said plots
was at a very low price. Pursuant to the direction of the
High Court to the State Government to exercise its power G
of revision u/s.41(3) read with s.12 of the U. P. Urban
Planning and Development Act, 1973, the Government
concluded that the allotments made were irregular for (i)
allotments of commercial plots had been made for
H
70
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A industrial purposes at industrial rates without getting the
land use changed from commercial to industrial in
accordance with the regulations and without obtaining
the consent of the state government; and (ii) the plots
earmarked for commercial use in a commercial area were
B allotted at rates applicable to industrial plots, without
calling for competitive bids/tenders and without the
permission of the state government. It, therefore, directed
on 01.08.2007 NOIDA to cancel the allotments and initiate
action against the officers of NOIDA responsible for the
c irregularities. Consequently, the NOIDA issued
cancellation letters dated 3.8.2007 canceling the
allotments and consequential leases granted in favour of
the appellants; and the said writ petitions were dismissed
as withdrawn.
D
The allottees filed writ petitions before the High Court
challenging the cancellation of allotment of plots and the
leases by communications dated 3.8.2007. A Division
Bench of the High Court allowed the writ petitions. It
quashed the order dated 1.8.2007 of the State
E Government and the cancellation orders dated 3.8.2007
passed by NOIDA on the ground that they were opposed
to principles of natural justice for want of opportunity of
hearing as required under proviso to s.41(3) of 1973 Act.
The High Court, therefore, remanded the matters to the
F State Government for taking decision afresh.
In the instant appeals filed by the allottees, it was
contended for the appellants that the High Court, having
quashed the order of the State Government dated
G 1.8.2007 and the consequential orders of cancellation
dated 3.8.2007 passed by NOIDA, ought to have upheld
the allotments and the leases and should not have
remanded the matter to the state government for
consideration.
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS.
71
On 9.7.2008 the Court directed status quo regarding
A
possession. On 18.7.2008 the Court, while granting stay
of dispossession of the appellants from the respective
sites allotted to them, directed the State Government to
give a hearing to the appellants and pass a reasoned
order in accordance with law. The state government B
accordingly passed individual orders dated 8.9.2008 in
the case of each of the appellants, holding that the
allotment of plots to them was bad. It cancelled the
allotments and directed action to be taken against the
erring officers of NOIDA.
c
· The questions for consideration before the Court
were: (1) "Where allotment has been followed by grant
of a lease (which is duly executed) and delivery of .
possession in favour of the less-ee, whether the leases
could be unilaterally cancelled by the lessor?" (2)
D
"Whether the cancellations were on account of change
in policy as a consequence of change of government, or
on account of new government's desire to nullify the
actions of previous government?" (3) "Whether the
allotments of plots to appellants suffer from any
E
irregularity or illegality?"
Disposing of the appeals, the Court
HELD: 1. The High Court rightly set aside the orders
dated 1.8.2007 of the State government, because no
hearing was given to the appellants as required u/s 41(3)
F
of the 1973 Act. Even otherwise, when valuable rights
had vested in the allottees, by reason of the allotments
and grant of leases, such rights could not be interfered
with or adversely affected, without a hearing to the G
affected parties. The High rightly directed the state
government to decide the matter afresh after hearing the
appellants. This court reiterated the said direction in its
interim order dated 18.7.2008. Therefore, there is no need
to interfere ~ith the final order of the High Court. [para
H
72
SUPREME COURT REPORTS
[2011) 7 S.C.R.
A 16) (107-C-D-F-G]
Whether completed lease can be cancelled:
2.1. Two lease deeds have been duly registered. In
regard to other lease deeds, which were presented for
B registration, though there is no objection for registration,
registration formalities are kept pending in view of a
· demand by the registration authorities for deficit stamp
duty and registration charges on the basis of circle rate
and the issue is pending before the registration officer
C concerned or in cpurt. As far as NOIDA is concerned,
execution and registration of the leases were complete.d,
and, consequently, possession of the plots was delivered
to the allottees/lessees in April and May, 2007. Each
appellant has also incurred considerable amount for
D preliminary expenditure for the hotel project (in addition
to the premium, location benefit charges, rent, stamp duty
and registration charges) as they were expected to
execute the projects in a time bound manner. [para 19]
[110-H; 111-A-D]
E
2.2. Under private law, a lease governed exclusively
by the provisions of Transfer of Property Act, 1882 could
be cancelled only by filing a civil suit for its cancellation
or for a declaration that it is illegal, null and void and for
the consequential relief of delivery back of possession.
F Unless and until a court of competent jurisdiction grants
such a decree, the lease will continue to be effective and
binding. Unilateral cancellation of a registered lease deed
by the lessor will neither terminate the lease nor entitle a
lessor to seek possession. This is the position under
G private law. [para 21) [111-G-H; 112-A]
2.3. But, where the grant of lease is governed by a
statute or statutory regulations, and if such statute
expressly reserves the power of cancellation or
H revocation . to the lessor, it will be permissible for an
ITC LTD. v. STATE OF UTTAR PRADESH & ORS.
73
Authority, as the lessor, to cancel a duly executed and
A
registered lease deed, even if possession has been
delivered, on the/ specific grounds of cancellation
provided in the statute. [para 22] [112-B]
2.4. In the instant case, NOIDA is an authority
8
constituted under the Uttar Pradesh Industrial Area
Development Act, 1976, for development of an industrial
and urban township (also known as Noida) in Uttar
Pradesh under the provisions of the Act. Section 7
empowers the authority to sell, lease or otherwise C
transfer whether by auction, allotment or otherwise, any
land or building belonging to it in the industrial
development area, on such terms and conditions as it
may think fit to impose, on such terms and conditions
and subject to any rules that may be made. Section 14
empowers the Chief Executive Officer of the Authority to D
resume a site or building which had been transferred by
the Authority and forfeit the whole or part of the money
paid in regard to such transfer, in the following two
circumstances : (a) non-payment by the lessee, of
consideration money or any installment thereof due by
E
the lessee on account of the transfer of any site or
building by the Authority; or b) breach of any condition
of such transfer or breach of any rules or regulations
made under the Act by the lessee. Thus, if a lessee
commits default in paying either the premium or the lease
F
rent or other dues, or commits breach of any term of the
lease deed or breach of any rules or regulations under
the Act, the Chief Executive Officer of NOIDA can res1,Jme
the leased plot or building in the manner provided i~ the
statute, without filing a civil suit. The authority to resume
G
implies and includes the authority to unilaterally cancel
the lease. [para 23] [112-C-H; 113-A]
2.5. NOIDA has not alleged or made out any default
in payment or breach of conditions of the lease or breach
H
74
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A of rules and regulations. Nor is it the case of NOIDA that
any of the appellants is guilty of any suppression or
misstatement of fact, misrepresentation or fraud. Neither
the cancellation of the allotment and the lease by NOIDA
by letter dated 3.8.2007, nor the orders dated 1.8.2007 or
B 8.9.2008 made by the state government refer to any of
these grounds. Therefore, the allotment of commercial
plots by NOIDA to the appellants for setting up hotels is
valid. There is no violation of the regulations or policies
of NOIDA in allotting commercial plots for hotels.
c Therefore, cancellation of allotment is unsustainable. The
cancellation cannot be sustained with reference to the
grounds mentioned in s. 14 of the Act. The grounds
mentioned for cancellation are mistakes committed by
NOIDA itself in making allotments and fixing the premium,
0 in violation of the Regulations and policies of NOIDA by
officers of NOIDA. These are not grounds for cancellation
u/s 14 of the Act. [para 25 and 58] [113-F-H; 114-A; 141D]
2.6. Section 41 (3) of the U.P. Urban Planning and
E Development Act, 1973 shows that the State government,
can examine the legality or propriety of any order of
NOIDA and pass appropriate orders. If the state
government in exercise of its revisional jurisdiction finds
the allotments were irregular or contrary to the
F regulations or policies of NOIDA and directs cancellation,
the allotments become invalid and leases also become
invalid. Consequently, NOIDA can resume possession,
without intervention of a civil court in a civil suit. [para 27]
G
H
[116-B-D]
State of Haryana vs. State of Punjab - 2002 (1)
SCR 227 = 2002 (2) sec 507 and State of Karnataka vs. All
India Manufacturers Organisation - 2006 (1) Suppl. SCR 86
= 2006 (4) sec 683 - held inapplicable.
ITC LTD. v. STATE OF UTTAR PRADESH & ORS.
75
Whether cancellation was on account of change in
A
Government?:
3.1. This is not a case where as a consequence of
change in government, the new government has
reviewed the decision relating to hotel site allotment,
8
merely because it was a decision of the previous
government. Nor is it a case of new policy of the new
government being at variance with the policy of. the
previous government. In the instant case, the allotments
of plots for hotel projects were challenged in two writ C
petitions and in compliance with the direction of the High
Court, the state government had a relook at the matter,
found some irregularities in allotment and, by letter dated
1.8.2007, directed NOIDA to take action to remedy the
irregularities found in the allotments. The orders dated
8.9.2008 were made in view of the final order of the High
D
Court and the interim order of this Court directing
reconsideration. The decision of the state government in
revision, is not based on any different policy, but based
on its finding that the existing regulations and policies of
NOIDA were violated. [para 29] [118-B-D-G-H]
E
Whether the allotments violate the regulations/policies of
NOIDA?
4.1. In the instant case, no amendment was made
changing the land use of the plots in question from
commercial to industrial. The state government on
examination of all the facts in ·its revisional jurisdiction
found that the hotel plots allotted to appellants were part
F
of Sectors 96, 97 and 98 (for five star plots) and other
sectors (for plots for 4 star and 3 star hotels) which were
G
earmarked for commercial use under the NOIDA Master
Plan. It was of the view that in view of tourism/hotels
being declared as an "industry" and the government
policy requiring allotment of plots for tourism/hotels at
industrial rates,. if any plot had to be allotted for a hotel,
H
76
SUPREME COURT REPORTS
[2011) 7 S.C.R.
A the land use of the· said plot had to be changed to
industrial use in the Master plan by adopting the
prescribed procedure under the regulations, before
making the allotment. It was also of the view that if the
plots were allotted for hotel industry, then the
B construction should be as per the NOIDA building
regulations and directions applicable to industries in
regard to FAR, ground coverage, height, setbacks,
construction of building etc. It was also of the view thJt
if plots in commercial areas are to be allotted it could be
c only in accordance with the NOIDA Commercial Property
Management Policy which required all commercial plots
to be allotted on sealed tender or public auction basis.
As NOIDA did not alter the land use of the plots in
question from commercial use to industrial use in the
0 Master Plan nor did it amend the definitions of
commercial use and industrial use in the 1991
Regulations so that hotels would no longer be a
commercial use, but an industrial use, the state
government held that statutory regL.lations and directives
E of NOIDA had been violated in making the hotel plot
allotments. [para 31] [120-D-H; 121-A]
·
Whether plots earmarked for commercial use in
commercial area could be allotted for hotels?:
F
5.1. The NOIDA Building Regulations and Directions
of 2006 make it clear that FAR and the permissible height
of the building is far more advantageous in the case of
commercial hotel buildings when compared to industrial
buildings. It may be mentioned that even when the 1986
G Building Regulations were in force till 4.12.2006, the
provisions for FAR and height of building were far more
advantageous to commercial buildings, when compared
to industrial buildings. [Para 36] [126-E-F]
5.2. Running a hotel or boarding house or a
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS.
77
restaurant is a commercial activity and use of a land or A
building for hotel is commercial use. By no stretch of
imagination, use of a plot for a hotel can be considered
as use of such land for an industrial purpose. An
industrial building is defined in Regulation 3.12(e) of the
2006 Building Regulations as a building in which B
products or materials of all kinds and properties are
manufacture, fabricated, .assembled or processed. As per
the 1991 Regulations, use for a hotel is a commercial use.
[para 37) [126-F-H]
5.3. Having regard to the provisions of the NO.IDA c
(Preparation and Finalisation of Plan) 1991 Regulations,
1991 use of land for hotel cannot be considered as an
industrial use, but will continue to remain a commercial
use. The policy of the state government dated 22.5.2006
cannot override the NOIDA Regulations. If any policy is D
made, intending to give different meaning to the words
'commercial use'· and 'industrial use', that can be given
effect only if the regulations· are suitably amended. [para
38] [127-F-G]
E
5.4. When tourism is given the status of an industry,
it does not mean tourism involves manufacturing,
fabrication, processing or assembling, but it refers to a
service industry. By giving the status of 'industry', the
policy enabled a particular service activity (iii the instant F
case tourism and hotels) to secure ·certain benefits in
allotment of land at concessional prices and certain tax
exemptions. Therefore, the fact that the tourism or hotels
have been given the status of 'industry' will not convert
them into industries, for the purpose of allotment of plots,· G
nor will the use of land by such tourism or hotel industry,
will be an industrial use. It does not also mean that all the
hotels and tourist offices should be shifted from
commercial areas to industrial areas or that hotels or
tourist offices cannot operate in commercial areas, or that H
78
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A
they cannot get allotment of land or building earmarked
for commercial use. Allotment of plots for hotels in a
commercial area is wholly in consonance with the NOIDA
Regulations and Master plan which earmarks areas for
specific land uses like industrial, residential, commercial,
B institutional, public, semi-public, etc. Therefore, the
allotment of plots situated in commercial areas
earmarked for commercial use,. to hotels did not violate
any provisions of the Act or the NOIDA Regulations. It
was not necessary for NOIDA to change the land use of
c plots to be allotted to hotels, from commercial to industrial
use. [para 39-40] [127-H; 128-B-H]
Whether allotment of hotel sites by NOIDA should have
been by inviting tenders/holding auctions?
D
6.1. Allotment of commercial plots is governed by the
NOIDA Policies and Procedures for Commercial Property
Management, 2004. Under the said policy, commercial
properties of NOIDA can be allotted only on sealed tender
basis or by way of public auction. For \his purpose NOIDA
E has to fix a reserve rate and the person who gives the
highest bid/offer above the reserve rate, who is otherwise
eligible, is allotted the plot. The said policy in regard to
the procedure for allotment of commercial properties was
not amended or modified to provide for allotment of
F
commercial properties for hotels at fixed prices. The
allotment of commercial plots at fixed rate was, therefore,
clearly contrary to the said regulations of NOIDA. [para
44] [131-F-H; 132-A]
Home Secretary v. Darshj!t Singh Grewal 1993 (4) SCC
G 25 - relied on
H
Brij Bhusan vs. State of Jammu & Kashmir - 1986 (2)
SCC 354, Sachidanand Pandey vs. State of West Bengal
1987 (2) SCR 223 =1987 (2) SCC 295, and MP Oil Extraction
ITC LTD. v. STATE OF UTIAR PRADESH & ORS.
79
vs. State of MP 1997 (1) Suppl. SCR 671 = 1997 (7) SCC A
592 - distinguihsed
6.2. The state government policy dated 22.5.2006 or
its adoption by tJOIDA on 5.6.2006 did not amend to the
regulations, instructions, policies and procedures of B
NOIDA. If the said Tourism/Hotels development policy
dated 22.5.2006 contained any procedure which was at
variance with the existing regulations or procedures of
NOIDA; such procedures in the policy dated 22.5.2006
could come into effect only by NOIDA amending its C
regulations and Property Management Policies. As per
the 1991 Regulations ahd 2006 Building Regulations,
hotel buildings are commercial buildings and use of land
for hotels is commercial use and any plot allotted for
hotels is a commercial property. Therefore, any allotment D
of a plot for hotels should comply with the NOIDA
Commercial Property Management Policy, 2004. Unless
the said Policy was amended, providing for allotment at
fixed rates, in regard to any sub-category of commercial
plotS, allotment of a commercial property belonging to
NOIDA otherwise than by sealed tender basis or auction E
basis will be an allotment in violation of and contrary to,
the regulations directives and policies of NOIDA. [para 48]
[134-D-G]
6.3. The failure to follow the procedure prescribed in F
the NOIDA Commercial Property Management Policy is a
violation of the policy and such violation has resulted in
loss to the public exchequer. The violation of the
regulations and policies of NOIDA may be unintentional
and a bonafide mistake on account of a mis-reading of G
the requirement of the policy dated 22.5.2006.
Nevertheless it is a violation. If there is a violation of the
regulations and policies of NOIDA in making allotments,
the state government can certainly interfere under its
revisional jurisdiction. [para 49-50] [135-A-F-G]
H
80
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A
(cl Whether the rate charged was erroneous and has led
to any loss?
7.Mere earmarking of particular land for allotment to
hotels which is a commercial activity at industrial plot
8
prices, does not mean there is a loss in respect of an
amount equal to the difference between the rate of
commercial plots and rate of industrial plots. Any decision
to allot plots to hotels at industrial rates, by itself, did not
cause any loss, as such a decision was intended to be
an incentive to attract investment.
But there will be a
c 'IOSS' I if a plot Which is earmarked for Commercial USe,
allotted for a commercial purpose, which is required to
be allotted at commercial rates by tender or auction, is
erroneously charged either at a residential plot rate or an
industrial plot rate. The regulations and policies of NOIDA
D require the allotment of commercial plots to be by sealed
tender or by public auction. As the allotment is of
commercial plots governed by NOIDA Commercial
Property Management Policy, and as the reserve rate
itself was Rs.30000/- per sq.m. it has to be held that
E allotment at Rs.7,400 per sq.m. caused loss and violated
the regulations and p~licy of NOIDA. [para 53 and 55]
[138-D-F; 139-C-E-F]
F
IV. What should be the consequence of the violation?
8.1. The violation occurred on account of a mistake
on the part of the .officers of NOIDA in misinterpreting the
government policy dated 22.5.2006, which has resulted
in lesser allotment price. The allottees were in no way to
be blamed for the mistake. Nor were the allottees guilty
G of any suppression, misstatement or misrepresentation
of facts, fraud, collusion or undue influence in obtaining
the allotments at Rs. 7,400/- per sq.m. According to
respondents, the rate of premium ought to have been
Rs.70,000/- per sq.m. being the market rate, even though
H the reserve rate was only Rs.30,000/- per sq.m. The
ITC LTD. v. STATE OF UTIAR PRADESH & ORS.
81
mistake was found out by the state government, in
A
exercise of revisional jurisdiction. But by "then the
allotment was followed by payment of premium,
execution of the lease deed, and delivery of possession.
By the time the state government decided that the
allotment should be cancelled the transaction was
B
complete in all respects. The fact that the registration of
some of the leases was kept 'pending' in view of a
dispute relating to valuation would not be relevant for this
purpose. [para 58) [141-E-G]
8.2. In public law, breach of statutory provisions, c
procedural irregularities, arbitrariness and mala fides on
the part of the Authority (transferor) will furnish grounds
to cancel or annul the transfer. But before a completed
transfer is interfered on the ground of violation of the
regulations, it will be necessary to consider: whether the
D
transferee had any role to play (fraud, misrepresentation,
undue influence etc.) in such violation of the regulations,
in which event cancellation of the transfer is inevitable.
If the transferee had acted bona fide and was blameless,
it may be possible to save the transfer but that again
E
would depend upon the answer to the further question
as to whether public interest has suffered or will suffer
as· a consequence of the violation of the regulations:
(i) If public interest has neither suffered, nor likely to
F
suffer, on account of the violation, then the transfer
may be allowed to stand as then the violation will be
a mere technical procedural irregularity without
adverse effects.
(ii) On the other hand, if the violation of the G
. regulations leaves or likely to leave an everlasting
adverse effect or ·impact on public interest (as for
example when it results in environmental
degradation or results in a loss which is not
reimbursable), public interest should prevail and the
H
A
B
82
SUPREME COURT REPORTS
[2011] 7 S.C.R.
transfer should be rescinded or cancelled.
(iii) But where the consequence of the violation is
merely a short-recovery of the consideration, the
transfer may be saved by giving the transferee an
opportunity to make good the short-fall in
consideration. [para 63.1] [145-F-H; 146-A-D]
8.3. If the government or its instrumentalities are
seen to be frequently resiling from duly concluded
solemn transfers, the confidence of the public and
C international community in the functioning of the
government will be shaken. To save the credibility of the
government and its instrumentalities, an effort should
always be made to save the concluded transactions/
transfers wherever possible, provided (i) that it will not
D prejudice the public interest, or cause loss to public
exchequer or lead to public mischief, and (ii) that the
transferee is blameless and had no part to play in the
violation of the regulation. [para 63.2] [146-E-G]
E
8.4. If the concluded transfer cannot be saved and
has to be cancelled, the innocent and blameless
transferee ~i..ould be reimbursed all the payments made
by him and all expenditure incurred by him in r~gard to
the transfer with appropriate interest. If some other relief
can be granted on grounds of equity without harming
F public interest and public exchequer, grant of such
equitable relief should also be considered. [para 63.3]
[146-H; 147-A-B]
Syed Abdul Qadir vs. State of Bihar 2008 (17) SCR 917
G = 2009 (3) sec 475 - relied on.
8.5. In the instant case, the allotment of commercial
plots to appellants is valid and legal. The violation is in
making such allotment on fixed allotment rate which is
H less than the rate the plots would have fetched by calling
ITC LTD. v. STATE OF UTIAR PRADESH & ORS.
83
for tenders or by holding auctions. The violation of the
A
guidelines in regard to disposal of commercial plots has
resulted only in a loss of revenue by way of premium and
if this could be made up, there is no reason why the
leases should not be continued. According to the State
Government, the commercial plots would have fetched a
B
premium at rate of Rs.70,000 per sq.mat the relevant time
(October 2006 to January 2007) and NOIDA had been
denied the benefit of that allotment rate, by reason of
allotment of the plots at Rs.7400/- per sq.m. Therefore, the
equitable solution is to give an opportunity to the lessees c
to pay the difference thereby in consideration which
arose on account of wrong interpretation instead of
cancelling the leases and if the appellants are wiling to
pay the balance of premium as claimed by respondents,
. the leases need not be interfered; [para 65-661 [148-B-G]
0
8.6. Therefore, if the appellants (2006-2007 allottees)
are to be extended the benefits offered to allottees under
the 2008 scheme, the rate of Rs.70,000/- per sq.m. (the rate
of 2008 scheme was 10% more than Rs.70,000/- per
sq.m.) claimed by the respondents becomes logical and
E
reasonable. Therefore, there is no reason to reject the
claim of respondents that the allotment rate should be
Rs.70,000/- per s.q.m. The appellants are granted an
opportunity to save the leases by paying the difference
in premium at Rs.62600/- per sq.m. to make it upto
F
Rs.70,000/- per sq.m. [para 69] [151-D-F]
(i) The order of the High Court setting aside the
revisional order dated 1.8.2007 of the State
Government and the consequential orders of G
cancellation of allotment of plots dated 3.8.2007 by
NOIDA, is affirmed.
(ii) The revisional orders dated 8.9.2008 passed by
the State Government cancelling the allotments of
plots to appellants, are set aside.
H
A
8
c
D
E
F
G
H
84
SUPREME COURT REPORTS
[2011) 7 S.C.R.
(iii) The appellants are given the option to continue
their respective leases by paying the premium
(allotment rate) at Rs.70000/- per sq.m. (with
corresponding increase in yearly rent/one time lease
rent), without any location benefit charges. The
appellants shall exercise such option by 30.9.2011.
Such of those appellants exercising the option will
be entitled to the benefits which has been extended
in regard to the allottees under 2008 allotment
scheme of NOIDA:
On exercise of such option, the lease shall
continue and the period between 1.8.2007 to
31.7.2011 shall be excluded for calculating the lease
period of 90 years. Consequently, the period of lease
mentioned in the lease deed shall stand extended by
a corresponding four years period, so that the lessee
has the benefit of the lease for 90 years. An
amendment to the lease deed shall be executed
between NOIDA and the lessee incorporating the
aforesaid changes.
(iv) If any appellant is unwilling to continue the lease
by paying the higher premium as aforesaid, or fails
to exercise the option as per para (iii) above by
30.9.2011, the allotment and consequential lease in
its favour shall stand cancelled. In that event, NOIDA
shall return all amounts paid by such appellant to
NOIDA towards the allotment and the lease, and also
reimburse the stamp duty and registration charges
incurred by it, with interest at 18% per annum from
the date of payment/incurring of such amounts to
date of reimbursement by NOIDA. If NOIDA returns
the amount to the appellant within 31.12.2011, the
rate of interest payable by NOIDA shall be only 11%
per annum instead of 18% per annum. [para 70] [151G-H; 152-A-C-E-H; 153-A-C]
ITC LTD. v. STATE OF UTTAR PRADESH & ORS.
85
Case Law Reference:
A
2002 (1) SCR 227
held inapplicable
para 28
2006 (1 ) Suppl.SCR 86
held inapplicable
para 28
1986 (2) ~cc 354
distinguished
para 42
B
1987 (2) SCR 223
distinguished
para 42
1993 (4) sec 25
distinguished
para 47
1997 (1) Suppl. SCR 671 distinguished
para 52
2008 (17) SCR .917
distinguished
para 64
c
CIVIL APPELLATE JURISDICTION : Civil Appeal No .
. 4561 of 2008.
From the Judgment & Order dated 13.5.2008 of the High
D
Court of Judicature at Allahabad in SLP No. 15375 of 2008.
WITH
C.A. Nos. 4562, 4563, 4564, 4565, 4566, 4567, 4566, 4569,
4570, 4571, 4572 & 4968 of 2008.
E
Gopal Subramanium, SG, T.R. Andhyarujina, Harish N.
Salve, Ranjit Kumar, Maninder Singh, P.P. Rao, S.K. Agarwal,
K.K. Venugopal, Satish Chandra Mishra, Ratnakar Dash,
Ravinder Srivastava, Fakhruddin, Harish Malhotra, Shail Kumar
F
Dwivedi, AAG, L.K. Bhushan, Swaty Malik (for Dua Associates),
Ruby Singh Ahuja, Meenakshi Grover, Manu Aggarwal, Abeer
Kumar, R.N. Karanjawala, _Manik Karanjawala, Simran Brar,
Vedanta Verma (for Karanjawala & Co.), Abhinav Mukerji ,
Gaui'av Sharma, Surbhi Mehta, Bindu Saxena, Aparajita
Swarup, Shailendra Swarup, Neha Khattar, D. Bhadra, Hashmi,
G
Ravinder Agarwal, Arun K. Sinha, Rakesh Singh, Sumit Sinha,
Dheeraj Malhotra, Aslam Ahmed, Babit Singh Jamwal, Gagan
Gupta, D. Bhattacharya, M.K. Singh, Pramod B. Agarwala,
Rajul Shrivastav, Abhishek Baid, Antara, Ameet Singh,
H
86
SUPREME COURT REPORTS
[2011] 7 S.C.R.
A Pareena Swarup, Praveen Swarup D. Mehta, Ameet Singh,
Nikhil Majithia, Anuvrat Sharma, M.K. Choudhary, Tanuj
Khurana, S.K. Verma, R.K. Yadav, Ashutosh Srivastava for the
appearing parties.
B
The Judgment of the Court was delivered by
R.V.RAVEENDRAN, J. 1. The appellants in these
appeals are the lessees of plots allotted by the New Okhla
Industrial Development Authority (for short 'the Authority' or
'NOIDA') for construction of 5 star, 4 star and 3 star hotels in
C Noida, District Gautam Budh Nagar, Uttar Pradesh. The said
Authority was constituted under the provisions of the
U.P.lndustrial Area Development Act, 1Q76 ('Act' for short) for
development of an Industrial and Urban Township of Noida in
Uttar Pradesh, neighbouring Delhi.
D
2. Tourism was granted the status of an "industry" by the
state government during 1997-98, by extending certain
concessions and facilities available to industries. However as
tourism •. in particular hotel industry, had not received the
required encouragement, the state government with the intention
E of attracting capital investment in tourism industry came up with
a policy, as per its communication dated 22.5.2006 addressed
to the Director General of Tourism, Uttar Pradesh. Relevant
portions of the said policy are extracted below :
F
G
H
(1)
Land should be earmarked for hotels by the
concerned Development Authorities while preparing
the Master Plan with the cooperation of the Tourism
Department and such land should be provided for
hotels. Where the Master-Plan stands finalized. the
said procedure has to be followed in respect of
surplus land. In regard to Development Authorities
which have not finalised the Master Plan, steps may
be taken for reserving land for hotels to the extent
possible, near tourist spots/places of tourism with
the assistance of the Tourism Department.
ITC LTD. v. STATE OF UTTAR PRADESH & ORS.
87
-·-~·.
[R.V. RAVEENDRAN, J.]
Whenever the Master Plans of Authorities are
A
revised, the land should be earmarked for hotels
with the assistance of the Tourism Department. The
lands earmarked will be kept reserved for tourism/
hotels for five years from the date of publicizing the
scheme. If no hotel entrepreneur comes forward in
B
five years, the authority shall be free to alter its land
use.
(2)
If change in land use by the Authority is necessary
for giving the earmarked plot to hotel industry, such c
change in land use shall be done by the Authority
in accordance with the rules and the prescribed
procedures on a 'case to case' basis by the
· competent authority.
(3)
D
&
(4)
xxxxx
(5)
Since Tourism including Hotels, has been given the
E
status of Industry, in regard to hotels also plots shall
be earmarked as in the case of industries, and
shall be allotted at industrial rates as in the case
of industrial plots. This policy shall be implemented
in every district of the State.
F
(6)
xxxxx
(7)
They shall be given cent-percent rebate in Sukh
Sadhan Tax for five years from the date of starting
of new hotels.