Holding

The Court held that the State Government remained the lessor of the LIA, RIICO had no statutory authority to act as lessor, the 1979 Rules are not statutory, and the State was duly empowered under Article 138 of RIICO’s AoA to cancel the supplementary leases and permissions, with no breach of natural justice, Rules of Business, or legitimate expectation.

Summary

The Supreme Court examined the status of the Large-Scale Industrial Area (LIA) in Kota, Rajasthan, and held that the land has remained under the uninterrupted ownership and lessor relationship of the State Government, not transferred to RIICO by the 1979 order. It found that the leases granted to JKSL and later to Arfat Petrochemicals were executed under the 1959 Rajasthan Industrial Areas Allotment Rules, and RIICO never acquired leasehold authority over the land. Consequently, the 1979 RIICO Rules were deemed non‑statutory, and the State Government was competent to direct RIICO, under Article 138 of RIICO’s Articles of Association, to cancel the supplementary lease deeds and conversion permissions. The Court ruled that there was no violation of the principles of natural justice, the Rules of Business were complied with, and no legitimate expectation or promissory estoppel could be invoked by the respondent. The cancellation of the supplementary leases and approvals was upheld, while the respondent was permitted to seek fresh approval under the 1959 Rules.

Issues considered

Whether the LIA, Kota has always been under the management and control of the State Government or was transferred to RIICO pursuant to the Government Order dated 18.09.1979.
Whether the 1979 Rules of RIICO are statutory in nature.
Whether the failure to observe the principles of natural justice vitiated the State Government's decision to annul the permissions/approvals granted by RIICO.
Whether the State Government could exercise its powers under Article 138 of RIICO’s Articles of Association to direct cancellation of the supplementary leases.
Whether the Rajasthan Rules of Business were complied with in the cancellation process.
Whether the doctrines of legitimate expectation and promissory estoppel apply in favour of Arfat Petrochemicals.
Whether the appellant unions are entitled to any relief.

Legislation cited

Companies Act, 1956
Constitution of Indias. 138 (as quoted in RIICO AoA), s. 166
Rajasthan Industrial Areas Allotment Rules, 1959s. 11A, s. 12, s. 2, s. 8, s. 9
Rajasthan Land Revenue Act, 1956s. 100
RIICO Disposal of Land Rules, 1979s. 20A, s. 20B, s. 20C
Sick Industrial Companies (Special Provisions) Act, 1985s. 18

Subjects

industrial landleaseholdlessor-lessee relationshipRIICOArticle 138natural justicelegitimate expectationpromissory estoppelRules of Businessstatutory rulespublic interest

Judgment

230 [2023]
SUPREME COURT 7 S.C.R. 230
REPORTS [2023] 7 S.C.R.

A BISHAMBHAR PRASAD
v.
M/s. ARFAT PETROCHEMICALS PVT. LTD. AND ORS.
(Civil Appeal No. 2963 of 2023 Etc.)
B APRIL 20, 2023
[SURYA KANT AND VIKRAM NATH, JJ.]
Industrial Development – Industrial land – Appeals from
judgment passed by the High Court whereby the Writ Petition filed
by Respondent No.1 was allowed – As a corollary, the decision by
C
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 –
D 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
E
/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
F 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
G
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
H of the area – The land was also never allotted to RIICO on a
230
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 231
PVT. LTD. AND ORS.

leasehold basis under Rule 11A of the 1959 Rules – Thus, RIICO A
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
B
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 C
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
D
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 E
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
F
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 G
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
H
232 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 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
B
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 re-
C approaching 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
D
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.
E 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.
F 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
G principles of natural justice to be applied.
Doctrines / Principles – Promissory estoppel – Supervening
public interest acts as a veto against the invocation of promissory
estoppel.

H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 233
PVT. LTD. AND ORS.

Disposing of the appeals, the Court A
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? B

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 C
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 D
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 E
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?
F
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 G
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
H
234 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 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
B
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
C 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]
D 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.
E 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
F 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
G 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
H ‘right’ ever accrued in favour of Respondent No. 1, which the
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 235
PVT. LTD. AND ORS.

State Government could not have despoiled behind its back. A
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
B
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. C
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.
D
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 E
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? F
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 G
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
H
236 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 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.
B
[Para 81][298-B-D]
Whether the Rules of Business were not followed?
5. It appears to this Court that the Rules of Business have
been substantially complied with. The entire Cabinet was called
C 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
D 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
E 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
F 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?
G
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
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 237
PVT. LTD. AND ORS.

the lessor without there being any right to do so, and issued the A
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,
B
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] C
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 D
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] E
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 F
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-F-
H] G
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
H
238 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 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
B
the Appropriate Government, and judicial forums. [Para 107,
106][308-A-C]
7.4. The overall conclusions are summarized in the following
points: –
C 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;

D 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
E 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
F 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
G
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;
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 239
PVT. LTD. AND ORS.

G. There was no violation of the Principles of Natural Justice A
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 B
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 C
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
D
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. E
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 F
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 G
liberty granted. [Paras 104, 108 and 109][308-D-H; 309-A-H; 310-
A-B]
M.G. Pandke & Ors. v. Municipal Council, Hinganghat,
Dist. Wardha & Ors.1993 Supp (1) SCC 708 : [1992] 1
Suppl. SCR 464 and Sachidananda Pandey v. State of H
240 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 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
B 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
C 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.
D (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
E 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
F 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.
G 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
H Suppl. SCR 322 – referred to.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 241
PVT. LTD. AND ORS.

Case Law Reference A
[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 B
[1979] 2 SCR 641 referred to Para 32
[2011] 11 SCR 1094 referred to Para 33
[2010] 5 SCR 1081 referred to Para 33
C
(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
D
[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
E
(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 F
[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 G
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.
H
242 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 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
B 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,
C 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.
D
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,
E 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.
F 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
G
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”)
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 243
PVT. LTD. AND ORS. [SURYA KANT, J.]

to J.K. Synthetics Ltd. (“JKSL”) on 12.09.1958. Following the allotment, A
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.
B
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: C
“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.”
D
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, E
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 – F
(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
G
(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.
H
244 SUPREME COURT REPORTS [2023] 7 S.C.R.

A (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
B
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
C 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
D 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.

E 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.
F
(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.
G
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
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 245
PVT. LTD. AND ORS. [SURYA KANT, J.]

industry owned by the same management. The lessee shall have A
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 B
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. C
(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:- D
(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 E
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. F
(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 G
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. H
246 SUPREME COURT REPORTS [2023] 7 S.C.R.

A (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 sub-
B divided 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.
C
(iv) Provide also that, in case of sick unit as per RBI guidelines,
the lessee with the prior permission of the State Government,
may transfer his right or interest in the leased land sub-
divided under the above proviso on the following conditions:-
(a) That NOC from Financial Institutions/Bank shall be
D
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
E 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
F 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
G 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
H shall be final.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 247
PVT. LTD. AND ORS. [SURYA KANT, J.]

Provided also that the developer of micro, small and medium A
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.”
B
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: C

…
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 D
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
E
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
F
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 G
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”)
H
248 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 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
B
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
C 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
D
the areas to be entrusted to RSIMDC in the said communication.
9. The Government Order dated 18.09.1979 and Joint Director’s
Order dated 28.09.1979, warrant reproduction:
“Government of Rajasthan
E Industry Group-2 Department
No.P-4 56/Industry/1/79Jaipur, Dated: 18.9.79
Order
It has been decided in the meeting dated 18.09.1979 of
Rajasthan State Level Planning andDevelopment Coordination
F Committee that all the industrial areas of Rajasthan shall only be
developed through Rajasthan State Industrial and Mining
Development Corporation. Further, it has also been decided that
the industrial areas operated by the Department of Industry shall
be handed over to Rajasthan State Industrial and Mining
G Development Corporation Ltd., Jaipur w.e.f. 01.10.1979.
Therefore, the State Government hereby issues order to transfer
the handing over of industrial areas operated by the Department
of Industry to Rajasthan State Industrial and Mining Development
Corporation Ltd., Jaipur w.e.f. 01.10.1979.”
H x---------------------------------x--------------------------------------x
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 249
PVT. LTD. AND ORS. [SURYA KANT, J.]

“Office of Joint Director, District Industrial Centre, Kota A
Dated: 28.09.1979
Order
With reference to the State Government Order No. Industry
(Group-I) Department, A.P.4 (56) Industry/1/79 dated 18.09.1979 B
and Director, Department of Industry, Rajasthan, Jaipur DO letter
No.F.2 (182) 9A/2305 dated 21.09.1979, the following Industrial
Areas (Departmental) are hereby transferred to Rajasthan State
Industrial and Mining Development Corporation Ltd., Jaipur w.e.f.
28.09.1979 (Afternoon):
C
1. Large Scale Industrial Area, Kota
2. Small Scale Industrial Area, Kota
3. Lakhava Industrial Area, Kota
4. Nanta Industrial Area, Kota”
D
x---------------------------------x--------------------------------------x
10. The contents of the 1979 Rules, under which RIICO would
carry out its activities in terms of industrial areas allotted to it, that are
important for our purposes may also be noted at this stage:
“20-A. The Managing Director shall have full powers with E
regard to the following:
1. Approval of layout plan of the industrial areas and changes/
modification / revision /subsequent changes therein and all related
matters.
F
2. Changes in status of any of the land at any industrial area e.g.
conversion from industrial land to open land, service land,
commercial land, residential land, conversion from open land to
industrial land, commercial land, residential land, services land,
conversion from service land to industrial, open, commercial,
residential and for other purposes etc., and vice-versa. G
20-B. Sr. DGM / SRMs / RMs are authorized for:
(i) sub-division of plots.
(ii) reconstitution of plots.
(iii) … H
250 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 20-C
xxx xxx xxx
(A) Following riders/conditions will be observed while
considering the change in land use:
B i) No change in land use of allotted plots will be permitted
for residential purpose.
ii) No change in land use of vacant industrial plot would be
allowed. In other words, the allottees of industrial plot
who have not set up an industry will not be permitted
C change in land use for non-industrial purposes. However,
change in land use of part vacant sub-divided plot would
be allowed subject to condition that the leasehold rights
of the sub-divided plot are held by the allottee of
integrated plot.

D iii) No change in land use of allotted institutional plots will
be allowed in the dedicated Institutional Areas for any
other purpose.
iv) No change in land use of plots allotted under the
provisions of Rule 3(E) and 3(W) of RIICO Disposal of
Land Rules, 1979 will be permitted.
E
v) Change in land use of plot allotted for non-industrial use
will be allowed for vacant plot subject to payment of
15% of the prevailing rate of allotment as additional
charges.
F vi) Change of land use of the allotted plots for commercial/
institutional purposes as permitted under this rule will be
considered only for the plots located on the roads having
right of way of 18.00 mtr. and above (total road width).
However, in the land use conversion cases wherein the
criterion of minimum road width of 24 mtr. or above is
G specified in the building regulations/parameters then the
same will be observed while considering the cases of
the land use conversions.
vii) …”

H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 251
PVT. LTD. AND ORS. [SURYA KANT, J.]

11. Even after the Govt. Order dated 18.09.1979, JKSL continued A
to deal directly with the District Collector, Kota. Another lease, extending
JKSL’s utilization of the land in LIA, Kota, was signed in 06.10.1982
between the Collector and JKSL, and not RIICO. During the same period,
the 1959 Rules were amended to introduce provisions that would
effectuate the allocation of industrial areas to RIICO, and to then facilitate
B
the Company administering these lands under the 1979 Rules. Relevant
sub-clauses of Rule 11A inserted on 23.12.1983, and Rule 12 added in
13.07.1982, are particularly important in this context:
“11-A. Allotment of land to the Rajasthan State Industrial
Development and Investment Corporation Ltd. or Rajasthan
Tourism Development Corporation- C

Land shall be allotted to the Rajasthan State Industrial Development
and Investment Corporation Ltd. or Rajasthan Tourism
Development Corporation for setting up and developing Industrial
Areas, on the following terms and conditions :-
D
(i) The land shall be allotted on lease hold basis for a period of
99 years;
(ii) The premium to be charged for the allotment of government
land for industrial purposes shall be equivalent to the
prevailing market price of the same class of agricultural E
land in the vicinity and shall be determined accordingly by
the Colonization Commissioner in the Rajasthan Canal
Project Colony Area and by the Collector concerned in other
areas:
Provided that no premium for allotment shall be charged F
from Rajasthan State Industrial Development and
Investment Corporation where the land has been purchased
by the Rajasthan State Industrial Development and
Investment Corporation or acquired for Rajasthan State
Industrial Development and Investment Corporation after
its incorporation and the compensation is paid by the G
Rajasthan State Industrial Development and Investment
Corporation.
(iii) ….
(iv) The Rajasthan State Industrial Development and Investment
Corporation Ltd. [or Rajasthan Tourism Development H
252 SUPREME COURT REPORTS [2023] 7 S.C.R.

A Corporation] may sub-lease the leased land or part thereof,
for industrial purposes including essential welfare and
supporting services, provided that in the case of Diamond
and Gem Development Corporation to who the land has
already been leased out by RIICO for 99 years, the sub-
lessee i.e. DGDC may further sublet and the terms and
B
conditions and other provisions contained in the rules in so
far as they relate to RIICO shall mutatis mutandis apply
to DGDC also as if the land in question has been let out to
them by State Government and rule 11-A ibid.
Provided further that where land was allotted and converted
C in favour of Rajasthan State Industrial Development and
Investment Corporation Ltd. [or Rajasthan Tourism
Development Corporation] after its incorporation for
industrial purpose but land was used for essential welfare
and supporting services, such allotment [xxx] shall be
D deemed to be for industrial purpose.
(iv-a) The sub-lessee of the Rajasthan State Industrial
Development and Investment Corporation Limited may
further sub-lease the sub-leased land or part thereof on such
terms and conditions as may be mutually agreed between
E such sub-lessee and subsequent sub-lessee. The terms and
conditions applicable to sub-lessee shall also mutatis
mutandis apply to such subsequent sub-lessee.
(v) The Rajasthan State Industrial Development and Investment
Corporation Ltd. [or Rajasthan Tourism Development
F Corporation] may levy and recover such lease rent and other
charges as may be determined by it, in respect of the lands
sub-leased by it;
(vi) The periods of the sub-leases by the Rajasthan State
Industrial Development and Investment Corporation Ltd.
G [or Rajasthan Tourism Development Corporation] shall be
determined by it, but shall not exceed 99 years, in all, in any
case;
(vii) The land shall revert to the Government free of all
encumbrances and without payment of any compensation
in case the Rajasthan State Industrial Development and
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 253
PVT. LTD. AND ORS. [SURYA KANT, J.]

Investment Corporation Ltd. [or Rajasthan Tourism A
Development Corporation] or any of its sub-lessees, use it
for any purpose other than industrial [including essential
welfare and supporting services], or commit breach of any
other condition of the lease or sub-leases;
(viii) The sub-lessees of the Rajasthan State Industrial B
Development and Investment Corporation Ltd. [or
Rajasthan Tourism Development Corporation shall continue
to be governed by all other terms and conditions prescribed
in these rules, and any other analogues rules that may be
promulgated or orders that may be issued, in this behalf by
the State Government. C
12. Allotment of land by Rajasthan State Industrial
Development and Investment Corporation Ltd. [or
Rajasthan Tourism Development Corporation.
The Rajasthan State Industrial Development and Investment
Corporation Ltd. Jaipur or Rajasthan Tourism Development D
Corporation shall be empowered to make allotment in accordance
with the Rajasthan State Industrial Development and Investment
Corporation Disposal of Land Rules, 1979 [or any other rules
framed by the RIICO and RTDC for the purpose] of vacant plots
to entrepreneurs in the Industrial Areas notified by the State E
Government and transferred to the said Corporation. The
Corporation shall also be authorised to execute lease deeds, realize
development charges, lease rent and other dues from the
entrepreneurs to whom plots have already been allotted in
accordance with the provision of these rules, and to take any
consequential or residuary action in regard to the plots allotted the F
entrepreneur.
Provided that the Rajasthan State Industrial Development and
Investment Corporation Ltd. or Rajasthan Tourism Development
Corporation shall be empowered to grant written permission to
the lessee for transfer of rights or interest in the land in respect of G
the plots/land located in the Industrial Areas notified by the State
Government and transferred to the said corporation:
Provided further that any permission granted or action taken for
transfer of rights or interest in the plots/land by the Rajasthan
State Industrial Development and Investment Corporation Ltd. or
H
254 SUPREME COURT REPORTS [2023] 7 S.C.R.

A Rajasthan Tourism Development Corporation. after 13-07-1982
in respect of the plots/land saturated in the Industrial Areas and
transferred to the said Corporation shall be deemed to be valid
under the first proviso to this rule.”
12. In the backdrop of these amendments, confusion arose
B regarding whether Rules 11A and 12 of the 1959 Rules would be
applicable prospectively or retrospectively. In this context, a clarification
was sought by the District Collector, Kota, through a letter dated
15.05.1986. The Collector was referring in this context to the deposit of
lease rent and to whom the rent in question should go:
“Therefore, guide in this regard that the above-mentioned
C
notification dated 13-07-1982, the lease rent etc. of the land allotted
to the factory will be deposited by RIICO or deposited in the
erstwhile tehsil itself s a state item. Please send guidance in this
regard soon. Till the guidance is received the decision has been
taken to deposit the lease amount in the Tehsil. Photocopy of the
D form letter is also being sent from M/s J K Synthetic in this regard.
Signature
District collector,
Kota
Number:- F-8 (198) Revenue/4435-38
E Dt. 15-05-86"
x---------------------------------x--------------------------------------x
13. In response to this, a notification was issued by the State
Government on 23.05.1987, clarifying that Rule 12 of the 1959 Rules,
F added on 13.07.1982, would not apply retrospectively and the lease rent
and other items pertaining to different deeds would remain a state subject.
“Rajasthan Government
Revenue (Group-4) Department
Sr. No. 2 (242) Rajasthan/3/86Jaipur,
G Dated 23.05.1987
Sent:- District Collector, Kota.
Sub:- Regarding development fee, lease rent and service charge
of land allottee to M/s JK Synthetic Ltd. Kota.
Ref:- Your letter 4434 dated 15-05-1986.
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 255
PVT. LTD. AND ORS. [SURYA KANT, J.]

Sir, A
According to the above subject, it is written that the notification
dated 13-07-1982 of this department has not been implemented
with retrospective effect and in earlier cases the amount of lease
rent etc. should be deposited in the tehsil as a state item.
Yours Faithfully B
Katara
Deputy Government Secretary”
x---------------------------------x--------------------------------------x
14. This seemed to remove whatever doubts, if any, and clarified C
explicitly that the amendments to the 1959 Rules, of which Rules 11A
and 12 are important for us to keep in mind, were prospectively applicable.
The management and control of the lands leased out under the 1959
Rules, were apparently not handed over to RIICO. This understanding
was enunciated in a Government Circular dated 12.01.1995 which
indicates that revenue records would reflect that ownership and the right D
to administer the land remained with the State Government. Further,
documents in this regard would be retained by the District Industries
Centre, and not RIICO:
“Government of Rajasthan
Industries (Group-1) Department E
1. Director
Industries Department
Jaipur, Rajasthan
2. All District Collector
F
3. All General Manager
District Industries Centre
Sr. No. 1(75) Industries/1/94 Jaipur, Dated 12th January, 1995
1. Land reserved for industrial area Under section 92 of
Rajasthan Land Revenue Act, 1956 land allotted under G
Rajasthan Industrial Area Allotment Rules, 1959 all records
to be kept with District Industrial Centre. At present files
with RIICO should also be taken back and kept with District
Industrial Centre. In all these cases compliance of terms of
lease deed and monitoring of the same to be under
supervision of District Industrial Centre. H
256 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 2. Before lease deeds are signed for Land allotted under
Rajasthan Industrial Area Allotment Rules, 1959 entry of
change of land use and ownership should be entered into
the revenue records and only then the land should be allotted
under Rajasthan Industrial Area Allotment Rules, 1959.
B 3. After the signing of lease deed the same should be entered
into the revenue records and files pertaining to it should be
kept with District Industries Centre.
4. Lease deed of the allotted land under Rajasthan Industrial
Area Allotment Rules, 1959 is to be executed by District
Collector/ General Manager, District Industries Centre. As
C District Collector/ Managing Director has to initiate action
in cases of violation of terms of lease deed, General
Manager, District Industries Centre to be directly responsible
to bring any or all violations in the notice of Director, District
Industries Centre and District Collector.
D Sincerely,
Special Secretary Industry”
x---------------------------------x--------------------------------------x
15. A circular by RIICO itself, on 27.01.1995, gave RIICO’s own
interpretation of the content and meaning of the Circular issued by
E Industries Department, Government of Rajasthan on 12.01.1995. It
concurred with the stand that files pertaining to lands for which allotment
and leases had been executed under the 1959 Rules, would be retained
by the State Government and not the Corporation:
“Rajasthan State Industrial Development and Investment
F Corporation Ltd.
Udyog Bhawan, Tilak Marg, Jaipur- 302005
Sr. IPI/P-3(24)47/95
Dated:- 27-01-1995
Circular
G
Sub:- Proceeding in respect of land under Rajasthan Industrial
Area Allocation Rules, 1959.
In the industrial areas of the corporation (and those industrial
areas which were later transferred from the Department of
H Industries to the Corporation) in violation of the terms of the lease
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 257
PVT. LTD. AND ORS. [SURYA KANT, J.]

of land allotment. Action is taken by the unit office under the A
Corporation’s Land Disposal Rules. Some such cases (especially
in Bhilwara) have come to notice in which land allocation to
Industrial Units at the state level or district level was done under
the Rajasthan Industrial Area Allocation Rules, 1959 and whose
lease deed was also executed by the District Collector (Industry).
B
But their files were transferred to the unit offices of the corporation
in some such cases proceedings were initiated by the unit office
of the corporation in cases of violation of the terms of the lease
deed. Such proceedings are irregular.
In the above context, the State Government has recently issued
circular dated 12-01-1995, a copy of which is being attached for C
your information. It will be clear from this that under the Rajasthan
Industrial Area Allocation Rules, 1959 the District Industry Center/
Collector (Industry) will have the right and responsibility to take
action in respect of violation of the terms of the lease deed. If you
have any documents under consideration in this regard, please D
return them to the District Industries Centre.
Enclosed Circular Dated 12-01-1995.
Copy:-
1. All Unit offices For information. E
2. RIICO (Headquarters) Officers for information
(S S Chaturvedi)
Advisor (Infra)”
x---------------------------------x--------------------------------------x F
16. In this background, JKSL was continuing its operations in the
leased-out area for several years. However, in the 1990s, JKSL
encountered financial difficulties and was eventually declared a “sick
company” by the Board for Industrial and Financial Reconstruction
(“BIFR”) on 02.04.1998, under the Sick Industrial Companies (Special G
Provisions) Act, 1985 (“SICA”). Following the classification of JKSL as
a sick company, the matter was referred to the Appellate Authority for
Industrial and Financial Reconstruction (“AAIFR”). During this period,
JKSL signed a Memorandum of Understanding with Respondent No. 1
as part of its plan to sell the Kota unit of its operations. Section 18 of
H
258 SUPREME COURT REPORTS [2023] 7 S.C.R.

A SICA1 envisages certain measures being taken for revival of the company
that has fallen on difficult times and been declared a “sick” company.
17. The prospect of a demerger of the certain units owned by
JKSL became the preferred strategy for effectuating the recuperation
of the company. Respondent No. 1 emerged as the favoured entity to
B take over these units and also entered into two tripartite settlements on
09.10.2002 and 22.10.2002, involving JKSL and two worker’s unions, to
pay off part of the dues of the former labourers of JKSL, as well as
offer them employment under Respondent No. 1. The relevant terms
and conditions of the agreement dated 09.10.2002, are as follows:
C “IV. TERMS AND CONDITIONS
xxx xxx xxx

1
18.Preparation and Sanction of Schemes —
(1) Where an order is made under sub-section (3) of section 17 in relation to any sick
D industrial company, the operating agency specified in the order shall prepare, as
expeditiously as possible and ordinarily within a period of ninety days from the date of
such order, a scheme with respect to such company providing for any one or more of
the following measures, namely:—
[(a) the financial reconstruction of the sick industrial company;]
(b) the proper management of the sick industrial company by change in, or take over
of, management of the sick industrial company;
E [(c) the amalgamation of— (i) the sick industrial company with any other company, or
(ii) any other company with the sick industrial company; (hereafter in this section, in
the case of sub-clause (i), the other company, and in the case of sub-clause (ii), the sick
industrial company, referred to as “transferee company”;]
(d) the sale or lease of a part or whole of any industrial undertaking of the sick
industrial company;
[(da) the rationalisation of managerial personnel, supervisory staff and workmen in
F accordance with law;]
(e) such other preventive, ameliorative and remedial measures as may be appropriate;
(f) such incidental, consequential or supplemental measures as may be necessary or
expedient in connection with or for the purposes of the measures specified in clauses
(a) to (e).
…
(6A) Where a sanctioned scheme provides for the transfer of any property or liability
G of the sick industrial company in favour of any other company or person or where such
scheme provides for the transfer of any property or liability of any other company or
person in favour of the sick industrial company, then, by virtue of, and to the extent
provided in, the scheme, on and from the date of coming into operation of the sanctioned
scheme or any provision thereof, the property shall be transferred to, and vest in, and
the liability shall become the liability of, such other company or person or, as the case
H may be, the sick industrial company.]
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 259
PVT. LTD. AND ORS. [SURYA KANT, J.]

2. It is further agreed that while APPL will take over all the liabilities A
pertaining the workmen/employees of Sir Padampat Research
Centre, as determined as per Annexure B even though the SPRC
unit will not be transferred to APPL and will be retained by JKSL.
3. The APPL will operate the Kota Complex .in the name and
style of Arfat petrochemical Pvt. Ltd. (APPL) as a new company B
and new employer. They will issue their appointment letters as
per requirements in a phased manner subject to suitability and
covering terms of employment etc. The dues of employment under
JKSL would be settled as full and final payment as summarized in
Annexure-A.
C
xxx xxx xxx”
The rest of the agreement contains numerous clauses that are in
furtherance of the absorption of the workers into Respondent No. 1’s
operations that were to start after the demerger of defunct units owned
by JKSL. The second agreement of 22.10.2002 also contained similar D
provisions.
18. Eventually, AAIFR sanctioned a rehabilitation scheme for JKSL
on 23.01.2003. The scheme referred to and validated the tripartite
agreements/settlements entered into by JKSL, Respondent No. 1, and
the different labour unions. It was noted that the liabilities of the workers E
had been taken on by Respondent No. 1, alongside its obligation under
those agreements to revive the industrial operations at Kota. A Joint
Venture & Shareholder Agreement (hereinafter, “JV”) was signed
between Respondent No. 1 and JKSL on 13.05.2003, which cemented
the former’s obligation to discharge the liabilities outstanding on LIA,
Kota, as well as the dues of the labourers. The AAIFR scheme was F
finalized on 07.01.2005, and it included an obligation on the part of
Respondent No. 1 to honour the earlier tripartite agreements with the
JKSL workers unions. Part of the rehabilitation scheme involved hiving
off 227.15 acres of the land in the LIA, Kota, away from JKSL and to
Respondent No. 1. G
19. Respondent No. 1, as part of the aforementioned JV between
itself and JKSL, continued to coordinate with the State Government on
shifting the lease on LIA, Kota, away from JKSL and to itself. A letter
to this effect was sent by Respondent No. 1 to the State Government on
07.01.2006, seeking the demarcation and transfer of the lease over LIA,
H
260 SUPREME COURT REPORTS [2023] 7 S.C.R.

A Kota, to Respondent No. 1 solely, in light of the AAIFR scheme. The
relevant part of this letter is reproduced below:
“…This has reference to meeting with your goodself on
04/01/2006 regarding Bifurcation and Transfer of Lease Hold Land
of J.K. Synthetics Limited, Kota to M/s Arafat Petrochemical
B Pvt. Ltd…
…
We request your goodself for an expeditious approval-
(c) for split of lease deed dated 06/10/1982 in to 2 portions
C – one covering area of 37.16 acres pertaining to SPRC which is
not to be transferred as the same will continue in the name of
JKSL and another for balance land.
(d) Permission to transfer to APPL all the remaining land
except the aforesaid 37.16 Acres.
D We once again request your good self to kind accord you
approval in the above matter…”
20. As per AAIFR’s recommendations, the State Government
through the Collector proceeded to execute 7 fresh lease deeds on the
same date in favour of Respondent No. 1. The 7 deeds signed on
17.03.2007, collectively handed over the leasehold on the land to
E
Respondent No. 1, in the following segments:
i) 1st Deed: Plot No. 5A of 48.40 acres, meant for setting up
a nylon plant and colony;
ii) 2nd Deed: Plot No. 5B of 7.15 acres, for conducting R&D
F on acrylic fibre;
iii) 3rd Deed: Plot No. 5C of 14.45 acres, for setting up a nylon
tyre and cord plant;
iv) 4th Deed: Plot Nos. 16, 17, & D of 30.56 acres, for setting
up a polyester staple fibre plant;
G v) 5 th Deed: Plot Nos. 23-30, A-C, of 70.66 acres, for
construction of CDPH roads;
vi) 6th Deed: Plot Nos. 19-21B, 32B, 33, 34 & F of 26,16 acres,
for setting up another acrylic/staple fibre plant;
vii) 7th Deed: Plot Nos. 19-21A, 22, 31, 32A & F1 of 29.77
H acres, for setting up a synthetic staple fibre plant.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 261
PVT. LTD. AND ORS. [SURYA KANT, J.]

The terms of the lease deeds were largely pari materia. The A
relevant portion, contained in each of these fresh leases granting the
land to Respondent No. 1, and relevant for our purposes, are as follows:
“NOW THIS INDENTURE WITNESSETH as follows:
…
B
(iii) That the lessee shall set up, construct, erect and build on the
plot only such buildings, sheds and structures as are required by
him for setting up the industry aforesaid and also such other
residentialquarters as are required for those: engaged or to be
engaged in the said factory.
(iv) The lessee agrees not to construct or build any structures or C
buildings 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 industry promotion aforesaid of or which the said plot
has been leased to the lessee.”
What is clear from this series of documents is the paramountcy D
of using the land for its specific intended purpose, and for there to be no
deviation from that industrial purpose for putting up commercial structures
of any kind. The overall objective behind the lease, despite having
changed hands from JKSL to Respondent No. 1, remained unaltered.
21. The AAIFR scheme contained various requirements that E
Respondent No. 1 was mandated to fulfil. Among these included the
revival of the industrial units at the site which JKSL had no longer been
in sufficient financial health to operate. Further, as also necessitated by
the scheme, the aforementioned tripartite settlement agreements between
Respondent No. 1, JKSL, and the workers unions was to be given effect F
to. The settlement agreements fixed the compensation payable to the
workers at Rs. 40.42 Crores, and also envisaged that the workers in
question would receive employment in the industrial units that would,
henceforth, be managed by Respondent No. 1. The relevant portions of
the AAIFR scheme are worth reproduction:
G
“9 Identification of JV Partner
9.1 The Arfat Group are identified by JKSL after an extensive
search undertaken by the Company with the help of M/s Access
International (Access) a Boston based consultancy Company…
H
262 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 9.2 Disposal of individual assets of Kota units was not possible or
practical without resolution of the on-going labour disputes and
settlement of labour liabilities. One the important consideration
for revival was assumption of the labour liability by the prospective
buyer as workers dues were very high and without settlement of
the same revival was not possible. Therefore, in order to evaluate
B
the offers received. It was decided by the Company in consultation
with Access to analyse them on the basis of Quantum offer no. of
units being restarted total no. of jobs being created and willingness
of the higher regarding resolution of labour disputes and assumption
of labour liabilities.”
C 22. Pursuant to the AAIFR scheme, Respondent No. 1 initially
restarted one of the units for manufacture of acrylic fibre. The remaining
6 units remained comatose. Unfortunately, the sole unit that was
rejuvenated suffered a purported fire in October, 2007, after only a brief
period of operation and just 6 months after the transfer lease deeds
D were signed, which resulted in the shutdown of the factory. Consequently,
the overall objective of reviving the industrial units in the LIA, Kota, was
frustrated. The offshoot of this was a decade of litigation primarily
involving the workers unions and Respondent No. 1, regarding the latter’s
failure to revive the industrial units as contemplated in the AAIFR
scheme.
E
23. The workmen initiated proceedings before multiple forums
including the National Company Law Tribunal, the Rajasthan High Court,
the BIFR and AAIFR, in their attempt to recover their dues and have
the rehabilitation scheme implemented. Among these litigations was an
SLP, and resultant Review Petitions filed before this Court concerning
F directions issued by AAIFR to Respondent No. 1. The directions were
in favour of the workmen and in furtherance of the rehabilitation scheme
that AAIFR had previously approved. However, in appeal, the Rajasthan
High Court ruled that AAIFR had no jurisdiction over Respondent No. 1
as it was not a “sick company” under SICA. This was further appealed
G to the Supreme Court. The SLP by the Appellant Unions and others,
was dismissed by this Court on 18.11.2016, and the subsequent Review
Petitions were also rejected on 17.08.2017 and 06.03.2018, respectively,
affirming that no directions could be issued to Respondent No. 1 but also
noting that the AAIFR plan should be executed. Some of the other
proceedings by individuals or groups of workers, remain pending in various
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 263
PVT. LTD. AND ORS. [SURYA KANT, J.]

forums and do not require recounting for our purposes. The relevant A
part of the order dismissing the SLP on 18.11.20162 is as follows:
“12. Several contentions have been raised by both sides during
the course of hearing of these Appeals which we have not
adverted to as they are not relevant for adjudication of the
dispute in these appeals. We express no opinion on the B
jurisdiction of BIFR under other provisions of the Act. It is
open to the BIFR to review the implementation of the
Sanctioned Scheme and pass suitable directions.”
24. In the midst of the legal tussle between Respondent No. 1 and
the different workers unions, the former made an attempt to have an
affordable housing scheme developed on the LIA, Kota, under the Chief C
Minister Jan Aavas Yojana. This application was made, once again, to
the District Collector, Kota. By this point, the industrial units in the area
had been lying dormant for over 10 years. However, this application to
be considered under the Jan Aavas Yojana was unsuccessful.
25. Subsequently, after having dealt directly with the Collector for D
over a decade on matters pertaining to LIA, Kota, Respondent No. 1
eventually sought a change of land use from industrial to commercial, to
the extent of 23% of the land it possessed under the lease. However,
this proposal was submitted to RIICO instead of the Collector.
Respondent No. 1 shifted its position, having previously liaised with the E
District Collector for the execution of lease deeds in 2007 or for the Jan
Aavas Yojana, to now coordinating with RIICO instead. The proposals
were meant to effectuate the sub-division and change of land under the
1979 Rules. The proposals were considered by the Land Planning
Committee constituted by RIICO on 03.10.2018 and approval was granted
in-principle for the sub-division and conversion, as recorded in the Minutes F
of the Meeting issued by RIICO on 05.10.2018. One day after this, on
06.10.2018, the Rajasthan State Assembly Elections process began and
the Model Code of Conduct came into effect. The Infrastructure
Development Committee of RIICO followed suit on 08.10.2018 and
issued its own approval in this respect.
G
26. Following the completion of the process, supplementary lease
agreements were executed between RIICO and Respondent No. 1 on
22.11.2018. Another supplementary deed for merger of plots was also
signed between these parties on 13.12.2018. The conversion subsequently
2
CA Nos. 8597-8599 of 2010. H
264 SUPREME COURT REPORTS [2023] 7 S.C.R.

A came under scrutiny after the change of government in the 2018
Rajasthan elections. The newly elected Council of Ministers constituted
a Cabinet Committee on 01.01.2019 to review decisions made by the
prior ruling government in the 6 months period preceding the elections.
While this internal consideration was unfolding, RIICO directed its unit
offices to cease grant of permissions for conversion of use of land under
B
Rule 20(c) of the 1979 Rules on 27.05.2019, until further notice. The
Kota branch of RIICO, however, proceeded to allow sub-division of the
LIA, Kota, as requested by Respondent No. 1, on 05.07.2019. The
mistake became clear only after the sub-division was sanctioned,
necessitating the issuance of withdrawal orders by the office at Kota in
C respect of both the conversion of land and the sub-division of the plot, on
22.07.2019 and 25.07.2019, respectively.
27. Meanwhile, the internal deliberations by the Cabinet Committee
set up by the State Government extended till 03.08.2019, when the
Committee resolved to cancel all the permissions and approvals granted
D to Respondent No. 1 in respect of conversion of the property at LIA,
Kota.
28. The State Government directed RIICO, by exercising the
powers it believed were vested in it under Article 138 of RIICO’s Articles
of Association, to carry out the requisite steps to annul the approvals
provided to Respondent No. 1. RIICO issued orders on 11.10.2019 and
E
14.10.2019, to finally cancel the permission for conversion of land, as
well as cancel the supplementary leases themselves that had been
subsisting in the name of Respondent No. 1.
29. Respondent No. 1 was aggrieved by these actions and made
various representations to the State Government, as well as RIICO,
F seeking to have its lease and possession over the land restored. Eventually,
it filed a Writ Petition before the High Court challenging the cancellation
of its lease and the permission for conversion of the use of the land. The
arguments raised included:
(a) Article 138 of the AoA of RIICO did not have statutory force
G and a third party could not be adversely impacted by decisions
made or directions issued under it;
(b) Even if Article 138 had statutory force, the manner in which
the approvals and permissions accorded to Respondent No. 1 were
quashed and set aside, was arbitrary, unreasoned, and
H unconstitutional due to falling afoul of Article 14 of the Constitution;
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 265
PVT. LTD. AND ORS. [SURYA KANT, J.]

(c) Respondent No. 1 had not even been issued a show cause A
notice nor given a chance to defend itself. Thus, the Principles of
Natural Justice had not been followed in the process of cancelling
the allotment;
(d) The procedure under the 1979 Rules had to be followed, as
the LIA, Kota had been transferred to RIICO under the 18.09.1979 B
Order.
30. The State Government and its authorities objected to the
maintainability of the petition on the ground that Article 138 of the AoA
of RIICO were not statutory in nature and, hence, a Writ could not be
filed in this regard. Further contentions were raised defending the C
cancellation of the allotment and permission for conversion of the land,
on the ground that the decision was taken in contravention of the Model
Code of Conduct that had come into effect during the period when the
Land Planning Committee and Infrastructure Development Committee
of RIICO had decided to allow Respondent No. 1 to convert 23% of the
land to commercial use. D
31. While the matter was initially placed before a learned Single
Judge, the then Chief Justice of the High Court decided to transfer the
file to a Division Bench presided over by him. The various Appellant
Unions which had been aggrieved by the non-implementation of the
AAIFR scheme were impleaded into the proceedings. Eventually, the E
Division Bench heard detailed arguments and passed the impugned
judgment, concurring with Respondent No. 1’s position. It held:
i) The question as to whether RIICO could be directed under
Article 138 of the AoA to carry out actions which may
abrogate the fundamental rights of a third party was of vital F
importance. It required the Division Bench to adjudicate
the dispute, rather than a Single Judge;
ii) The decision made by the State Government to direct
RIICO to cancel the allotment of land to Respondent No. 1
was without following due procedure, and hence, a Writ G
under Article 226 of the Constitution was maintainable
against this measure;
iii) The Government Order dated 18.09.1979, allocated all
industrial areas in the State of Rajasthan to RIICO for the
purpose of overseeing and facilitating their development. H
266 SUPREME COURT REPORTS [2023] 7 S.C.R.

A Whatever course of action was taken in respect of these
lands from this point onwards would have to be under the
1979 Rules. These Rules had been completely ignored by
the State Government and its authorities while quashing the
supplementary leases and the conversion;
B iv) The conversion of land was permissible under the Master
Plan for the LIA, Kota. RIICO, given it was now in charge
of these lands, had the authority under the 1979 Rules read
with the Master Plan to allow conversion of land, if it was
deemed necessary and appropriate;
v) There was no reason assigned by the Cabinet Committee
C for its conclusion on 03.08.2019 that the leases required
cancellation. The Supreme Court in Mohinder Singh Gill
v. The Chief Election Officer3 had laid down that reasons
behind certain actions had to be included in the final decision
itself and could not be subsequently supplemented via
D affidavits. A change of government could not be a
permissible catalyst for abrogation of the decisions made
by the previous government. Further, Respondent No. 1
was kept in the dark about the deliberations throughout and
had no forum to advocate its case for why the allotment
and conversion of land were legally sound;
E
vi) The claim that the permission for conversion of the land
from industrial use to commercial use violated the Model
Code of Conduct was suspect, as no other similarly granted
approvals had been set aside on this basis. It appeared that
Respondent No. 1 had been specifically singled out and
F targeted;
vii) Respondent No. 1 had already spent significant amounts
on the development of land, based on the supplementary
lease deed and conversion that had been granted earlier.
Hence, the doctrine of legitimate expectations and estoppel
G would operate against the State and its authorities from
reneging on this arrangement;
viii) The workers unions had failed to put in an appearance during
the arguments, and their submissions could not be considered
as a result.
3
H (1978) 1 SCC 405.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 267
PVT. LTD. AND ORS. [SURYA KANT, J.]

Consequently, the High Court quashed the decision of the Cabinet A
Committee and the steps taken by RIICO to cancel the allotment to
Respondent No. 1. The Appellant Unions, RIICO, and the State, have
now come before us in appeal in this batch of matters.
B. ARGUMENTS
32. We have heard submissions from learned Senior Counsels, B
Mr. Dushyant Dave and Dr. Manish Singhvi, representing the State of
Rajasthan and RIICO, respectively. They sought to point out the flaws
in the impugned judgment through the following arguments:-
i) The land allotted to Respondent No. 1 in LIA, Kota, always
remained with the State Government and was never C
allocated to RIICO despite the Order dated 18.09.1979
regarding industrial lands being moved under the control of
RIICO. Various communications and activities by RIICO
over the years indicate that it was also aware of this fact.
Hence, RIICO had no authority to consider the proposal by D
Respondent No. 1 for changing the usage of the land from
industrial to commercial;
ii) When the fresh set of lease were executed with Respondent
No. 1 pursuant to the AAIFR scheme and rehabilitation
plan for JKSL, the agreements were signed by the District E
Collector, Kota. RIICO was not involved in this process.
Respondent No. 1 had, in fact, acted all along in a manner
which acknowledged the District Collector and the state
revenue authorities were always managing the affairs of
the subject - area;
F
iii) The land in question was to be regulated through the 1959
Rules rather than the 1979 Rules. This was because, as
RIICO and Respondent No. 1 had already accepted through
their conduct over decades, that the State Government
retained control over LIA, Kota. Hence, only the State of
Rajasthan through the District Collector, Kota, and not G
RIICO, could have considered the proposal for conversion
of the land and the execution of supplementary lease deeds.
Rule 12 of the 1979 Rules clearly envisaged that the newly
inserted provisions would be applicable only to leases that
were signed prospectively. In this instance, JKSL had
H
268 SUPREME COURT REPORTS [2023] 7 S.C.R.

A already been put in charge of the area in LIA, Kota, under
the 1959 Rules;
iv) Rule 8 of the 1959 Rules clearly states that the land in
question is not to be used for any purpose other than the
objective of industrial development. It is only with express
B authorization of the State Government that the usage can
be changed. Rule 9 of the 1959 Rules mandates that
permission of the government be taken when seeking
subdivision of plots as well. Hence, this procedure had to
be followed mandatorily by Respondent No. 1 if it desired
the alteration of use of land and corresponding subdivision;
C
v) RIICO has never raised any demand for lease rent or service
charges from Respondent No. 1. From the series of
documents and communications, as already reproduced
earlier, it is evident that RIICO had the same opinion
regarding its own lack of authority and jurisdiction over the
D land in question. The land remained with the State
Government at all times;
vi) Respondent No. 1 had abjectly failed to fulfil its obligation
to revive the industrial units at LIA, Kota. The mandatory
terms of the rehabilitation plan by AAIFR had not been
E complied with and, as per SICA, the consequence of this
default had to be the winding up of the company;
vii) The permission for conversion of the land from industrial to
commercial was meant to benefit Respondent No. 1 and
frustrate the purpose for which the land had been allotted
F in the first place. The prior government and Respondent
No. 1 had acted in concert to hastily push through the
process for changing the usage of the land, in defiance of
the AAIFR scheme as well as the Model Code of Conduct,
causing a loss to the public exchequer and stymying the
G industrial development of the Kota region;
viii) The new government was well within its rights to examine
the decisions by the previous ruling class, as held by this
Court in Krishna Ballav Sahay & Ors. v. Commission of
Enquiry & Ors.4 Further, Article 138 of the AoA of RIICO
4
H [1969] 1 SCR 387.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 269
PVT. LTD. AND ORS. [SURYA KANT, J.]

explicitly gave power to the State of Rajasthan to issue A
directions to it for carrying out certain measures. This
included the cancellation of the supplementary lease deed
with Respondent No. 1 and the setting aside of the
permission to convert the land’s usage. A similar clause to
Article 138 is contained in the Articles/Memorandum of
B
almost every government controlled entity, and has been
upheld in Management of Fertilizer Corporation of India
v. Their Workmen 5 and subsequently affirmed by a
Constitution Bench in Sukhdev Singh & Ors. v. Bhagat
Ram & Ors.6;
ix) As an arguendo, even if the land was deemed to be allocated C
to RIICO as per the Order dated 18.09.1979 and the
Corporation was the competent authority to issue approvals
and permissions vis-à-vis LIA, Kota, there was still no
infirmity in the directions issued by the State of Rajasthan
under Article 138 of the AoA. The State Government D
retained complete discretion to order RIICO to act according
to its diktats in public interest;
x) RIICO itself had subsequently taken a decision to not allow
any conversion in terms of the usage of land. This
deliberation took place following the filing of Public Interest E
Litigations before the Rajasthan High Court. The final
decision to freeze any further conversions of this nature
was issued on 05.07.2019 to the State Government and all
RIICO unit offices across the state. Following this, the
permissions granted to Respondent No. 1 for changing the
land to commercial utilization and sub-division of the plot F
for this purpose, were both withdrawn on 22.07.2019 and
25.07.2019, respectively. The supplementary lease deed was
then cancelled on 11.10.2019;
xi) There is no guarantee contained anywhere in the 1959 Rules,
or even the 1979 Rules for that matter, against a change in G
policy by the Government. It is entirely permissible for the
government to act in accordance with changing realities,
especially when there is a clear case of public property
5
[1969] 2 SCR 706.
6
(1975) 1 SCC 421. H
270 SUPREME COURT REPORTS [2023] 7 S.C.R.

A being utilized for private gain, with the collusion of the
erstwhile Executive Authorities and the management of
RIICO;
xii) There can be no question of estoppel against statute. The
money spent by Respondent No. 1 on the land would not
B validate the contravention of the Master Plan for the LIA,
Kota. The Plan clearly contemplated a purely industrial area
which was undermined by Respondent No. 1’s desire to
set up commercial enterprises instead.
xiii) Respondent No. 1 had failed to show in concrete terms,
C the exact investments it had carried out on the land. Its
equitable entitlement to seek restoration of the earlier
decision permitting conversion of the land had not been
proved from the records. Even if there was some merit to
such claim, this Court in Motilal Padampat v. State of
Uttar Pradesh7 had ruled that estoppel would be overridden
D by supervening public interest and provisions of binding
statutes and/or rules;
xiv) The transfer of the case from the Single Judge to the Division
Bench by the then-Learned Chief Justice was unjustified
and irregular under the Rules of the High Court of Judicature
E for Rajasthan, 1952. On this procedural ground as well, the
impugned judgment was unsustainable.
33. On the contrary, learned Senior Counsels, Mr. Mukul Rohatgi
and Mr. A.N.S. Nadkarni, appearing for Respondent No. 1, have
attempted to rebuff the submissions by the State of Rajasthan and RIICO
F in the following terms: -
i) The Cabinet Committee decision dated 03.08.2019 was
solely taken to single out Respondent No. 1 and cancel the
permissions/approval accorded by RIICO during the regime
of the earlier government. The reasons for the cancellation
G were never provided and do not exist in either the file or
the final decision. The grounds for cancellation were never
mentioned subsequently either. All the reasons eventually
cited by the Appellants before the High Court, were merely
afterthoughts, such as:
7
H (1979) 2 SCC 409.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 271
PVT. LTD. AND ORS. [SURYA KANT, J.]

a) The Model Code of Conduct being in force; A
b) The sub-division of plots of change of use could not have
been granted by RIICO and the Corporation did not possess
the ability to transfer lands;
c) Only the Collector had the power to grant permissions.
B
ii) The Model Code of Conduct is irrelevant, as the application
for conversion of the land to commercial, and permission
for sub-division, was filed in August 2018, much before the
election process even began. In between, there were several
other decisions taken by the same Land Planning Committee
and Infrastructure Development Committee none of which C
were cancelled. Even in regard to the Land Planning
Committee, several other proposals were considered and
granted during the same period when Respondent No. 1’s
application was pending. There were around 70 cases
approved in September 2018, as well as December 2018, D
apart from Respondent No. 1’s. None of these have been
subsequently annulled by the Appellants, clearly showing
that this is an act of pure arbitrariness and the arguments
raised on the Model Code of Conduct are nothing but a
lame excuse;
E
iii) There are 30 other instances of conversion in which RIICO
has acted as the competent authority to grant permission,
from 1996 to 2019. Out of these 30, 3 of the cases are from
LIA, Kota. These three cases involved conversion of 100%
of the land to commercial usage, as opposed to Respondent
No. 1 which only sought conversion of 23%. The residential F
colonies that have been raised by Respondent No. 1 have
not been objected to by the State. Further, as recently as in
2022, RIICO has been demanding lease rent and service
charges from Respondent No. 1, clearly showing that it is
in charge; G
iv) The Collector had only signed the initial transfer lease deeds
of 2007 with Respondent No. 1 because the lease deeds in
question were not fresh leases, but were executed for the
remainder of the term of the already subsisting lease in
favour of JKSL. The AAIFR scheme referred to the consent
H
272 SUPREME COURT REPORTS [2023] 7 S.C.R.

A of the state government, which also necessitated the
Collector’s participation. This was the only reason for the
2007 deeds to have been executed with the Collector and
not RIICO;
v) It is very clear that the land in LIA, Kota, had been
B transferred and allotted to RIICO and the Corporation was
considered to be the sole authority, even by the State
Government, which was capable of dealing with the land.
The Order dated 18.09.1979 by the State Government states
that industrial areas are to be transferred, pursuant to which
the Joint Director of Industries allotted the land to RIICO
C on 28.09.1979 by an order.
vi) Under Section 100 of the Rajasthan Land Revenue Act,
the State Government had framed the 1959 Rules, which
were meant to govern the allotment of industrial plots across
the state and the grant of leases over these areas. The
D 1959 Rules, were purposefully amended with insertion of
Rules 11A & 12. Rule 11A states that industrial lands are to
be allocated to RIICO for industrial development, and under
Rule 12, the Company is empowered to further distribute
land via leases to different entrepreneurs for development.
E Therefore, the allotment to RIICO is a statutory allotment,
validated by the Rajasthan Land Revenue Act, and the 1959
Rules;
vii) Respondent No. 1 acted pursuant to the approvals granted
by RIICO and, hence, Appellants are now bound by the
F principles of Promissory Estoppel and Legitimate
Expectations. Respondent No. 1 has invested around Rs.
137.75 Crores in the LIA, Kota, and has also paid off the
labour dues of the Appellant Unions, as agreed upon in the
tripartite settlement agreements;

G viii) As Respondent No. 1 has acted on the presumption that
RIICO had validly approved the conversion of land and the
sub-division of the plots, there is no scope for cancellation
subsequently. Promissory estoppel squarely applies in favour
of Respondent No. 1, and the Motilal Padampat (Supra)
decision cited by Appellants is, on the contrary, beneficial
H to Respondent No. 1’s position;
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 273
PVT. LTD. AND ORS. [SURYA KANT, J.]

ix) The alteration in the ruling government cannot be the reason A
behind the cancellation of a decision taken by the earlier
government. Such behaviour is arbitrary, discriminatory, and
untenable in law. This Court in State of Tamil Nadu v.
Shyam Sunder8 had held that an instrumentality of the State
cannot have a case whereby it pleads contrary to the position
B
adopted by the State itself. Policies adopted in regard to
certain projects should not keep altering as per changing
governments. In a matter of governance of a State or with
the execution of a decision taken by the prior ruling
establishment, when the decision in question does not involve
political philosophy, the succeeding government is required C
to see it through to its logical conclusion;
x) Governments cannot blow hot and cold and are not permitted
to approbate and reprobate. RIICO had already taken a
detailed decision, in compliance with the 1979 Rules which
are the applicable regulations. They cannot resile from this D
on flimsy grounds which are merely afterthoughts.
Governance is a continuous process and under the
Constitution, there is no general power of review available
to any government to examine, set aside, and recall the
decisions of the earlier government. The Appellants’
reliance on Krishna Ballav Sahay (Supra) is also E
misplaced as that case concerned an inquiry being
conducted on the basis of serious allegations of corruption
against government officers/ministers. It was only after
these facts were ascertained did the government reverse
the decision by the earlier ruling party. In the present F
scenario, no such allegations have been made and no inquiry
was conducted either;
xi) The Appellants were also obliged to follow the Rules of
Business framed under Article 166(3) of the Constitution
when implementing their policies, which was once again G
bypassed entirely. Rule 5 of the Rules states that the
Governor, acting on advice from the Chief Minister, will
allocate business of the government to various Ministers
and assign specific departments to their portfolio. Rule 9
8
(2011) 8 SCC 737. H
274 SUPREME COURT REPORTS [2023] 7 S.C.R.

A goes on to require the Minster in charge of a particular
department to be primarily responsible of carrying out
business under that department. Under Schedule I of the
Rules of Business, the Minister for Industries is to take
decisions in matters connected to RIICO and industrial
matters such as the cancellation of the supplementary lease
B
deeds and/or revocation of permissions. The final decision
of 03.08.2019 which directed the cancellation in question
did not include participation by the Minister for Industries.
Further, the decision needed to be placed before the Chief
Minister for authentication before it was finally issued. This
C Court, in MRF v. Manohar Parrikar & Ors.9 has cemented
the mandatory nature of the Rules of Business;
xii) Article 138 of the AoA of RIICO could not have been
resorted to for directing cancellation of the supplementary
lease deed and permission for using the land for commercial
D purposes. Such clauses in the Articles are for generally
setting out the policy of the Company and not to make
decisions that affect the rights of third parties. The cases
relied upon by the Appellants to uphold the ability to issue
orders to RIICO under Article 138 of its AoA, are unhelpful
as the facts in those instances dealt with indoor
E management of the corporations in question. The action(s)
taken in the present case do not concern an internal matter
of RIICO, but rather the abrogation of validly procured
permissions and vested rights that had accrued to
Respondent No. 1. An elaborate procedure for cancellation
F is already provided under the 1979 Rules, which needed to
be followed if such drastic measures were to be taken.
Unbridled and unfettered powers cannot be granted to the
State Government to issue instructions to RIICO in this
manner as it may be used brazenly and without paying heed
to any procedure under law. The State Government has
G abused this alleged power which it claims to have been
always vested in it;
xiii) This Court has already held in B. Rajagopala Naidu v.
State Transport Appellate Tribunal, Madras & Ors.10
9
(2010) 11 SCC 374.
H 10
(1964) 7 SCR 1.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 275
PVT. LTD. AND ORS. [SURYA KANT, J.]

that powers such as those provided under Article 138 of A
RIICO’s AoA cannot be used as appellate powers to take
vengeance against specific entities. Such provisions do not
accord a carte blanche authority to quash earlier decisions
taken by RIICO, for oblique and unspecified reasons.
Moreover, such an action is clear evidence of malice in
B
law, as it is blatantly arbitrary and discriminatory, as described
by this Court in Kalabharati Advertising v. Hemant
Vimalnath Narichania & Ors.11;
xiv) The Order of 18.09.1979 had stated, in unequivocal
language, that all industrial areas would be transferred to
RIICO and this included the LIA, Kota. This decision was C
given effect to by the Joint Director on 28.09.1979 and the
area over which Respondent No. 1 retained a lease came
under the control of RIICO. The 1979 Rules were brought
into force in the same year, and were meant to provide
guidelines on the basis of which RIICO would carry out its D
functions, including permissions for sub-division, change of
land use, and allotment of industrial areas.
xv) The State Government has, in fact, taken a stand in SLP
(Civil) No. 8552 of 2021, filed in respect of neighbouring
land situated in the same industrial area, whereby it accepts E
the transfer of such lands to RIICO has already taken place.
It has acknowledged that RIICO has stepped into the shoes
of the State Government and the Corporation provides
services that are similar to that of a civic body or municipal
corporation in the areas managed by it. That is why Rule
12 was specifically inserted into the 1959 Rules, to accord F
all powers that the State Government would have had, to
RIICO as well. Hence, the Corporation steps into the shoes
of the government;
xvi) Further, as the 1979 Rules were mentioned in the 1959 Rules
in Rule 12, the 1979 Rules were specifically incorporated G
into them. The 1979 Rules were not only given statutory
recognition by virtue of this mention in the 1959 Rules, but
additionally, all the allotments done under the 1979 Rules
also received statutory endorsement and recognition;
11
(2010) 9 SCC 437. H
276 SUPREME COURT REPORTS [2023] 7 S.C.R.

A xvii) In a similar matter concerning the Bharatpur Industrial Area,
an allotment had been made by the Collector to Perfect
Potteries. The lease stated that no use other than industrial
use would be permissible. However, subsequently, the
industrial area was transferred to RIICO and the
Corporation granted permission for subdivision and
B
conversion of the land. The Collector had terminated the
lease as a result. The matter was referred to a High-Level
Committee of the State of Rajasthan presided over by the
Chief Secretary and comprising of the Advocate General,
Principal Secretary of Law, Principal Secretary of
C Industries, and others. The Committee held that by virtue
of the insertion of Rule 12 of the 1959 Rules, the actions
taken by RIICO were valid and the Collector’s order of
termination was to be set aside. The relevant extracts of
the Committee’s decision are as follows:
D “DECISION OF THE COMMITEE
After due deliberations, Members of the Committee
were of the opinion that RIICO Is having undisputed
jurisdiction. In the matter of all those industrial areas
which were notified/developed by the State Government
E and came to be transferred to RIICO vide order dated
18.09.1979 and in view of subsequent amendment in
Rajasthan Industrial Area Amendment Rule, 1959 vide
notification dated 13.07.1982 by Insertion of rule 12.
In view of the above, it was decided by the
committee that the order dated 22.08.2019 of Collector
F Bharatpur needs to be set aside. For this purpose, RIICO
should file a revision petition before the Govt. of
Rajasthan in Revenue Department through Pr. Secretary,
Revenue for consideration of the matter.
The meeting ended with a vote of thanks to the chair.
G
Sd/-
(Hukam Singh Rajpurohit)
Secretary to Government
& Member Secretary”
H x----------------------------x-------------------------------x
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 277
PVT. LTD. AND ORS. [SURYA KANT, J.]

xviii) There has also been an admission on oath before the A
Rajasthan High Court in another similar matter.12 The
affidavit submitted before the High Court lays out the
following in terms of the State’s position: a) RIICO has
been authorized to act in accordance with the 1979 Rules
in respect to industrial plots. The Rules themselves have
B
acquired statutory force by virtue of reference to these
Rules in statutory legislations/enactments. Given this, no
other authority would be able to interfere in the sphere of
activities that are regulated under the 1979 Rules; b)
RIICO’s own authority derives from Rules 11A and 12 of
the 1959 Rules, by virtue of which the State Government C
had vested the responsibility to develop industrial areas upon
the Corporation; (c) RIICO, as a public sector undertaking,
would not have been able to function in the manner in which
it does if express authorization had not been provided.
xix) The change of use of the land was permitted under the D
Master Plan. As the 1979 Rules were applicable by virtue
of the 18.09.1979 Order transferring industrial lands to
RIICO, the Corporation’s only obligation was to ensure that
the sub-division and alteration of the utilization of the land
was in consonance with said Rules read with the Master
Plan. Moreover, the State of Rajasthan itself issued a circular E
on 19.03.2003 allowing conversion of industrial land for
other purposes in order to promote economic growth, in
light of the recession that had taken hold at the time;
xx) The initial agreement for transfer of the lands from JKSL
to Respondent No. 1 was signed by the Collector, not F
because the State Government still had control, but rather
because those were the requirements under SICA and the
AAIFR scheme. Rule 9(iv) of the 1959 Rules had required
a lessee which was declared a “sick company” under SICA,
at that time JKSL, to seek permission from the State G
Government for transfer of its lease rights to a third entity.
The permission was manifested through the District
Collector, Kota, under the aegis of the AAIFR scheme.
12
Annex. R-47: D.B. WP (Civil) No. 19102 of 2018, “Ravindra Sharma v. State of
Rajasthan & Ors.” – Add. Affidavit on behalf of Respondents, by Mr. Rajendra Singh,
Dy. Comm., JDA, Jodhpur. H
278 SUPREME COURT REPORTS [2023] 7 S.C.R.

A This was not a fresh lease, but only an extension of the
already existing period of the subsisting lease. Hence, this
was not an acknowledgement of any kind by Respondent
No. 1 that the State of Rajasthan retained control over the
land and was merely a procedural requirement that was
being fulfilled under the 1959 Rules, due to JKSL’s status
B
as a sick company. Respondent No. 1 has consistently acted
in consonance with the approach that RIICO has control
over the land and the corresponding power to take further
measures in respect of it, such as for conversion of use and
sub-division of plots;
C xxi) The letter dated 12.01.1995 relied upon by Appellants as a
proof that the title over the land was retained by the State
Government was later overridden by a letter dated
31.03.1995. By virtue of this letter, the files of transferred
lands were directed to remain with RIICO;
D xxii) The Jan Aavas Yojana scheme under which Respondent
No. 1 had applied to the Collector, was purely because it
was mandatory to do so under the Scheme itself. In no
way does this act as an acceptance that the Collector and
the State Government were in charge of the land in LIA,
E Kota. In fact, the Collector had sought the opinion of RIICO
in the matter, clearly showing the Collector’s own conviction
that consent needed to be sought from the Corporation;
xxiii) The lack of a show cause notice or an opportunity to
Respondent No. 1 to defend itself is fatal to the Appellants’
F case. Swadeshi Cotton Mills v. Union of India13 had made
clear the need for principles of natural justice to be followed
even for administrative decisions. A process for cancellation
was provided already under Rule 24(1) of the 1979 Rules,
which had to be adhered to.14
13
G (1981) 1 SCC 664.
14
24. CANCELLATION
The Corporation shall have the right to cancel the plot allotment after issuing a 45 days
registered AD show cause notice to the allottee by the concerned Sr. DGM / Senior
Regional Manager / Regional Manager for breach of any of these rules, condition of
allotment letter or terms of lease agreement. The powers of plot cancellation shall vest
with the Unit Head for all categories of the land/plot allotments except for the land/
H plots allotted under Rule 3(W).
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 279
PVT. LTD. AND ORS. [SURYA KANT, J.]

xxiv) The Appellants are making unfounded allegations regarding A
placement of the Writ Petition filed by respondent No.1
before Division Bench of the High Court. The Chief Justice
being Master being Master of the Roster, was competent
to enlist any matter before a Single or Division Bench.
Challenge to Article 138 of AoA was an issue of paramount
B
public importance, hence the case was rightly placed before
a Division Bench.
xxv) The arguments regarding the failure of the AAIFR scheme
were irrelevant and beside the point. This Court in its earlier
order in the context of the petitions filed by the workers
unions had already affirmed that SICA would not apply to C
Respondent No. 1, given it was not a “sick company”. The
land in question had been obtained as part of the AAIFR
scheme by way of auction, but that did not mean that the
BIFR or AAIFR itself would have jurisdiction over
Respondent No. 1. D
xxvi) As far as the SLPs filed by the Appellant Unions were
concerned, the Supreme Court’s earlier orders on 17.08.2017
and 06.03.2018 dismissing their Review Petitions had put a
quietus to that issue. Respondent No. 1 had paid the workers
their agreed upon dues under the AAIFR scheme and no E
further directions could be issued to it in terms of the
rehabilitation plan.
34. Learned Senior Counsels, Mr. Dave & Dr. Singhvi, provided
the following rebuttals in their rejoinder, besides reiterating their earlier
arguments once again: - F
i) The act of the new government, following elections, going
into the decisions of the earlier ruling party is legally
In show cause notice the allottee would be asked to show cause why the plot allotment
should not be cancelled, lease deed of the plot should not be terminated and plot should
not be taken in possession, in view of the default committed by the allottee. In the
notice it would also be clarified that, the said default shall be condoned only on payment
G
of interest/retention charges or removal of breach of terms and conditions/ its
regularisation. In case of no response or reply to the show cause notice without
commitment for deposition of dues, for regularisation of delay / default or removal of
breach of terms and conditions by the allottee, allotment of plot should be cancelled
terminating the lease-deed of plot.
… H
280 SUPREME COURT REPORTS [2023] 7 S.C.R.

A acceptable. Respondent No. 1 had failed to prove the
alleged mala fide intent behind the cancellation of the
supplementary lease deed and the quashing of the approval
for sub-division and conversion of the usage of land;
ii) There is no fetter on the power provided under Article 138
B of the AoA of RIICO to issue directions to the Corporation.
In terms of the requirement for reasons to be provided,
Justice Chinnappa Reddy’s opinion in Sachidananda
Pandey v. State of West Bengal & Ors.15 outlined that the
process, deliberations, and minutes of the meeting preceding
a decision would be taken into account when ascertaining
C the reason for a particular measure to be taken. Contrary
to Respondent No. 1’s position, the entire rationale did not
have to be laid out in the conveyance of the final verdict;
iii) It is only the subsequent government that is competent and
capable of looking into the decisions taken by the previous
D regime. The current government had all the authority and
rights to examine earlier decisions, and annul them if
irregularities were discovered. The State Government has
acted in pursuance of its mandate and obligation in this
matter;
E iv) RIICO is nothing more than a company and the 1979 Rules
are framed under its AoA. These Rules are subject to
statutory mandates and requirements. The 1979 Rules are
nothing more than a set of internal regulations of RIICO
and are not comparable to the 1959 Rules that were enacted
under the Rajasthan Land Revenue Act, 1956. This Court
F in Life Insurance Corporation of India v. Escorts Ltd.
& Ors.16 has emphasized the character of such companies
and the conduct of their business via the AoA and internal
rules made in furtherance of the Articles;
v) Rule 11A is the appropriate provision in the 1959 Rules to
G govern the usage and utilization of the land. Since the land
in question was never transferred to RIICO, RIICO could
not have acted under the 1979 Rules at all. The State
Government always continued to manage and control the
subject land under the 1959 Rules.
15
(1987) 2 SCC 295.
H 16
(1986) 1 SCC 264.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 281
PVT. LTD. AND ORS. [SURYA KANT, J.]

35. The Appellant Unions have also made the following submissions A
in support of the rights of the former employees of JKSL:-
i) The unions have challenged the initial transfer lease deed
to Respondent No. 1 signed in 2007. This petition has been
pending before the HC and its outcome will have a knock-
on effect on all other proceedings initiated thereafter. This B
includes the SLPs before us;
ii) The Appellant Unions had accepted the AAIFR scheme
only on the basis that the industrial units at LIA, Kota, would
be restarted. The workers had been owed over Rs. 250
Crores in dues, of which they had agreed to take only a C
small portion as the rehabilitation plan envisaged the
restarting of the units and consequent employment for them.
As the plan had abjectly failed and Respondent No. 1 was
unsuccessful in restarting production, the labourers were
owed the entirety of their dues.
D
C. ANALYSIS
36. With the assistance of the exhaustive and thorough submissions
before us, we may now proceed to examine the controversy before us.
C.1. Whether the LIA, Kota has been always under the
management and control of the State Government or it was E
transferred to RIICO pursuant to Government Order dated
18.09.1979?
37. From the recounting of the arguments raised on behalf of all
the parties, the first question that arises for our determination is whether
the LIA, Kota continued under the uninterrupted administrative control F
of the State Government, or whether it was transferred to RIICO. To
uncover the answer, it is necessary to recapitulate the facts which have
already been referred to in extenso. There is broadly no dispute that
Government land was allotted to JKSL on a leasehold basis in the year
1958. The said allotment was made by the State Government in
G
furtherance of its industrial policy, read with the power traceable to the
Rajasthan Land Revenue Act, 1956. Section 100 of the said Act
empowers the State Government to frame rules for regulating the sales
of land in industrial and commercial areas, as well as the power to impose
other conditions like annual assessment etc. In exercise of that power,
the State Government formulated the 1959 Rules. The allotment of land H
282 SUPREME COURT REPORTS [2023] 7 S.C.R.

A to JKSL, thus, for all intents and purposes, came to be regulated under
the 1956 Act read with the 1959 Rules. As an offshoot of the allotment
of land, the State Government and JKSL entered into a bilateral relationship
of lessor and lessee, respectively. It may be beneficial to refer to Rule 2
of the 1959 Rules at this stage which provides that the land in industrial
area may be allotted on lease hold basis for 99 years “…by the State
B
Government in the industrialist department….”. Rule 4 contemplates
that every such lease may be renewed for further period of 99 years at
the option of the lessee.
38. We may now advert to Rule 8 of the 1959 rules, as reproduced
in para 6, which mandates that the land given for industrial purposes
C 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. Rule 8 further empowers the State Government
to grant permission for establishment of industry other than for which
the land was initially allotted.
D 39. In this context, the stipulations contained in the first lease
deed executed by State Government in favour of JKSL in 1967 are
relevant. Under this lease, the lessee was obligated to use the allotted
land for the prescribed industrial purpose, failing which the land was
liable to be reverted “to the lessor”. This leads to the inescapable
conclusion that the first formal lease of 1967 was strictly in conformity
E with provisions of the 1959 Rules.
40. 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
F 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. This jural
relationship was further cemented between the State and Respondent
G
No.1 when 7 fresh lease deeds were executed in favour of Respondent
No.1 by the State Government through the Collector, Kota. The details
of these 7 leases have been provided in para 20 of this order. It is pertinent
to mention that the terms and conditions contained in these fresh lease
deed executed on 17.3.2007 were broadly the same as were incorporated
H while leasing out the subject land originally to JKSL.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 283
PVT. LTD. AND ORS. [SURYA KANT, J.]

41. What clearly emerges from this sequence of events is that A
from 1958 to 2007, and further onwards till the present date, 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
B
supplementary conveyance deed.
42. We may now address some of the important intervening
circumstances, events and Government Orders and circulars, heavily
relied upon by Respondent No. 1. It is a matter of record that Government
of Rajasthan issued an order on 18.09.1979 (reproduced in para 9) where
under it was decided that “all the industrial areas of Rajasthan shall only C
be developed through Rajasthan State Industrial and Mining Development
Corporation”. The Government Order further declared that “the industrial
areas operated by the Department of Industry shall be handed over to
Rajasthan State Industrial and Mining Development Corporation Limited,
Jaipur w.e.f. 1.10.1979”. In purported compliance of the above-mentioned D
Government Order dated 18.09.1979, the Joint Director, District Industrial
Centre, Kota issued an Order on 28.09.1979 (also reproduced in para 9)
thereby transferring certain industrial areas to the Corporation including
“Large Scale Industrial Area, Kota”.
43. There is an unending debate between the parties with respect E
to the scope and import of Government Order dated 18.09.1979 and
whether it was given effect to qua the land allotted to JKSL in LIA,
Kota. It should be remembered that Respondent No. 1 had not appeared
on the scene at the time when the Government Order in question was
passed.
F
44. Firstly, we propose to analyse the purpose and effect of
Government Order dated 18.09.1979. As we have been able to
understand, all the industrial areas of Rajasthan were to be transferred
to RSIMDC for the purpose of “development” of those areas. The
industrial areas were to be handed over only for this specific purpose. In
other words, RSIMDC was entrusted with the task of a Local Authority G
to carry out development activities in the industrial areas like “(a)
construction of roads; (b) supply of electricity; (c) supply of water; (d)
sewerage system; (e) all related amenities for the workers employed in
industrial areas” etc. etc.
H
284 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 45. It is equally relevant here to appreciate that a lessee is liable
to pay Development Charges for the allotted industrial land under Rule 3
of 1959 Rules. After subjecting the allottees with the levy of Development
Charges, the State Government as a lessor was obligated to provide all
amenities in the industrial area on the principle of quid pro quo. Whether
such services and amenities are developed by the State Government at
B
its own expense or through an agency hired for that purpose, is completely
inconsequential, insofar as the subsistence of the relationship of lessor –
lessee is concerned.
46. We say so also for the plain reason that the expression ‘handed
over’ contained in the Government Order dated 18.09.1979 does not
C and cannot be construed as the transfer of ownership of the industrial
land from State Government to RSIMDC or RIICO. The word “transfer”
used by the Joint Director in his Order of 28.09.1979 has to be read in
conjunction with the Government Order dated 18.09.1979 which
unequivocally says that handing over of the industrial areas was only for
D development purposes.
47. It appears to us that ownership or title of an immovable property
cannot be transferred save and except by way of an act of legislation or
a validly executed instrument of transferring such ownership rights. The
omnibus administrative order issued for a purpose specified therein cannot
E be stretched to construe an implied transfer of ownership. There is no
hidden treasure lying underneath Government Order dated 18.09.1979
to infer a non-existent consequence like vesting of lessor’s rights in RIICO
in respect of LIA, Kota.
48. Thus, we have no hesitation to hold that a relationship of lessor
F - 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.
49. Another strong plank of argumentation advanced on behalf of
Respondent No.1 is founded upon Rules 11A and 12 of the 1959 Rules
G which came to be inserted by way of amendment in the years 1982 &
1983. We accordingly propose to minutely analyse both the Rules.
50. Rule 11A says that land “shall be allotted” to RIICO and
Rajasthan Tourism Development Corporation “for setting up and
developing industrial areas” on the terms and conditions prescribed
therein. The Rule provides that the land shall be allotted to RIICO on a
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 285
PVT. LTD. AND ORS. [SURYA KANT, J.]

leasehold basis and RIICO shall be free to sub-lease the land on agreed A
terms and conditions. RIICO has been further authorised to levy and
recover such lease rent and other charges as may be determined by it, in
respect of lands sub-leased by it. The period of sub-leases shall not
exceed 99 years. Clause (viii) of Rule 11A noticeably states that the
land shall revert to the State Government, free from all encumbrances
B
and without payment of any compensation, in case RIICO or its sub-
lessees use it for any purpose other than industrial, or commit breach of
any other than condition of the lease or sub-leases. Rule 11A,
contemplates allotment of land to RIICO on lease hold basis for a period
of 99 years, with further authorization to execute sub-leases strictly for
industrial purposes. The State Government has expressly reserved its C
rights to secure the land back free from all encumbrances if RIICO or
its sub-lessees fail to use the allotted land for industrial purposes or commit
a breach of any other condition. The expression “shall be” signifies
allotment of land to RIICO in the future. Rule 11A is not attracted in
respect of the lands which had already been leased out prior to insertion
D
of this rule on 23.12.1983.
51. We have no reason to doubt that Rule 11A, per se, does not
advance the cause of Respondent No. 1 for the reason that Respondent
No. 1 has merely stepped into the shoes of JKSL and lease deeds were
executed in the year 2007 directly by the State Government in favour of
Respondent No.1, without resorting to Rule 11A, namely, through RIICO. E
Had it been a case of execution of fresh lease deeds in favour of
Respondent No. 1 by RIICO in 2007, it could be convincingly argued
that such allotment was in furtherance of the authorization conferred on
RIICO under Rule 11A. The facts do not bear out such an eventuality.
52. That apart, the plain wording of Rule 11A clearly shows that F
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 G
and further economic progress. The State remains the overarching power
in this dynamic and RIICO remains subservient to it.
53. As regard to Rule 12 (reproduced in para 11 of this order), it
may be seen that the same is compartmentalised in two parts. The first
part is a consequence of Rule 11A, namely, if the State Government has H
286 SUPREME COURT REPORTS [2023] 7 S.C.R.

A allotted land to RIICO on lease hold basis under Rule 11A, in that case,
this segment of Rule 12 empowers RIICO “to make allotment” in
accordance with its 1979 rules of “vacant plots” to entrepreneurs in the
industrial areas notified by the State Government and transferred to
the said Corporation.
B 54. To be more specific, the first part of Rule 12 authorises RIICO
to execute sub-leases in respect of land which has been leased out to it
by the State Government under Rule 11A of the 1959 Rules.
55. The second part of Rule 12 says that RIICO “shall also be
authorised” to execute lease deeds, realize development charges, lease
C rent and other dues from the entrepreneurs to whom plots had already
been allotted under the 1959 Rules. In our considered opinion, the second
part is an enabling provision whereunder RIICO has been authorised to
execute lease deeds or realize development charges/lease rents and other
dues from pre-1982 group of allottees. A plain reading of this provision
makes it abundantly clear that RIICO would execute lease deeds only in
D a case where land had been principally allotted but a formal agreement
between a lessor and lessee or lessee and sub-lessee is yet to be
executed. If a piece of land had already been allotted and a formal lease
deed stood executed between the State and such an allottee, there arises
no occasion to execute a second lease deed in respect of the same
E leased out land. In that case, only development charges and lease rent
etc. are to be recovered by RIICO for the reasons which we have
already explained, and which is merely a cost factor towards the
development activities to be undertaken by RIICO as per the Government
order dated 18.09.1979. The second part of Rule 12 also does not fortify
the claim of Respondent No. 1 for the reasons that:-
F
(a) lease deeds in favour of JKSL had been already executed in
the year 1967 before Rule 12 came into force;
(b) no part of the land in dispute was ever allotted to RIICO
under Rule 11A of the 1959 Rules;
G (c) Respondent No. 1 is a substitute of JKSL and that is why
fresh lease deeds were executed in favour of Respondent No. 1
only for the remainder of the period of the already subsisting lease;
(d) There was no independent lessor – lessee relationship between
the State Government and Respondent No. 1 except that
H Respondent No. 1 substituted JKSL pursuant to AAIFR order;
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 287
PVT. LTD. AND ORS. [SURYA KANT, J.]

(e) the non-applicability of second part of Rule 12 was reinforced A
when transfer lease deeds were executed in favour of Respondent
No.1 in 2007 by the State Government through the Collector and
not by RIICO;
(f) We are informed that even lease rent has also been deposited
by Respondent No. 1 continuously for years post 2007 with the B
Tehsildar, Kota, and not with RIICO; and
(g) There has been no formal agreement as lessee and sub-lessee
between RIICO and Respondent No. 1 with the concurrence of
State Government.
56. Another argument raised by Respondent No. 1 was that the C
transfer lease deeds were signed pursuant to the requirement of Rule
9(iv) of the 1959 Rules, which necessitates a sign off by the State
Government for transfer of land from one company to another, when
the entity that possessed the lease is declared a sick company. Rule 9 in
its entirety has been reproduced in para 6 of this Order.
57. We are, once again, unmoved by this submission. If the 1959 D
Rules were not even applicable to begin with, there would have been no
need to comply with Rule 9(iv) at all. Rather, the very fact that compliance
with this provision was necessary, is sufficient indication that Respondent
No. 1 was fully aware that the State Government had ownership, title,
and control of LIA, Kota. E
58. Having held so, there is no alternative but to conclude that the
relationship of lessor and lessee between State and Respondent No. 1
has 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 by-pass the State Government and assume the
F
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 G
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.
H
288 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 59. Not that we are dependent in any manner upon the
understanding of the Government Order dated 18.09.1979 or Rules 8, 9,
11A and 12 of the 1959 Rules, by the State Government or RIICO.
Irrespective of their inconsistent stand taken before different forums
with respect to the status of RIICO qua LIA, Kota, we have drawn our
conclusion primarily on the basis of plain reading of the said Government
B
Order and the 1959 Rules. We, however, hasten to add that the
correspondence/circulars issued by the State Government and RIICO
subsequently, which we have reproduced and discussed in paragraphs
12 to 15 of this judgment, unambiguously fortify our construction of both
the Government Order and the 1959 Rules, referred to above.
C C-2. Whether the 1979 Rules of RIICO are statutory in
nature?
60. The question regarding whether the 1979 Rules formulated
by RIICO are of statutory character, is more or less rendered academic
as the fate of these appeals does not hinge upon this issue in view of our
D holding in Part C-I. Nevertheless, since the High Court has opined on
this issue, we propose to answer the question so that there remains no
uncertainty in the minds of State authorities, RIICO or the leaseholders.
61. It must be noticed at the outset that RIICO is not a statutory
body. The Company was brought into being under the Companies Act,
E 1956 by the State of Rajasthan, which holds 100% shares in it. The
distinction between companies that are brought into being “by” an Act,
and those created “under” an Act, is that 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.
F 62. This was fleshed out further in S.S. Dhanoa v. Municipal
Corporation, Delhi & Ors.17which held:
“9. Corporation, in its widest sense, may mean any association
of individuals entitled to act as an individual. But that certainly
is not the sense in which it is used here. Corporation established
G by or under an Act of Legislature can only mean a body
corporate which owes its existence, and not merely its
corporate status, to the Act. For example, a Municipality, a
Zilla Parishad or a Gram Panchayat owes its existence and
status to an Act of Legislature. On the other hand, an
17
H 1981 (3) SCC 431.
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 289
PVT. LTD. AND ORS. [SURYA KANT, J.]

association of persons constituting themselves into a Company A
under the Companies Act or a Society under the Societies
Registration Act owes its existence not to the Act of Legislature
but to acts of parties though, it may owe its status as a body
corporate to an Act of Legislature.”
63. The importance of this difference in our context was B
summarized concisely in Executive Committee of Vaish Degree College
v. Lakshmi Narain18:
“10…In other words the position seems to be that the institution
concerned must owe its very existence to a statute which would
be the fountainhead of its powers. The question in such case C
to be asked is, if there is no statute, would the institution have
any legal existence. If the answer is in the negative, then
undoubtedly it is a statutory body, but if the institution has a
separate existence of its own without any reference to the
statute concerned but is merely governed by the statutory
provisions it cannot be said to be a statutory body…” D

64. What we have, very clearly, is a company incorporated “under”
the Companies Act, 1956. RIICO does not owe its existence to a statute,
but is rather created under the Companies Act and is subject to its
provisions. It is only governed by the provisions of the Companies Act
and not created by it. The 1979 Rules, which learned Senior Counsel E
Mr. Rohatgi had argued contained a “statutory flavour” were issued
pursuant to Article 93 of RIICO’s AoA. It is difficult to see how the
status of “statutory rules” may be accorded to regulations that are brought
into existence under the Articles of a non-statutory company.
65. Respondents have cited M.G. Pandke & Ors. v. Municipal F
Council, Hinganghat, Dist. Wardha & Ors.19 to make their case
regarding the 1979 Rules being statutory in nature. In that case, the
State of Maharashtra had come out with the “Secondary School Code”
via executive directions. The State then promulgated the Maharashtra
Secondary Education Boards Act, 1965, and the associated Maharashtra G
Secondary Education Boards Regulations, 1966. Within the latter, a
reference had been made to the Secondary School Code and it was
mandated that schools comply with the Code under Regulation 19(7)(xvi).
When a conflict between the Secondary School Code and the bylaws of
18
1976 (2) SCC 58.
19
1993 Supp (1) SCC 708. H
290 SUPREME COURT REPORTS [2023] 7 S.C.R.

A the Respondent Municipal Council arose, this Court had to determine
the legal status of the Code and proceeded to conclude as follows:
“12. Learned Counsel for the appellants has raised the
following contentions in support of his case:
1. Regulation 19(7)(xvi) of Maharashtra Regulations which
B is a statutory regulation makes it obligatory for the Municipal
Council to follow the provisions of the Code. The Code itself
may be non-statutory but the mandate to follow the Code flows
from Regulations 19(7)(xvi) of the Maharashtra Regulations
which is mandatory. The field having been occupied by the
C Code under the statutory-mandate, no bye-law to the contrary
could be framed by the Municipal Council.
…
13. When the Code was enforced in the year 1963, the Act
and Regulations were holding the field in Vidarbha Division.
D Under the Act and the Regulations the age of superannuation
being 60 years, the Code, while fixing 58 years as the age of
superannuation for rest of Maharashtra, permitted the
Vidarbha teachers to superannuate on attaining the age of
60 years. The Maharashtra Act which came into force on
E January 1, 1966 repealed the Act and the regulations. In
Baboolal’s case (AIR 1974 Bom 219) the High Court referred
to the repealing and saving section of the Maharashtra Act
and came to the conclusion that there was no provision
thereunder to save the regulations. Assuming that the
Regulations under the Act stood repealed, the Code which
F was framed by the Maharashtra Government continued to
hold the field. It is not disputed by the learned Counsel for
the appellants that the Code by itself is not statutory and is in
the nature of executive instructions. But he strongly relies on
Regulation 19(7)(xvi) of Maharashtra Regulations and
G contends that the said Regulation makes it obligatory for the
Municipal Council Hinganghat to follow the provisions, of
the Code. It is for the State Government to frame the Code in
whatever’ manner it likes but once the Code is in operation
its provisions have to be followed by the Municipal Council
Hinganghat under the mandate of Regulation 19(7)(xvi) of
H Maharashtra Regulations. We see considerable force in the
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 291
PVT. LTD. AND ORS. [SURYA KANT, J.]

argument of the learned Counsel. The Code has been framed A
with the purpose of bringing security of service, uniformity,
efficiency and discipline in the working of non-Government
High Schools. It has to be applied uniformly to the schools
run by various Municipal Councils in the State. It is no doubt
correct that the Municipal Councils have the power to frame
B
bye-laws under the Maharashtra Municipalities Act, 1965 but
if the field is already occupied under the mandate of statutory
Maharashtra Regulations, the Municipal Council cannot
frame bye-laws to the contrary rendering the mandate of the
Maharashtra Regulations Nugatory. We are of the view that
the Municipal Council Hinganghat has out stepped its C
jurisdiction in framing bye-law 4 of the bye-laws. We,
therefore, direct that the conditions of service of the appellants
shall be governed by the Code as enforced by Regulation
19(7)(xvi) of the Maharashtra Regulations. Bye-law 4 of the
bye-laws shall not be applicable to the appellants.”
D
66. We fail to see how this decision assists Respondent No. 1.
There was a reference made to the Secondary School Code in the
Maharashtra Regulations but at no point of time was there an indication
that the Code was designated as “statutory”. In fact, the legal force of
the Code was bestowed upon it by the reference in Regulation 19(7)(xvi)
of the Maharashtra Regulations, which were statutory in nature. E

67. This cannot, in any way, be extrapolated to affirm the proposition
that references in legislations and statutory rules, infuses a “statutory
flavour” to regulations that are not of such character. In the present
case, 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 F
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, as was accepted even in M.G. G
Pandke (Supra).
68. Thus, it is clear to us that no statutory force underpins the
1979 Rules and there is no question of them prevailing over or governing
the subject area.
H
292 SUPREME COURT REPORTS [2023] 7 S.C.R.

A C.3 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?
69. Respondent No. 1, while vehemently objecting to the usage of
B Article 138 of RIICO’s AoA to issue directions to the Corporation for
cancellation of the supplementary lease deeds and attendant approvals/
permissions, has equated such directions by the State Government to a
“farman” whereby any semblance of procedure and due process are
abandoned to its own prejudice. It was asserted that the method of
undertaking these measures had to be followed and an opportunity of
C hearing needed to be provided to Respondent No. 1. This was further
elaborated upon by emphasizing on the failure to provide Respondent
No. 1 with a show cause notice, and blatant non-adherence to Principles
of Natural Justice.
70. Both sides have raised contentions on the need for reasons
D behind the cancellation to be specified in the order itself or not. Learned
Senior Counsel, Mr. Dave, had cited the judgement in Sachidananda
Pandey (Supra) to argue that the consideration of whether reasons
were provided would include the internal deliberations within the State
Government, and not be confined merely to the order itself. The exact
E passage relied upon by him read as follows:
“27. Dr. Singhvi cited before us the well-known decisions of
this Court… to urge that even an administrative decision must
be arrived at after taking into account all relevant
considerations and eschewing irrelevant considerations and
F that the reasons for an order must find a place in the order
itself and those reasons cannot be supplemented later by fresh
reasons in the shape of an affidavit or otherwise. The
submission was that neither the Cabinet memorandum of
January 7, 1981 nor the Cabinet Memorandum of September
9, 1981 revealed that relevant considerations had been taken
G into account. What was not said in either of the Cabinet
Memoranda, it was said, could not later be supplemented by
considerations which were never present to the mind of the
decision making authority. We do not agree with the
submission of Dr. Singhvi. The proposition that a decision
H must be arrived at after taking into account all relevant
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 293
PVT. LTD. AND ORS. [SURYA KANT, J.]

considerations, eschewing all irrelevant considerations cannot A
for a moment be doubted. We have already pointed out that
relevant considerations were not ignored and, indeed, were
taken into account by the Government of West Bengal. It is
not one of those cases where the evidence is first gathered
and a decision is later arrived at one fine morning and the
B
decision is incorporated in a reasoned order. This is a case
where discussions have necessarily to stretch over a long
period of time. Several factors have to be independently and
separately weighed and considered. This is a case where the
decision and the reasons for the decisions can only be gathered
by looking at the entire course of events and circumstances C
stretching over the period from the initiation of the proposal
to the taking of the final decision. It is important to note that
unlike Mohinder Singh Gill’s case where that Court was
dealing with a Statutory Order made by a statutory functionary
who could not therefore, be allowed to supplement the grounds
D
of this order by later explanations, the present is a case where
neither a statutory functions nor a statutory functionary is
involved but the transaction bears a commercial though public
character which can only be settled after protracted
discussion, clarification and consultation with all interested
persons. The principle of Mohinder Singh Gill’s case has no E
application to the factual situation here.”
71. We have no qualms with the logic employed by this Court in
Sachidananda Pandey (Supra). However, this citation may not be
helpful to the appellants in the present instance. The extracted passage
refers to “consultation with all interested persons” and the earlier part of F
the judgment give the complete details regarding how representations
and objections had been sent with regard to the construction of a hotel in
the area in question, especially in the context of its impact on the ecology
and migratory birds. It was in this factual background, coupled with the
fact that the deliberations had been going on for around 2 years, that the
Court was satisfied that relevant considerations had been appropriately G
accounted for. In our scenario, on the other hand, the deliberations by
the Cabinet Committee which proceeded for around 7-8 months, do not
indicate that Respondent No. 1 was ever heard or involved in the process.

H
294 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 72. The importance of Principles of Natural Justice, among which
we are concerned with audi alterem partem in this case, have been
deliberated upon by this Court numerous times in the past. As far back
as in Union of India v. P.K. Roy20 the Court held:
“12…But the extent and application of the doctrine of natural
B justice cannot be imprisoned within the strait-jacket of a rigid
formula. The application of the doctrine depends upon the
nature of the jurisdiction conferred on the administrative
authority, upon the character of the rights of the persons
affected, the scheme and policy of the statute and other
relevant circumstances disclosed in the particular case…”
C
73. Further, in A.K. Kraipak v. Union of India21 the nature of an
administrative power and the obligations reposed upon the State to function
in a just and fair manner was explained:
“13. The dividing line between an administrative power and
D a quasi-judicial power is quite thin and is being gradually
obliterated. For determining whether a power is an
administrative power or a quasi-judicial power one has to
look to the nature of the power conferred, the person or
persons on whom it is conferred, the framework of the law
conferring that power, the consequences ensuing from the
E exercise of that power and the manner in which that power is
expected to be exercised. Under our Constitution the rule of
law pervades over the entire field of administration. Every
organ of the State under our Constitution is regulated and
controlled by the rule of law. In a welfare State like ours it is
F inevitable that the jurisdiction of the administrative bodies is
increasing at a rapid rate. The concept of rule of law would
lose its vitality if the instrumentalities of the State are not
charged with the duty of discharging their functions in a fair
and just manner. The requirement of acting judicially in
essence is nothing but a requirement to act justly and fairly
G and not arbitrarily or capriciously. The procedures which are
considered inherent in the exercise of a judicial power are
merely to facilitate if not ensure a just and fair decision. In
recent years the concept of quasi-judicial power has been
20
(1968) 2 SCR 186.
21
(1969) 2 SCC 262.
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 295
PVT. LTD. AND ORS. [SURYA KANT, J.]

undergoing a radical change. What was considered as an A
administrative power some years back is now being considered
as a quasi-judicial power…”
74. In this context, it may be true that 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 B
legally vested ‘right’ ever accrued in favour of Respondent No. 1, which
the State Government could not have despoiled behind its back. It has
already been held by us categorically that RIICO had no authority
whatsoever to accord permission for conversion and sub-division of the
industrial land allotted to Respondent No. 1. We have further opined that
the State Government has always retained its authority as lessor and C
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 D
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.
E
75. On the face of these findings, the question that arises is whether
Respondent No. 1, which actively participated in RIICO’s decision making
process and secured benefits without any authority in law, can be
permitted to complain of a deprivation of the opportunity of being heard.
We are of the considered opinion that the principle of audi altrempartem
F
should not be an empty formality nor a compulsory ritual that must always
be performed. The principal issue that arose for consideration before
the Cabinet Committee pertained to the legitimacy of the power assumed
by RIICO in respect of LIA, Kota, and not whether the permissions
granted to Respondent No. 1 suffered from any propriety or legality. It
is true that the issue was raked up with a political flavour, but eventually G
the final resolution centred around the RIICO’s lack of authority. We do
not think that Respondent No. 1 could render any assistance to the Cabinet
Committee in the formation of their views. In any case, we have carried
out an in-depth analysis of the entire gamut of documents and statutory
rules, and have come to a firm conclusion that it was the State Government
H
296 SUPREME COURT REPORTS [2023] 7 S.C.R.

A alone which was competent to accord necessary permissions to
Respondent No. 1 under the 1959 Rules, and not RIICO in purported
exercise of its powers under the 1979 Rules. Our holding is not confined
to the decisions taken in favour of Respondent No. 1 alone, and shall
encompass all other similarly placed lease-holders, with no discretion to
the State Government to blow hot and cold and/or to take ad hoc decisions
B
on a pick and choose basis. The only exception can be in a case where
land has been expressly leased out to RIICO under Rule 11A of 1959
Rules and RIICO has further sub-leased the same land as per the scheme
envisaged under clause (viii) of the said Rule.
76. We may at this stage refer to the observations made by this
C
Court in S.L. Kapoor v. Jagmohan & Ors.22 where the non-observance
of Principles of Natural Justice was not condoned, but nonetheless
forgone, on the following basis:
“17. Linked with this question is the question whether the
failure to observe natural justice does at all matter if the
D
observance of natural justice would have made no difference,
the admitted or indisputable facts speaking for themselves.
Where on the admitted or indisputable facts only one
conclusion is possible and under the law only one penalty is
permissible, the Court may not issue its writ to compel the
E observance of natural justice, not because it approves the non-
observance of natural justice but because Courts do not issue
futile writs. But it will be a pernicious principle to apply in
other situations where conclusions are controversial, however,
slightly, and penalties are discretionary.”
F 77. Further affirmation on this point is found in K.
Balasubramanian (Ex. Capt.) v. State of Tamil Nadu23:
“9…This High Court, has in our opinion rightly held that the
directions contained in orders dated November 16, 1976, and
June 15, 1977, were invalid being contrary to the provisions
G contained in Rule 35 of the General Rules. Since the said
orders were invalid, the petitioners would not claim any right
on the basis of the said orders and, there was, therefore, no
22
(1980) 4 SCC 379.
23
(1991) 2 SCC 708.
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 297
PVT. LTD. AND ORS. [SURYA KANT, J.]

question of affording them an opportunity of a hearing before A
passing the order dated March 3, 1980…”
78. These decisions fortify our conclusion that 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 B
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.
C
C. 4 Whether the State Government could have exercised
its powers under Article 138 of the AoA of RIICO to direct
cancellation?
79. It has already been noted that RIICO is a 100% Government
owned company incorporated under the Companies Act, 1956. RIICO, D
in deference to the statutory requirements of the Companies Act, has
formulated its own Articles of Association (AoA). Article 138 of these
Articles reads as follows:
“138. Directions and instruction of the Governor.
Notwithstanding anything contained in any of these articles, the E
State Government may from time to time, issue such directions or
instructions as he may consider necessary in regard to the affairs
of the conduct of the business of the Company or Directors thereof
and in like manner may vary and annul any such direction or
instruction. The Directors shall duly comply with and give F
immediate effect to director instruction so issued.”
80. It is a matter of common knowledge that clauses of this nature
are invariably inserted in AoAs of most Public Sector Undertakings and/
or Corporations owned and controlled by the State. The State Government
being the sole investor, its overriding powers have been acceded to by
G
RIICO through Article 138 of its AoA. It is pertinent to note that Article
138 opens with a non obstante clause and, thus, the power given to
State Government to issue directions under this provision cannot be
curtailed and is not subject to any other provision within the Articles. It is
categorically provided in Article 138 that the State Government may
issue “such directions or instructions……in regard to the affairs of the H
298 SUPREME COURT REPORTS [2023] 7 S.C.R.

A conduct of the business of the Company or Directors thereof…”. Article
138 also empowers the State Government to “vary and annul any such
direction or instruction”. The Directors are obligated to comply with the
Government directions/instructions.
81. In the present case, the State Government has directed RIICO
B 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, in our considered
opinion, was well within its rights to invoke Article 138 of AoA and
C 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 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
D 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.
C. 5 Whether the Rules of Business were not followed?
82. Respondent No. 1 has heavily relied upon the Rules of Business
E to urge that failure to comply with the procedure provided therein would
lead to invalidation of the government decision. This Court’s earlier
pronouncement in MRF (Supra) was cited in support of this contention.
The relevant extract of the judgment addressing this aspect of the matter
is to the following effect:
F “67… In the case on hand, we are required to examine the
contentions of the appellants on this issue with reference to
the Business Rules framed by Governor of Goa under Article
166(3) of the Constitution of India.
68. Rule 7(2) of the Business Rules of the Government of Goa
G states, that, no proposal which requires previous concurrence
of Finance Department under the said Rule, but in which
Finance Department has not concurred, may not be proceeded
with, unless the Council of Ministers has taken a decision to
that effect. The wordings of this Rule are different from the
provisions of Rule 9 of the Business Rules of Maharashtra
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and have to be read in context with the provisions of Rule 3 A
of the Business Rules of Government of Goa which states that
the business of the Government shall be transacted in
accordance with the Business Rules. Under Rule 7(2) thereof,
the concurrence of the Finance Department is a condition
precedent.
B
69. Likewise Rule 6 of the Business Rules states, that, the
Council of Minister shall be collectively responsible for all
executive orders passed by any Department in the name of
the Governor or contract made in exercise of the power
conferred on the Governor or any other officer subordinate
to him in accordance with the Rules, whether such orders or C
contracts are authorized by an individual minister on a matter
pertaining to the Department under his charge or as the result
of discussion at a meeting of the Council of Minister or
otherwise. This Rule requires that an executive order issued
from any department in the name of the Governor of the State D
should be known to the Council of Ministers so as to fulfil
the collective responsibility of the Council of Ministers.
70. Further Rule 7 of the Business Rules requires that no
Department shall without the concurrence of the Finance
Department issue any order which may involve any E
abandonment of revenue or involve expenditure for which
no provisions have been made in the Appropriation Act or
involve any grant of land or assignment of revenue or
concession, grant, lease or licence in respect of minerals or
forest rights or rights to water, power or any easement or
privilege or otherwise have a financial implications whether F
involving expenditure or not.
71.From a combined reading of the provisions of Rules 7, 3
and 6 of the Business Rules of the Government of Goa the
conclusion would be irresistible that any proposal which is
likely to be converted into a decision of the State Government G
involving expenditure or abandonment of revenue for which
there is no provision made in the Appropriation Act or an
issue which involves concession or otherwise has a financial
implication on the State is required to be processed only after
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300 SUPREME COURT REPORTS [2023] 7 S.C.R.

A the concurrence of the Finance Department and cannot be
finalized merely at the level of the Minister in charge…”
83. Learned Senior Counsel, Mr. Nadkarni, has emphasized on
Schedule I of the Rules of Business, under which the matters related to
RIICO would be addressed by the Industries Department. By extension,
B the Minister for Industries would be the nodal authority responsible for
finalizing decisions that impact RIICO’s functioning. Since the Minister
for Industries was not included in the Cabinet Committee and was not
involved while taking the final decision, his absence vitiates the decision
taken on 03.08.2019.
C 84. The relevant portions of the Rules of Business relief upon by
Respondent No.1 are as follows:
“PART-II ALLOCATION AND DISPOSAL OF BUSINESS
…

D 4. The Business of the Government shall be transacted in the
Secretariat Departments specified in the First Schedule and shall
be classified and distributed between those departments as laid
down therein.
…
E 7. The Council shall be collectively responsible for all advice
tendered to the Governor and also for all executive orders issued
in the name of the Governor in accordance with these Rules,
whether such advice is tendered or such orders are authorised by
an individual minister on a matter appertaining to his portfolio or
as a result of discussion at a meeting of the Council or a sub-
F
committee thereof or howsoever otherwise.
9. Without prejudice to the provisions of Rule 7, the minister-in-
charge or the minister of State-in-charge of a department, shall
be primarily responsible for the disposal of the business pertaining
to that Department.”
G
85. We are, however, unable to agree with the contentions placed
by Respondent No. 1. It appears to us 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
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connected permissions to Respondent No. 1 by RIICO. The Cabinet, A
which included the Minister for Industries, then proceeded to constitute
three sub-committees 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. The intention
B
behind Article 166(3) under which the Rules of Business are framed,
have been succinctly set out by this Court in Gulabrao Keshavrao Patil
& Ors. v. State of Gujarat 24:
“7…Article 166(1) and (2) expressly envisage authentication
of all the executive action and shall be expressed to be taken
in the name of the Governor and shall be authenticated in C
such manner specified in the rules made by the Governor.
Under Article 166(3), the Governor is authorised to make the
rules for the more convenient transaction of the business of
the Government of the State, and for the allocation among
Ministers of the said business insofar as it is not a business D
with respect to which the Governor is by or under the
Constitution required to act in his discretion...”
86. Another decision in Lalaram and Ors. vs. Jaipur
Development Authority and Ors.25also laid down the following:
“104…Thus, Article 166(3) mandates the making of the Rules E
of Business for more convenient transactions of the affairs of
the Government. Clause (1) stipulates the mode of expression
of an executive action taken in conformity therewith and
Clause (2) ordains the manner of authentication of the
consequential orders and instruments. Having regard to the F
role assigned to the Council of Ministers with the Chief Minister
at the summit, the Rules of Business framed Under Article
166(3) meant for convenient transaction of the affairs of the
Government, by allocation thereof among the Ministers,
secures their collective participation in the administration of
the governance of the State. This scheme of executive G
functioning, assuredly thus, is in assonance with the
constitutional edict with regard thereto, modelling the steel
frame of the State machinery.”
24
(1996) 2 SCC 26.
25
(2016) 11 SCC 31. H
302 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 87. The purpose behind Article 166(3) is to form regulations for
the convenient administration of government. The Minister of Industries
was not, at any point, missing from the overall decision to review the
actions taken by RIICO and to take necessary steps thereafter. The
cabinet sub-committee was merely acting on behalf of the entire Council
of Ministers, when carrying out the exhaustive fact-finding enquiries.
B
88. We must not overlook the overall objective of ensuring that
governance is carried out in a convenient and efficient manner. Rule 7
of the Rules of Business embodies this spirit as well, in that it advocates
for collective governance by the Council of Ministers in terms of
recommendations made to the Governor. The Council was collectively
C involved in the decision to have sub-committees set up to revisit different
decisions taken by the prior government, including with respect to actions
by RIICO.
89. The judgment in MRF (Supra) formulated its final conclusion
on the basis of a construction of the Rules of Business of Goa and only
D after interpreting the Rules, was the mandatory nature of the sign off
from the Finance Department distilled. In our case, the sign off from the
Minister for Industries is clear from the authorization granted on
01.01.2019 to the sub-committee to look into the decisions of the prior
government and RIICO. Therefore, the spirit behind the Rules of Business
E stand complied with in the present case.
90. We hasten to emphasize once more that 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
F powers in favour 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.
G
C.6 Does the Doctrine of Legitimate Expectations and
Promissory Estoppel apply in favour of Respondent No. 1?
91. An additional point in this regard is the inapplicability of principles
of estoppel and legitimate expectations. In line with our analysis on why
the principles of natural justice will not be of relevance, these defences,
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similarly, cannot be raised by Respondent No. 1 on the strength of illegal A
actions or orders passed by RIICO. Moreover, there is no governmental
action or order in favour of Respondent No.1 which can give rise to any
legitimate expectations. The execution of the supplementary lease deed
by RIICO in favour of Respondent No. 1, along with the attendant
permissions in its favour for converting the usage of the land and sub-
B
division, are actions taken between them. This Court has clearly laid out
the contours of legitimate expectations on numerous occasions, along
with commenting on the scenarios where they are inapplicable. In
Bannari Amman Sugars Ltd. vs. Commercial Tax Officer and Ors.26
it was opined that:
“8…It is generally agreed that ‘legitimate expectation’ gives C
the applicant sufficient locus standi for judicial review and
that the doctrine of legitimate expectation to be confined mostly
to right of a fair hearing before a decision which results in
negativing a promise or withdrawing an undertaking is taken.
The doctrine does not give scope to claim relief straightway D
from the administrative authorities as no crystallized right as
such is involved. The protection of such legitimate expectation
does not require the fulfilment of the expectation where an
overriding public interest requires otherwise. In other words,
where a person’s legitimate expectation is not fulfilled by
taking a particular decision then decision maker should justify E
the denial of such expectation by showing some overriding
public interest.”
92. In Food Corporation of India v. Kamdhenu Cattle Feed
Industries27, this Court also noted that legitimate expectations may not
themselves give rise to defensible rights, but merely act as a bulwark F
against arbitrator decision making that does not take into account these
interests. The Court outlined:
“8. The mere reasonable or legitimate expectation of a citizen,
in such a situation, may not by itself he distinct enforceable
right, but failure to consider and give due weight to it may G
render the decision arbitrary, and this is how the requirement
of due consideration of a legitimate expectation forms part of

26
(2005) 1 SCC 625.
27
(1993) 1 SCC 71. H
304 SUPREME COURT REPORTS [2023] 7 S.C.R.

A the principle of non-arbitrariness, a necessary concomitant
of the rule of law. Every legitimate expectation is a relevant
factor requiring due consideration in a fair decision making
process. Whether the expectation of the claimant is reasonable
or legitimate in the context is a question of fact in each case.
Whenever the question arises, it is to be determined not
B
according to the claimant’s perception but in larger public
interest wherein other more important considerations may
outweigh what would otherwise have been the legitimate
expectation of the claimant. A bona fide decision of the public
authority reached in this manner would satisfy the
C requirement of non-arbitrariness and withstand judicial
scrutiny. The doctrine of legitimate expectation gets assimilated
in the rule of law and operates in our legal system in this
manner and to this extent.”
93. From this encapsulation of the law, it is clear to us that no
D legitimate expectation could have arisen in favour 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 the lessor without there being any right to do so, and issued
the requisite permissions. Evidently, such approvals had no legs to stand
E 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
F promissory estoppel in its favour.
94. Furthermore, this Court in Food Corporation of India (Supra)
had noted that other overriding public interests could outweigh the
consideration of legitimate expectations in favour of a private party. Thus,
even if we were to consider Respondent No. 1’s arguments at their
G highest, the objectives of a private entity such as Respondent No. 1
could not outweigh the larger public interest behind the industrial
development of the land. Respondent No. 1 cannot be permitted to act
in defiance of the 1959 Rules, which are applicable to the land and which
mandate the utilization of the land for industrial purposes, subject to the
variations as may be permitted by the State Government.
H
BISHAMBHAR PRASAD v. M/s. ARFAT PETROCHEMICALS 305
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95. On the very same logic, there can be no promissory estoppel A
working against the Appellants. In this regard, the view taken by this
Court in Motilal Padampat (Supra) is worthy of reproduction:
“24… But it is necessary to point out that since the doctrine of
promissory estoppel is an equitable doctrine, it must yield when
the equity so requires. If it can be shown by the Government B
that having regard to the facts as they have transpired, it
would be inequitable to hold the Government to the promise
made by it, the Court would not raise an equity in favour of
the promise and enforce the promise against the Government.
The doctrine of promissory estoppel would be displaced in
such a case because, on the facts, equity would not require C
that the Government should be held bound by the promise
made by it. When the Government is able to show that in view
of the facts as have transpired, public interest would be
prejudiced if the Government were required to carry out the
promise, the Court would have to balance the public interest D
in the Government carrying out a promise made to a citizen
which has induced the citizen to act upon it and after this
position and the public interest likely to suffer if the promise
were required to be carried out by the Government and
determine which way the equity lies. It would not be enough
for the Government just to say that public interest requires E
that the Government should not be compelled to carry out the
promise or that the public interest would suffer if the
Government were required to honour it…”
96. Hence, supervening public interest, as we have already
elaborated upon above, acts as a veto against the invocation of promissory F
estoppel. On these grounds as well, Respondent No. 1 cannot claim any
right to the continuation of the supplementary lease deeds.
97. Our conclusion, incontrovertibly, is that Respondent No. 1
cannot lay claim to any legitimate expectation or promissory estoppel.
The supplementary lease deeds and corresponding permissions were G
executed with/by RIICO which had no authority and power to do so.
This, combined with the overriding public interest in having the land in
LIA, Kota utilized for industrial purposes for the economic progression
of the state or any revised purpose, as may be permitted by the State
Government in public interest, leaves us in no doubt that Respondent H
306 SUPREME COURT REPORTS [2023] 7 S.C.R.

A No. 1 has no further valid defences against the cancellation of the
supplementary lease deeds.
C.7 Whether the Appellant Unions are entitled to relief?
98. The one issue that remains for our consideration is with regard
to the Appellant Unions. We are receptive and sensitive to the interests
B of the workers in this regard, especially given that a significant part of
the AAIFR scheme remains unimplemented. We have been informed
by learned counsels appearing for the Appellant Unions that an earlier
petition challenging the transfer lease deeds of 2007, whereby the land
was handed over to Respondent No. 1, is still pending before the Rajasthan
C High Court. This proceeding would, naturally, have a knock-on effect
with regard to everything that happens subsequently, if the High Court
were to ascertain that the transfer leases were invalid.
99. Regardless, we do not have the requisite material before us to
comment on this point, and it would be inappropriate for us to do so in
D any case, especially when the matter is sub-judice before the High Court.
Thus, the High Court will consider the workers’ petition on its own merits,
uninfluenced by anything that we have held in this judgment in the context
of the dispute between the State Government, RIICO and Respondent
No. 1. In the same breath, we also abstain from commenting on the
other petitions filed by individual workers before various forums. These
E proceedings may continue and be decided eventually in accordance with
law.
100. We note that despite the passage of 21 years since the
tripartite agreements were signed between JKSL, Respondent No. 1
and the workers unions in 2002, and 16 years since the transfer lease
F deeds were signed in 2007, the LIA, Kota has remained dormant. The
objective of restarting industrial production in the area, as envisaged by
the AAIFR rehabilitation plan and required by virtue of the settlements
of 2002, remains out of reach. The damage this causes to the former
employees of JKSL, as well as the industrial and economic growth of
G the State, cannot be underestimated. While we are not in a position to
direct or order the implementation of the AAIFR plan, we recall the
earlier orders of this Court which had dismissed the workers unions’
SLP, and the subsequent Review Petitions on 17.08.2017 and 06.03.2018,
but with a note that the rehabilitation plan should be implemented.

H
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101. Given that the earlier orders of the Supreme Court have A
already held that Respondent No. 1 is not a sick industrial company and
that judgment has become final with the dismissal of the Review Petitions,
there is no point reverting to SICA any longer. However, we re-emphasize
the importance of finding a viable solution to this complex issue.
102. We reiterate the earlier observations made by this Court B
regarding implementation of the AAIFR scheme. The objective of the
original transfer lease deeds of 2007 that were signed for the purpose of
using the land for industrial development should be carried out, subject
to altering the usage of the land under the 1959 Rules.
103. However, at the same time, our sympathy for the Appellant C
Unions cannot translate into any concrete relief in the context of the
dues they seek. We are not appropriately positioned to consider their
prayers in this context. Instead, we grant liberty to the Appellant Unions
to approach the appropriate government and other forums as permitted
by law, to seek their respective dues. We clarify once again that we
have expressed no opinion on the merits of this segment of the D
controversy.
D. CONCLUSION
104. Our final analysis is that the supplementary leases signed
between Respondent No. 1 and RIICO are unsustainable. RIICO did E
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. F
105. 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 G
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.
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308 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 106. 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.
B 107. With regard to the Appellant Unions, we do not consider it
expedient for us to enter into the demands made by the labour unions for
the dues of JKSL’s employees. We express no views on the content of
the prayers by the Appellant Unions, and leave it open for them to seek
their remedies under law from the Appropriate Government, and judicial
C forums.
108. We may summarize our overall conclusions in the following
points:-
A. There has been an uninterrupted and subsisting relationship
of lessor and lessee between the State Government and
D 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
E
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
F 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
G 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
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11A and 12. No such express allocation was ever made in A
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;
B
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, 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 C
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 D
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
E
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, F
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; G

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.

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310 SUPREME COURT REPORTS [2023] 7 S.C.R.

A 109. 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 in Para 106
of this judgment.
B
110. Pending interlocutory applications, if any, also stand disposed
of.

Bibhuti Bhushan Bose Appeals disposed of.
C (Assisted by : Shubhanshu Das, LCRA)

D

E

F

G

H