Holding

A lease created under a statute may be cancelled only on grounds expressly provided in that statute and after observing natural justice; absent such grounds, a completed lease cannot be unilaterally cancelled, and where procedural violations occurred without fault on the part of the lessee, the remedy is to adjust the premium rather than rescind the lease.

Summary

The Supreme Court examined the cancellation of leases and allotments of commercial plots in Noida granted to hotel developers under the Uttar Pradesh Urban Planning and Development Act, 1973 and the Uttar Pradesh Industrial Area Development Act, 1976. It held that a lease governed by a statute can be cancelled only if the statute expressly authorises such cancellation and if the lessee is given a hearing; otherwise a completed lease cannot be unilaterally rescinded. The Court found that the allotment of commercial plots for hotels was valid and did not violate NOIDA regulations, which classify hotels as a commercial use. While the allotment process breached NOIDA’s Commercial Property Management Policy by not using sealed tenders, the breach did not justify cancellation but only required the lessees to pay the premium difference. Consequently, the Supreme Court affirmed the High Court’s quashing of the cancellation orders and allowed the appellants to continue their leases upon paying the higher premium.

Issues considered

Whether a lease granted under a statutory scheme can be unilaterally cancelled by the lessor after execution and possession.
Whether the cancellation of the hotel plot allotments was motivated by a change of government or by a finding of irregularity.
Whether the allotment of commercial plots for hotels violated NOIDA’s regulations and policies, including the requirement of tender/auction.
Whether the rate of premium fixed at Rs.7,400 per sq.m. caused a loss to the public exchequer and justified cancellation.
What remedial action is appropriate when a procedural violation is identified but the lessee is innocent?

Legislation cited

Indian Contract Act, 1872s. 20, s. 21
Transfer of Property Act, 1882
Uttar Pradesh Industrial Area Development Act, 1976s. 14, s. 7
Uttar Pradesh Urban Planning and Development Act, 1973s. 12, s. 41(3)

Subjects

lease cancellationstatutory authoritynatural justicerevisional jurisdictioncommercial vs industrial land usehotel projectsUttar Pradesh Urban Planning and Development ActNOIDA regulationspublic lawadministrative lawtransfer of property act

Judgment

[2011] 7 S.C.R. 66

A ITC LTD.
V.
STATE OF UTTAR PRADESH & ORS.
(Civil Appeal No. 4561 of 2008)
JULY 5, 2011
B
[R. V. RAVEENDRAN AND
B. SUDERSHAN REDDY, JJ.]

Uttar Pradesh Urban Planning and Development Act,
c 1973:

s.41(3) rlw ss.12 and 14 -Allotment of commercial plots
in commercial area for construction of 5 star, 4 star and 3 star
hotels on 90 years lease - Plots allotted at industrial rates -
D Later on, allotments cancelled as the same were made
without following the procedure of auction, and the allotment
on fixed industrial rates caused loss to government
exchequer - HELD: Under private law, a lease governed
exclusively by the provisions of Transfer of Property Act could
E be cancelled only by filing a civil suit for its cancellation or
for a declaration that it is illegal, null and void and for the
consequential relief of delivery back of possession - Where
the grant of lease is governed by a statute or statutory
regulations, and if such statute expressly reserves the power
of cancellation or revocation to the lessor, it will be
F permissible for an Authority, as the lessor, to cancel a duly
executed and registered lease deed, even if possession has
been delivered, on the specific grounds of cancellation
provided in the statute - In the instant case, NO/DA is a
statutory authority and it has not alleged or made out any
G default in payment or breach of conditions of the lease or
breach of rules and regulations - Nor is it the case of NO/DA
that any of the allottees is guilty_ of any suppression or
misstatement of fact, misrepresentation or fraud - Therefore,
the allotment of commercial plots by NO/DA to the allottees
H 66
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 67

for setting up hotels is valid -There is no violation of the A
regulations or policies of NO/DA in allotting commercial plots
for hotels - Therefore, cancellation of allotment is
unsustainable.

ss. 41(3) - Allotment of plots - Cancellation of- HELD:
8
When valuable rights had vested in the a/lottees, by reason
of the allotments and grant of leases, such rights could not
be interfered with or adversely affected, without a hearing to
the affected parties - Natural justice - Opportunity of hearing.

Administrative Law: c
Allotment of commercial plots for hotels - Cancellation
order - Judicial review of - HELD: In the instant case, the ·
allotments of plots for hotel projects were challenged in writ
petitions and in compliance with the direction of the High D
Court, the state government had a relook at the matter and
found some irregularities in allotment - The decision of the
state government in revision, is not based on any different
policy, but based on its finding that the existing regulations
and policies of NO/DA were violated - The policy of the state E
government cannot override the NO/DA Regulations - If any
policy is made, intending to give different meaning to the words
'commercial use' and 'industrial use', that can be given effect
only if the regulations are suitably amended - The fact that
the tourism or hotels have been given the status of 'industry' F
will not convert them into industries, for the purpose of
allotment of plots, nor will the use of land by such tourism or
hotel industry, will be an industrial use - Allotment of plots
for hotels in a commercial area is wholly in consonance with
the NO/DA Regulations and Master plan which earmarks
areas for specific land uses like industrial, residential, G
commercial, institutiona·I, public, semi-public, etc - Therefore,
the allotment of plots situated in commercial areas earmarked
for commercial use, to hotels did not violate any provisions
of the Act or the NO/DA Regulations - NO/DA (Preparation
H
68 SUPREME COURT REPORTS [2011] 7 S.C.R.

A and Finalisation of Plan) 1991 Regulations, 1991 - Policy
dated 22.5.2006 of Government of Uttar Pradesh - Uttar
Pradesh Urban Planning and Development Act, 1973.

Public law - Breach of statutory provisions or procedural
irregularities - Allotment of plots for hotels on 90 years lease
8
- Cancellation of - Remedial action - Explained.

TOURISM:

Running a hotel/boarding house/restaurant - HELD: Is
c a commercial activity - By no stretch of imagination, use of
a plot for a hotel can be considered as use of such land for
an industrial purpose - It was not necessary for NO/DA to
change the land use of plots_ to be allotted to hotels, from
commercial to industrial use.
D Urban Development:

Allotment of commercial plots for 5 star, 4 star and 3 star
hotels - Requirement of inviting tenders - Commercial plots
in commercial area allotted at fixed industrial rate without
E inviting tenders - HELD: Allotment of commercial plots is
governed by the NO/DA Policies and Procedures for
Commercial Property Management, 2004 - Under the said
policy, commercial properties of NO/DA can be allotted only
on sealed tender basis or by way of public auction - The
F allotment of commercial plots at fixed rate was, therefore,
clearly contrary to the said regulations of NO/DA - The failure
to follow the procedure prescribed in the NO/DA Commercial
Property Management Policy is a violation of the policy and
such violation has resulted in loss to the public exchequer -
G Therefore, the state government can certainly interfere under
its revisiona/ jurisdiction - As the allotment is of commercial
plots governed by NO/DA Commercial Property Management
Policy, and as the reserve rate itself was Rs.300001- per sq.m.,
allotment at Rs. 7,400 per sq.m. caused loss and violated the
H regulations and policy of NO/DA - However, the violation
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 69

occurred on account of a mistake on the part of the officers A
of NO/DA in misinterpreting the government policy dated
22.5.2006 - The a/lottees are given the option to continue
their respective leases by paying the premium (allotment rate)
at Rs. 70,0001- per sq.m. (with corresponding increase in yearly
rent/one time lease rent}, without any location benefit charges 8
- NO/DA Policies and Procedures for Commercial Property
Management, 2004 - Uttar Pradesh Urban Planning and
Development Act, 1973 - s.41.

Words and Phrases:
c
Expression 'industry' used in the context of tourism/hotel
- Connotation of.

Keeping in view the Common Wealth Games 2010
and pursuant to a meeting with the Secretary, Sports and o
Youth Affairs, Government of India, the NOIDA, on
17.10.2006, invited applications for allotment of plots of
industrial land at industrial rates of Rs. 7,4001- per sq. mts.
plus location charges for 5 star, 4 star and 3 star hotels
on 90 years lease ha.sis. Allotments of 9 plots for 5 star E
hotels 2 plots for 4 star hotel and 3 plots for 3 star hotels
were made on 12.01.2007. The Government scheme
dated 22.05.2006 was approved on 05.06.2006 and the
lease deeds were registered in two cases and in other
cases, the registration was kept pending on the ground
of under valuation stating that as against circle rate of F
Rs.70,0001- per sq. mt., the premium for the sale was only
Rs. 7,400 per sq. mts. Writ petitions were filed in the High
Court on the ground that the allotment of the said plots
was at a very low price. Pursuant to the direction of the
High Court to the State Government to exercise its power G
of revision u/s.41(3) read with s.12 of the U. P. Urban
Planning and Development Act, 1973, the Government
concluded that the allotments made were irregular for (i)
allotments of commercial plots had been made for
H
70 SUPREME COURT REPORTS [2011] 7 S.C.R.

A industrial purposes at industrial rates without getting the
land use changed from commercial to industrial in
accordance with the regulations and without obtaining
the consent of the state government; and (ii) the plots
earmarked for commercial use in a commercial area were
B allotted at rates applicable to industrial plots, without
calling for competitive bids/tenders and without the
permission of the state government. It, therefore, directed
on 01.08.2007 NOIDA to cancel the allotments and initiate
action against the officers of NOIDA responsible for the
c irregularities. Consequently, the NOIDA issued
cancellation letters dated 3.8.2007 canceling the
allotments and consequential leases granted in favour of
the appellants; and the said writ petitions were dismissed
as withdrawn.
D The allottees filed writ petitions before the High Court
challenging the cancellation of allotment of plots and the
leases by communications dated 3.8.2007. A Division
Bench of the High Court allowed the writ petitions. It
quashed the order dated 1.8.2007 of the State
E Government and the cancellation orders dated 3.8.2007
passed by NOIDA on the ground that they were opposed
to principles of natural justice for want of opportunity of
hearing as required under proviso to s.41(3) of 1973 Act.
The High Court, therefore, remanded the matters to the
F State Government for taking decision afresh.

In the instant appeals filed by the allottees, it was
contended for the appellants that the High Court, having
quashed the order of the State Government dated
G 1.8.2007 and the consequential orders of cancellation
dated 3.8.2007 passed by NOIDA, ought to have upheld
the allotments and the leases and should not have
remanded the matter to the state government for
consideration.
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 71

On 9.7.2008 the Court directed status quo regarding A
possession. On 18.7.2008 the Court, while granting stay
of dispossession of the appellants from the respective
sites allotted to them, directed the State Government to
give a hearing to the appellants and pass a reasoned
order in accordance with law. The state government B
accordingly passed individual orders dated 8.9.2008 in
the case of each of the appellants, holding that the
allotment of plots to them was bad. It cancelled the
allotments and directed action to be taken against the
erring officers of NOIDA. c
· The questions for consideration before the Court
were: (1) "Where allotment has been followed by grant
of a lease (which is duly executed) and delivery of .
possession in favour of the less-ee, whether the leases
could be unilaterally cancelled by the lessor?" (2) D
"Whether the cancellations were on account of change
in policy as a consequence of change of government, or
on account of new government's desire to nullify the
actions of previous government?" (3) "Whether the
allotments of plots to appellants suffer from any E
irregularity or illegality?"
Disposing of the appeals, the Court

HELD: 1. The High Court rightly set aside the orders
dated 1.8.2007 of the State government, because no F
hearing was given to the appellants as required u/s 41(3)
of the 1973 Act. Even otherwise, when valuable rights
had vested in the allottees, by reason of the allotments
and grant of leases, such rights could not be interfered
with or adversely affected, without a hearing to the G
affected parties. The High rightly directed the state
government to decide the matter afresh after hearing the
appellants. This court reiterated the said direction in its
interim order dated 18.7.2008. Therefore, there is no need
to interfere ~ith the final order of the High Court. [para H
72 SUPREME COURT REPORTS [2011) 7 S.C.R.

A 16) (107-C-D-F-G]

Whether completed lease can be cancelled:

2.1. Two lease deeds have been duly registered. In
regard to other lease deeds, which were presented for
B registration, though there is no objection for registration,
registration formalities are kept pending in view of a
· demand by the registration authorities for deficit stamp
duty and registration charges on the basis of circle rate
and the issue is pending before the registration officer
C concerned or in cpurt. As far as NOIDA is concerned,
execution and registration of the leases were complete.d,
and, consequently, possession of the plots was delivered
to the allottees/lessees in April and May, 2007. Each
appellant has also incurred considerable amount for
D preliminary expenditure for the hotel project (in addition
to the premium, location benefit charges, rent, stamp duty
and registration charges) as they were expected to
execute the projects in a time bound manner. [para 19]
[110-H; 111-A-D]
E
2.2. Under private law, a lease governed exclusively
by the provisions of Transfer of Property Act, 1882 could
be cancelled only by filing a civil suit for its cancellation
or for a declaration that it is illegal, null and void and for
the consequential relief of delivery back of possession.
F Unless and until a court of competent jurisdiction grants
such a decree, the lease will continue to be effective and
binding. Unilateral cancellation of a registered lease deed
by the lessor will neither terminate the lease nor entitle a
lessor to seek possession. This is the position under
G private law. [para 21) [111-G-H; 112-A]
2.3. But, where the grant of lease is governed by a
statute or statutory regulations, and if such statute
expressly reserves the power of cancellation or
H revocation .to the lessor, it will be permissible for an
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 73

Authority, as the lessor, to cancel a duly executed and A
registered lease deed, even if possession has been
delivered, on the/ specific grounds of cancellation
provided in the statute. [para 22] [112-B]

2.4. In the instant case, NOIDA is an authority 8
constituted under the Uttar Pradesh Industrial Area
Development Act, 1976, for development of an industrial
and urban township (also known as Noida) in Uttar
Pradesh under the provisions of the Act. Section 7
empowers the authority to sell, lease or otherwise C
transfer whether by auction, allotment or otherwise, any
land or building belonging to it in the industrial
development area, on such terms and conditions as it
may think fit to impose, on such terms and conditions
and subject to any rules that may be made. Section 14
empowers the Chief Executive Officer of the Authority to D
resume a site or building which had been transferred by
the Authority and forfeit the whole or part of the money
paid in regard to such transfer, in the following two
circumstances : (a) non-payment by the lessee, of
consideration money or any installment thereof due by E
the lessee on account of the transfer of any site or
building by the Authority; or b) breach of any condition
of such transfer or breach of any rules or regulations
made under the Act by the lessee. Thus, if a lessee
commits default in paying either the premium or the lease F
rent or other dues, or commits breach of any term of the
lease deed or breach of any rules or regulations under
the Act, the Chief Executive Officer of NOIDA can res1,Jme
the leased plot or building in the manner provided i~ the
statute, without filing a civil suit. The authority to resume G
implies and includes the authority to unilaterally cancel
the lease. [para 23] [112-C-H; 113-A]

2.5. NOIDA has not alleged or made out any default
in payment or breach of conditions of the lease or breach
H
74 SUPREME COURT REPORTS [2011] 7 S.C.R.

A of rules and regulations. Nor is it the case of NOIDA that
any of the appellants is guilty of any suppression or
misstatement of fact, misrepresentation or fraud. Neither
the cancellation of the allotment and the lease by NOIDA
by letter dated 3.8.2007, nor the orders dated 1.8.2007 or
B 8.9.2008 made by the state government refer to any of
these grounds. Therefore, the allotment of commercial
plots by NOIDA to the appellants for setting up hotels is
valid. There is no violation of the regulations or policies
of NOIDA in allotting commercial plots for hotels.
c Therefore, cancellation of allotment is unsustainable. The
cancellation cannot be sustained with reference to the
grounds mentioned in s. 14 of the Act. The grounds
mentioned for cancellation are mistakes committed by
NOIDA itself in making allotments and fixing the premium,
0 in violation of the Regulations and policies of NOIDA by
officers of NOIDA. These are not grounds for cancellation
u/s 14 of the Act. [para 25 and 58] [113-F-H; 114-A; 141-
D]
2.6. Section 41 (3) of the U.P. Urban Planning and
E Development Act, 1973 shows that the State government,
can examine the legality or propriety of any order of
NOIDA and pass appropriate orders. If the state
government in exercise of its revisional jurisdiction finds
the allotments were irregular or contrary to the
F regulations or policies of NOIDA and directs cancellation,
the allotments become invalid and leases also become
invalid. Consequently, NOIDA can resume possession,
without intervention of a civil court in a civil suit. [para 27]
[116-B-D]
G
State of Haryana vs. State of Punjab - 2002 (1)
SCR 227 = 2002 (2) sec 507 and State of Karnataka vs. All
India Manufacturers Organisation - 2006 (1) Suppl. SCR 86
=
2006 (4) sec 683 - held inapplicable.
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 75

Whether cancellation was on account of change in A
Government?:
3.1. This is not a case where as a consequence of
change in government, the new government has
reviewed the decision relating to hotel site allotment, 8
merely because it was a decision of the previous
government. Nor is it a case of new policy of the new
government being at variance with the policy of. the
previous government. In the instant case, the allotments
of plots for hotel projects were challenged in two writ C
petitions and in compliance with the direction of the High
Court, the state government had a relook at the matter,
found some irregularities in allotment and, by letter dated
1.8.2007, directed NOIDA to take action to remedy the
irregularities found in the allotments. The orders dated
8.9.2008 were made in view of the final order of the High D
Court and the interim order of this Court directing
reconsideration. The decision of the state government in
revision, is not based on any different policy, but based
on its finding that the existing regulations and policies of
NOIDA were violated. [para 29] [118-B-D-G-H] E
Whether the allotments violate the regulations/policies of
NOIDA?

4.1. In the instant case, no amendment was made
changing the land use of the plots in question from F
commercial to industrial. The state government on
examination of all the facts in ·its revisional jurisdiction
found that the hotel plots allotted to appellants were part
of Sectors 96, 97 and 98 (for five star plots) and other
sectors (for plots for 4 star and 3 star hotels) which were G
earmarked for commercial use under the NOIDA Master
Plan. It was of the view that in view of tourism/hotels
being declared as an "industry" and the government
policy requiring allotment of plots for tourism/hotels at
industrial rates,. if any plot had to be allotted for a hotel, H
76 SUPREME COURT REPORTS [2011) 7 S.C.R.

A the land use of the· said plot had to be changed to
industrial use in the Master plan by adopting the
prescribed procedure under the regulations, before
making the allotment. It was also of the view that if the
plots were allotted for hotel industry, then the
B construction should be as per the NOIDA building
regulations and directions applicable to industries in
regard to FAR, ground coverage, height, setbacks,
construction of building etc. It was also of the view thJt
if plots in commercial areas are to be allotted it could be
c only in accordance with the NOIDA Commercial Property
Management Policy which required all commercial plots
to be allotted on sealed tender or public auction basis.
As NOIDA did not alter the land use of the plots in
question from commercial use to industrial use in the
0 Master Plan nor did it amend the definitions of
commercial use and industrial use in the 1991
Regulations so that hotels would no longer be a
commercial use, but an industrial use, the state
government held that statutory regL.lations and directives
E of NOIDA had been violated in making the hotel plot
allotments. [para 31] [120-D-H; 121-A] ·

Whether plots earmarked for commercial use in
commercial area could be allotted for hotels?:

F 5.1. The NOIDA Building Regulations and Directions
of 2006 make it clear that FAR and the permissible height
of the building is far more advantageous in the case of
commercial hotel buildings when compared to industrial
buildings. It may be mentioned that even when the 1986
G Building Regulations were in force till 4.12.2006, the
provisions for FAR and height of building were far more
advantageous to commercial buildings, when compared
to industrial buildings. [Para 36] [126-E-F]

5.2. Running a hotel or boarding house or a
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 77

restaurant is a commercial activity and use of a land or A
building for hotel is commercial use. By no stretch of
imagination, use of a plot for a hotel can be considered
as use of such land for an industrial purpose. An
industrial building is defined in Regulation 3.12(e) of the
2006 Building Regulations as a building in which B
products or materials of all kinds and properties are
manufacture, fabricated, .assembled or processed. As per
the 1991 Regulations, use for a hotel is a commercial use.
[para 37) [126-F-H]

5.3. Having regard to the provisions of the NO.IDA
c
(Preparation and Finalisation of Plan) 1991 Regulations,
1991 use of land for hotel cannot be considered as an
industrial use, but will continue to remain a commercial
use. The policy of the state government dated 22.5.2006
cannot override the NOIDA Regulations. If any policy is D
made, intending to give different meaning to the words
'commercial use'· and 'industrial use', that can be given
effect only if the regulations· are suitably amended. [para
38] [127-F-G]
E
5.4. When tourism is given the status of an industry,
it does not mean tourism involves manufacturing,
fabrication, processing or assembling, but it refers to a
service industry. By giving the status of 'industry', the
policy enabled a particular service activity (iii the instant F
case tourism and hotels) to secure ·certain benefits in
allotment of land at concessional prices and certain tax
exemptions. Therefore, the fact that the tourism or hotels
have been given the status of 'industry' will not convert
them into industries, for the purpose of allotment of plots,· G
nor will the use of land by such tourism or hotel industry,
will be an industrial use. It does not also mean that all the
hotels and tourist offices should be shifted from
commercial areas to industrial areas or that hotels or
tourist offices cannot operate in commercial areas, or that H
78 SUPREME COURT REPORTS [2011] 7 S.C.R.

A they cannot get allotment of land or building earmarked
for commercial use. Allotment of plots for hotels in a
commercial area is wholly in consonance with the NOIDA
Regulations and Master plan which earmarks areas for
specific land uses like industrial, residential, commercial,
B institutional, public, semi-public, etc. Therefore, the
allotment of plots situated in commercial areas
earmarked for commercial use,. to hotels did not violate
any provisions of the Act or the NOIDA Regulations. It
was not necessary for NOIDA to change the land use of
c plots to be allotted to hotels, from commercial to industrial
use. [para 39-40] [127-H; 128-B-H]

Whether allotment of hotel sites by NOIDA should have
been by inviting tenders/holding auctions?

D 6.1. Allotment of commercial plots is governed by the
NOIDA Policies and Procedures for Commercial Property
Management, 2004. Under the said policy, commercial
properties of NOIDA can be allotted only on sealed tender
basis or by way of public auction. For \his purpose NOIDA
E has to fix a reserve rate and the person who gives the
highest bid/offer above the reserve rate, who is otherwise
eligible, is allotted the plot. The said policy in regard to
the procedure for allotment of commercial properties was
not amended or modified to provide for allotment of
F commercial properties for hotels at fixed prices. The
allotment of commercial plots at fixed rate was, therefore,
clearly contrary to the said regulations of NOIDA. [para
44] [131-F-H; 132-A]
Home Secretary v. Darshj!t Singh Grewal 1993 (4) SCC
G 25 - relied on
Brij Bhusan vs. State of Jammu & Kashmir - 1986 (2)
SCC 354, Sachidanand Pandey vs. State of West Bengal
1987 (2) SCR 223 =1987 (2) SCC 295, and MP Oil Extraction
H
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 79

vs. State of MP 1997 (1) Suppl. SCR 671 =1997 (7) SCC A
592 - distinguihsed
6.2. The state government policy dated 22.5.2006 or
its adoption by tJOIDA on 5.6.2006 did not amend to the
regulations, instructions, policies and procedures of B
NOIDA. If the said Tourism/Hotels development policy
dated 22.5.2006 contained any procedure which was at
variance with the existing regulations or procedures of
NOIDA; such procedures in the policy dated 22.5.2006
could come into effect only by NOIDA amending its C
regulations and Property Management Policies. As per
the 1991 Regulations ahd 2006 Building Regulations,
hotel buildings are commercial buildings and use of land
for hotels is commercial use and any plot allotted for
hotels is a commercial property. Therefore, any allotment D
of a plot for hotels should comply with the NOIDA
Commercial Property Management Policy, 2004. Unless
the said Policy was amended, providing for allotment at
fixed rates, in regard to any sub-category of commercial
plotS, allotment of a commercial property belonging to
NOIDA otherwise than by sealed tender basis or auction E
basis will be an allotment in violation of and contrary to,
the regulations directives and policies of NOIDA. [para 48]
[134-D-G]

6.3. The failure to follow the procedure prescribed in F
the NOIDA Commercial Property Management Policy is a
violation of the policy and such violation has resulted in
loss to the public exchequer. The violation of the
regulations and policies of NOIDA may be unintentional
and a bonafide mistake on account of a mis-reading of G
the requirement of the policy dated 22.5.2006.
Nevertheless it is a violation. If there is a violation of the
regulations and policies of NOIDA in making allotments,
the state government can certainly interfere under its
revisional jurisdiction. [para 49-50] [135-A-F-G]
H
80 SUPREME COURT REPORTS [2011] 7 S.C.R.

A (cl Whether the rate charged was erroneous and has led
to any loss?
7.Mere earmarking of particular land for allotment to
hotels which is a commercial activity at industrial plot
prices, does not mean there is a loss in respect of an
8
amount equal to the difference between the rate of
commercial plots and rate of industrial plots. Any decision
to allot plots to hotels at industrial rates, by itself, did not
cause any loss, as such a decision was intended to be
an incentive to attract investment. But there will be a
c 'IOSS' I if a plot Which is earmarked for Commercial USe,
allotted for a commercial purpose, which is required to
be allotted at commercial rates by tender or auction, is
erroneously charged either at a residential plot rate or an
industrial plot rate. The regulations and policies of NOIDA
D require the allotment of commercial plots to be by sealed
tender or by public auction. As the allotment is of
commercial plots governed by NOIDA Commercial
Property Management Policy, and as the reserve rate
itself was Rs.30000/- per sq.m. it has to be held that
E allotment at Rs.7,400 per sq.m. caused loss and violated
the regulations and p~licy of NOIDA. [para 53 and 55]
[138-D-F; 139-C-E-F]
IV. What should be the consequence of the violation?
F 8.1. The violation occurred on account of a mistake
on the part of the .officers of NOIDA in misinterpreting the
government policy dated 22.5.2006, which has resulted
in lesser allotment price. The allottees were in no way to
be blamed for the mistake. Nor were the allottees guilty
G of any suppression, misstatement or misrepresentation
of facts, fraud, collusion or undue influence in obtaining
the allotments at Rs. 7,400/- per sq.m. According to
respondents, the rate of premium ought to have been
Rs.70,000/- per sq.m. being the market rate, even though
H the reserve rate was only Rs.30,000/- per sq.m. The
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 81

mistake was found out by the state government, in A
exercise of revisional jurisdiction. But by "then the
allotment was followed by payment of premium,
execution of the lease deed, and delivery of possession.
By the time the state government decided that the
allotment should be cancelled the transaction was B
complete in all respects. The fact that the registration of
some of the leases was kept 'pending' in view of a
dispute relating to valuation would not be relevant for this
purpose. [para 58) [141-E-G]

8.2. In public law, breach of statutory provisions,
c
procedural irregularities, arbitrariness and mala fides on
the part of the Authority (transferor) will furnish grounds
to cancel or annul the transfer. But before a completed
transfer is interfered on the ground of violation of the
regulations, it will be necessary to consider: whether the D
transferee had any role to play (fraud, misrepresentation,
undue influence etc.) in such violation of the regulations,
in which event cancellation of the transfer is inevitable.
If the transferee had acted bona fide and was blameless,
it may be possible to save the transfer but that again E
would depend upon the answer to the further question
as to whether public interest has suffered or will suffer
as· a consequence of the violation of the regulations:

(i) If public interest has neither suffered, nor likely to F
suffer, on account of the violation, then the transfer
may be allowed to stand as then the violation will be
a mere technical procedural irregularity without
adverse effects.

(ii) On the other hand, if the violation of the G
.regulations leaves or likely to leave an everlasting
adverse effect or ·impact on public interest (as for
example when it results in environmental
degradation or results in a loss which is not
reimbursable), public interest should prevail and the H
82 SUPREME COURT REPORTS [2011] 7 S.C.R.

A transfer should be rescinded or cancelled.
(iii) But where the consequence of the violation is
merely a short-recovery of the consideration, the
transfer may be saved by giving the transferee an
B
opportunity to make good the short-fall in
consideration. [para 63.1] [145-F-H; 146-A-D]
8.3. If the government or its instrumentalities are
seen to be frequently resiling from duly concluded
solemn transfers, the confidence of the public and
C international community in the functioning of the
government will be shaken. To save the credibility of the
government and its instrumentalities, an effort should
always be made to save the concluded transactions/
transfers wherever possible, provided (i) that it will not
D prejudice the public interest, or cause loss to public
exchequer or lead to public mischief, and (ii) that the
transferee is blameless and had no part to play in the
violation of the regulation. [para 63.2] [146-E-G]
E 8.4. If the concluded transfer cannot be saved and
has to be cancelled, the innocent and blameless
transferee ~i..ould be reimbursed all the payments made
by him and all expenditure incurred by him in r~gard to
the transfer with appropriate interest. If some other relief
can be granted on grounds of equity without harming
F public interest and public exchequer, grant of such
equitable relief should also be considered. [para 63.3]
[146-H; 147-A-B]
Syed Abdul Qadir vs. State of Bihar 2008 (17) SCR 917
G =2009 (3) sec 475 - relied on.
8.5. In the instant case, the allotment of commercial
plots to appellants is valid and legal. The violation is in
making such allotment on fixed allotment rate which is
H less than the rate the plots would have fetched by calling
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 83

for tenders or by holding auctions. The violation of the A
guidelines in regard to disposal of commercial plots has
resulted only in a loss of revenue by way of premium and
if this could be made up, there is no reason why the
leases should not be continued. According to the State
Government, the commercial plots would have fetched a B
premium at rate of Rs.70,000 per sq.mat the relevant time
(October 2006 to January 2007) and NOIDA had been
denied the benefit of that allotment rate, by reason of
allotment of the plots at Rs.7400/- per sq.m. Therefore, the
equitable solution is to give an opportunity to the lessees c
to pay the difference thereby in consideration which
arose on account of wrong interpretation instead of
cancelling the leases and if the appellants are wiling to
pay the balance of premium as claimed by respondents,
. the leases need not be interfered; [para 65-661 [148-B-G]
0
8.6. Therefore, if the appellants (2006-2007 allottees)
are to be extended the benefits offered to allottees under
the 2008 scheme, the rate of Rs.70,000/- per sq.m. (the rate
of 2008 scheme was 10% more than Rs.70,000/- per
sq.m.) claimed by the respondents becomes logical and E
reasonable. Therefore, there is no reason to reject the
claim of respondents that the allotment rate should be
Rs.70,000/- per s.q.m. The appellants are granted an
opportunity to save the leases by paying the difference
in premium at Rs.62600/- per sq.m. to make it upto F
Rs.70,000/- per sq.m. [para 69] [151-D-F]

(i) The order of the High Court setting aside the
revisional order dated 1.8.2007 of the State
Government and the consequential orders of G
cancellation of allotment of plots dated 3.8.2007 by
NOIDA, is affirmed.
(ii) The revisional orders dated 8.9.2008 passed by
the State Government cancelling the allotments of
plots to appellants, are set aside. H
84 SUPREME COURT REPORTS [2011) 7 S.C.R.

A (iii) The appellants are given the option to continue
their respective leases by paying the premium
(allotment rate) at Rs.70000/- per sq.m. (with
corresponding increase in yearly rent/one time lease
rent), without any location benefit charges. The
8 appellants shall exercise such option by 30.9.2011.
Such of those appellants exercising the option will
be entitled to the benefits which has been extended
in regard to the allottees under 2008 allotment
scheme of NOIDA:
c On exercise of such option, the lease shall
continue and the period between 1.8.2007 to
31.7.2011 shall be excluded for calculating the lease
period of 90 years. Consequently, the period of lease
mentioned in the lease deed shall stand extended by
D a corresponding four years period, so that the lessee
has the benefit of the lease for 90 years. An
amendment to the lease deed shall be executed
between NOIDA and the lessee incorporating the
aforesaid changes.
E
(iv) If any appellant is unwilling to continue the lease
by paying the higher premium as aforesaid, or fails
to exercise the option as per para (iii) above by
30.9.2011, the allotment and consequential lease in
F its favour shall stand cancelled. In that event, NOIDA
shall return all amounts paid by such appellant to
NOIDA towards the allotment and the lease, and also
reimburse the stamp duty and registration charges
incurred by it, with interest at 18% per annum from
the date of payment/incurring of such amounts to
G date of reimbursement by NOIDA. If NOIDA returns
the amount to the appellant within 31.12.2011, the
rate of interest payable by NOIDA shall be only 11%
per annum instead of 18% per annum. [para 70] [151-
G-H; 152-A-C-E-H; 153-A-C]
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 85

Case Law Reference: A
2002 (1) SCR 227 held inapplicable para 28
2006 (1 ) Suppl.SCR 86 held inapplicable para 28
1986 (2) ~cc 354 distinguished para 42
B
1987 (2) SCR 223 distinguished para 42

1993 (4) sec 25 distinguished para 47

1997 (1) Suppl. SCR 671 distinguished para 52
para 64
c
2008 (17) SCR .917 distinguished

CIVIL APPELLATE JURISDICTION : Civil Appeal No .
. 4561 of 2008.

From the Judgment & Order dated 13.5.2008 of the High D
Court of Judicature at Allahabad in SLP No. 15375 of 2008.

WITH
C.A. Nos. 4562, 4563, 4564, 4565, 4566, 4567, 4566, 4569,
4570, 4571, 4572 & 4968 of 2008. E

Gopal Subramanium, SG, T.R. Andhyarujina, Harish N.
Salve, Ranjit Kumar, Maninder Singh, P.P. Rao, S.K. Agarwal,
K.K. Venugopal, Satish Chandra Mishra, Ratnakar Dash,
Ravinder Srivastava, Fakhruddin, Harish Malhotra, Shail Kumar F
Dwivedi, AAG, L.K. Bhushan, Swaty Malik (for Dua Associates),
Ruby Singh Ahuja, Meenakshi Grover, Manu Aggarwal, Abeer
Kumar, R.N. Karanjawala, _Manik Karanjawala, Simran Brar,
Vedanta Verma (for Karanjawala & Co.), Abhinav Mukerji ,
Gaui'av Sharma, Surbhi Mehta, Bindu Saxena, Aparajita
Swarup, Shailendra Swarup, Neha Khattar, D. Bhadra, Hashmi, G
Ravinder Agarwal, Arun K. Sinha, Rakesh Singh, Sumit Sinha,
Dheeraj Malhotra, Aslam Ahmed, Babit Singh Jamwal, Gagan
Gupta, D. Bhattacharya, M.K. Singh, Pramod B. Agarwala,
Rajul Shrivastav, Abhishek Baid, Antara, Ameet Singh,
H
86 SUPREME COURT REPORTS [2011] 7 S.C.R.

A Pareena Swarup, Praveen Swarup D. Mehta, Ameet Singh,
Nikhil Majithia, Anuvrat Sharma, M.K. Choudhary, Tanuj
Khurana, S.K. Verma, R.K. Yadav, Ashutosh Srivastava for the
appearing parties.

The Judgment of the Court was delivered by
B
R.V.RAVEENDRAN, J. 1. The appellants in these
appeals are the lessees of plots allotted by the New Okhla
Industrial Development Authority (for short 'the Authority' or
'NOIDA') for construction of 5 star, 4 star and 3 star hotels in
C Noida, District Gautam Budh Nagar, Uttar Pradesh. The said
Authority was constituted under the provisions of the
U.P.lndustrial Area Development Act, 1Q76 ('Act' for short) for
development of an Industrial and Urban Township of Noida in
Uttar Pradesh, neighbouring Delhi.
D
2. Tourism was granted the status of an "industry" by the
state government during 1997-98, by extending certain
concessions and facilities available to industries. However as
tourism •. in particular hotel industry, had not received the
required encouragement, the state government with the intention
E of attracting capital investment in tourism industry came up with
a policy, as per its communication dated 22.5.2006 addressed
to the Director General of Tourism, Uttar Pradesh. Relevant
portions of the said policy are extracted below :

F (1) Land should be earmarked for hotels by the
concerned Development Authorities while preparing
the Master Plan with the cooperation of the Tourism
Department and such land should be provided for
hotels. Where the Master-Plan stands finalized. the
G said procedure has to be followed in respect of
surplus land. In regard to Development Authorities
which have not finalised the Master Plan, steps may
be taken for reserving land for hotels to the extent
possible, near tourist spots/places of tourism with
the assistance of the Tourism Department.
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 87 -·-~·.

[R.V. RAVEENDRAN, J.]
Whenever the Master Plans of Authorities are A
revised, the land should be earmarked for hotels
with the assistance of the Tourism Department. The
lands earmarked will be kept reserved for tourism/
hotels for five years from the date of publicizing the
scheme. If no hotel entrepreneur comes forward in B
five years, the authority shall be free to alter its land
use.

(2) If change in land use by the Authority is necessary
for giving the earmarked plot to hotel industry, such
change in land use shall be done by the Authority c
in accordance with the rules and the prescribed
procedures on a 'case to case' basis by the
· competent authority.

(3) D
&
(4) xxxxx
(5) Since Tourism including Hotels, has been given the E
status of Industry, in regard to hotels also plots shall
be earmarked as in the case of industries, and
shall be allotted at industrial rates as in the case
of industrial plots. This policy shall be implemented
in every district of the State. F
(6) xxxxx

(7) They shall be given cent-percent rebate in Sukh
Sadhan Tax for five years from the date of starting
of new hotels. Other concessions shall be G
admissible as per industrial policy.

(8) The earmarked land for Hotel industry, shall be
allotted only to Tourism entrepreneurs.
H
88 SUPREME COURT REPORTS [2011) 7 s. C.R.

A (10) Land shall be made available to hotel entrepreneurs
by all Authorities including the Housing and
Industrial Development Departments, at industrial
rates. To ensure that hotel entrepreneurs may get
the benefit of this provision, all the above Authorities
8 shall ensure the necessary arrangements/
amendment in their rules so that it may be possible
to rr.ake available the land to hotel entrepreneurs
on industrial rates.

(11) Only in areas where there are Authorities, the
c estimation of category wise requirement,
determination of number of plots and star category
wise determination of hotels will be made by the
concerned Authorities. In other areas the Tourism
Department shall assist in this exercise.
D
xxxxx

(15) After earmarking the land for hotels, applications
will have to be invited for allotment to hotel/tourist
entrepreneurs on industrial rates. The condition
E
of eligibility for applicant shall be as follows:- x x x

(16) Where there is industrial lands, and more than
one applicant, the Development Authorities shall
allot the industrial land on the basis of suitability
F of the applicants, in accordance with the current
procedure."

(emphasis supplied)

3. At the 135th meeting of the Board of Directors/Members
G of NOIDA (for short 'NOIDA Board') held on 5.6.2006, the said
State Policy dated 22.5.2006 to attract more capital investment
in tourism/hotel industry was considered. The NOIDA Board
resolved to implement the said policy in the areas falling within
its jurisdiction and apply the rates applicable to its Industrial
H area (Phase I) to the plots to be allotted to the hotel industry.
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 89
[R.V. RAVEENDRAN, J.]
The rate referred was the reserve rate of Rs.7400/- per sq.m. A
applicable to Industrial Area (Phase I) plots, fixed by the NOIDA
Board at its meeting held on 20.3.2006. The resolution also
mentioned that the implementation of the said policy should
ensure ·construction of sufficient hotels before the
Commonwealth Games to be held in Delhi, which were B
scheduled to commence in October, 2010. Having regard to
the importance of the matter, the Principal Secretary, Tourism,
the Commissioner, Meerut Circle and the Director of Industries
of the U.P. Government, attended the said meeting as special
invitees. c
4. At a meeting held by the Circle Commissioner, Meerut
on 2.7.2006 with officials of NOIDA, he communicated the
direction that construction of Hotels should be completed
before the commencement of the Commonwealth Games. At
the said meeting the following 14 plots were identified as being D
suitable for allotment as hotels/plots: (a) six plots each
measuring 40000 sq.m. for 5 star hotels in Sectors 96, 97 and
98; (b) five .plots each me~suring 20000 sq.m. for 4 star hotels
in Sectors 72, 101, 105, 124 and 135; and (c) three plots for 3
star hotels (measuring 20000, 20000 & 10000 sq.m.) in E
Sectors 62, 63, and 142. In view of the Government's Policy
dated 22.5.2006 and the decisions taken at the meeting
chaired by the Commissioner, Meerut Circle on 6.7.2006, the
NOIDA Board took the following decisions at its 136th meeting
held on 14.7.2006 : (i) It approved the proposal for making F
provision for hotels in reserved commercial area - Zone C 3
(as hotels had not been permitted in commercial areas C-1 and
C-2 of the master plan reserved for wholesale and retail
activities and as there was demand for hotels due to
Commonwealth Games 2010) and directed inclusion thereof G
in the approved proposed NOIDA Master Plan 2021 and
reference to the State Government for its approval. (ii) It
decided to launch the Hotel Plot Allotment Scheme and
authorized the CEO to finalise the terms and conditions for
H
90 SUPREME COURT REPORTS [2011] 7 S.C.R.

A allotment, so as to ensure construction of hotels by the allottees
before the commencement of the Commonwealth Games. In
pursuance of the said decision, NOIDA sent a communication
dated 20.7.2006 to the State Government seeking approval
of its decision to make a provision for hotels in commercial
8 areas under Zone 3 and inclusion of it in NOIDA Master Plan,
2021.

5. The Secretary, Sports & Youth Affairs, Government of
India, held meetings with NOIDA officials on 28.7.2006 and
22.8.2006 in connection with preparations for Commonwealth
C Games scheduled in October, 2010. At those meetings, the
Secretary, Sports & Youth Affairs stressed the Government of
India's request for earmarking 25 hotel plots in NOIDA.
Therefore it was decided to reduce the area of 5 star hotels
to 24000 sq.m. (instead of 40,000 sq.m. earlier proposed), the
D area of 4 star hotels to 12500 sq.m. (instead of 20000 sq.m.)
and the area of 3 star Hotels to 7500 sq.m. (instead of 10000
sq.m.) and thereby convert the 14 plots into 25 plots made up
of 10 plots for 5 star hotels, 5 plots for 4 star hoteils and 10
plots for 3 star hotels. At the meeting held on 28.8.2006 under
E the chairmanship of the Circle Commissioner, Meerut, the said
decision to increase the number of plots for hotels from 14 to
25 by reducing the plot measurements, in the following manner:

(i) Ten plots for 3 star hotels - (area 7500 sq.m.
each)
F
Plot Nos. SDC/H1 and SDC/H2 in sector 62, plot
Nos.A-155/B and A-155/C in sector 63, plot No.
SDC/H 2 in sector 72, plot No.124A/2 in sector
124, plot No.SDC/H-2 in sector 103, plot No.SOC/
G H-2 in sector 105, SDC/H-2 in sector 135 and plot
No.14 in sector 142.

(ii) Five plots for 4 star hotels: (area: 12.500 sq.m.
each)
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 91
[R.V. RAVEENDRAN, J.]
Plot No.SDC/H-1 in sectors 72, 103, 105 and 135 A
and plot No.124A/1 in sector 124.

(iii) Ten plots for 5 star hotels : (area 24.000 sq.m.)

Plot Nos.H-1 to H·10 in sectors 96, 97 and 98.
B
The proposal for approving the increase in number of plots and
reductions in their size was placed before the NOIDA Board
at the 137th meeting on 1.9.2006. The NOIDA Board approved
the proposal. The terms and conditions for allotment drawn by
the CEO were also approved with a modification that they c
should provide for obtaining Hotel Completion Certificate by
December 2009 (with authority to CEO to grant extension of
time). ·

6. In pursuance of the said decision, NOIDA published the
Hotel Site Allotment Scheme on 17.10.2006, by D
advertisements in newspapers and by issue of information
brochures containing detailed terms. and conditions, inviting
applications for allotment of plots for 5 star, 4 star and 3 star
hotels in NOIDA on 90 years lease basis. Applications were
made available between 17.10.2006 and 1.11.2006 (extended E
till 10.11.2006). We extract below the relevant information from
the Brochures. The following eligibility criteria were prescribed:

Eligibility criterion for selection (extracted from clauses
8 to 11 of Brochures) F

Minimum experience in 10 years for 5 star and 4 star; 5
Hotel business years for 3 star
Average turnover during Rs.100 crores, Rs. 75 crores &
the last three years Rs.50 crores respectively for
G
five star, four star and three
star,
Net worth Positive

Allotment of hotel sites among the eligible applicants shall H
92 SUPREME COURT REPORTS (2011] 7 S.C.R.

A be done on the basis of their experience, turnover and net
worth. Allotment of hotel site to the eligible applicants shall
be made in descending order, of the plot applied for, on
the basis of their evaluation. In case same marks are
obtained by more than one applicant, then allotment
B amongst them shall be made on the basis of draw of lots.

For each hotel that has a tie up/collaboration with
international chain of hotels or in case the applicant
company/institution is itself an international chain, then
three additional marks shall be awarded for each hotel in
c the 3/4/5 star and above/equivalent rating category owned/
managed by the applicant.

"Rate of Allotment, that is premium payable (Clause
13 of the Brochure)
D
(a) The current rate of allotment is Rs.7,400/- (Rupees
Seven Thousand Four Hundred Only) per square
metre. ·

(b) Besides, Location benefit charges as stated below
E shall be charged in addition to above allotment rate
at the following rates :-

(i). 2.5% of above rate if plot is on 18 mtr. but
less than 30 mtr. wide road.
'
F
(ii) 5% of above rate if plot is on a road having
width of 30 mtr. or above.

(iii) 2.5% of above rate if plot is facing/abutting
green belt or park.
G
(iv) 2.5% of above rate if plot is a corner plot.

The maximum location charges would not exceed
10% of the total allotment amount of the plot.

H (c) The land rate stated above is subject to change
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 93
[R.V. RAVEENDRAN, J.]

without giving any notice. The rate prevailing on the A
date of issue of allotment letter would be
applicable."

Payment of annual rent : (extracted from clause E in the
Brochures) B

In addition to the amount paid/payable for the allotment of
plot, allottee shall have to pay yearly lease rent in the
manner given below :

(a) The lease rent will be 2.5% of the total amount paid c
for the plot and will be payable annually.

(b) On expiry of every ten years from the date of
execution of the lease deed, lease rent would be
enhanced by 50% of the annual rent payable at the
D
time of such enhancement.

xxxxxx

(e) Allottee has the option to pay lease rent equivalent
to 11 years of the current lease rent as "One Time E
Lease Rent" unless the Authority decides to
withdraw this facility. On payment of One Time
Lease Rent, no further annual lease rent would be
required to be paid for the balance lease period.
This option may be exercised at any time during the F
lease period, provided the allottee has paid the
earlier lease rent due and lease rent already paid
will not be considered in One Time Lease Rent
option."

Norms of development (extracted from Clause (I) in the G
Brochures):
(a) Ground coverage and floor area ratio is as under :
Maximum ground coverage 25% [for 5/4 star]
30% [for 3 star]
H
94 SUPREME COURT REPORTS [2011] 7 S.C.R.

A Maximum FAR 2 [for 5/4 star]
1.5 [for 3 star]
Maximum height & set backs as per building
bye-laws
(b) Other norms:
B
i. 5% of the FAR can be used for Commercial space.

ii. Basement below the ground floor to the maximum
extent of ground coverage shall be allowed and if
use for parking and services would not be counted
c in the FAR. Basement used for parking will be
permitted upto the setback line of the plot. n

"Transfer (Clause J of the Brochures)

D 1. The allotted plot shall not be transferred before the
allotted premises is declared functional by the
Authority. In case the allottee wants to transfer the
plot after the hotel is declared functional, the allottee
will have to seek prior permission from the
E Authority. Authority may refus.e to allow transfer
without giving any reason. However, in case the
transfer is permitted, transfer charges shall be
.
payable as per policy of the Authority and all terms
and conditions of transfer memorandum shall be
binding jointly and severally on the transferee and
F
transferor.

2. No change in shareholding pattern of the members
in the Consortium shall be permih "'!d till the project
is completed and functionality certificate is
G obtained from the Authority.

3. In no circumstances, the sub-division of plot will be
allowed by the Authority.

4. The allottee shall not be allowed to use any land
H other than allotted premises and shall also ensure
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 95
[R.V. RAVEENDRAN, J.]
to keep the allotted premises, environment neat & A
clean.

Cancellation (Clause (o) of the Brochures)

(i) lfit is discovered that the allotment of the plot has
. been obtained by suppression of any fact or B
misstatement or misrepresentation or fraud the
allotment of the plot shall be cancelled and the
entire deposited amount shall be forfeited to the
Authority._
c
(ii) If there is any breach in the terms of allotment, or if
the allottee does not abide the terms and
conditions of the building rules or any rules framed
by NOIDA, the allotment may be cancelled by the
Authority and the possession of the demised D
premises shall be taken over by the Authority from
the allottee. In such an event, allottee will not be
entitled for any compensation whatsoever and
refund of any amount credited or is in arrears/
overdue as Revenue Receipt(s) if any, may be E
refunded after forfeiting the amount as per rules.
However, total forfeited amount would not exceed
the total deposits.

7. The number of applications received under the said
scheme published on 17.10.2006 and the allotments made after F
processing and evaluation, are as under :
Category of No. of plots No. of Number of
Hotel Plots offered for applications allotments
allotment received made
G
5 star 10 15 9
4 star 5 5 2
3 star 10 11 3
Total 25 31 14
H
96 SUPREME COURT REPORTS [2011) 7 S.C.R.

A It is stated by NOIDA that the eval~ation of applications and
recommendations for allotment were made by an independent
Screening Committee (U.P.lndustrial Consultants Ltd.) and the
recommendations for allotmer1ts were approved by the CEO ·
of NOIDA. The allotments were made on 12.1.2007 and the
B allottees were required to pay the premium for the leases at
the rate of Rs.7400/- per sq.m. plus location charges. At the
142nd meeting held on 9.2.2007, the Board of Directors of
NOIDA approved the CEO's acceptance of the
recommendations of the Screening Committee relating to
C allotment and directed that the remaining.11 unallotted plots (7
plots in 3 star category, 3 plots in 4 star category and 1 plot in
5 star category) be re-advertised.

8. At the 143rd meeting held on 9.3.2007, the Board of
NOIDA perused the relevant agenda and noted the allotments
D made to the allottees, the payments received by way of
premium from the allottees and the proposals for execution of
lease deeds in favour of the allottees of the hotel plots, under
the government scheme dated 22.5.2006 approved on
5.6.2006. In pursuance of the above, lease deeds have been
E executed and presented for registration in March, April -and
May, 2007. In two cases the lease deeds have been registered.
In other cases, it is stated that the registration is pending in view
of proceedings for under-valuation on the ground that as against
the circle rate of Rs.70,000 per sq.m., the premium for the lease
F was only Rs.7,400 per sq.m.

9. At that stage, two writ petitions (Civil Misc. W.P.
No.24917/2007 and PIL W.P. No.29252/2007) were filed in the
High Court of Allahabad, challenging the allotment of the hotel
sites by NOIDA on the ground that the allotment was at a very
G low price. The first writ petition was filed on 22.5.2007, hardly
within one month from date of execution of the lease deeds. In
the said writ petition, a division bench of the High Court made
a reasoned interim order on 22.5.2007 directing the state
government to exercise its power of revision under section
H
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 97
[R.V. RAVEENDRAN, J.]

41(3) of the U.P. Urban Planning & Development Act, 1973 (for A
short '1973 Act') read with section 12 of the Act and take a
relook in regard to the allotments made in favour of the
appellants by NOIDA and take an independent decision. In
pursuance of the said application, the state government
examined the matter and concluded that the allotments made B
to the appellants were irregular on two grounds. Firstly
allotments of commercial plots had been made for industrial
purposes at industrial rates without getting the land use changed
from commercial to industrial in accordance with the regulations
and without obtaining the consent of the state government. c
Secondly, the plots earmarked for commercial use in a
commercial area were allotted at rates applicable to industrial
plots, without calling for competitive bids/tenders and without
the permission of the state government. It therefore directed
NOIDA to cancel the allotments and initiate action against the D
officers of NOIDA responsible for the irregularities.

10. NOIDA implemented the said direction dated 1.8.2007
issued by the State Government by issuing cancellation letters
dated 3.8.2007 cancelling the allotments and consequential
leases granted in favour of the appellants. NOIDA informed the E
allottees that action was being taken as per rules to refund the
money being paid by them and called upon them to return the
possession of the plots. Letters of cancellation stated that as
per the NOIDA Development Area Building Regulations and
Directions, 1986 and 2006. (published in the Gazettes dated F
01.12.1986 and 05.12.2006 respectively), hotels fall under
commercial category and therefore the Government Policy
dated 22.05.2006 was null and void; and that even if the
government policy dated 22.5.2006 was valid, the following
mistakes in the allotment could not be legally rectified and G
therefore the allotments were being cancelled:

(i) F.A.R. of the plots is fixed at 2.00 in the Brochure
whereas F.A.R. of industrial plots is 0.60.

(ii) The Government Order dated 22.05.06 issued by H
98 SUPREME COURT REPORTS [2011] 7 S.C.R.

A the Tourism department does not refer to 5% of
F.A.R. being used for commercial activities. But
NOIDA's hotel scheme contained in the Brochures
shows that 5% of F.A.R. is fixed for commercial
activities,
B
(iii) According to the Building byelaws of the Authority
published in the Gazette dated 16.12.2006, 'hotel'
is kept in commercial category. All the allotted plots
are shown for commercial use in NOIDA Master
Plan. According to the current policy of the
c Authority, the disposal of commercial plots has to
· be done by inviting bids/tenders. But the said
procedure was not adopted.

(iv) The allotment of plots is made at industrial rates.
D The then prevailing reserved rates in Industrial Area
Phase-I was Rs.7,400/- per sq.mt. And its allotment
should be made on the basis of bids/tenders. But
in the allotment of hotei, the bids/tender procedure
along with the above rates were not followed.
E
(v) All the plots allotted in the cases in question are
shown for commercial purpose. Before including
these plots in hotel scheme, according to Para 2
of the Government Order dated 22.05.06 it was
necessary to change. the use of the land from
F commercial to industrial, for which permission from
N.C.R. Planning Board was necessary which was
not complied with in the case at hand."

11. The state government also filed an affidavit before the
G High Court on 2.8.2007, in the writ petitions challenging the
allotments, referring to its aforesaid decision and the
consequential direction issued to the NOIDA on 1.8.2007. The
relevant portions of the said affidavit are extracted below :

"3·. That after receipt of the orders of this Hon'ble Court the
H
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 99
[R.V. RAVEENDRAN, J.]
matter was examined by the infrastructure and A
Development committee in consultation with concerned
Officers including chairman & CEO, NOIDA and found that
without changing the land use of land in question, the
commercial land was given for industrial purpose and
opined that the allotment of land by NOIDA does not B
appear to be justified and seems liable for cancellation in
accordance with law."

"4. That the recommendations of Infrastructure and
Industrial Development Commissioner was considered by C
the State Government and a decision was taken in
exercise of the power vested under section 41(1) of the
U.P.Urban Planning and Development Act, 1973 to direct
NOIDA Authority to take action in accordance with law. It
was also decided to direct the NOIDA Authority to identify
the guilty officials and send the recommendation to the D
Government."

In view of the affidavit filed by the State Government, and the
cancellation of allotments by NOIDA. the writ petitioners sought
leave to withdraw the writ petitions. The High Court by a E
detailed order dated 10.8.2007, dismissed the writ petitions as
withdrawn, as the reliefs sought had been granted.

12. Thereafter the appellants filed writ petitions before the
High Court challenging the cancellation of allotment of plots and F
the leases by communications dated 3.8.2007. The said writ
petitions were allowed by a Division Bench of the Allahabad
High Court by a common order dated 13.5.2008. The High
Court quashed the order dated 1.8.2007 of the State
Government and the cancellation orders dated 3.8.2007 passed
by NOIDA on the ground that they were opposed to principles G
of natural justice for want of opportunity of hearing as required
under proviso to section 41 (3) of 1973 Act. The High Court
therefore remanded the matters to the State Government for
taking a fresh decision, after affording an opportunity of hearing
H
100 SUPREME COURT REPORTS (2011] 7 S.C.R.

A to the writ petitioners, keeping in view the following
observations of the High Court:

"The question as to whether the rates were fixed in the
advertisement whereas the same were meant to be only
a reserved price, would lead to the conclusion that a
B
minimum price had been fixed and that offers for higher
amount could be made but at the same time, it is to be
noted that in spite of this price which was indicated in the
advertisement, only 14 plots could be settled as against
the 25 plots which had been advertised. This clearly
c indicates that in spite of adequate advertisement having
been made, the authority was unable to fetch investors for
almost half of the plots. This clearly reflects that the
stringent conditions which had been imposed in the
advertisement, detracted prospective investors to a great
D extent. Even before this Court, there is no challenge by way
of any such prospective investor to the said advertisement
or the procedure adopted by the authority except for two
petitions filed as a PIL which were also ultimately
withdrawn by the petitioners therein. Thus, in these
E circumstances, it cannot be readily inferred that the deal
was a ma/a fide deal or was some sort of underhand
dealing merely because plots had been sold at much
higher rates in the nearly commercial area. This, in our
opinion, would be comparing uncomparables inasmuch as
F the terms and conditions in the present allotment are far
more stringent and curtail much of the rights as against
those plots which have been settled by NOIDA at higher
rates on different terms and conditions. In the instant case,
the authority has come up with the plea that there was a
G mistake in the implementation of the policy on account
of an incorrect interpretation with regard to the industrial
rates to be applied at the time of allotment. It is surprising
as to how the authority has termed it as a mistake when
extensive deliberations had taken place and conscious
decisions-had-been implemented followed by execution of
H
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 101
[R.V. RAVEENDRAN, J.]
lease deeds and registration thereof. A

Admittedly no misrepresentation had been made by
petitioners, on the contrary, it is a clear case of
misrepresentation by the NOIDA that land would be
allotted at fixed price of Rs.7,400/- per sq. mtr. Not a single
8
person has come forward to offer any higher price for ·
either of the plots. No doubt, statutory rules have been
violated but such violations appear to be more technical
than contrary to public interest.

It is not in dispute that once the NOIDA had adopted the C
· policy decision dated 22nd May, 2006 in toto, regulations
could be amended and if same had not been done, the
State Government could have asked the NOIDA to make
the amendments for giving effect to the policy decision
d*dn~M~.2006. D
The question as to whether the rules and regulations
require amendment for the purposes of justifying the
advertisement, has not all been considered by the State
Government or NOIDA while passing the impugned order.
This has vitally affected the rights which accrued in favour E
of the petitioners on account of the action of the parties in
altering their position after the allotment was made.
Whether the implementation ·of the policy without bringing
an amendment in the rules and regulations would be fatal,
should have been the subject matter of deliberations by F
the State Government while passing the impugned order
inasmuch as we do not find any such reason reflected
therein. Even otherwise, if this irregularity did exist, then it
was still open to the State Government to have considered
the implementation of any such amendment looking to the G
fact that the hotels were very much urgently required and
the work was required to be finished by 2009. It is
nobody's case that there was no fair advertisement
indicating the terms and conditions on which the allotment
was to be made. The policy to invoke the industrial rates H
102 SUPREME COURT REPORTS [2011] 7 S.C.R.

A for allotment was only to promote the hotel business in view
of the forthcoming Commonwealth Games and, in the long
run, to promote tourism. It is for the State Government to
decide as to whether the rates prescribed were
reasonable vis-a-vis the object sought to be achieved. It
B cannot be lost sight of that there are many allotments made
by the Government even free of cost to exclusively
charitable institutions or institutions which provide services
on 'no profit no loss' basis to the public at large. Can it be
said that the allotment of such plots have also to be tuned
c keeping in view the high rate of revenue that can be
collected from the land? Thus, the purpose which has to
be seen and the object which is sought to be achieved, in
our opinion, is in the realm of policy decision to be taken
by the State Government founded on a reasonable basis
and which has a rational nexus with the object to be
D
achieved. The consideration for fixing appropriate rates
may also be one of the factors but the same has to be
concluded by taking an appropriate decision. Thus, the
decision in this case was required to take after giving
opportunity of hearing to the petitioners as the petitioners
E had acquired valuable rights due to intervening events.
This is we are saying again keeping in view the undiluted
facts that out of 25 .plots that were offered, only 14
prospective allottees have applied and were allotted
plots .....
F
In the absence of any kind of allegation of fraud or
misrepresentation or impression of bias or favouritism or
nepotism or corruption, the decision to cancel the allotment
needs a fresh look by the State Government in the back
G ground of the observations made.

In our opinion the law laid down by the Hon'ble Supreme
Court in the case of Sachidanand Pandey. (Supra) is
appropriately applicable in the facts of the present case
and should have been noticed by the State Government
H
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 103
[R.V. RAVEENDRAN, J.]
along with other aspect of the matter before taking a A
decision in the matter.

The State Government has failed to take note of the fact
that the price fetched in respect Of plots settled With the
petitioners was considered again by the Board of NOIDA B
in its 137th meeting dated 4th September, 2006 and after
noticing the settlement made, at a price of Rs.7,400/- per
sq. mtr. with the petitioners, the Board approved the same.
Meaning thereby that even. if, there may have been some
irregularity in the settlement of plots, vis-a-vis policy C
guidelines stood condoned by the NOIDA itself. The State
Government should have a/so kept in mind that the
petitioners had already been put in actual possession
over the land in question, the lease-deeds had already
been executed and 11 cases a/so registered.
D
The issue so formulated by us need examination by the
State Government afresh in the background that public
interest must prevail in all circumstances and all statutory
provisions and the power conferred upon the State
Government under Section 41 of Act, 1973 must have at E
its heart larger public good."

(emphasis supplied)

13. The appellants being aggrieved by the said common
order of the High Court, to the extent it remanded the matters F
to the State Government for fresh consideration, have filed
these appeals by special leave. The appellants contended that
the High Court, having quashed the order of the State
Government dated 1.8.2007 and the consequential orders of
cancellation dated 3.8.2007 passed by NOIDA, ought to have G
upheld the allotments and leases and should not have
remanded the matter to the state government for fresh
consideration. On 9.7.2008 this court directed status quo
regarding possession. On 18.7.2008 this court granted leave
and issued the following directions : H
104 SUPREME COURT REPORTS [2011] 7 S.Q.R.

A "Interim stay of dispossession of the petitioners from the
respective sites allotted to them. The petitioners shall
maintain status quo and shall not put up any construction
on the sites and shail not create any third party rights.

The High Court while setting aside the cancellation of letters
B
of allotment has directed the State Government to give a
hearing to the petitioners individually and therefore pass
a reasoned order, in the light of its observations, in regard
to its proposal to cancel the allotment of sites.

c W~ direct that the State Government (Principal Secretary,
Industrial Development Department, Uttar Pradesh
Government} shall accordingly give a hearing and pass a
reasoned order in accordance with law uninfi'uenced by the
observa~ions made by the High Court in the impugned
D judgment dated 13.5.2008.

All the petitioners agree to appear before the concerned
Authority without further notice on 11.08.2008 for such
hearing. We make it clear that the participation in such
hearing by the petitioners and passing of orders by Uttar
·E
Pradesh Governl'T}ent will be without prejudice to the
respective contentions of parties:

List on 09.09.2008. The concerned Authority shall take its
decision by that date and submit its decision to this Court."
F
(emphasis supplied)

14. In pursuance of it, the state government (Principal
Secretary, Infrastructure and lnc!ustrial Development} gave a
hearing to the appellants and passed individual orders dated
G 8.9.2008 in the case of each of the appellants, without reference
to the observations or directions of the High Court. The state
government has held that the allotment of plots to the appellants
was bad and cancelled the allotment and directed action to be
taken against the erring officers of NOIDA. In the said orders
H
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 105
[R.V. RAVEENDRAN, J.]
dated 8.9.2008 made under section 41 (3) of the 1973 Act, the A
state government has held :

(i) The object of the government policy dated 22.5.2006
was to treat hotels as 'industry', and make allotment of land
in favour of hotel entrepreneurs on industrial terms, subject 8
to the statutory Regulations, 1996 and Building
Regulations, 2006 on land earmarked for industrial use.
Therefore all conditions applicable to industrial buildings
will apply to construction of hotels. NOIDA Master Plan had
to be amended demarcating Sectors 96, 97, 98 (where
five star Hotel Plots H-1 to H-10 are situated) and other C
commercial areas allotted for hotels, for industrial use.

(ii) Though NOIDA at its 135th meeting on 5.6.2006 while
adopting the government policy dated 22.5.2006 resolved
to change its rules, regulations and policy, it did not do so D
and consequently the allotments of plots were in violation
of the statutory provisions, in particular Regulations 3(1)(b)
and 4(1)(b)(iii) read with Regulation 2(d) and (e) of the
1991 Regulations. The adoption of government policy
dated 22.5.2006, did not result in automatic amendment E
or modification of the regulations of NOIDA.

(iii) The allotments were made at the industrial rate of
Rs.7400 per sq.m. The plots allotted were commercial
plots, of which the prevailing circle rate was Rs. 70,000 per F
sq.m. As a result, there was a loss of Rs.1643.77 crores
to NOIDA in the premium charged for the 14 plots. If the
rental income for 90 years, with reference to a premium
of Rs.70000/- per sq.m. is calculated, the loss on account
of annual rent would be Rs.3077.37 crores. Thus the total
loss of revenue by not inviting tenders was Rs.4721.14 G
crores.

(iv) NOIDA could not have allotted commercial plots at
fixed rates, in favour of the ·appellants without public
auction or inviting tenders. If it wanted to allot eommercial H
106 SUPREME COURT REPORTS [2011] 7 S.C.R.

A plot at a fixed rate, it ought to have amended its regulations
and policies, and that was not done.

(v) The allotment of plots at Rs.7400 per sq.m. was illegal
as the said price was not approved by the Board of
NOIDA. The Board of Directors had directed at the 135th
B
meeting on 5.6.2006 while deciding to implement the
Government policy dated 22.5.2006, 'to apply the rate of
Industrial Area Phase I' for hotel industry. This meant that
the reserve rate was to be fixed at Rs.7400/- per sq.m. for
the plots and applications ought to have been invited by
c sealed tenders. But the CEO of NOIDA had shown in the
Brochures, a fixed allotment rate of Rs.7400/- per sq.m.
contrary to the decision of the NOIDA Board. Secondly the
reserve rate had to be fixed after ascertaining the market
value which was also not done. The policy of NOIDA both
D in regard to allotment of both commercial plots and
Industrial area - Phase I plots was on the basis of sealed
tenders. That was violated by allotting plots at a fixed rate.

(vi) The policy of the government dated 22.5.2006 adopted
E by NOIDA by resolution dated 5.6.2006 contemplated
change of land use, amendment of regulations and policies
of NOIDA, and following the prescribed procedure for
allotment of commercial and industrial plots. But neither the
amendments were carried out, nor the prescribed
F procedures followed.

(vii) The following violations make the allotments invalid :
(a) ·reserved price being treated as fixed price; (b)
procedure for allotment of plots in commercial areas and
industrial areas (Phase I) which was by auction or by bids
G not being followed; (c) change of land use not being
effected; and (d) regulations not being amended to give
effect to the policy dated 22.5.2006.

15. As these revisional orders dated 8.9.2008 were
H passed by the state government, during the pendency of these
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 107
[R.V. RAVEENDRAN, J.]
appeals, in pursuance of the directions of this court issued on A
18.7.2008, this court permitted the appellants to challenge the
said orders of cancellation dated 8.9.2008 by filing additional
grounds in order to avoid duplication of proceedings. The
respondents were also permitted to file their additional counter
affidavits. These appeals were therefore heard with reference 8
to the challenge to the orders of cancellation dated 8.9.2008,
in addition to the challenge to the order of remand of the High
Court dated 13.5.2008.

16. We may first briefly deal with the challenge to the order
of the High Court dated 13.5.2008. The High Court rightly set C
aside the orders dated 1.8.2007 of the state government,
because no hearing was given to the appellants as required
under section 41 (3) of the 1973 Act. Even otherwise, when
valuable rights had vested in the appellants, by reason of the
allotments and grant of leases, such rights could not be D
interfered with or adversely affected, without a hearing to th~
affected parties. Violatipn of principles of natural justice was a
ground to set aside the order dated 1.8.2007 and the
consequential orders dated 3.8.2007. Several objections were
raised by appellants to the cancellation. These objections had E
not been considered by the state government. As the High
Court was setting aside the orders dated 1.8.2007 and the
consequential order dated 3.8.2007, on the ground of violation
.of principles of natural justice, necessarily it had to direct the
state government to reconsider the entire matter. The High F
Court therefore referred to the several issues which required
to be considered and several admitted facts which will have a
bearing thereon, and directed the state government to decide
the matter afresh after hearing the appellants. This court
reiterated the said direction in its interim order dated G
18. 7.2008. Therefore there is no need to interfere with the final
order of the High Court.

"'1-7-..,Therefore what in effect remains for our consideration
is the validity of the orders of cancellation dated 8.9.2008
H
108 SUPREME COURT REPORTS [2011) 7 S.C.R.

A passed by the state government in exercise of its revisional
jurisdiction. On the facts and circumstances and on the
contentions urged, the questions that arise for consideration in
these appeals broadly are :

I. Where allotment has been followed by grant of a lease
B (which is duly executed) and delivery of possession in
favour of the lessee, whether the 1eases could be
unilaterally cancelled by the lessor?

II. Whether the cancellations were on account of change
c in policy as a consequence of change of government, or
on account of new government's desire to nullify the
actions of previous government?

Ill. Whether the allotments of plots to appellants suffer from
any irregularity or illegality?
D
(a) Whether allotment of commercial plots for hotels, is
contrary to the government policy dated 22.5.2006,
adopted by NOIDA on 5.6.2006, or [he regulations and
policies of NOIDA?
E
(b) Whether allotment of hotel sites by NOIDA should have
been only on the basis of sealed tenders/public action?

(c) Whether the allotment rate is erroneous resulting in any
loss to NOIDA?
F
IV. If there is any violation of the regulations/policies of
NOIDA in making the allotments, what is the consequence?

(i) Who is responsible for the same?
G (ii) Whether there is any suppression, misstatement or
misrepresentation of facts, or fraud, collusion or undue
influence on the part of any of the appellants in obtaining
the allotment/lease?

H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 109
[R.V. RAVEENDRAN, J.]
(iii) What should be the remedial action? A
I. Whether a completed lease can be cancelled?
18. The particulars of the lease deeds executed by NOIDA
witti regard to the hotel buildings allotted on 12.1.2007 to
various allottees are as under: B
CA No. Name of the Cate- Plot Date of Date of
allottee/lessee gory Number execution delivery of
of lease possess-
deed ion
4561/08 ITC Ltd. 5 star Plot No.H-5 11.4.2007 11.4.2007
Sector 97 (pending
registration)
c
4562/08 Indian Hotels Ltd. 5 star Plot No.H-2 4.4.2007 9.4.2007
Sector 96 (pending
registration)
4563/08 Bharat Hotels Ltd. 5 star Plot No.H-1 28.3.2007 29.3.2007
Sector 96 (registered) D

4564/08 Hampshire Hotels. 5 star Plot No.H-3 .28.3.2007 28.3.2007
& Resorts Pvt.Ltd.. Sector 96 (registered)

4565/08 Arora Holdings Ltd. 5 star Plot No.H-6 18.4.2007 27.4.2007
(consortium) Sector 97 (pending E
registration)
4566/08 Crimson Hotels 5 star Plot Nci.H-7 11.7.2007 18.4.2007
Ltd. through Sector 97 (pending
Clarkston Hotels registration)
(P) Ltd. I

4567/08 Mariada Holdings 3 star PlotSDC-H 18.4.2007 26.4.2007 F
Ltd. (consortium) -1 Sector 62 (pending
registration)
4568/08 M/s Mast Craft Ltd. 3 star Plot SOC- 18.4.2007 27.4.2007
(consortium) H-2 pel)ding
through Mis. Sector 105 registration)
NOIDA Luxury
G
Hotels & Resorts
(P) Ltd.
4569/08 Swiss-Bell Hotels 5 star H-9 18.4.2007 24.4.2007
International Ltd. .Sector 98 (pending
(consortium) registration)
4570/08 Rendezvous 5 star H-8 20.4.2007 H
110 SUPREME COURT REPORTS [2011] 7 S.C.R.

A Hotels lnterna- Sector 98 (pending 24.4.2007
tional Pvt.Ltd. registration)
(Consortium)
through Somap
Hotels (P) Ltd.
4571/08 Royal Orchid 3 star 124 A/2 20.4.2007 26.4.2007
B Hotels Ltd. Sector 124 (pending
(consortium) registration)
4572/08 Orchid lnfras- 4 star 124 A/1 - -
Structure Devel- Sector 124
opers Pvt. Ltd.
4968/08 Metrovino Mana- 4 star SDC/H-1 3.5.2007 4.5.2007
c gement Ltd.
(Consortium)
Sector 105 (pending
registration)
- Elbrus Builders 5 star H-4 - -
(P) Ltd. Sector 96
(Consortium)

19. The appellants applied for allotment in pursuance of
D advertisements/brochures issued in October 1996 by NOIDA
inviting applications from hotel entrepreneurs for allotment of
plots for hotels. Each of the appellants fulfilled the elaborate
eligibility criteria for allotment of respc.-;tive category of plot.
After detailed comparative evaluation of the applications
E through an independent agency NOIDA found them fit and
eligible for allotment. Out of 25 plots, allotments were made only
in respect of 14 plots. NOIDA issued them letters of allotment
on 12.1.2007. Each appellant paid the lease premium ranging
between Rs.17.76 crores (five star plots) to Rs.5.55 crores
F (three star plots) as premium plus location benefit charges.
Many also exercised the option to pay 27.5% of the premium
plus location ben~fit charges, as eleven years rent in advance
in lump sum as 'one time lease rent' instead of paying yearly
rent for 90 years. On payment of premium and other dues by
G the allottes, in terms of the relevant regulations, lease deeds
were executed in favour of the appellants, in the standard lease
format of NOIDA in the months of March, April and May, 2007
. and they were duly presented for registration. The appellants
have also incurred stamp duty and registration charges ranging
H from about Rs.2 crores to Rs.62 lakhs. Two lease deeds (in
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 111
[R.V. RAVEENDRAN, J.]
favour of Bharat Hotels Ltd. and Hampshire Hotels & Resorts A
Ltd.) have been duly registered. In regard to other lease deeds,
thoµgh presented for registration, though there is no objection
for registration, registration formalities are kept pending in
view of a demand by the registration authorities for deficit
stamp duty and registration charges on the basis of circle rate B
and the issue is pending before the concerned registration
officer or in court. As far as NOIDA is concerned, execution
and registration of the leases were completed and
consequently possession of the plots were delivered to the
respective allottee/lessee in April and May, 2007. Each C
appellant has also incurred considerable amount for
preliminary expenditure for the hotel project (in addition to the
premium, location benefit charges, rent, stamp duty .and
registration charges) as they were expected to execute the
projects in a time bound manner.
D
20. In the aforesaid factual background, the first contention
of the appellants is that when the leases have been granted,
executed and registered, when entire premium and other dues
have been paid and possession has been delivered, the lessor
(NOIDA) cannot unilaterally cancel the leases. The appellants E
do not challenge the power of NOIDA as lessor, to terminate
the lease on the ground of fraud and misrepresentation under
clause Xlll(1) of the lease deed or on the ground of breach of
the terms of the lease under clause XIV of the lease deed.
What is challenged is the right to cancel a concluded lease F
itself, on the ground that allotment was not valid.

21. A lease governed exclusively by the provisions of
Transfer of Property Act, 1882 ('TP Act' for short) could be
cancelled only by _filing a civil suit for its cancellation or for a G
declaration that it is illegal, null and void and for the
consequential relief of delivery back of possession. Unless and
until a court of competent jurisdiction grants such a decree, the
lease will continue to be effective and binding. Unilateral
cancellation of a registered lease deed by the lessor will
neither terminate the lease nor entitle a lessor to seek H
112 SUPREME COURT REPORTS [2011] 7 S.C.R.

A possession. This is the position under private law.

22. But where the grant of lease is governed by a statute
or statutory regulations, and if such statute expressly reserves
the power of cancellation or revocation to the lessor, it will be
8 permissible for an Authority, as the lessor, to cancel a duly
executed and registered lease deed, even if possession has
been delivered, on the specific grounds of cancellation
provided in the statute.

23. NOIDA is an authority constituted for development of
C an industrial and urban township (also known as Noida) in Uttar
Pradesh under the provisions of the Act. Section 7 empowers
the authority to sell, lease or otherwise transfer whether by
auction, allotment or otherwise, any land or building belonging
to it in the industrial development area, on such terms and
D conditions as it may think fit to impose, on such terms and
conditions and subject to any rules that may be made. Section
14 provides for forfeiture for breach of conditions of transfer.
The said section empowers the Chief Executive Officer of the
Authority to resume a site or building which had been
E transferred by the Authority and forfeit the whole or part of the
money paid in regard to such transfer, in the following two
circumstances : a) non-payment by the lessee, of consideration
money or any installment thereof due by the lessee on account
of the transfer of any site or building by the Authority; or b)
F breach of any condition of such transfer or breach of any rules
or regulations made under the Act by the lessee. Sub-section
(2) provides that where the Chief Executive Officer of the
Authority resumes any site or building under sub-section (1) of
section 14, on his requisition, the Collector may cause the
G possession thereof to be taken from the transferee by use of
such force as may be necessary and deliver the same to the
Authority. This makes it clear that if a lessee commits default
in paying either the premium or the lease rent or other dues,
or commits breach of any term of the lease deed or breach of
H any rules or regulations under the Act, the Chief Executive
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 113
[R.V. RAVEENDRAN, J.]

Officer of NOIDA can resume the leased plot or building in the A
manner provided in the statute, without filing a civil suit. The
authority to resume implies and includes the authority to
unilaterally cancel the lease.

24. Clause XIV of the lease deeds executed by the NOIDA 8
in favour of the appellants provides that "notwithstanding -
anything to the contrary contained herein, in the event of breach
of terms of lease, or if the lessee does not abide by the terms
and conditions of the building regulations and directions or any
rules framed by the lessor from time to time", the lease may C
be cancelled by the lessor and the possession of the demised
premises can be taken over by the lessor from the lessee.
Clause XIII (i) provides that "if it is discovered that the allotment/
lease of the demised -premises has been obtained by
suppression of any fact or misstatement or misrepresentation
or fraud on the part of the lessee", then the lease shall be D
cancelled and the entire deposit amount shall stand forfeited.
·Therefore NOIDA has the authority, having been empowered
by the statute, to cancel the lease and resume possession,
without recourse to a civil court by a suit, in two circumstances
(i) non-payment of the premium/rent/other dues; (ii) breach of E
conditions of transfer or breach of rules or regulations under
the Act (the conditions referred would include any suppression
of fact or misstatement or misrepresentation or fraud on the
part of the lessee in obtaining the lease).
F
25. NOIDA has not alleged or made out any default in
payment or breach of conditions of the lease or breach of rules
and regulations. Nor is it the case of NOIDA that any of the
appellants is guilty of any suppression or misstatement of fact,
misrepresentation or fraud. Neither the cancellation of the G
allotment and the lease by NOIDA by letter dated 3.8.2007, nor
the orders dated 1.8.2007 or 8.9.2008 made by the state
government refer to any of these grounds. Therefore the
cancellation cannot be sustained with reference to the grounds
mentioned in section 14 of the Act. The grounds mentioned for H
114 SUPREME COURT REPORTS (2011) 7 S.C.R.

A cancellation are mistakes committed by NOIDA itself in making
allotments and fixing the premium, in violation of the
Regulations and policies of NOIDA by officers of NOIDA. These
are not grounds for cancellation under section 14 of the Act.

26. The learned counsel for the respondents submitted that
8
. the lease was terminated by the state government, in exercise
of revisional jurisdiction under section 41 of the UP Urban
Planning and Development Act, 1973 read with section 12 of
the Act on the ground that there were irregularities and
violations of regulations and policies of NOIDA in allotting the
C hotel plots to the appellants. It is submitted that the state
government has such power to cancel the allotment and as a
consequence the lease. Let us examine whether the state
government has such power. Section 12 of the Act provides
that the provisions of Chapter Vil and sections 30, 32, 40.• 41,
D 43, 44, 45, 46, 47, 49, 50, 51, 53 and 58 of the Uttar Pradesh
Urban Planning and Development Act, 1973 as re-enacted and
modified by Uttar Pradesh President's Acts (Re-enactment with
Modifications) Act, 1974 shall mutatis mutandis apply to the
Authority with the adaptations mentioned in the said section.
E Section 41 of the 1973 Act, relating to control by State
Government, is thus applicable to NOIDA. The said section with
the adaptations mentioned in section 12 of the Act, reads as
under:

"41. Control by State Government- (1) The Authority, the
F
Chairman or the Chief Executive Officer shall carry out such
directions as may be issued to it form time to time by the
State Government for the efficient administration of this
Act.
G (2) If in, or in connection with the exercise of its power and
discharge of its functions by the Authority, the Chairl!lan
or the Chief Executive Officer under this Act, any dispute
arises between the Authority, the Chairm;:in or the Chief
Executive Officer and the State Government the decision
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 115
[R.V. RAVEENDRAN, J.]
of the State Government on such dispute shall be final. A

(3) The State Government may, at any time, either on its
own motion or an application made to it in this behalf, call
for the records of any case disposed of or order passed
by the Authority or the Chairman for the purpose of
8
satisfying itself as to the legality or propriety of any order
passed or direction issued and may pass such order or
issue such direction in relation thereto as it may think fit.

Provided that the State Government shall not pass on order
prejudicial to any person without affording such person a C
reasonable opportunity of being heard.

(4) Every order of the State Government made in exercise
of the powers conferred by this Act shall be final and shall
not be called in question in any court." D

27. Sub-section (3) enables the state government, either
on its own motion or on an application made to it in this behalf,
to call for-the records of any case disposed of or order passed
by the Authority for the purpose of satisfying itself as to the
legality or propriety of any order passed or direction issued and E
may pass such order or issue such direction in relation thereto
as it may think fit. The allotments were challenged in two writ ·
litigations before the Allahabad High Court (Civil Misc.WP
24917/2007 and PIL WP No. 29252/2007). A division bench
of the High Court directed the state government to exercise its F
power of revision and have a relook in regard to the allotments
made in favour of the appellants by NOIDA in exercise of its
power under section 41 (3) of the 1973 Act (read with section
12 of the Act). The order dated 1.8.2007 passed by the state
government in pursuance of the said direction of the High Court G
was set aside by the High Court on the ground that the order
violated section 41 (3) of the 1973 Act and directed fresh
consideration after hearing the parties. This Court also directed
the state government to pass a fresh order. Accordingly the state
government examined the matter and passed the impugned H
116 SUPREME COURT REPORTS [2011] 7 S.C.R.

A orders dated 8.9.2008. The state government has concluded
that the allotments by NOIDA were in violation of the regulations
and policies of NOIDA and therefore cancelled the allotments
and consequential leases. The State Government is
empowered to issue such direction. (Whether the order of the
B State Government is valid on merits is a separate issue). The
limited question under consideration is whether the state
government can cancel the allotments and consequently the
leases. Section 41 (3) shows that the state government, can
examine the legality or propriety of any order of NOIDA and
c pass appropriate orders. If the state government in exercise of
its revisional jurisdiction finds the allotments were irregular or
contrary to the regulations or policies of NOIDA and directs
cancellation, the allotments become invalid and leases also
become invalid. Consequently NOIDA can resume possession,
without intervention of a civil court in a civil suit.
0
II. Whether the cancellation was on account of the change
in government

28. The appellants submitted that the Hotel plot scheme
E was introduced and allotments were made in pursuance of a
policy of the government that was in power in 2006; and that
immediately after the allotment and execution of the lease
deeds, there were changes in government on 15.5.2007. The
appellants contend that the direction to cancel the allotments
F (issued on 1.8.2007) and the orders of cancellation (issued on
8.9.2008) was apparently a consequence of the new
government reviewing and changing the policies by the previous
government or as a consequence of the new government's
intention to upset the decisions of the previous government. It
G is submitted that the successor government cannot reopen
concluded transactions of the previous government on the
ground of change in policy or by merely reconsidering them.
Reliance is placed upon two decisions of this Court in support
of their contention - State of Haryana vs. State of Punjab -
2002 (2) SCC 507 and State of Karnataka vs. All India
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 117
[R.V. RAVEENDRAN, J.]
Manufacturers Organisation - 2006 (4) SCC 683. In State of A
Haryana, this Court observed :

" ..... What really bothers us most is the functioning of the
political parties, who assume power to do whatever that
suits and whatever would catch the vote-bank. They forget 8
for a moment that the constitution conceives of a
Government to be manned by the representatives of the
people, who get themselves elected in an election. The
decisions taken at the governmental level should not be
so easily nullified by a change of government and by
some other.political party assuming power, particularly C
when such a decision affects some other State and the
interest of the nation as a whole. It cannot be disputed that
so far as policy is concerned, a political party assuming
power is entitled to engraft the political philosophy behind
the party, since that must be held to be the will of the D
people. But in the matter of governance of a State or in
the matter of.execution of a decision taken by a previous
government, on the basis of a consensus arrived at,
which does not involve any political philosophy, the
succeeding government must be held duty bound to E
continue and carry on the unfinished job rather than
putting a stop to the same."

(emphasis supplied)

In· State of Karnataka, (supra) this Court while reiterating the
F
above principle laid down in State of Haryana, added :

Taking an overall view of the matter, it appears that there
could hardly be a dispute that the project is a mega project
which is in the larger public interest of the State of G
Karnataka and merely because there was a change in the
Government, there was no necessity for reviewing all
decisions taken by the previous Government, which is what
appears to have happened. That such an action cannot be
H
118 SUPREME COURT REPORTS [2011] 7 S.C.R.

A taken every time there is a change of Government has
been clearly laid down ......... "

29. On a careful consideration, we find that the contention
has no merit. This is not a case where as a consequence of
change in government, the new government has reviewed the
8
decision relating to hotel site allotment, merely because it was
a decision of the previous government. Nor is it a case where
any new policy of the new government, being at variance with
the policy of the previous government. The principles stated in
C the said two decisions will be relevant in such cases. In this
case, the allotments of plots for hotel projects were challenged
in two writ petitions - the first of which was filed on 22.5.2007.
In the said writ petition, the High Court made an interim order
dated 25.5.2007, directing the state government to have a re-
lock of the entire matter in view of the serious allegations made
D in the writ petitions about allotment at throw away prices. In fact,
the High Court specifically directed the state government to
exercise its power of revision under section 41(3) of 1973 Act
and take an independent decision. It is in compliance with the
said direction that the state government had a relock at the
E matter, found some irregularities in allotment and directed
NOIDA to take action to remedy the irregularities found in the
allotments, vide letter dated 1.8.2007. This was confirmed in
the affidavit dated 2.8.2007 filed by the state government before
the High Court. Therefore, the decision dated 1.8.2007 was not
F a decision taken by a subseq!Jent government in an attempt to
find fault with the policies or actions of the previous government,
but a decision taken in exercise of a power under section 41
of the 1973 Act in the normal course of governmental business,
in pursuance of specific directions of the High Court. The
G orders dated 8.9.2008 were made in view of the final order of
the High Court and the interim order of this court directing
reconsid~ration. We therefore, reject the contention that the
decisions dated 1.8.2007 and 8.9.2008 of the state government
were the result of any ulterior motive to interfere with the policies
H or decisions of the earlier government. The decision of the
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 119
[R.V. RAVEENDRAN, J.]
state government in revision, is not based on any different A
policy, but based on its finding that the existing regulations and
policies of NOIDA were violated.

Ill. Whether the allotments violate the regulations/policies
of NOIDA? B
30. The Central Government requested the governments
of Uttar Pradesh and Haryana to encourage the high segment
hotel industry and add to the available room capacity in areas
adjoining Delhi, in time to meet the increased demand
expected during the Commonwealth Games scheduled to be C
held in October, 2010. The Uttar Pradesh government had
declared 'tourism' to be an industry as far back as 1997-98 to
encourage tourism in the State. It however found that the said
incentive did not have any marked effect, as far as increasing
the number of quality hotels, an integral part of tourism. To attract D
the twin objects, that is to comply with the request of the central
government for creation of more star hotels, and also to attract
capital investment in the hotel segment of tourism industry
throughout the state, the state _government came out with a
policy on 22.5.2006 with the following two new hotel-specific E
incentives, in addition to the standard incentives available to
tourism industry : (i) allotment of plots for hotels at industrial plot
prices; and (ii) 100% rebate in Sukh Sadan Tax for five years
from start-up. When the policy dated 22.5.2006 is read as a
whole, the scheme that emerges is this: The development F
authorities were expected to earmark specific areas for setting
up hotels while preparing the Master Plan, with the assistance
of tourism department. Where the development authorities had
already finalized the master plan, they were required to earmark
surplus lands (that is, areas not reserved for any identified or G
specific use) for allotment to hotels. If suitable surplus land was
not available and it becomes necessary to allot plots earmarked
for other use, for purposes of hotels, the development
authorities were required to follow the rules and change the land
use so that the.land could be legitimately used for hotel industry.
H
120 SUPREME COURT REPORTS [2011) 7 S.C.R.

A In areas where there were no dev~lopment authorities, suitable
lands near tourist spots were to be acquired/transferred to
tourism department which would allot the land to Hotels/tourism
industry. The plots earmarked for hotels had to be allotted to
hotels/tourism entrepreneurs at industrial plot rates, as was
B done in the case of allotments for industries. The policy was a
general policy intended to apply for the entire state. It
proceeded on the assumption that earmarking areas for hotels
and tourism for allotment at industrial rates, would be under a
separate and distinct categorization of land use. It apparently
c did not contemplate high value commercial plots in NOIDA
being earmarked for hotel industry and being allotted at
industrial rates.

31. The state government on examination of all the facts
in its revisional jurisdiction found that the hotel plots allotted to
D appellants were part of Sectors 96, 97 and 98 (for five star
plots) and other sectors (for plots for 4 star and 3 star hotels)
which were earmarked for commercial use under the NOIDA
Master Plan. It was of the view that in view of tourism/hotels
being declared as an "industry" and the government policy
E requiring allotment of plots for tourism/hotels at industrial rates,
if any plot had to be allotted for a hotel, the land use of the said
plot had to be changed to industrial use in the Master plan by
adopting the prescribed procedure under the regulations, before
making the allotment. It was also of the view that if the plots were
F allotted for hotel industry, then the construction should be as per
the NOIDA building regulations and directions applicable to
industries in regard to FAR, ground coverage, height, setbacks,
construction of building etc. It was also of the view that if plots
in commercial areas are to be allotted it could be only in
G accordance with the NOIDA Commercial Property
Management Policy which required all commercial plots to be
allotted on sealed tender or public auction basis. As NOIDA
did not alter the land use of the plots in question from
commercial use to industrial use in the Master Plan nor amend
H the definitions of commercial use and industrial use in the 1991
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 121
[R.V. RAVEENDRAN, J.]
Regulations so that hotels would no longer be a commercial A
use, but a industrial use, the state government held that statutory
regulations and directives of NOIDA had been violated in
making the hotel plot allotments.

32. The state government contends that the allotment of 8
commercial plots to appellants for establishing hotels without
converting them to industrial use violated the NOIDA
Regulations and therefore impermissible and illegal. The state
government further contends that when hotels were given the
status of 'industry', the use of land for hotels would be an
industrial use and therefore, the allotment of plots by NOIDA C
for constructing hotels should have been in areas earmarked
as indu.strial area, and that if any area earmarked for
commercial use is to be allotted to hotels, such allotment can
be only after change of such land from commercial use to
industrial use. Alternatively, itis submitted that even if the plots D
in area earmarked for commercial use are allotted to hdtels
such allotment could be only by adopting the procedure
applicable to allotments of commercial plots that is by inviting
tenders or bids and not by allotment at any fixed rate that too a
fixed rate which is a reserved rate for an industrial plot. Lastly, E
it is contended that if a commercial plot could be allotted to a
hotel, it cannot be charged the industrial plot rate, but should
have been charged as a commercial plot. It is submitted that
charging 14 comm.ercial plots at industrial rates has resulted
in a loss of Rs.4721.14 crores. F

33. On the other hand, the appellants contend that the
policy dated 22.5.2006 did not direct or require that allotment
of plots for hotels should be in areas earmarked for industrial
use. They point out that the hotel business is a commercial G
activity and under the 1991 Regulations, commercial use
includes use of land or building for a hotel, and use of land or
building for locating an industry is an industrial use. It is
submitted that allotment of plots in commercial areas to hotels
was justified as it is a commercial use. It is next submitted that
the policy required only the rates applicable to industrial plots, H
122 SUPREME COURT REPORTS [2011] 7 S.C.R.

A to be applied to the plots allotted to hotels wherever they are
situated, as an incentive for hotel and tourism industry, and that
did not mean that the building regulations should be applied to
hotel buildings. The allotment of hotel plots having been done
at legitimately fixed allotment rates, there is no question of loss
B to NOIDA.

These contentions give rise to three sub-issues and we
will deal them separatelv.

(a) Whether plots earmarked for commercial use in
· C commercial area. could be allotted for hotels?

34. We will first examine the question whether commercial
plots could not be allotted to hotels, without changing the
earmarked land use from 'commercial' to 'industrial' and
0 whether the FAR, maximum height, set backs, ground coverage
etc. applicable to hotel plots should be as per the regulations
applicable to industrial buildings and not as applicable to
commercial buildings.

(34.1) Section 6 of the Act relates to the functions of the
E Authority. Sub-section (1) specifies the object of the Authority
is to secure planned development of industrial development
area. Sub-section (2) provides that the functions of the authority
include preparation of a plan for the development of the
'industrial development area' to demarcate and develop sites
F for industrial, commercial and residential purposes, to lay down
the purpose for which a particular plot shall be used (that is
industrial, commercial, residential or other specified purpose)
in the development area. In exercise of its power under section
19 read with section 6 of the Act, the Authority made the NOIDA
G (Preparation and Finalisation of Plan) Regulations, 1991 ('1991
Regulations' for short).

(34.2) Clauses (d), (e) and (f) of Regulation 2 of the said
Regulations define commercial use, industrial use and
H institutional use as under:
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 123
[R.V. RAVEENDRAN, J.]
"(d) 'Commercial Use' means the use of any land or A
building or part thereof for carrying on any trade, business
or profession, sale of goods of any type, whatsoever and
includes private hospitals, nursing homes, hostels, hotels,
restaurants, boarding houses not attached to any
educational institution, consultant offices in any field, B
cottage and service industries;

· (e) 'Industrial Use' means the use of any land or building
or part thereof mainly for location of industries and
other uses incidental to industrial use such as offices, C
eatable establishment etc.;

(f) 'Institutional Use' means the use of any land/building or
part thereof for carrying on activities like testing, research,
demonstration etc. for the betterment of the society and it
includes educational institutions;" D

(emphasis supplied)

(34.3) Regulation 4 provides that the NOIDA Master Plan
may include Sector Plans showing various sectors into which
the development area or part thereof may be divided for the E
purpose of development. It requires the said Plan to show the
various existing and proposed land uses indicating the most
desirable utilization of land for (i) industrial use by allocating the
area of land for various scales or types of industries or both;
(ii) residential use by allocating the area of land for housing; F
(iii) commercial use by allocating the area of land for wholesale
or retail markets, specialized markets, town level shops, show-
rooms and commercial offices and such allied commercial
activities; (iv) public use by allocating the area of land for
Government offices, hospitals, telephone exchanges, police G
lines etc; (v) organized recreational open spaces by allocating
area of land for parks, stadiu1]1 etc.; (vi) agricultural use by
allocating the area of land for farming, horticulture, sericulture;
(vii) such other purposes as the Authority may deem fit, in the
',; '
H
124 SUPREME COURT REPORTS [2011] 7 S.C.R.

A course of proper development of the development area. The
said 1991 Regulations also requires the Plan to include the
systematic regulation of each land use area, allocation of
heights, number of storeys, size and number of buildings, size
of yards and other open spaces and the use of land and
B buildings.

(34.4) Regulation 9 provides that the plan finalized and
approved by the Authority shall be effective for such period as
may be specified by the Authority, but not less than five years.
C Regulation 11 authorises the Authority to make amendment to
the Plan and requires the Authority, before making any
amendment to the Plan to publish a notice at least in one
newspaper having circulation in the area inviting objections and
suggestions and further requires every amendment made to the
plan to be published. It provides that the amendment shall come
D into operation either on the date of the first publication or on
such other date as the authority may fix. It is of relevance to note
that in this case no amendment was made changing the land
use of the plots in question from commer ~ial to industrial.

E 35. The Authority made the NOIDA Building Regulations
and Directions, 2006 (for short "2006 Building Regulations"),
with prior approval of the state government and in exercise of
its powers under sections 9(2) and 19 of the Act. The said
Building Regulations replaced the NOIDA Building Regulations
F and Directions 1986, with effect from 5.12.2006.

(35.1) Regulation 3.12 defines building as any structure or
erection or part of a structure or erection which is intended to
be used for residential, commercial, industrial or other
purposes. Clause (e) thereof defines 'industrial building' as
G referring to a building in which products or materials of all kinds
and properties are fabricated, assembled or processed, such
as assembly plants laboratories, power plants, smoke houses,
refineries, gas plants, mills, diaries or factories.

H (35.2) Regulation 33.3 prescribes the maximum ground
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 125
[R.V. RAVEENDRAN, J.]
coverage, maximum FAR in percentage and maximum height A
for industrial building~ The same is extracted below :
s. Plot Area Max. Max. FAR Max.
No. Ground in% height
Coverage (in mt)
1. Upto 100 60 120 15 B
2. Above 100 upto 450 15
a. First 100 Same as (1) above
b. Next 350 or part thereof 60 100
3. Above 450 upto 2000 15
c
a. First 450 Same as (2) above
b. Next 1550 or part thereof 55 80
4. Above 2000 upto 12000 15
a. First 2000 Same as (3) above
b. Next 10000 or part 55. 70 D
thereof
5. Above 12000 upto 15
-
20000
a. First 12000 Sanie as (4) above
b. Next 8000 or of part 50 65 E
thereof
6. Above20000 15
a. First20000 Same as (5) above
b. Above20000 50 60
F
The said regulation shows that no industrial building put up in
an industrial plot can exceed a height of 15 mtrs. The
permissible FAR for industrial use ranges between 1.2 to 0.6
depending upon the size of the plot. The FAR as per the above
table would be 0.679 for a plot measuring 24000 sq.m., 0.72 G
for a plot measuring 12500 sq.m. and 0.74 for a plot measuring
7500 sq.m.

(35.3) Regulation 33.4 divides the commercial buildings
into two categories that is hotel buildings and buildings for other H
126 SUPREME COURT REPORTS (2011] 7 S.C.R.

A commercial activities and prescribes the maximum ground
coverage, FAR and maximum height for both types of
commercial buildings. As we are concerned with hotel
buildings, the relevant portion of said regulation dealing with
hotel building is extracted below :
B
SI. Use Maximum FAR Max.
No. ground height
coverage
%
1. Hotel Building
c (a) Below three star category 30% 1.25 24.0 m
(b) Three star category 30% 1.5 No limit
(c) Above three star category 25% 2.0 No limit

The said regulation shows that for hotel buildings there is no
D height restriction at all and the FAR is 2 (for 4 star and 5 star
categories) and 1.5 (for 3 star category hotels).

36. The 2006 Building RegulationE make it clear that FAR
and the permissible height of the building is far more
E advantageous in the case of commercial hotel buildings when
compared to industrial buildings. It may be mentioned that even
when the 1986 Building Regulations were in force till 4.12.2006,
the provisions for FAR and height of building were far more
advantageous to commercial buildings, when compared to
F industrial buildings.

37. Running a hotel or boarding house or a restaurant is
a commercial activity. By no stretch of imagination, use of a
plot for a hotel can be considered as use of such land for an
industrial purpose. An industrial building is defined in
G Regulation 3.12{e) of the NOIDA Building Regulations and
Directions of 2006 as a building in which products or materials
of all kinds and properties are fabricated, assembled or
processed. As per the 1~91 Regulations, use for a hotel is a
commercial use; and 'industrial use' refers to manufacturing,
H
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 127
[R.V. RAVEENDRAN, J.]
fabrication, assembling and processing activities. If the land A
allotted to a hotel is to be considered as an allotment for an
industrial use and the building constructed in such plot is to be
considered as an industrial building, the consequence will be
that no five star, four star or three star hotel can be constructed
in such plots. Further the restrictions for industrial buildings, B
relating to permissible FAR (less than 0. 75 as against 2 for
hotels) and height (maximum of 15 M as against absence of
any height restriction for hotels) make industrial plots useless
and unviable for a hotel. We note below the comparative table
of FAR and the permissible height for industrial and commercial c
buildings, worked out from Regulations 33.3 and 33.4 of the
2006 Regulations :

s. Plot Size Under permissible FAR Permissible Height
No. D
Industrial Commercial Industrial Commercial
1. 7500 sq.m 0.74 1.5 15 mtr. ' No height
Three Star restriction
2. 12500 sq.m 0.72 2 15 mtr. No height
Four Star restriction E
3. 24000 sq.m 0.679 2 15 mtr. No height
Five Star restriction

38. Having regard to the provisions of 1991 Regulations, use
of land for hotel cannot be considered as an industrial use, F
but will continue to remain a commercial use. The policy of
the state government dated 22.5.2006 cannot override the
NOIDA Regulations. If any policy is made, intending to give
different meaning to the words 'commercial use' and
'industrial use', that can be given effect only if the regulations G
are suitably amended. Be that as it may.
39. When tourism is given the status of an industry, it does
not mean tourism involves manufacturing, fabrication,
processing or assembling. The term 'industry' has different
H
128 SUPREME COURT REPORTS [2011) 7 S.C.R.

A nuances. The traditional meaning of 'industry' may be
manufacture or production of goods. When used in the context
of an 'industrial area' or 'a land for industrial use' the word
'industry' will refer to use for manufacture, production and allied
activities. On the other hand, when the word 'industry' is used
B in the context of tourism/hotels, hospitals/nursing homes or
banking, it refers to a service industry, that is groups engaged
in that particular organized activity, and does not refer to any
manufacturing, processing, assembling etc. When the
government policy gave tourism and hotels, the status of an
c industry, it did not require hotels to undertake manufacturing or
production activities. By giving the status of 'industry'. the policy
enabled a particular service activity (in this case tourism and
hotels) to secure certain benefits in allotment of land at
concessional prices and certain tax exemptions. Therefore, the
fact that the tourism or hotels have been given the status of
0
'industry' will not convert them into industries, for the purpose
of allotment of plots, nor will the use of land by such tourism or
hotel industry, will be an industrial use. It does not also mean
that all the hotels and tourist offices should be shifted from
commercial areas to industrial areas or that hotels or tourist
E ,offices cannot operate in commercial areas, or that they cannot
get allotment of land or building earmarked for commercial use.
Running hotels, to repeat, is a commercial activity and the use
of a land or building for a hotel is commercial use and
therefore, allotment of plots for hotels in a commercial area is
F wholly in consonance with the NOIDA R~gulations and Master
plan which earmarks areas for specific land uses like industrial,
residential, commercial, institutional, public, semi-public, etc.

40. We are therefore of the view that the allotment of plots
G situated in commercial areas earmarked for commercial use,
to hotels did not violate any provisions of the Act or the NOIDA
Regulations. We are also of the view that it was not necessary
for NOIDA to change the land use of plots to be allotted to
hotels, from commercial to industrial use. The contentions of
H the respondents to the contrary are therefore, rejected.
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 129
[R.V. RAVEENDRAN, J.]
(b) Whether allotment of hotel sites by NOIDA should A
have been by inviting tenders/holding auctions?

41. The learned counsel for appellants contended that
whenever the State or its authorities decide to dispose of their
properties, it need not always be by public auction or by inviting 8
sealed tenders, involving competitive bidding. It is submitted
that if the object of a poli.cy relating to allotment of plots is to
promote hotel industry and not to earn revenue, it would be open
to the state government and its authorities to dispose of their
properties by other recognized methods, that is by allotment at C
fixed rates after inviting applications from eligible applicants,
or by allotment after specific invitation and negotiations,
depending upon the facts and circumstances. It is pointed out
that in pursuing socio-economic goals, as for example when
plots are allotted by development authorities to persons
belonging to economically weaker sections or persons D
belonging to middle classes, allotments are always made at
fixed rate by drawing lots and not by inviting tenders or by
auctions. It is submitted that only a few plots as for example,
the corner plots or plots of some special category are normally
disposed of by either public auction or by inviting tenders. E
According to appellants, whether allotment should be by public
auction or by inviting tenders or by inviting applications for
allotment at fixed rate is a decision to be taken by the authority
concerned, on the facts and circumstances of each case; and
therefore NOIDA did not commit any irregularity, by adopting F
the method of allotment of hotel plots at fixed rate applicable
to industrial plots, to give a boost to tourism industry in the state,
in pursuance of government policy dated 22.5.2006.

42. In support of their contention, the appellants relied upon G
the decisions of this Court in Brij Bhusan vs. State of Jammu
& Kashmir - 1986 (2) SCC 354, Sachidanand Pandey vs.
State of West Bengal - 1987 (2) SCC 295, and MP Oil
Extraction vs. State of MP - 1997 (7) SCC 592. In Brij Bhusan
(supra), this Court was considering a case where certain H
130 SUPREME COURT REPORTS [2011] 7 S.C.R.

A
..
entrepreneurs had on their own had offered to set up the
factories for manufacturing of resin and turpentine derivatives.
After negotiations the state government gave licences to them
to set up factories and assured supply of the required raw
materials (Oleo Resin). No advertisements were issued by the
B state government inviting tenders for setting up such factories.
Other entrepreneurs who were interested in setting up factories,
challenged· the grarit'of licence's· on the ground that due
opportunify :was 'not given to an· tf\eent?Efp'renelfl'S to make their
applicatlons. This Court rejeeted tt\efWrit petitions holding that
c in the absence bflnateriarto 'show that the State had acted
rnala ficfe'or out of improper or-corrupt motive or in order to
promote the privat~ iriterest of someone at the cost of the State,
the decision fo grant licences was not open to interference. It
reiterated where State is allocating resources for the purpose
0 of encouraging setting up of industries within the State, the
State is not bound to advertise and tell the people that it wants
a particular industry to be set up in the State or invite those
interested to come up with proposals.

In Sachidanand Pandey, this Court held :
E . ~ ~:i ~- -:.~_ ~ .'r

tSt~t~ci~,r1~ or ,p,ublic-pwned ·property is not to be dealt
wit~,at:.;t~~ 1 eb~a,l~t~ 4isqret\on. 9;f tbe executive. Certain
precepts and principles have to be observed. Public
interest is the paramount consideration. One of the
F m.eth.ods, of .s~curing the. public interest, when it is
consi~~r~d 11ec..e$>sa_ry to dispose of a property, is to sell
the property by public auction or by inviting tenders. Though
that is the ordinary rule, it is not an invariable rule. There
may be situations where there are compelling reasons
necessitating departure from the rule but then the reasons
G
for the departure must be rational and should not be
suggestive of discrimination. Appearance of public justice
is as important as doing justice. Nothing should be done
which gives an appearance of bias, jobbery or nepotism."

H · To the same effect is the decision in MP Oil Extraction. The
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 131
[R.V. RAVEENDRAN, J.]
appellants point out that their cases are much stronger than A
those considered in those cases, as their allotments were not
made on any private negotiations, but after wide advertisement
in newspapers inviting applications from all persons who
fulfilled the eligibility criteria; and that all applications received
were evaluated through an independent agency and allotments s
were made as per their recommendation. They submit that the
process of allotment was fair and normal. They contend that
failure to invite tenders or hold public auction would not vitiate
the allotments.

43. But the issue in these cases is different. The principle C
laid down in the cases relied on by the appellants would be of
some assistance in a situation where there are no specific
rules, regulations or policy guidelines governing the procedure
as to how allotments are to be made, or contracts are to be
awarded, or licences are to be issued. Those decisions may D
also be of some assistance while dealing with a grievance that
all persons interested or all eligible persons were not given an
opportunity to apply. The state government has found that the
NOIDA Commercial Property Management Policy required
allotment of commercial properties only on sealed tenders or E
public auction basis; and if the said requirement was ignored
and allotment is made at a fixed rate, contrary to the specific
terms of the policies of NOIDA; and that allotment at fixed rate
basis had resulted in a huge financial loss to NOIDA.
F
44. Allotment of commercial plots is governed by the
NOIDA Policies and Procedures for Commercial Property
. Management, 2004. Under the said policy, commercial
properties of NOIDA can be allotted only on sealed tender basis
or by way of public auction. For this purpose NOIDA has to fix G
a reserve rate and the person who gives the highest bid/offer
above the reserve rate, who is otherwise eligible, is allotted the
plot. The said policy in regard to the procedure for allotment of
commercial properties was not amended or modified to
provide for allotment of commercial properties for hotels at
. . H
132 SUPREME COURT REPORTS [2011] 7 S.C.R.

A fixed prices. The allotment of commercial plots at fixed rate was
therefore clearly contrary to the said regulations of NOIDA.

45. We may also refer to the NOIDA Policies and
Procedures for Industrial Property Management, 2006 as
amended on 20.3.2006 ("Industrial Property Management
8
Policy'', for short) iri this connection. It divides the industrial
sectors in NOIDA into three industrial Phases as under :

(1) Phase I Sectors from 1 to 11 and 16

c (2) Phase II Includes Phase-II, Phase-II Extension/
Hosiery Complex, Sector-80, 81 and 83

(3) Phase Ill Includes Sector-57, 58, 59, 60, 63, 64
and 65.

D It provided that allotments of industrial plots in Phase I should
be made on the basis of sealed tenders, the reserved rate
being Rs. 7400/- per sq.m. It further provided that allotments of
plots in Phases II and Ill should be made at fixed prices of
Rs.2100 and Rs.4000 per sq.m.
E
46. The appellants submitted that the said NOIDA
Commercial Management Policy and NOIDA Industrial
Management Policy are not statutory rules made by the state
government under section 18 of the Act, nor are they statutory
F regulations made by NOIDA under section 19 of the Act. It is
submitted that the NOIDA Commercial Management Policy is
merely a set of guidelines and directives prepared by NOIDA
in regard to the terms and conditions for transfer of commercial
properties of NOIDA and such guidelines could be altered by
NOIDA at any point of time. It is pointed out that the said NOIDA
G Commercial Management Policy itself stated that it could be
amended/modified/altered without any notice. It was submitted
that when NOIDA adopted the state government policy dated
22.5.2006 for allotment of plots for hotels at industrial plot rates,
the NOIDA Commercial Property Management Policy stood
H
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 133
[R.V. RAVEENDRAN, J.]
modified by incorporating an exception to the directive requiring A
allotment of commercial plots only by sealed tenders/auction,
that allotment for hotel plots could be at fixed rate basis instead
of tender basis or auction basis. It was further submitted that
at all events, when brochures were issued on 17.10.2006
containing the "special terms and conditions for allotment of B
hotel plots" providing for allotment at the fixed rate of Rs.7400
per sq.m., it amounted to declaration of a separate policy for
plots allotted or hotels and the guidelines contained in the
NOIDA Commercial Property Policy ceased to apply to hotel
plots. c
47. In Sachidanand Pandey (supra), the legal position as
to the need obeying orders/instructions/procedures was
succinctly stated by Chinappa Reddy, J.

"statutes and statutory orders have, no doubt, to be D
obeyed. It does not mean that other orders, instructions
etc. may be departed from in an individual case, if
applicable to the facts. They are not to be ignored until
amended. The government or the Board may have the
power to amend these orders and instructions, but E
nonetheless they must be obeyed so long as they are in
force and are applicable"

(emphasis supplied)

In Home Secretary v._ Darshjlt Singh Grewal - 1993 (4) SCC F
25, the need to adhere to policy guidelines was emphasized:

"It may be relevant to emphasize at this juncture that while
the rules and regulations referred to above are statutory,
the policy guidelines are relatable to the executive powers G
of the Chandigarh Administration. It is axiomatic that
having enunciated a policy of general application and
having communicated it to all concerned including the
Chandigarh Engineering College, the Administration is
_!:L
134 SUPREME COURT REPORTS [2011] 7 S.C.R.

A bound by it. It can, of course, change the policy but until
that is cone, it is bound to adhere to it."

(emphasis supplied)

It is thus clear that where an Authority makes regulations and
B issues polices and procedures, they are intended to be followed
and complied with. They cannot be ignored or avoided unless
superseded or amended. The fact that Authority has the power
to amend the regulations, policies and procedures, does not
mean that they can be ignored. As long as they are in force,
C they are required to be obeyed by the Authority.

48. The state government policy dated 22.5.2006 or its
adoption by NOIDA on 5.6.2006 did not amend to the
regulations, instructions, policies and procedures of NOIDA. If
0 the said Tourism/Hotels development policy dated 22.5.2006
contained any procedure which was at variance with the existing
regulations or procedures of NOIDA, such procedures in the
policy dated 22.5.2006 could come into effect only by NOIDA
amending its regulations and Property Management Policies.
E As per the 1991 Regulations and 2006 Building Regulations,
hotel buildings are commercial buildings and use of land for
hotels is commercial use and any plot allotted for hotels is a
commercial property. Therefore any allotment of a plot for hotels
should comply with the NOIDA Commercial Property
Management Policy, 2004. Unless the NOIDA Commercial
F Property Management Policy was amended, providing for
allotment at fixed rates, in regard to any sub-category of
commercial plots, allotment of a commercial property belonging
to NOIDA otherwise than by sealed tender basis or auction
basis will be an allotment in violation of and contrary to, the
G regulations directives and policies of NOIDA. The fact that
NOIDA was acting in pursuance of the government policy dated
22.5.2006 would make no difference. The government policy
itself very clearly stated that if the implementation of the policy
required amendment of the rules, regulations and procedures
H of the development authorities, the same had to be carried out.
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 135
[R.V. RAVEENDRAN, J.]
49. The failure to follow the procedure prescribed in the A
NOIDA Commercial Property Management Policy is a violation
of the policy and such violation has resulted in loss to the public
exchequer. The allotment on sealed tender basis/auction basis
is provided, only in regard to commercial properties and not in
regard to properties earmarked for residential or institutional B
uses. It is also not provided for properties earmarked for
industrial use (except in regard to plots situated in industrial
areas in Phase I which because of their very advantageous
locations are apparently considered to be very valuable). The
properties are sold by tender/auction basis with a reserve rate, c
so as to secure a higher price/rate on account of the healthy
competition among the applicants. The higher revenue would
enable NOIDA to subsidize the price of plots for allotment to
weaker sections of the society for residential use or for
allotment of plots for institutional use or for various D
developmental activities. Therefore once a policy is made in
regard to commercial properties, it has to be complied with.

50. There is no doubt that the scheme of allotment
contained in the NOIDA Commercial Property Policy could be
altered or amended by carving out a different procedure for E
hotel plots. But that should have been by placing the said
Commercial Property Policy before the NOIDA Board for
consideration and amendment with reference to hotel plots to
be allotted as per government policy dated 22.5.2006. The
policy was neither before the NOIDA Board for amendment, nor F
was it amended. The violation of the regulations and policies
of NOIDA may be unintentional and a bonafide mistake on
account of a mis-reading ·of the requirement of the policy dated
22.5.2006. Nevertheless it is a violation. If there is a violation
of the regulations and policies of NOIDA in making allotments, G
the state government can certainly interfere under its revisional
jurisdiction.

(c) Whether the rate charged was erroneous and has led
to any loss?
H
136 SUPREME COURT REPORTS [2011) 7 S.C.R.

A 51. The next question is whether the violation has resulted
in any loss of revenue to NOIDA. This requires consideration
of the question whether the allotment rate is correct. We have
already held that allotment of commercial plots by NOIDA was
possible only by inviting sealed tenders or by holding auction.
B That means that any allotment at a fixed rate (equivalent to the
reserved rate for industrial plots) is irregular and in violation of
the regulations and policies of NOIDA.

52. But the appellants contend that there was no irregularity
in the allotment rate nor any 'loss' to NOIDA by allotting plots
C at the rate of Rs.7400/- per sq.m. and that it was validly fixed.
We may briefly refer to the reasons given in support of their
contention : The standard methods of attracting capital
investment or to encourage a particular industry is to allot land
at attractive terms or at concessional prices and give
D exemptions and rebates in regard to certain state taxes.
Therefore, if the government took a conscious policy decision
to allot plots for hotels at industrial plot rates, which is
considerably lesser than the commercial plots rates, it is not
to be considered as a loss to the exchequer, but should be
E viewed as a part of its strategy to secure investment in hotel
industry in the state. Allotment prices fixed by the Authority
mainly depends upon the earmarked use of the land and
incidentally upon the situation, proximity or physical advantages
of a land. The same land may be allotted at different rates,
F depending upon its earmarked use. The policy of the
government required allotment of plots to hotels at a fixed rate,
that is, the rates chargeable to industrial plots. The government
policy did not contemplate allotment of plots for hotels by sealed
tenders or by auction. NOIDA adopted the government policy
G and fixed the allotment rate equal to the reser.1e rate applicable
to industrial plots in phase-I which was Rs.7400/- per sq.m. The
allotment rate by NOIDA primarily depends upon the earmarked
use and secondarily the situation, as can be illustrated from the
notified rates of NOIDA itself. The NOIDA Board resolution
H dated 20.3.2006 shows that the allotment rate varied between
\
ITC LTD. v. STATE OF UTTAR PRADESH & ORS. 137
[R.V. RAVEENDRAN, J.]

Rs.22100 to Rs.7500 in respect of residential plots depending A
upon the sector. If the same plots were to be allotted for group
housing, the allotment rate varied from Rs.31,000 to Rs.12,000
per sq.m. In and around the same area, if the allotment was
for institutional use, the rate could vary between Rs.5000 to
Rs.12700 per sq.m and if the allotment was for industrial use B
depending upon whether the plots were situated in Phase-II and
Phase-Ill, the rate would be either Rs.2100 or Rs.4000 per sq.m,
The industrial plots situated in Phase-I, were to be allotted by
inviting sealed tenders with the reserve rate being Rs.7400 per
sq.m. Thus though the sector in which the property was situated c
had a bearing on the allotment rate, the main criterion for fixation
of rate was the earmarked use, that is whether the land was
earmarked for residential, institutional, industrial or commercial
use. If the land is earmarked for commercial use, NOIDA
resolution dated 20.3.2006 required the allotment to be by D
sealed tenders or by auction with the reserved rate being
.Rs.30000 per sq.m. If the very same plots were to be
earmarked for institutional use (for research/software/
information technology services) the allotment rate would be
only Rs.5000 per sq.m and if they were earmarked for industrial E
use, the allotment rate would be only Rs.2100 or Rs.4000 per
sq.m. It is therefore contented that allotment at a fixed rate
determined by NOIDA, does not involve any loss.

53. It is true that allotment of plots at different rates for
different purposes may not give rise to a 'loss' to NOIDA. For F
example, NOIDA at its 141st meeting dated 8.1.2007 fixed
different allotment rates for different land uses in a multi-product ·
special economic zone: (a) Commercial land use: Rs.70000/-
per sq.m. (b) Residential land use: Rs.12000/- per sq.m. (c)
Institutional/recreational land use: Rs.5000 per sq.m. {d) G ·
Industrial land use: Rs.4000 per sq.m. All these lands are
situated in a specific demarcated area (special economic
zone). The above pricing by NOIDA did not depend upon the
situational importance of the area or accessibility of the area
or nearness to any landmarks or main roads nor on any physical H
138 SUPREME COURT REPORTS [2011] 7 S.C.R.

A advantages or disadvantages of the particular lands. The prices
were purely dependent upon the earmarked land use. The
same land if it was earmarked for commercial purpose would
have fetched Rs.70,000 per sq.m. and if it was earmarked for
· residential use would have fetched Rs.12,000 per sq.m. and if
B earmarked for industrial use, would have fetched only Rs.4000
per sq.m. Therefore, when NOIDA allotted plots for residential
use at Rs.12,000 per sq.m. it could not be said that it lost
Rs.58,000 per sq.m. on the ground that the land would have
fetched Rs.70,000 if it had been allotted for commercial use.
c Similarly it cannot be said that NOIDA suffered a loss of
Rs.66,000 per sq.m. if the land was allotted for industrial use
for Rs.4000/- per sq.m on the ground that it would have fetched
Rs.70,000 per sq.m. if it had been allotted for commercial use.
Therefore, there is no concept of "loss" to NOIDA, when it takes
a decision to earmark different parcels of land for different uses
0
and fixes different rates for them. Therefore mere earmarking
of particular land for allotment to hotels which is a commercial
activity at industrial plot prices, does not mean there is a loss
in respect of an amount equal to the difference between the rate
of commercial plots and rate of industrial plots. Any decision
E to allot plots to hotels at industrial rates, by itself, did not cause
any loss, as such a decision was intended to be an incentive
to attract investment. But there will be a 'loss', if a plot which is
earmarked for commercial use, allotted for a commercial
purpose, which is required to be allotted at commercial rates
F by tender or auction, is erroneously charged either at a
residential plot rate or an industrial plot rate.

54. It is next submitted by the appellants that the state
government being conscious of the fact that commercial plot
G prices was many time more than industrial plot prices, and that
it will not be possible to attract capital investment in higher
category hotels unless some substantive incentive was given,
purposefully and deliberately directed that the plots for hotels
even though for commercial use should be charged at industrial
H plot rates. The said policy was accepted 'and implemented by
ITC LTDi v:'STATE~OF UTTAR PRADESH & ORS. 139
• 1• -i· »<[R.V. iRAVEENDRAN, ·J.},r
·NOIDA•by fixing the'allotrilentrate at Rs.7400 sq.m. Therefore, A
in respect of commercial plots allotted for hotels, the rates
·should be as applicable to industrial plots. In other words,
among commerciat·plots, a sub-category of hotels was created
·entitling ·allotmE!nt· at Rs. 7400 •in view of the policy of the •
government.. rt ls pointed 1out ·that such sub-categorization with a
lesser"rates:is:a'stanaatd practice with NOIDA with reference
to allotment for different institutional uses.
. l;r·~"':i·*' .., i!1c:f tr.:· ) . . . a-· .• , · .
. ;•· 5~. The-said ·S!Jbmission no doubt, is persuasive and
, attractive: But they.ignore the regulations and policies of.NOIDA
-which requifE!. the ~llotm~nt.'ofcommercial P.lots to be by sealed C
tender or bY:P.ubl!9 a~ct!ol}.:lf e1ny.su~-categorisation was to be
'.made in regard tO.ho~els,!it .coutd·b~ only.by _ameridment of the
. concerned 0 regu,~_tions al}d. th~ C9mm~rcial.P.roperty
,Manageme11t.Policy,-to 1 prpy_id~ for.allo~ment in rega~q to.such .
:~ub-categow.atfl?'(e<J_ !n.{iustrial plc?t r~tes,.instea~ ~f ~Y !nviting D
,_seal~d ten_gers_:,c;>fi hglq~l'l9:au~~on. W~ have already noticed the
,~cheme e11vis~g~d.:; by~~tie ·p~l_is;y was to create a separate _
ca~egory of:use i11,r~gaf{j to hotels and allot surplus land which . ·
was not earmarked for any specific use, for the said purpose
of hotels~ As thera116fnienfls'of commercial plots governed by ~ E
. NOIDA Cc)rrimercial·Property Management Policy;;and as.the
reserve' fate itselfwas"'Rs:3oOOO/- per sq:m; it has to be held
that allotment at'Rs:7;400 p'er'sq-:ni.,.caused loss and violated
I the regulatloris'an(fpolicy..,.of NOIDA.
. - SS. -;h~ ~;;,~~~~· ~~~e\~~~ed out the ~~~n·~c~~unt · F
of allotments:~ingmade at a fixed rate of Rs.7400/~per.sq.m.
·instead of Rs;~70,000/~ .per sq:m,;as Rs.4,721/14·crores. as
detailed below : ·
. - '
A. The·valu~ of~.1,4i..p~ot~ (~.~~.583, , ,, ,,' _- -G
, sg. 111.) 1 .@i~~.7Q!09.,0hP.ef sq.m .. , Rs.1838.08 crores
r_ ~ ,,:Jr :tr~&1;;>!~'11J--_:i.1:r :-,.~.r\ ,,,. .., i:·•.~ -~ '' :;:r. --~~
·18'. _ Actual premiYITll~~~iv~,from.the. , · . ...
appeltants;in.regard 1to the 1,1; plf?'fj,; fl'!i'Ul~H; tfJ· !'JUh>V .~ ,1
@ Rs. 74001;,per-sq.m. Rs.194.31 crores H
140 SUPREME COURT REPORTS [2011] 7 S.C.R.

A
C. Loss of premium (B - A) Rs.1643.77 crores

D. Add: Loss of revenue by way of
lease rent during the lease
B period of 90 years as a
consequence of lesser premium· Rs.3077.37 crores

E. Total loss to public exchequer
(C + D) Rs.4721.14 crores
c 57. We find that the calculational error in arriving at the total
loss, even assuming that the commercial rate is Rs.70,000/-
per sq.m. The loss of Rs.4721/14 crores arrived at by the state
government includes Rs.3077/37 crores as loss of rental
revenue during 90 years in future. If today's value of tomorrow's ..
0 'loss' income is to be calculated, that can not be done by simply
taking the aggregate of the 'loss' over the future period as
today's loss. There are well. recognised actuarial methods to
calculate the present value of a future loss. !n fact, this is clearly
recognized by NOIDA by giving the option to the lessee to pay
E by way of a lump sum, an one time lease rent equal to the lease
rent of 11 years of the lease instead of paying the annual rent
for 90 years. In other words, NOIDA has itself calculated the
present value of the future rental income for 90 years as being
equivalent to 11 years' current rent. As the rent per year is 2'.5% '
F of the total amount paid for the plot, the one time lease·- rent
which is eleven times the present an'nual rental value: will be
27.5% of the amount paid as premium. On that basis the loss
will be as under : - · ' ·

G A. The area of 14 plots 2,63,500 sq.m.;

B. Value of 263500 sq.m. at Rs.70,000/- ·'
per sq.m. Rs.1844.50 crores

H C. Value of 2,63,500 sq.m. at
ITC LTD.· v. .STATE OF UTTAR. PRADESH.:& ORS. 141
[R.V.
i
· RAYEENDRAN,
. . ' '
J.]i. ,
' i

; j:- Rs.7400/-,per sq.m.· -.,, Hs.194.99 crores A

O,. Difference in premium•(B -:-·C) . Rs ..1649.51 crores .
•r t"• , "' • J. t . _! , ._. • ~' t

E.. Add : .One-time l_ease rent at.27.5% Rs.453.62 .cro_res
:;· •. (equivalent to rentaL_inc9nie oyer .. · , - _, , 1 r- • B
1 • 90 years) ·, -- . ·, •.,, · -· -~ .·,._., .. " ,,.-,, .., ·
... ... ' ...
"· '
·- - -
.......1 ' '"'·1 ..4 -·· ' ,

I .' 'It .. : 1 ... ~ .

Total difference (D + E) Rs.2103.13 crores*
(*Plu·s· stamp duty & registration · ·1
charges.on· the increased premium/rent) .'. c
' -,~ ........ ·,-·ll,,__f _:.~ . .(,,-,~- -~·--~,~·, .• ~· ....
IV. What should be the·consegu'ence of the violation?
-' -~- l :_,~ .- ·t· .- i -·~· -~' j.~,· .J'

· 58. Let"tis sum: up the· position! The allotment of
commercial 1plots by NOIDA to 1ttie ·ap·pellants for~setting· up·
hotels is valid. There is ho violation of the regufations~or policies; 0 _.
of- NOIDA in allotting comm'ercial ·p1ots'forrh6te!s.rtherefcfrer '
cancellation 'of allotment is unsustainable. There·is'howeve'r
violation of the regulations rand policies· of. NOlDA in making '
such ·allotmenf on'fixed 'rate ba'sis, ·instead' of ~inviting sealed:'
tenders or-holding public:auction.'This violation:occurred;on·· E
account of a-mistake on the'pait ofthe•officers ofN01DA.in"
misinterpreting· the government policy'dated· 22:5:2006., The'
allotteeswere in ·no way to be' blamed for the mistake. Nor were
the· allottees guilty of any suppression; misstatement<or".i
misrepresentation of facts, fraud; collusion or .undue influence
in obtaining the allotments at Rs.7400 per sq.m. The mistake F.
was found out by the state gove~nment, .iri exercise'of revislonaf''
f ' 1-1 _ fy -_- , ·~ 'f" ·~ I •' ... .,. ..,

jurisdiction. But by then the allotment was followed by payment ·
1
of premium, execution 6fthe 1ease deed, 'and. Clelivery o(
possession. By the time the state government decided that the
allotment should be cancelled-the transaction was complete in G,:
all respects.. Tlie tact that the reglstrati'9rtof,some
'. - ,..
' ...
of.the.leases,
.. ' - - - )

· w~s kept 'p~~~~n~'. .,),Q .vi~'vl{ ';>qf3'"!,J~J~pu!~Ae)~Ji~,9. ,\9,,~ely~tieDw
would o_ ·.~e relP.liant i tli1.ss. m. o_sejn!+i::e circums.tances.th,e. .. ,
. ~ja ~I~FJ;,:Y~t1' i:t~~ ~, ~;;111<.:1;tl#1r;..t~unrlu ~lq-~t """)
High -~9' ,~y}t\Wtffi~ '' ' ,1~mfl1~1;,u~rep,\j~dtQ.dtJ~~~E H 11
m~;rif~~Hlr~~ ~~q<;>,~,sL~~al~~'il.1b~1 !P~ou~1% <@q~&r9,~[1?Mo1
142 SUPREME COURT REPORTS [2011] 7 S.C.R.

A High Court directed reconsideration in the light of its
observations that the allotments of commercial plots for hotels
were not in violation of any regulations and the allottees were
not guilty of any objectionable conduct. The High Court therefore
wanted to save the allotment but rectify the error committed in
B regard to the valuation and remanded the matter for fresh
consideration. However, the appellants challenged the judgment
of the High Court and when this Court gave an opportunity to
the State Government to pass fresh orders independent of the
observations of the High Court, after hearing the parties, it has
c reiterated the cancellation, holding that the mistake has resulted
in a lesser allotment price. According to respondents, the rate
of premium ought to have been Rs.70,000/- per sq.m. being
the market rate, even though the reserve rate was only
Rs.30,000/- per sq.m. The question is, on the facts and
circumstances, when the allotments are valid and only the
0
fixation of premium is erroneous, whether cancellation of leases
is warranted or whether charging the rate claimed by the
respondents (Rs.70,000/- per sq.m.) wnuld be the appropriate
course. '

E (i) What is the cause for the violation? ,,
59. The NOIDA Board adopted the above policy dated
22.5.2006 at its meeting held on 5.6.2006 and directed
implementation of the policy so as to ensure that construction
F of hotels in the allotted plots could be completed before the
commencement of Commonwealth Games in 2010. ·Thus
NOIDA Board was conscious that the policy dated 22.5.2006
had something to do with the time bound need to have several
5/4/3 Star hotels in a functional condition by the year 2010.
G Taking note .of the direction in the government policy, that the
allotment of plots for hotel industry should be at industrial rates,
NOIDA decided to implement its scheme for allotment of hotel
plots, by adopting the rates that were fixed by it as the re~erve
rate for plots in industrial area Phase I (Rs.7400/- per sq.m.)
as the allotment rate. When the said allotment rate was fixed
H for hotel plots on 5.6.2006, the plots had not been identified
ITC ,LTD. v. STATE OF UTIAR PRADESH & ORS. 143
·""' '"' ' [R.V. RAVEENDRAN, J.] .
for allotment of hotels. When NOIDA Board resolved to A
implement the' poiicy' dated 22.5.2006 a"nd allot plots for hotels
at 'industrial rates' that is rates applicable to its plots in
industrir;i area (Phase I), apparently it interpreted the policy as
d:re:cting ·that all plots allotted for hotels should be allotted at
fixed industrial rate. It is also possible that when the rate was B
fixed, it assumed that some surplus land (not earmarked for any
. specific purpose)' or land earmarked for industrial use, will be
.. ·allottedto hotels; a·nd when the plots for hotels were
··subsequently identified by a Committee headed by the Circle
Commissioner, Meerut, in areas earmarked for commercial use c
in the. Master Plan, it was assumed by NOIDA officials that in
view of the policy of the state government and in view of the
NOIDA Board resolution dated 5.6.2006, whatever or whichever
plots were. identified. or earmarked as hotel plots should be
charged at the industrial plot rate that had been already 0
decided. The error was in assuming that any kind of plot (even
commercial plots covered by a special policy requiring disposal
by tenders/auctions) should be allotted at fixed industrial rate.
The pressure from Central Government regarding need to have
sever~! .:;tar, fi9tels before the commencement of E
Commonwealth Games and the terms of the Government
Policy dated 22.5.2006, made them to proceed on that basis,
without further verification. That is how the Brochures
(advertisements) showed Rs.7400/- per sq.mas the allotment
rate for hotel plots. Thus the charging of premium at a rate of
Rs.7400/..tper sq.m. In regard to hotel plots, is purely on account F
of the mistake on the part of the officers of NOIDA misreading
the government policy dated 22.5.2006 and assuming that it
would override NOIDA's regulations and policy regarding
commercial properties,
G
(Ii) Whether allottees were guilty of fraud/ob!ectlonable
eoo{luct
60. The next question that arises for our consideration is
whether the charging of a lesser rate for the allotment of plots H
144 SUPREME COURT REPORTS [2011) 7 S.C.R.

A or fixation of Rs. 7400/- per sq.m. as the premium was a
consequence of any misrepresentation, fraud or suppression
of fact, or collusion on the part of the appellants. It has never
· been the case of respondents that any of the appellants had at
any time misrepresented or suppressed any fact or had
B committed any fraud or had colluded with any officer of the
State government or NOIDA or in any way influenced the officers
of the state government or NOIDA in either obtaining the
allotment or in the fixation of the allotment rate. Neither the
direction dated 1.8.2007 of the state government under section
c 41 of the 1993 Act nor the letters of cancellation dated 3.8.2007
issued by NOIDA attribute any such improper motive or conduct
to any of the appellants.

61. Before the High Court, the respondents clearly
admitted that they were not attributing any misrepresentation
D or fraud or other objectionable conduct, to the appellants. The
stand of the respondents was that the allotments at the rate of
Rs.7400/- per sq.m. was due to a mistake on the part of NOIDA
officials. The High Court has also ruled out any underhand
dealing or malafides in regard to fixation of rate of premium at
E the rate of Rs.7400/- per sq.m. The said findings of High Court
remain unchallenged. In fact the finding is sound and is not open
to challenge. Further, when this Court directed the State
Government to pass fresh reasoned revisional order,
uninfluenced by the reasoning or findings of the High Court, the
F State Government has passed detailed orders dated 8.9.2008
for cancellation of plots. Even in these orders dated 8.9.2008,
the state government has not imputed any mala tides,
misrepresentation, fraud or suppression of fact, collusion, undue
influence or any other illegal act or improper conduct to any of
G the appellants. The state government has passed the order of
cancellation dated 8.9.2008 on the ground that NOIDA had
itself violated the regulations and policies of NOIDA leading to
loss to public exchequer.

H (iii) What should be the remedial action?
1. ITC' LTD. v. STATE OF UTTAR PRADESH & ORS. 145
;1 [RV. RAVEENDRAN, J.]
r.::. ll 62. If.after effecting a transfer, the transferor finds that he A
had stipulated a lesser consideration (sale price or lease
premium) for the transfer, due to a mistake of fact or wrong
understanding or misreading of any law (and such mistake was
r;ot caused on account of any fraud, coercion or
· misrepresentation by the transferee) what is the remedy of the· B
· transferor? In private law, the transferor may have no remedy,
· c:s ·completed transactions of transfers cannot be re-opened or
i.cancelled.· A 'transfer' of property is an executed contract.
· Section 4 of Transfer of Property Act, 1882 provides that the
, chapters and sections of that Act relating to contracts, shall be c
···taken as part of the Indian Contract Act, 1872. Section 20 of
Contract Act provides that where both the parties to an
.•agreement are under a mistake as to a matter of fact essential
. to the agreement, the agreement is void. But the explanation
· thereto provides that an erroneous opinion as to the value of 0
- - the thing which forms the subject matter of the agreement is
not to be deemed a. mistake as to a matter of fact. Section 21
LI of Contract Act provides that a contract is not voidable because
1 . it was caused· by a mistake as to any law in force in India.

"''='Therefore, having regard to the provisions of Transfer of E
_:,,Property Act and Contract Act, a transfer can not be cancelled
:: ·On the ground that parties were mistaken about the
·- consideration. -

63. The position is however different in public law. Breach
of statutory provisions, procedural irregularities, arbitrariness· F
and mala tides on the part of the Authority (transferor) will furnish
grounds to cancel or annul the transfer. But before a completed
transfer is interfered on the ground of violation of the
regulations, it will be necessary to consider two questions. The
first question is whether the transferee had any role to play G
(fraud, misrepresentation, undue influence etc.) in such violation
of the regulations, in which event cancellation of the transfer is
inevitable.
(63.1) If the transferee had acted bona fide and was
blameless, it may be possible to save the transfer but that again H
146 SUPREME COURT REPORTS [2011) 7 S.C.R.

A would depend upon the answer to the further question as to
whether public interest has suffered or will suffer as a
consequence of the violation of the regulations:
(i) If public interest has neither suffered, nor likely to suffer,
on account of the violation, then the transfer may be
B
allowed to stand as then the violation will be a mere
technical procedural Irregularity without adverse effects.
(ii). On. the other hand, if the vi~latio" of the ·regulations
leaves or likely to leave an everlasting adverse effect or
c impact on public interest (as for exampl~ when it results
in environmental degradation or results in a loss which is
not reimbursable), public Interest should prevail and the
transfer should be rescinded or cancelled.

D (iii) But where the consequence of the violation is merely
a short-recovery of the consideration, th~ transfer may be .
saved by giving the transferee an opportunity to make good
the short-fall in consideration.. ·
(63.2) The aforesaid exercise may seem to be
E cumbersome, but is absolutely necessary to protect the sanctity
of contracts and transfers. If the government or its
instrumentalities are seen to be frequently resiling from duly
concluded solemn transfers, the confidence of the public and
international community In the functioning of the government will
F be ishaken. To save the credibility of the government and its
lnstrumentalitles, an effort should always be made to save the
concluded transactions/transfers wherever possible, provided
(i) that It will not prejudice the public interest, or cause loss to
public exchequer or leeid to public ml$chlef, and (II) that the
G transferee is blameless and had no p<irt ta play In the vlolatlon
of the regulation.
(63.3) If the concluded transfer cannot be saved and has
to be cancelled, the Jnnocent and blameless transferee should
H be reimbursed all the payments made by him and all
ITC LTD. v. STATE OF UTIAR PRADESH & ORS. 147
{R.V. RAVEENDRAN, J.] .
expei:iditure. incurred by him in regard to the, ~ransfer with A
appropriate interest. If some other relief can be-granted on
grounds of equity without harming public interest and· public
exchequer, grant of such equitable relief should also be
considered. ·
B
64. We may give an example from service jurisprudence,
where a principle of equity is frequently invoked to give relief
tu an employee in somewhat similar circumstances. Where the
pay or other emoluments due to an employee is determined
and paid by the employer, and subsequently the employer finds, C
{usually on audit verification) that on ·account of wrong
understanding of the applicable rules· by the officers
implementing the rules, excess payment is made, criurts have
. recognized the need to give limited relief in regard to recovery
of past excess payments, to reduce hardship to the innocent
employees, who benefited from such wrong interpretation. A D
three Judge bench of this Court in Syed Abdul Qadir vs. State
of Bihar [2009 (3) SCC 475] stated the principle thus :

"This Court, iii a catena of decisions, has granted relief
against recovery of excess payment of emoluments/ E
allowances if (a) the excess amount was not paid on
account of any misrepresentation or fraud on the part of
the employee and (b) if.such excess payment was made
by the employer by applying a wrong principle for
calculating the pay/allowance or on the basis of a F
particular Interpretation of rule/order, which is
subsequently found to be erroneous.

The relief against recovery is granted by courts not
because of any right in the employees, but in equity,
exercising judicial discretion to relieve the employees from G
_,the hardship that will be caused if recovery is ordered. But,
/ if in a given case, it is proved that the employee had
knowledge that the payment received was in excess of
what was due or wrongly paid, or in cases where the error
is detected or corrected within a short time of wrong H
148 SUPREME COURT REPORTS - (2011] 7 S.C.R.

A payment, the matter being in the realm of judicial
discretion, courts may, on the facts and circumstances of
any particular case, order for recovery of the amount paid
in excess."

(emphasis supplied)
B
65. In these cases the allotment of commercial plots to
appellants is valid and legal. The violation is in making such
allotment on fixed allotment rate which is less than the rate the
plots would have fetched by calling for tenders or by holding
C auctions. Therefore the equitable solution in these cases is to
give an opportunity to the lessees to pay the difference thereby
in consideration which arose on account of wrong interpretation
instead of cancelling the leases. According _to the State
Government, the commercial plots would have fe.tch_ed a
D premium at rate of Rs.70,000 per sq.m at the relevant time
(October 2006 to January 2007) and NOIDA had been denied
the benefit of that allotment rate, by reason of allotmen.t of the
plots at Rs.7400/- per sq.m. Therefore if the appellan_ts are
wiling to pay the balance of premium as claimed by
E respondents, the teases need not be interfered. '

66. In this case the violation of the policies of NO-IDA in
making allotments has resulted in a less~r premium being
charged than what would have been applied for commercial
plots. According to respondents the premium that would have
F been charged was Rs.70,000/- per sq.mas against Rs.7,400
per sq.m. Therefore, the violation of the guidelines in regard to
disposal of commercial plots has resulted only in a. loss of
revenue by way of premil.Jm and if this could be made up, there
is no reason why the leases should not be continued.
G
67. The appellants of course disputed the claim for a
premium at the rate of Rs.70,000/- per sq.m on several
grounds. They contended that Rs. 70,000/- was only a circle rate
for purposes of registration and was not the actual "market
H value". It is also contended that even if Rs.70,000/- was the
ITC LTD. v. STATE OF'UTTARPRADESH & ORS. "149
[R.V. RAVEENDRAN, J.]
market value, it would represent the value of freehold land and A
not of a leasehold interest. It is submitted that on account of
the following restrictive factors in regard to their leases, the value
.r.;1f the leasehold interest will be far less than the value of
;'reehold property:
B
(a) A transferee has absolute ownership in a freehold
property, whereas in a leasehold for 90 years, the lessee
has to surrender the property to the lessor at the· end of
90 years.

(b) In regard to a freehold property, there is no liability to C
pay any rent. But in these leases, the lessees are liable to
pay annual rent equivalent to 2%% of the total amount paid
for the plot as lease rent with an increase of 50% in the
annual rent once every ten years. This is a continuing
liability for ninety years, unless the lessee chooses to pay D
eleven years current lease rent as 'one time lease rent'. ·

(c) The leases are subject to the following among other
restrictive covenants: (i) they should commence
construction within six months of the allotment and E
·complete the Hotel Project by December, 2009, so as to
make the hotel functional by June, 2010 with the threat of
f~rfeiture if the lessee failed to completeJhe project; (ii)
right to transfer being subject to permission from NOIDA
and subject to the claim of NOIDA for unearned increases;
(iii) risk of termination for breach and resumption of F
possession; and (iv) the restriction regarding user, that is,
the entire property having to be used only for a hotel with
only 5% of the FAR being permitted to be used as
commercial space. It is submitted that freehold properties
will not be subject to any of these restrictions. G

68. The respondents admitted that a transfer by sale is
more valuable than a transfer by way of lease, but contended
that long term leases for 90 years fetch a premium on par with
prevailing sale price. It is further submitted that as most of the H
150 SUPREME COURT REPORTS [2011] 7 S.C.R.

A properties in NOIDA are leasehold properties, the circle rate
represents the premium for long leases and not freehold prices.
It is pointed out that even in regard to any sale by NOIDA,
restrictive covenants regarding use could be imposed and
enforced. The respondents also alleged that when NOIDA
B invited applications for the unallotted hotel plots, hardly a year
later in March 2008, as against a reserved rate (premium) of
Rs. 77000/- per sq.m. fixed by NOIDA, prospective applicants
were willing to pay more and that would show that their cl.aim
that prevailing premium rate in 2006-2007 was Rs. 70,000/- per
c sq.m. was justified. The respondents have produced copies of
some of the tenders received in respect of the 2008 offer, in
support of their contention.
69. The appellants responded by pointing out that the terms
of lease under the 2008 scheme of NOIDA offering hotel plots
D for allotment were far more favourable to the lessees, when
·compared to the terms on which plots were offered to them,
and therefore neither the reserve rate for 2008 offer, nor the
responses thereto will be a safe guide to determine the market
value of the leasehold interest (premises) in 2006-07. They
E referred to the following significant differences in the lease
conditions which made the offer under the 2008 scheme far
more attractive and valuable for a lessee, when compared to
the terms of lease offered in 2006-2007 to the appellants:

F s. Description Position under 2006 Position under 2008
No of the term allotment allotment
1. Purpose For setting up hotels For development of
and with only 5% of FAR hotels with commercial
permitted permitted to be used activities with 40% of
G use as commercial space FAR permitted to be
used as commercial
space
2. Payment of 50% in 30 days 25% within 30 days
premium 50% in 180 days Balance 75% in 16 half
H
•'1rc Ufci. v:STATE OF UTIAR PRADESH & ORS.
1
151
"'-'"'' " ...• c[°R-.V. RAVEENDRAN, J.]
. - ~

'
yearly instalments A
. ' l •· ~ ..
(alongwith interest at
'.
Ii , '•: t '' . ' .
11 % from date of
I
allotment compounded
. ,. ..... ·.••... ~
\
half yearly)
. s:· ·'Triinsfef of·· The lessee shall not The lessee is entitled to B
.,rights .. . tran~fer the plot - transfer after obtaining
before the hotel completion certificate
;•J I L'fic·. ·, . ' :•
becomes functional. and no transfer charges
1 The Authority may or will be applic;:able if the
. may not allow transfer built up commercial
plot t ... , -

If° transfer is permitted, space is transferred c
,J .. .. transfer charges
\," . ., II within two years from
'f'L." ~: ·- . . shall be payable to the date of issue of
'
h•~ .. ;!-,.I~ 't ~ the Authority. completion certificate

~Therefore if the appellants (2006-2007 allottees) are to be o
extended the.aforesaid benefits offered to allottees under the
2008:·SChfi!me:1the rate-of-Rs.70,000/- per sq.m. (the rate of
2008 scheme was '10% more than Rs.70,000/- per sq.m.)
clairhed'by the respondents becomes logical and reasonable.
We1therefore find.no reason to reject the claim of respondents E
that!the:·auotment:fate should be Rs.70,000/- per sq.m. We
accord_ingly _grant the appellants an opportunity to save the
leases 'by'paying
.... 'the
...
~~~·-{
difference in premium at Rs.62600/- per
...... " ~.,

sq.m: to make 1t upto Rs.70,000/- per sq.m.

"70Ctn view of the above we dispose of these appeals as F
foll9~ :- ._.. . .• ,.,:r :.

7 (i) The order of.the High Court setting aside the revisional
.• order dated fa:2001 of the State Government and the
P eg~~c::quentiai'ord~rs of cancellation of allotment of plots G
pP~~ed;3.8.t.OP7:.~Y .NOIDA, is affirmed.

I (ii) cThe revis!onal orders dated 8.9.2008 -passed by the

•.•.., .. State Government cancelling ·the allotmentS'·!Of plots to
" ,, .appellants, ~re ·set aside.·.. ., ... ~.--- ' • ·~riit-::·ri · ,.
H
152 SUPREME COURT REPORTS [2011] 7 S.C.R.

A (iii) The appellants are given the option to continue their
respective leases by paying the premium (allotment rate)
at Rs. 70000/- per sq.m. (with corresponding increase in
yearly rent/one time lease rent), without any location benefit
charges. The appellants shall exercise such option by
B 30.9.2011. Such of those appellants exercising the option
will be entitled to the following benefits which has been
extended in regard to the allottees under 2008 allotment
scheme of NOIDA:

(a) 40% of FAR can be used by the allottee as commercial
c space (as stipulated in the 2008 scheme).

(b) Permission to pay at its option, the balance to make
up 25% of the premium (after adjusting all amounts paid
at Rs.7400/- per sq.m. plus location benefit charges) on
D or before 30.9.2011 and' the balance 75% of premium in
sixteen half yearly instalments· commencing from 1.1.2012 ·
with interest at 11 % per annum (as offered to the
applicants in 2008 scheme).

(c) The lessees will be entitled to transfer rights in
E
accordance with the 2008 scheme.

On exercise of such option, the lease shall continue and
the period between 1.8.2007 to 31.7.2011 shall be
excluded for calculating the lease period of 90 years.
F Consequently the period of lease mentioned in the lease
deed shall stand extended by a corresponding four years
period, so that the lessee has the benefit of the lease for
90 years. An amendment to the lease deed shall be
executed between NOIDA and the lessee incorporating the
G . aforesaid changes.

(iv) If any appellant is unwilling to continue the lease by
. payi,nQ.th~.,higher .premium as aforesaid, or· fails to
.,(3~~~~t~AA~\'?lihflS,.pegp,arai{.H)), above1by 30.9.2011,
the allotment and consequentiahlease:1n)its favour shall
H
ITC.1LTO.:-v. ·STATE OF UTTAR PRADESH & ORS. 153
[R.V. RAVEENDRAN, J.]

stand cancelled. In that event, NOIDA shall return all
r amounts paid by such appellant to NOIDA towards the
I '

~llotment and the Jease, and also reimburse the stamp duty
and registratio'n charges incurred by it, with interest at 18%
. _per annum from the date of paymenUincurring of such

'
.~.amounts to aate·of reimbursement.by NOIDA. If NOIDA B
r~turhs·t11e amount to the appellant within 31 ..12.2011, the
, rate of interest payable by NOIDA shall be only 11 % per
annum insteacfof 18% per annum.
! ,r, -
(vi) Parties to 1bear their respective costs.
If t; ~ c
. II
R.P.
I
1., ~- -·
I. I ,,. . .
Appeals disposed of.

l - - - · - _ _.i.:_. - .
. I . .

c'{'-.~r'-:-d H·~ ?f,.,~e"~"i "· ,...k, ·, , ... . ~rl

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?.01:'3 v:t• ·•r" \A/<Js '·
C1'11m1~--i t>~· ,.,., ' ... ,- r ·
'ftle th-':"r~J('r~ r· rij "1[1 ' ' ~
that tne z k:V ~nt ,,, , ·
acc.ord•nr r.-r 1r.t U
!:....~J.:~ "'-:' ·~1,_·~1.g ~,.·~ ("
~q m to f'1l"~C If LT•( \_, .

r!J. ln '·:·' t•I ~~
foriO', ·rs

{1} r·K or:'<.· -:>f 1·1~ :
urci3, Gd'.'-!J l 13 · ~ ~ -
-... ~,,,. '\,.:" tL~_.. ·!~ f U i1.

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(') 1 i .<'.\,. i.. '
: ~cf.,. 0.r· ..,. .•r ., · ·
-hi;..,.·:- •• :in;, r~{.