Itc Limited vs State Of U.P. & Ors

ITC LTD. ... Appellant

Vs.

State of Uttar Pradesh & Ors. ... Respondents

With Civil Appeal Nos.4562/2008, 4563/2008, 4564/2008, 4565/2008,

4566/2008, 4567/2008, 4568/2008, 4569/2008, 4570/2008, 4571/2008,

4572/2008 and 4968/2008.

J U D G M E N T

R.V.RAVEENDRAN, J.

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 Noida,

District Gautam Budh Nagar, Uttar Pradesh. The said Authority was

constituted under the provisions of the U.P.Industrial Area Development

2

Act, 1976 (`Act' for short) for development of an Industrial and Urban

Township of Noida in Uttar Pradesh, neighbouring Delhi.

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 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 :

(1) Land should be earmarked for hotels by the concerned Development

Authorities while preparing the Master Plan with the cooperation of

the Tourism Department and such land should be provided for hotels.

Where the Master-Plan stands finalized, the said procedure has to be

followed in respect of surplus land. In regard to Development

Authorities which have not finalised the Master Plan, steps may be

taken for reserving land for hotels to the extent possible, near tourist

spots/places of tourism with the assistance of the Tourism

Department. Whenever the Master Plans of Authorities are 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 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 in accordance with the rules and the prescribed

procedures on a `case to case' basis by the competent authority.

(3)

&

3

(4) x x x x x

(5) Since Tourism including Hotels, has been given the 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.

(6) x x x x x

(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 admissible as per industrial policy.

(8) The earmarked land for Hotel industry, shall be allotted only to

Tourism entrepreneurs.

(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 shall ensure the

necessary arrangements/amendment in their rules so that it may be

possible to make available the land to hotel entrepreneurs on

industrial rates.

(11) Only in areas where there are Authorities, the 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.

x x x x x

(15) After earmarking the land for hotels, applications will have to be

invited for allotment to hotel/tourist entrepreneurs on industrial

rates. The condition 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 of the applicants, in accordance with the current

procedure."

(emphasis supplied)

4

3. At the 135th meeting of the Board of Directors/Members 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 area (Phase I) to the plots to be allotted to the hotel industry. The

rate referred was the reserve rate of Rs.7400/- per sq.m. 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 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.

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

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identified as being 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 measuring 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 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 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 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 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 areas under Zone 3 and inclusion of it

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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 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 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 hotels and 10 plots for 3 star

hotels. At the meeting held on 28.8.2006 under 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)

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.SDC/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)

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Plot No.SDC/H-1 in sectors 72, 103, 105 and 135 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.

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 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 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 till 10.11.2006). We extract

below the relevant information from the Brochures. The following eligibility

criteria were prescribed :

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

Brochures)

Minimum experience in 10 years for 5 star and 4 star; 5 years for 3

Hotel business star

Average turnover during the Rs.100 crores, Rs. 75 crores & Rs.50

last three years crores respectively for five star, four star

and three star,

Net worth Positive

Allotment of hotel sites among the eligible applicants shall 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 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 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)

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 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.

(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.

(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.

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c) The land rate stated above is subject to change without giving any

notice. The rate prevailing on the date of issue of allotment letter

would be applicable."

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

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 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 time of such enhancement.

x x x x x x

e) Allottee has the option to pay lease rent equivalent to 11

years of the current lease rent as "One Time 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

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 Brochures):

(a) Ground coverage and floor area ratio is as under :

Maximum ground coverage : 25% [for 5/4 star]

30% [for 3 star]

Maximum FAR : 2 [for 5/4 star]

1.5 [for 3 star]

Maximum height & set backs : as per building bye-laws

(b) Other norms:

i. 5% of the FAR can be used for Commercial space.

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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 in the FAR. Basement used

for parking will be permitted upto the setback line of the

plot."

"Transfer (Clause J of the Brochures)

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

Authority. Authority may refuse 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 transferor.

2. No change in shareholding pattern of the members in the

Consortium shall be permitted till the project is completed and

functionality certificate is 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 other than allotted

premises and shall also ensure to keep the allotted premises,

environment neat & clean.

Cancellation (Clause (o) of the Brochures)

(i) If it is discovered that the allotment of the plot has been obtained

by suppression of any fact or misstatement or misrepresentation or

fraud the allotment of the plot shall be cancelled and the entire

deposited amount shall be forfeited to the Authority.

(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 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 refunded after forfeiting the amount as

per rules. However, total forfeited amount would not exceed the

total deposits.

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7. The number of applications received under the said scheme published

on 17.10.2006 and the allotments made after processing and evaluation, are

as under :

Category of No. of plots No. of applications Number of

Hotel Plots offered for received allotments made

allotment

5 star 10 15 9 4 star 5 5 2 3 star 10 11 3 Total 25 31 14

It is stated by NOIDA that the evaluation of applications and

recommendations for allotment were made by an independent Screening

Committee (U.P.Industrial Consultants Ltd.) and the recommendations for

allotments were approved by the CEO of NOIDA. The allotments were

made on 12.1.2007 and the 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 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.

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8. At the 143rd meeting held on 9.3.2007, the Board of NOIDA perused

the relevant agenda and noted the allotments 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 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 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 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 41(3) of the U.P. Urban

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Planning & Development Act, 1973 (for 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 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. 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 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 allottees that action was being taken as per rules to

refund the money being paid by them and called upon them to return the

14

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 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 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 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,

(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 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. 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 hotel, the bids/tender procedure along with the above

rates were not followed.

(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 commercial to industrial, for which

permission from N.C.R. Planning Board was necessary which was not

complied with in the case at hand."

15

11. The state government also filed an affidavit before the 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 matter was

examined by the infrastructure and 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 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 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 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 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 the leases by

communications dated 3.8.2007. The said writ petitions were allowed by a

16

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 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 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 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 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 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

circumstances, it cannot be readily inferred that the deal was a mala 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 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 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

17

extensive deliberations had taken place and conscious decisions had been

implemented followed by execution of lease deeds and registration

thereof.

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

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 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 dated 22nd

May, 2006.

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 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 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 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 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-`-vis the object sought to be achieved. It 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 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 achieved. The consideration for fixing appropriate

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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 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.....

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 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 along with other aspect of the matter before taking 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 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-`-vis policy guidelines stood condoned by the NOIDA itself. The State

Government should have also 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 also registered.

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 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 to the State Government for

fresh consideration, have filed these appeals by special leave. The appellants

19

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 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 :

"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 shall not create any third party rights.

The High Court while setting aside the cancellation of letters 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.

We 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

uninfluenced by the observations made by the High Court in the impugned

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 Pradesh Government 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."

(emphasis supplied)

20

14. In pursuance of it, the state government (Principal Secretary,

Infrastructure and Industrial Development) gave a hearing to the appellants

and passed individual orders dated 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 dated 8.9.2008

made under section 41(3) of the 1973 Act, the 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 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 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 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

21

adoption of government policy dated 22.5.2006, did not result in automatic

amendment 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 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 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 commercial 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 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 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 in

regard to allotment of both commercial plots and Industrial area - Phase I

22

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 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 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 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 passed by the state

government, during the pendency of these appeals, in pursuance of the

directions of this court issued on 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 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.

23

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 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 interfered with or

adversely affected, without a hearing to the affected parties. Violation 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 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 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 18.7.2008.

Therefore there is no need to interfere with the final order of the High Court.

24

17. Therefore what in effect remains for our consideration is the validity

of the orders of cancellation dated 8.9.2008 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 (which is duly

executed) and delivery of possession in favour of the lessee, whether the

leases could be unilaterally cancelled by the lessor?

II. 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?

III. Whether the allotments of plots to appellants suffer from any

irregularity or illegality?

(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 the regulations and policies of

NOIDA?

(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?

IV. If there is any violation of the regulations/policies of NOIDA in

making the allotments, what is the consequence?

25

(i) Who is responsible for the same?

(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?

(iii) What should be the remedial action?

I. Whether a completed lease can be cancelled?

18. The particulars of the lease deeds executed by NOIDA with regard to the

hotel buildings allotted on 12.1.2007 to various allottees are as under:

CA No. Name of the Category Plot Number Date of Date of

allottee/lessee execution of delivery of

lease deed possession

4561/08 ITC Ltd. 5 star Plot No.H-5 11.4.2007 11.4.2007

Sector 97 (pending

registration)

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)

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

registration)

4566/08 Crimson Hotels Ltd. 5 star Plot No.H-7 11.7.2007 18.4.2007

through Clarkston Hotels Sector 97 (pending

(P) Ltd. registration)

4567/08 Mariada Holdings Ltd. 3 star Plot SDC-H-1 18.4.2007 26.4.2007

(consortium) Sector 62 (pending

registration)

4568/08 M/s Mast Craft Ltd. 3 star Plot SDC-H-2 18.4.2007 27.4.2007

(consortium) through Sector 105 (pending

M/s. NOIDA Luxury registration)

Hotels & Resorts (P) Ltd.

26

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 Hotels 5 star H - 8 20.4.2007 24.4.2007

International Pvt.Ltd. Sector 98 (pending

(Consortium) through registration)

Somap Hotels (P) Ltd.

4571/08 Royal Orchid Hotels Ltd. 3 star 124 A/2 20.4.2007 26.4.2007

(consortium) Sector 124 (pending

registration)

4572/08 Orchid Infrastructure 4 star 124 A/1 -- --

Developers Pvt. Ltd. Sector 124

4968/08 Metrovino Management 4 star SDC/H-1 3.5.2007 4.5.2007

Ltd. (Consortium) Sector 105 (pending

registration)

-- Elbrus Builders (P) Ltd. 5 star H-4 -- --

(Consortium) Sector 96

19. The appellants applied for allotment in pursuance of

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

respective category of plot. After detailed comparative evaluation of the

applications 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 (three star plots) as premium plus location benefit

charges. Many also exercised the option to pay 27.5% of the premium plus

location benefit charges, as eleven years rent in advance in lump sum as `one

27

time lease rent' instead of paying yearly rent for 90 years. On payment of

premium and other dues by 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 from about Rs.2 crores to Rs.62 lakhs.

Two lease deeds (in favour of Bharat Hotels Ltd. and Hampshire Hotels &

Resorts Ltd.) have been duly registered. In regard to other lease deeds,

though 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 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 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.

28

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 do not challenge the power of NOIDA as

lessor, to terminate the lease on the ground of fraud and misrepresentation

under clause XIII(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 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 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 possession. This is the position under private law.

29

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 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 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 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 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

30

Authority; or b) 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 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 any rules or regulations under the Act,

the Chief Executive Officer of NOIDA can resume the leased plot or

building in the 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 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 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

31

"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 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

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).

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 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 cancellation are mistakes committed by NOIDA itself in

making allotments and fixing the premium, in violation of the Regulations

32

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 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 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 VII and sections 30, 32, 40, 41, 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. 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:

33

"41. Control by State Government - (1) The Authority, the 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.

(2) If in, or in connection with the exercise of its power and discharge of

its functions by the Authority, the Chairman or the Chief Executive

Officer under this Act, any dispute arises between the Authority, the

Chairman or the Chief Executive Officer and the State Government the

decision of the State Government on such dispute shall be final.

(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 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 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."

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 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

34

state government to exercise its 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 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 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

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 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

35

become invalid and leases also become invalid. Consequently NOIDA can

resume possession, without intervention of a civil court in a civil suit.

II. Whether the cancellation was on account of the change in

government

28. The appellants submitted that the Hotel plot scheme 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

(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

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

Manufacturers Organisation - 2006 (4) SCC 683. In State of Haryana, this

Court observed :

36

".....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 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 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 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 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 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 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 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 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

37

policy of the previous government. The principles stated in 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-

look of the entire matter in view of the serious allegations made 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 relook at

the 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 a decision taken by a subsequent 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 orders dated 8.9.2008 were made in view

of the final order of the High Court and the interim order of this court

38

directing reconsideration. 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 or decisions of the

earlier government. 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.

III. Whether the allotments violate the regulations/policies of NOIDA?

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 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 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

39

two new hotel-specific 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 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 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. In

areas where there were no development 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 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

40

industrial rates, would be under a separate and distinct categorization of land

use. It apparently 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 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 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

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 accordance with the NOIDA Commercial Property Management

41

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

the definitions of commercial use and industrial use in the 1991 Regulations

so that hotels would no longer be a commercial 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 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 for constructing hotels

should have been in areas earmarked as industrial 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, it is submitted that even if the plots in area earmarked for

commercial use are allotted to hotels such allotment could be only by

adopting the procedure applicable to allotments of commercial plots that is

42

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, 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 commercial plots at

industrial rates has resulted in a loss of Rs.4721.14 crores.

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 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, 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 to NOIDA.

43

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

separately.

(a) Whether plots earmarked for commercial use in 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 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 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 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

44

Authority made the NOIDA (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 institutional use as under:

"(d) 'Commercial Use' means the use of any land or 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, 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, 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;"

(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 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; (iii) commercial use by allocating the

area of land for wholesale or retail markets, specialized markets, town level

45

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 lines etc; (v) organized

recreational open spaces by allocating area of land for parks, stadium 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

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

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. 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 into operation either on the date of

46

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 commercial to industrial.

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 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 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.

47

35.2) Regulation 33.3 prescribes the maximum ground coverage, maximum

FAR in percentage and maximum height for industrial building. The same is

extracted below :

S.No. Plot Area Max. Ground Max. FAR in % Max. height

Coverage (in mt.)

1. Upto 100 60 120 15

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

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

thereof

5. Above 12000 upto 15

20000

a. First 12000 Same as (4) above

b. Next 8000 or of part 50 65

thereof

6. Above 20000 15

a. First 20000 Same as (5) above

b. Above 20000 50 60

48

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

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 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 :

Sl. Use Maximum ground FAR Max.

No. coverage % height

1. Hotel Building

(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 height

restriction at all and the FAR is 2 (for 4 star and 5 star categories) and 1.5

(for 3 star category hotels).

49

36. The 2006 Building Regulations 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 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.

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 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 1991 Regulations, use for a hotel is a commercial use; and

`industrial use' refers to manufacturing, fabrication, assembling and

processing activities. If the land 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

50

restrictions for industrial buildings, 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 buildings, worked out from

Regulations 33.3 and 33.4 of the 2006 Regulations :

S.No. Plot Size Under permissible FAR Permissible Height

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

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, 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 are suitably amended. Be that as it

may.

51

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 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 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 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 `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 offices cannot

52

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 wholly in consonance with the NOIDA Regulations 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 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

the respondents to the contrary are therefore, rejected.

(b) Whether allotment of hotel sites by NOIDA should 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 sealed tenders, involving competitive

bidding. It is submitted that if the object of a policy relating to allotment of

53

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 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 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. 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 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.

54

42. In support of their contention, the appellants relied upon 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 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 state

government inviting tenders for setting up such factories. Other

entrepreneurs who were interested in setting up factories, challenged the

grant of licences on the ground that due opportunity was not given to all the

entrepreneurs to make their applications. This Court rejected the writ

petitions holding that in the absence of material to show that the State had

acted mala fide or out of improper or corrupt motive or in order to promote

the private interest of someone at the cost of the State, the decision to grant

licences was not open to interference. It reiterated where State is allocating

resources for the purpose of encouraging setting up of industries within the

State, the State is not bound to advertise and tell the people that it wants a

55

particular industry to be set up in the State or invite those interested to come

up with proposals.

In Sachidanand Pandey, this Court held :

"State-owned or public-owned property is not to be dealt with at the

absolute discretion of the executive. Certain precepts and principles have

to be observed. Public interest is the paramount consideration. One of the

methods of securing the public interest, when it is considered necessary 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 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."

To the same effect is the decision in MP Oil Extraction. The appellants point

out that their cases are much stronger than 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 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.

56

43. But the issue in these cases is different. The principle 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 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

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.

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

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

57

amended or modified to provide for allotment of 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.

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 Policy", for short) in 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

(2) Phase II Includes Phase-II, Phase-II Extension/Hosiery Complex,

Sector-80, 81 and 83

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

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 III should be made

at fixed prices of Rs.2100 and Rs.4000 per sq.m.

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 regulations made by NOIDA under section 19 of the

58

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 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 modified by

incorporating an exception to the directive requiring 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

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.

59

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 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 nonetheless they must be obeyed so long

as they are in force and are applicable"

(emphasis supplied)

In Home Secretary v. Darshjit Singh Grewal - 1993 (4) SCC 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 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 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 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, they are

required to be obeyed by the Authority.

60

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 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. 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 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 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

61

amendment of the rules, regulations and procedures of the development

authorities, the same had to be carried out.

49. The failure to follow the procedure prescribed in the 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 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, 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 developmental activities. Therefore once a policy is made in regard

to commercial properties, it has to be complied with.

62

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 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 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, the state

government can certainly interfere under its revisional jurisdiction.

(c) Whether the rate charged was erroneous and has led to any loss?

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. That means that any allotment at a fixed rate (equivalent to the

63

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 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 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 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, 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

64

sealed tenders or by auction. NOIDA adopted the government policy and

fixed the allotment rate equal to the reserve 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 dated 20.3.2006 shows that the allotment rate varied

between Rs.22100 to Rs.7500 in respect of residential plots depending 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 depending upon whether the plots were situated in Phase-II

and Phase-III, 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 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 sealed tenders or by auction with

65

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 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 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) 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 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

66

earmarked for residential use would have fetched Rs.12,000 per sq.m. and if

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. 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 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 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 by tender or auction, is

erroneously charged either at a residential plot rate or an industrial plot rate.

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54. It is next submitted by the appellants that the state government being

conscious of the fact that commercial plot 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 plot rates. The

said policy was accepted and implemented by NOIDA by fixing the

allotment rate at Rs.7400 sq.m. Therefore, in respect of commercial plots

allotted for hotels, the rates should be as applicable to industrial plots. In

other words, among commercial plots, a sub-category of hotels was created

entitling allotment at Rs.7400 in view of the policy of the government. It is

pointed out that such sub-categorization with lesser rates is a standard

practice with NOIDA with reference to allotment for different institutional

uses.

55. The said submission no doubt, is persuasive and attractive. But they

ignore the regulations and policies of NOIDA which require the allotment of

commercial plots to be by sealed tender or by public auction. If any sub-

categorisation was to be made in regard to hotels, it could be only by

amendment of the concerned regulations and the Commercial Property

Management Policy, to provide for allotment in regard to such sub-category

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at fixed industrial plot rates, instead of by inviting sealed tenders or holding

auction. We have already noticed the scheme envisaged by the policy was to

create a separate category of use in regard to hotels and allot surplus land

which was not earmarked for any specific use, for the said purpose of hotels.

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 allotment at Rs.7,400 per sq.m. caused loss

and violated the regulations and policy of NOIDA.

56. The respondents have worked out the loss on account of allotments

being made 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 value of 14 plots (2,62,583

sq. m.) @ Rs.70,000/- per sq.m. Rs.1838.08 crores

B. Actual premium received from the appellants

in regard to the 14 plots @

Rs. 7400/- per sq.m. Rs.194.31 crores

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

D. Add: Loss of revenue by way of lease rent during

the lease 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

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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 `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. In fact, this is clearly recognized by NOIDA by giving the

option to the lessee to pay 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% of the total amount paid for

the plot, the one time lease rent which is eleven times the present annual

rental value, will be 27.5% of the amount paid as premium. On that basis the

loss will be as under :

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

C. Value of 2,63,500 sq.m. at

Rs.7400/- per sq.m. Rs.194.99 crores

D. Difference in premium (B - C) Rs.1649.51 crores

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E. Add : One-time lease rent at 27.5% Rs.453.62 crores

(equivalent to rental income over 90 years)

Total difference (D + E) Rs.2103.13 crores*

(*Plus stamp duty & registration charges

on the increased premium/rent)

IV. What should be the consequence of the violation?

58. Let us sum up the position. 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. Therefore cancellation of allotment is unsustainable. There is

however violation of the regulations and policies of NOIDA in making such

allotment on fixed rate basis, instead of inviting sealed tenders or holding

public auction. This violation occurred on account of a mistake on the part

of the officers of NOIDA in misinterpreting the government policy dated

22.5.2006. The allottees were in no way to be blamed for the mistake. Nor

were the allottees guilty of any suppression, misstatement or

misrepresentation of facts, fraud, collusion or undue influence in obtaining

the allotments at Rs.7400 per sq.m. The mistake was found out by the state

government, in 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

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allotment should be cancelled the transaction was 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. In the circumstances the High Court rightly felt that cancellation

was unwarranted and the matter required reconsideration by the State

Government. The 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 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 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 fixation of

premium is erroneous, whether cancellation of leases is warranted or

72

whether charging the rate claimed by the respondents (Rs.70,000/- per

sq.m.) would be the appropriate course.

(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 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. 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 reserve rate for plots in

industrial area Phase I (Rs.7400/- per sq.m.) as the allotment rate. When the

said allotment rate was fixed for hotel plots on 5.6.2006, the plots had not

been identified for allotment of hotels. When NOIDA Board resolved to

implement the policy dated 22.5.2006 and allot plots for hotels at `industrial

rates' that is rates applicable to its plots in industrial area (Phase I),

apparently it interpreted the policy as directing that all plots allotted for

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hotels should be allotted at fixed industrial rate. It is also possible that when

the rate was fixed, it assumed that some surplus land (not earmarked for any

specific purpose) or land earmarked for industrial use, will be allotted to

hotels; and when the plots for hotels were subsequently identified by a

Committee headed by the Circle Commissioner, Meerut, in areas earmarked

for commercial use 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 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 several star Hotels before

the commencement of 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.m as the allotment rate for hotel plots. Thus the

charging of premium at a rate of Rs.7400/- per sq.m. in regard to hotel plots,

is purely on account of the mistake on the part of the officers of NOIDA

misreading the government policy dated 22.5.2006 and assuming that it

74

would override NOIDA's regulations and policy regarding commercial

properties.

(ii) Whether allottees were guilty of fraud/objectionable conduct

60. The next question that arises for our consideration is whether the

charging of a lesser rate for the allotment of plots 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 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 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 or fraud or other objectionable

conduct, to the appellants. The stand of the respondents was that the

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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 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 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 fides, misrepresentation, fraud or suppression of fact,

collusion, undue influence or any other illegal act or improper conduct to

any of 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.

(iii ) What should be t he remedial action?

62. If after effecting a transfer, the transferor finds that he 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 not caused on account of any fraud, coercion or

76

misrepresentation by the transferee) what is the remedy of the transferor? In

private law, the transferor may have no remedy, as completed transactions of

transfers cannot be re-opened or 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 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 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 of Contract Act provides that a

contract is not voidable because it was caused by a mistake as to any law in

force in India. Therefore, having regard to the provisions of Transfer of

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 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

77

violation of the regulations, it will be necessary to consider two questions.

The first question is whether the 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.

63.1) If the transferee had acted bona fide and was blameless, it may be

possible to save the transfer but that again 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 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 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 transfer

should be rescinded or cancelled.

(iii) But where the consequence of the violation is merely a short-recovery

of the consideration, the transfer may be saved by giving the transferee an

opportunity to make good the short-fall in consideration.

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63.2) The aforesaid exercise may seem to be 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 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 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.

63.3) If the concluded transfer cannot be saved and has to be cancelled, the

innocent and blameless transferee should be reimbursed all the payments

made by him and all expenditure incurred by him in regard to the transfer

with 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.

64. We may give an example from service jurisprudence, where a

principle of equity is frequently invoked to give relief to an employee in

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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, (usually on audit verification) that on account of wrong

understanding of the applicable rules by the officers implementing the rules,

excess payment is made, courts 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

three Judge bench of this Court in Syed Abdul Qadir vs. State of Bihar [2009

(3) SCC 475] stated the principle thus :

"This Court, in a catena of decisions, has granted relief against recovery of

excess payment of emoluments/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 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 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 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)

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

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which is less than the rate the plots would have fetched by calling for tenders

or by holding 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 fetched a 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 allotment of the plots at

Rs.7400/- per sq.m. Therefore if the appellants are wiling to pay the balance

of premium as claimed by respondents, the leases need not be interfered.

66. In this case the violation of the policies of NOIDA in making

allotments has resulted in a lesser premium being charged than what would

have been applied for commercial plots. According to respondents the

premium that would have been charged was Rs.70,000/- per sq.m as 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

premium and if this could be made up, there is no reason why the leases

should not be continued.

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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 value". It is also contended that even if Rs.70,000/- was the market

value, it would represent the value of freehold land and not of a leasehold

interest. It is submitted that on account of the following restrictive factors in

regard to their leases, the value of the leasehold interest will be far less than

the value of freehold property:

(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 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 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 complete the Hotel Project by December, 2009, so as to make

the hotel functional by June, 2010 with the threat of forfeiture if the lessee

82

failed to complete the 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 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.

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 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 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 claim that prevailing premium rate in 2006-

2007 was Rs.70,000/- per 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.

83

69. The appellants responded by pointing out that the terms of lease under

the 2008 scheme of NOIDA offering hotel plots 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 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:

S.No. Description Position under 2006 Position under 2008 allotment

of the term allotment

1. Purpose and For setting up hotels with only For development of hotels with

permitted 5% of FAR permitted to be commercial activities with 40%

use used as commercial space of 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 yearly

instalments (alongwith interest

at 11% from date of allotment

compounded half yearly)

3. Transfer of The lessee shall not transfer The lessee is entitled to transfer

rights the plot before the hotel after obtaining completion

becomes functional. The certificate and no transfer

Authority may or may not charges will be applicable if the

allow transfer. If transfer is built up commercial space is

permitted, transfer charges transferred within two years

shall be payable to the from the date of issue of

Authority. completion certificate

84

Therefore if the appellants (2006-2007 allottees) are to be extended the

aforesaid 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

reasonable. We therefore find no reason to reject the claim of respondents

that the allotment rate should be Rs.70,000/- per sq.m. We accordingly grant

the appellants an opportunity to save the leases by paying the difference in

premium at Rs.62600/- per sq.m. to make it upto Rs.70,000/- per sq.m.

70. In view of the above we dispose of these appeals as follows :

(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

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.

(iii) The appellants are given the option to continue their respective leases

by paying the premium (allotment rate) at Rs.70000/- per sq.m. (with

corresponding increase in yearly rent/one time lease rent), without any

location benefit charges. The appellants shall exercise such option by

30.9.2011. Such of those appellants exercising the option will be entitled to

85

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 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 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 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. Consequently the period of lease mentioned in the lease deed shall

stand extended by a corresponding four years period, so that the lessee has

the benefit of the lease for 90 years. An amendment to the lease deed shall

be executed between NOIDA and the lessee incorporating the aforesaid

changes.

(iv) If any appellant is unwilling to continue the lease by paying the higher

premium as aforesaid, or fails to exercise the option as per para (iii) above

by 30.9.2011, the allotment and consequential lease in its favour shall stand

cancelled. In that event, NOIDA shall return all amounts paid by such

appellant to NOIDA towards the allotment and the lease, and also reimburse

the stamp duty and registration charges incurred by it, with interest at 18%

per annum from the date of payment/incurring of such amounts to date of

86

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.

(vi) Parties to bear their respective costs.

................................J.

(R V Raveendran)

New Delhi; .............................J.

July 5, 2011. (B Sudershan Reddy)