ITC LTD. Vs. State of
Uttar Pradesh & Ors.
J U D G M E N T
R.V.RAVEENDRAN, J.
1.
The
appellants in these appeals are the lessees of plots allotted by the New Okhla
Industrial Development Authority (for short `the Authority' or `NOIDA') for construction
of 5 star, 4 star and 3 star hotels in Noida, District Gautam Budh Nagar, Uttar
Pradesh. The said Authority was constituted under the provisions of the U.P.Industrial
Area Development 2Act, 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) & (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)
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 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 6in 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) 7 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 : 8Eligibility 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 PositiveAllotment
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.
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
|
|
|
|
i.
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.
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.
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.
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 13Planning
& 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 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.
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."
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." "
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 16Division 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 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
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 18 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 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 19contended 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)
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 21adoption
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 22plots 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.
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.
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? (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. Date of delivery of possession
|
Name
of the allottee/lessee
|
Category
|
Plot
Number
|
Date
of execution of lease deed
|
|
4561/08
11.4.2007
|
ITC
Ltd.
|
5
star
|
Plot No.H-5
Sector
97
|
11.4.2007
(pending
registration)
|
|
4562/08
9.4.2007
|
Indian
Hotels Ltd.
|
5
star
|
Plot
No.H-2
Sector
96
|
4.4.2007
(pending
registration)
|
|
4563/08
29.3.2007
|
Bharat
Hotels Ltd.
|
5
star
|
Plot
No.H-1
Sector
96
|
28.3.2007
(registered)
|
|
4564/08
28.3.2007
|
Hampshire
Hotels & Resorts Pvt.Ltd.
|
5
star
|
Plot
No.H-3
Sector
96
|
28.3.2007
(registered)
|
|
4565/08
27.4.2007
|
Arora
Holdings Ltd.
(consortium)
|
5
star
|
Plot
No.H-6
Sector
97
|
18.4.2007
(pending
registration)
|
|
4566/08
18.4.2007
|
Crimson
Hotels Ltd. through Clarkston Hotels (P) Ltd.
|
5
star
|
Plot
No.H-7
Sector
97
|
11.7.2007
(pending
registration)
|
|
4567/08
26.4.2007
|
Mariada
Holdings Ltd.
(consortium)
|
3
star
|
Plot
SDC-H-1
Sector
62
|
18.4.2007
(pending
registration)
|
|
4568/08
27.4.2007
|
M/s
Mast Craft Ltd.
(consortium)
through
M/s.
NOIDA Luxury
Hotels
& Resorts (P) Ltd.
|
3
star
|
Plot
SDC-H-2
Sector
105
|
18.4.2007
(pending
registration)
|
|
4569/08
|
Swiss-Bell
Hotels International Ltd. (consortium)
|
5
star
|
H – 9
Sector
98
|
18.4.2007
(pending
registration)
|
24.4.2007
|
|
4570/08
|
Rendezvous
Hotels International Pvt.Ltd. (Consortium) through Somap Hotels (P) Ltd.
|
5
star
|
H – 8
Sector
98
|
20.4.2007
(pending
registration)
|
24.4.2007
|
|
4571/08
|
Royal
Orchid Hotels Ltd. (consortium)
|
3
star
|
124
A/2
Sector
124
|
20.4.2007
(pending
registration)
|
26.4.2007
|
|
4572/08
|
Orchid
Infrastructure Developers Pvt. Ltd.
|
4
star
|
124
A/1 Sector 124
|
|
|
|
4968/08
|
Metrovino
Management Ltd. (Consortium)
|
4
star
|
SDC/H-1
Sector
105
|
3.5.2007
(pending
registration)
|
4.5.2007
|
|
|
Elbrus
Builders (P) Ltd.
(Consortium)
|
5
star
|
H-4
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 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.
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.
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 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 "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 32and 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 34state 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 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 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 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 39two 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 40industrial
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
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 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. 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 44Authority 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 45shops,
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 46the 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. 4735.2) 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 60 120 152. Above
100 upto 450 15 a. First 100 Same as (1) above b. Next 350 or part thereof 60 1003.
Above 450 upto 2000 15 a. First 450 Same as (2) above b. Next 1550 or part
thereof 55 804. Above 2000 upto 12000 15 a. First 2000 Same as (3) above b. Next
10000 or part 55 70 thereof5. Above 12000 upto 15 20000 a. First 12000 Same as
(4) above b. Next 8000 or of part 50 65 thereof6. Above 20000 15 a. First 20000
Same as (5) above b. Above 20000 50 60 48The 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).
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 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 restriction3.
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.
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 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 53plots 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.
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 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.
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 57amended 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 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.
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.
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 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.
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 63reserved 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 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 65the 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 66earmarked
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.
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 68at 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 croresB. Actual premium received from
the appellants in regard to the 14 plots @ Rs. 7400/- per sq.m. Rs.194.31
croresC. Loss of premium (B - A) Rs.1643.77 croresD. 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 croresE. Total loss to public exchequer (C + D) Rs.4721.14
crores
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 70 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 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 72whether 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 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 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 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 76misrepresentation
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 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. 7863.2) 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 79somewhat 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 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.
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 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.
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 84Therefore 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 85the 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 86reimbursement 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)
.............................J.
(B Sudershan Reddy)
New
Delhi;
July
5, 2011.
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