STATE OF HARYANA & ORS. Vs. NORTHERN INDIAN GLASS INDUSTRIES LTD.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 8378 of 2015, Judgment Date: Oct 07, 2015
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8378 OF 2015
[Arising out of SLP (Civil) No. 29250 of 2008]
STATE OF HARYANA & ORS. .. APPELLANTS
VERSUS
NORTHERN INDIAN GLASS INDUSTRIES LTD. .. RESPONDENT
J U D G M E N T
VIKRAMAJIT SEN, J.
1 Leave granted.
2 The Appellant, State of Haryana, is assailing the Judgment dated
11.12.2007 passed by the High Court of Haryana in Civil Writ Petition No.
3750 of 2005 whereby the Notice to resume the land of the Respondent has
been set aside. The Appellant State has been directed to comply with the
principles of natural justice as perceived by the High Court, and, in
consonance with its tenets, rehear the Respondent as well as the subsequent
purchasers, and thereafter to decide the issue of resumption of the subject
land by the Appellant State.
3 It is unfortunate, and indeed remarkable, that the fate of the
subject agricultural land, measuring 358 kanals and 7 marlas, located in
village Sankhol of Tehsil Bahadurgarh of District Rohtak, has been in a
state of uncertainty since the year of its acquisition in 1973. The
Respondent had approached the Appellant State on 18.5.1971 with a proposal
to set up an industrial undertaking having 20,000 tonnes capacity for
manufacture of sheet glass, requiring an investment plan of [pic]4 crore,.
It was projected that this industry would provide employment for as many as
one thousand workmen. Keeping in perspective the palpable public purpose
of generating employment and spurring industrial growth, the Appellant
State approved the said proposal and issued a Notification and a
Declaration under Sections 4 and 6 respectively of the Land Acquisition
Act, 1894 (referred to as “the Act” hereinafter) in 1973. The Award came
to be passed in the following year 1974 which computed the compensation for
the landowners at [pic]3,93,688.12. Immediately after the passing of the
Award on 16.10.1974, the Appellant State executed a Deed of Conveyance in
favour of the Respondent, the relevant clauses of which shall hereafter be
adverted to.
4 Being aggrieved with the quantum of compensation the landowners
approached the Additional District Judge in Reference proceeding under
Section 18 of the Act, who enhanced the compensation by [pic]59,349/- vide
Order dated 29.1.1979. The compensation was thereafter further enhanced to
[pic]8.10 lakh by the High Court vide Judgment dated 2.6.1988, which was
not interfered with by this Court by the dismissal of the SLP of the
Respondent. In the interregnum, on 1.8.1986, some of the landowners filed
Execution proceedings under Order XXI Rule 11 of the CPC against the
Respondent and the Appellant State for recovery of the enhanced
compensation awarded to them. It is these proceedings which have supplied
the bedrock for the dispute portrayed before us. In that execution case,
the Additional District Judge proceeded to attach the acquired land, vide
Orders dated 29.8.1987; and then directed its sale by way of auction vide
Order dated 4.3.1989. The Respondent thereupon presented the Executing
Court with an ingenious offer of private sale on the predication that the
barren and water-logged land would not fetch sufficient funds to satisfy
the decreed compensation through court auction. Suffice to note that the
application of the Respondent for private sale seems to have received the
imprimatur of the District Judge on 7.5.1991, and thence several portions
of the subject land had been sold by the Respondent. Knowledge of these
execution proceedings has been unconvincingly denied by the Appellant State
which asserts that it came to know about them only in 1991, when some of
the original landowners successfully challenged the acquisition proceedings
on the ground of non-utilization of the subject land in CWP No. 14735 of
1991. The High Court quashed the acquisition proceedings in its entirety
vide Judgment dated 5.3.1992 and directed that the land be returned to the
original landowners. These Orders were overturned by this Court on
29.10.2002 in Northern India Glass Industries v. Jaswant Singh (2003) 1 SCC
335 inter alia with the observations that in the event “the land was not
used for the purpose for which it was acquired, it was open to the
Appellant State to take action but that did not confer any right on the
respondents to ask for restitution of the land. As already noticed, the
Appellant State in this regard has already initiated proceedings for
resumption of the land. In our view, there arises no question of any unjust
enrichment to the Appellant Company.”
5 The Appellant State thereupon initiated resumption proceedings,
pursuant to which a Committee was constituted by it on 27.5.2004, which
visited the subject land and submitted its Report dated 16.6.2004. This
Report has provided the primary plank for the Notice of Resumption dated
6.1.2005 issued by the Appellant State to the Respondent, which was
challenged by the Respondent before the High Court in the CWP No. 3750 of
2005. This Notice has been annulled by the High Court vide the impugned
Judgment on the ground of non adherence to the audi alteram partem
principle, since the Respondent and the subsequent purchasers had not been
given an opportunity of hearing. This is the solitary issue which arises
before us. In the Writ Petition of the Respondent, the Appellant State
essayed to justify the impugned Notice of Resumption on the basis of the
terms and conditions set out in the Deed of Conveyance. The relevant
clauses of the Deed, whence the rights and the duties of the parties flow,
inter alia state:
“2. The Company hereby covenants with the Government that it shall:
Use the said land exclusively for all or any of the purposes of a
factory for the manufacture of sheet glass and such other products as the
Government may approve and for no other purpose.
XXXXXX
(iv) Not to transfer by way of sale, gift, exchange, mortgage or otherwise
the said land or the buildings constructed thereon or any right, title or
interest therein without prior written permission of the Government.
However, the Government hereby agrees that the company shall have the
liberty to mortgage the said land together with building erected/to be
erected thereon in favour of the Industrial Finance Corporation of India
(IFCI); Industrial Development Bank of India (IDBI); and the Industrial
Credit and Investment Corporation of India (ICICI).
XXXXXX
4(i) In the event of the company being up whether compulsorily or
voluntarily (save for the purposes of amalgamation or reconstruction) and
the company, through its liquidator, failing to obtain the Government’s
permission to transfer the said land with the buildings constructed thereon
in terms of the clause 2(iv) hereof or if the company shall fail to observe
and perform any of the covenants on its part contained in this deed, then
and in either such case the Government may resume the said land by serving
a notice on the company by sending it to the registered office of the
company by registered post (acknowledgment due). The notice shall indicate
the reasons for resumption of the said land and shall require the company
to remove and dispose of for its own benefit all buildings and other
structures constructed on the said land and all machinery and other
fittings fixed therein or lying thereon within a period of not more than 15
months from the date of service of the notice on the company.
(ii) That from the date of service of the notice referred to in sub-clause
(i) the said land shall subject to the provisions of sub-clause (iv)
hereinafter appearing stand resumed and vest in the Government.
6 Even a cursory glance at clause 2(iv) of the Deed would manifest that
the Respondent was specifically precluded from selling, gifting or
transferring the subject land without prior “written permission” of the
Appellant State. When clause 2(iv) and clause 4(i) of the Deed are read in
conjunction, it is at once apparent that the Appellant State was empowered
to resume the land in the event of their violation by the Respondent. Such
resumption, the Appellant State vehemently argues, could be done merely by
serving on the Respondent a notice containing the reasons therefor. The
Appellant State further contends that the Deed bestows no right on the
Respondent to be heard before resumption and hence no corresponding duty is
cast on the Appellant State to comply with the principles of natural
justice; that the rights and the duties of the parties are strictly
circumscribed by the contractual rights contained in the Deed, which alone
should be the determining factor to resolve disputes arising between the
parties. The argument of the Appellant State did find favour with the High
Court which held that the power of the Appellant State to convey the land
to the Respondent is subject to extant Rules. It opined that the Appellant
State has exercised its power to convey the land by virtue of Chapter VII
of the Act, but Clause 2(iv) is also borrowed from Section 44A of the Act.
Section 41, as provided in the Chapter VII of the Act read with the
preceding provisions, lays down several general conditions, such as, cost
of acquisition, terms on which the land transferred should be held by a
company, time period for fulfilment of conditions etc. Section 44A
thereafter forbids the concerned company from disposing of the land
transferred to it by any mode of conveyance, except with the previous
written sanction of the concerned Government. The clause for resumption
mentioned in the Deed has not been prescribed in the Act, but nevertheless
empowers the State to resume the land in certain situations. Sub-Rule 2
of Rule 5 of the Land Acquisition (Companies) Rules, 1963 provides that in
case a company breaches any of the terms of the Agreement, the appropriate
Government shall not make an order declaring the transfer of the acquired
land as null and void, unless the company has been given an opportunity of
being heard in the matter.
7 We agree with the High Court that the Deed of Conveyance is founded
on the Act and, therefore, contractual rights would not be the only
determinative elements in the dispute. We also endorse the High Court’s
opinion that the principles of natural justice are an “inalienable part of
the rule of law”; abidance with these principles is necessary even de hors
specific stipulation in this regard. We reiterate, however, that the Deed
of Conveyance does not permit the Respondent to sell the land without prior
written permission of the Appellant State. The Respondent, while admitting
that it never sought permission of the Appellant State, endeavours to
defend its conduct by asserting that since the Appellant State was a party
to the execution proceedings, it impliedly consented to the sales.
8 We have perused the Orders of the Executing Court adduced by the
Respondent where the Appellant State through its Land Acquisition Officer
has been shown as a party in the application filed on 1.8.1986 by the
original landowners under Order XXI Rule 11 of the CPC. As a matter of
fact, the Appellant State has also been mentioned as one of the Judgement
Debtors along with the Respondent in the Orders passed by the Executing
Court from time to time. It must be immediately underscored that neither
has it been pleaded that the Appellant State was notified of the Execution
proceedings nor has any effort been made to show that the Appellant State
was represented and heard by the Executing Court. Mere inclusion of a
party in a proceeding falls far too short of proving that its views or
stance had been laid and duly considered. We have no hesitation in
holding that there was no permission either in law or as per the Deed which
authorised the Respondent to sell the land. We think that had the
Executing Court been properly apprised of the terms and conditions of the
Conveyance Deed and the true factual circumstances of the case, its
conclusions would have been diametrically different. The Respondent cannot
take advantage of its own transgressions and legal duplicity and
shenanigans.
9 The plea of the Respondent is that it was saddled with higher
compensation awarded by the District Court and thereafter by the High
Court, and that requisite resources were not available with it to satisfy
the decreed amount and that consequently it filed in Court, instead with
the Appellant State, the application for permission for private sale. It
must immediately be highlighted that the said higher compensation was
computed at a mere [pic]8.8 lacs which stands in stark contrast to the
quantum of [pic]4 crore which was planned to be invested by the Respondent
in the manufacture of sheet glass.
10 Significantly, the Respondent was neither asked nor did it proffer
details of its other properties against which the decree in favour of the
original landowners could have been satisfied and satiated. The Respondent
also hid from the Executing Court the fact that the burden to pay any
enhanced compensation lay, in the first place, on the Appellant State and
not the Respondent. Class 2(v) is relevant on this point, and reads as:
2(v) pay to the Government any additional amount which may have to be paid
by the Government in addition to the sum of Rupees three lacs ninety three
thousand five hundred eighty eight and twelve paise only on account of
assessment or enhancement of compensation payable in respect of the
acquisition of the said land and all costs, charges and other expenses
whatsoever relating thereto resulting from any reference, appeal or writ
petition, etc to any court or authority. (emphasis is ours)
11 The Respondent has also argued that it had intimated the Appellant
State about the enhanced compensation, but it failed to elicit any
response. Even if the Appellant State failed to act upon its intimation,
it would have been appropriate for the Respondent to bring the relevant
clause to the notice of the Executing Court or invoke arbitration in terms
of Clause 4(viii) of the Deed. It could not arrogate to itself the power
to take unilateral action inconsonant with the contractual clauses.
12 Clause 2(iv) of the Deed of Conveyance, in pellucid terms, enables
the Respondent to mortgage the subject land along with any structure
thereon in favour of the Industrial Finance Corporation of India (IFCI),
the Industrial Development Bank of India (IDBI), or the Industrial Credit
and Investment Corporation of India (ICICI) in order to obtain loans.
Whilst conveyance of the property was forbidden, its mortgage to the named
entities was permitted. There was neither disposition of power nor any
justification for the Respondent to have sold the acquired land or even a
portion of it. As reflected in the Deed of Conveyance, the Respondent was
required to construct the factory within two years from the date of
delivery of possession of the acquired land or within one year from the
date of execution of the Deed, whichever period expired later. The Deed of
Conveyance was executed on 16.10.1974 whereas the possession was given on
20.06.1974, and it is an admitted fact that no factory building has been
constructed till date. The Appellant State cancelled the allotment of the
acquired land to the Respondent. However the petition for quashing of the
acquisition proceedings was allowed on 5.03.1992, which was ultimately set
aside by this Court on 29.10.2002. During the period 5.03.1992 to
29.10.2002, the land was returned to the original landowners, so the
Respondent could have done nothing. Thereafter, resumption took place on
6.1.2005.
13 The Respondent pleads all the said factors, but without basis halted
its efforts to construct the factory building and establish the sheet glass
industry. What is evident from the abovementioned facts is that, at least
before 05.03.1992, the only excusable factor could be of flood, which also
did not recur regularly since the date of possession, i.e. 20.10.1974 for
nearly two decades. Enhanced compensation and economical constraint had
already been discoursed above and even if the factor of flood is kept in
sight, cannot discharge the Respondent of the duty to establish the
industry. Significantly, the Respondent had not sought extension of time
from the Appellant State as per the Rules of 1963. The only conclusion to
be drawn from these facts is that the Respondent failed altogether to
perform the terms and conditions of the Conveyance, which throws serious
doubts on its intention to establish a sheet glass factory and commence
production on the acquired land.
14 The Committee constituted by the Appellant State had submitted its
Report dated 16.6.2004 which categorically stated that no plant, machinery,
electric connection etc, which may have some semblance of industrial
activity, was found on the site; instead, only an Office engaged in
dealership of plots has been set up. Indeed, the Committee had reported
that the acquired land had been divided into different plots, foretelling a
forthcoming unauthorised colony. The Report of the Committee remains
uncontroverted; rather, the endeavour of the Respondent is focused on
explaining the predicament it was supposedly trapped in. Recapitulating the
facts noted above, it is clearly evident that the Respondent failed to
establish and commence production in the sheet-glass factory within the
time frame provided in the Deed of Conveyance; that it used the subject
acquired land for purposes other than those allowed by the Deed; that it
sold the acquired land, without written permission or any permission worth
mentioning, to third parties. Despite all these happenings, the Respondent
failed to make even a single representation before the Appellant State.
15 The question to be answered is whether the Respondent should have
been given an opportunity of being heard by the Appellant State before the
Appellant State could resume the subject land acquired on its behalf for a
specified purpose. In State of Gujarat v. M.P. Shah Charitable Trust,
(1994) 3 SCC 552 it was contended by the respondent Trust that taking away
the power of the Trust to nominate certain number of students in the
concerned Government Medical College by the Appellant State was bad in law
inasmuch as the State Government had passed the impugned resolution without
notice to the Trust. This Court while allowing the appeal of the State has
observed thus:
“22. We are unable to see any substance in the argument that the
termination of arrangement without observing the principle of natural
justice (audi alteram partem) is void. The termination is not a quasi-
judicial act by any stretch of imagination; hence it was not necessary to
observe the principles of natural justice. It is not also an executive or
administrative act to attract the duty to act fairly. It was — as has been
repeatedly urged by Shri Ramaswamy — a matter governed by a
contract/agreement between the parties. If the matter is governed by a
contract, the writ petition is not maintainable since it is a public law
remedy and is not available in private law field, e.g., where the matter is
governed by a non-statutory contract”.
16 In State of Chhattisgarh v. Dhiroj Kumar Sengar, (2009) 13 SCC 600
a compassionate appointment was cancelled because the incumbent had
procured it on the prediction of the services of his deceased uncle, but
without proving that he had been validly adopted by him. The High Court
allowed his writ petition challenging the cancellation of appointment on
the ground that he had adduced an Adoption Deed as well as a Succession
Certificate. This Court found the said documents to be deficient of proving
the claim of adoption since the Deed of Adoption was unregistered and the
Succession Certificate included the name of the incumbent as well as his
real father. This Court noted that the appointment had been obtained by
suppression of the facts including the rejection of the first application
and therefore, principles of natural justice were not required mandatorily
to be complied with.
17 Nirma Industries v. SEBI (2013) 8 SCC 20, involved interpretation
of Regulation 27 of the Takeover Code. The appellant company therein after
making a public announcement for proposed open offer up to 20 per cent of
the shares of the existing shareholders of Shree Ram Multi Tech Ltd (SRMTL)
under Regulation 10 of the Takeover Code, sought to withdraw that offer in
the light of certain Reports in the public domain post the open-offer,
unearthing fraudulent transactions and siphoning off of funds by the
promoters of SRMTL. SEBI declined the request for withdrawal inter alia,
holding that the appellant company should have conducted due diligence
before making an open public offer. The failure by SEBI to grant any
opportunity of being orally heard was held by both the Securities Appellate
Tribunal and this Court not to vitiate the order of SEBI inter alia,
because SEBI had all the necessary information and materials before it to
make a fair decision, all of which had been duly considered.
18 In the Chairman Board of Mining Examination and Chief Inspector of
Mines v. Ramjee, (1977) 2 SCC 256, Krishna Iyer J, one of the foremost
apostles of human rights and natural justice, advocated that the Court
“.... cannot look at law in the abstract or natural justice as a mere
artefact. Nor can we fit into a rigid mould the concept of reasonable
opportunity..... If the authority which takes the final decision acts
mechanically and without applying its own mind, the order may be bad, but
if the decision-making body, after fair and independent consideration,
reaches a conclusion which tallies with the recommendations of the
subordinate authority which held the preliminary enquiry, there is no error
in law. ...” It would also be useful to recollect the observations of
this Court in Union of India v. Jesus Sales Corporation, (1996) 4 SCC 69
wherein it has been enunciated that the dictat of natural justice, viz.
affording an opportunity to the person concerned to present his case would
be met if the person concerned had the opportunity to present his case and
that all points were taken into consideration. More recently, in Patel
Engineering Ltd. v. Union of India (2012) 11 SCC 257, this Court has opined
“that there is no inviolable rule that a personal hearing of the affected
party must precede every decision of the State”.
19 In the instant case, the conduct of the Respondent has not only been
utterly unfair but, in fact, it smacks of fraud, malpractice and
malfeasance. It cannot be justified as a simple error which may exonerate
it of the allegations levelled against it by the Appellant State.
According to its own affidavit filed before the High Court, the Respondent
has executed 118 Sale Deeds in favour of various third parties, with
several sales being in 2004-05. This is sought to be vindicated by the
Respondent on the ground that since the land was returned to it in 2004
after the quashing of the acquisition was set aside by this Court, it could
have executed final Sale Deeds in respect of Agreements to Sell of 1991
post repossession of the land. Whether it had entered into Agreements to
Sell with third parties in 1991 or accepted Earnest Money thereagainst is
not an enquiry to be made here. It is also the case of the Respondent that
after the land remained in possession of the original landowners for twelve
long years, it was beyond its control to establish the unit as was proposed
and postulated at the time of acquisition and so in bona fide belief it
sold the remaining land as well. The Respondent cannot predicate that
after paying the cost of the land to the Appellant State and the enhanced
compensation to the original landowners, it had become absolute owner of
the land and consequently it could use the land in the manner it liked.
20 Some brief words with regard to persons who have purchased plots from
the Respondent. If a diligent title-search had been conducted by them it
would indubitably have disclosed that the sale transaction was contrary to
the purpose of the acquisition, was not consonant with the clauses of the
contract executed by the Appellant State and the Respondent and was
intrinsically inconsistent with the terms and the tenor of law. Equities
cannot emerge in favour of such purchasers who cannot but be presumed to
have purposefully transgressed the law. Suchlike persons are not justified
or entitled to seek impleadment in these proceedings. The impleadment
applications are meritless and are dismissed.
21 The prayer in the writ petition was for the issuance of a writ of
Certiorari quashing the Resumption Notice dated 6.1.2005 issued by the
Appellant State. In the impugned Judgment the Division Bench has opined
that the principles of natural justice applied irrespective of the nature
of the cause or the gravity thereof and are not mere platitudes. In our
analysis of the exposition of law contained hereinabove, we think that this
unjustly sets far too broad and wide a parameter to the perceptions of
natural justice. Quite to the contrary, Courts should be “pragmatic rather
than pedantic, realistic rather than doctrinaire, functional rather than
formal and practical rather than precedential”. We cannot lose
perspective of the fact that protracted litigation had already taken place
between the parties as a consequence of which the legal position of all
affected parties had already become well-known. It seems to us that in the
writ petition, the challenge was predicated on the perceived failure to
adhere to the audi alterem partem rule and not to the correctness of the
decision to resume possession of the land. In any event, we harbour no
manner of doubt that the circumstances of the case warrant the issuance of
the Resumption Notice of the land by the Appellant State. We also note
that the ‘Resumption Notice’ has been issued to the Respondent alone which,
because of its actions, has forfeited whatsoever rights it may have enjoyed
over the land in question. In fact the Respondent may be liable to make
over to the Appellant State all the profit that it has illegally and
unjustifiably reaped in its misutilization of the lands acquired for it for
the purpose of setting up an industrial unit for manufacture of sheet glass
with the accompanying projection of providing employment to almost a
thousand workmen. How this Resumption Notice will be implemented against
third parties is a matter on which we would think it prudent not to make
any observations. The Appellant State may not treat the observations made
by us above pertaining to third parties who have purchased land from the
Respondent as conclusively circumscribing any relief to them and/or
rendering it unnecessary to give any hearing to them. The Appellant State
will avowedly have to proceed in accordance with law, especially since it
has not maintained a watchful eye on the manner in which the land was dealt
with by the Respondent.
22 The Appeal is accordingly allowed and the Impugned Judgment is set
aside. We are mindful of the legally reprehensible manner in which the
Respondent has abused the acquisition of land in their favour. The
Respondent is therefore liable to pay costs of legal proceedings which are
quantified by us at [pic] 2 lakhs. Costs to be paid within two months.
…………………………………J.
[VIKRAMAJIT SEN]
…………………………………J.
[PRAFULLA C. PANT]
New Delhi,
October 07, 2015.
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