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

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

4 star

3 star

Total

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