Writ is not issued to perpetuate an illegality

ORISSA INDUSTRIAL INFRASTRUCTURE DEVELOPMENT CORPORATION v. MESCO KALINGA STEEL LTD. & ORS

Supreme Court of India / Civil Appeal No. 2545 of 2017

Sub

Lease of industrial land from government authority - Lessee neglected to execute lease deed for years - Lease cancelled and land resumed lessee obtaining order from High court for the allotment of land. The Apex Court held that the lessee has no right to claim the leased land ,since on his own act he has defaulted in executing Lease Deed for many years.

BRIEF FACTS

1. Mesco Kalinga Steel Ltd. (in short 'Mesco') had applied to IDCO for allotment of 2500 acres of land on 30.6.1994 and the State Government conveyed in principle approval for allotment of 2500 acres of land on the terms and conditions laid down in the policy decision of the State Government as revised on 25.1.1995 for establishment of steel plant.

2. Mesco deposited Rs.1.25 crores with IDCO on 3.4.1995 and took possession of 1756.29 acres of land in the first phase in 1996.

3. However, MESCO did not execute the lease deed with IDCO. Ultimately on 25.7.2003 on failure to get the lease deed executed, land was resumed and possession letter of 1756.29 acres of land was cancelled by IDCO. The amount of Rs.1.25 crores deposited by Mesco was forfeited and adjusted towards compensation for use and occupation of the land and damages.

4. Out of the resumed land, IDCO allotted 934.31 acres of land to other units and executed lease deed therefor.

5. Mesco made unsuccessful representations to IDCO for allotment and thereafter filed a writ petition before the High Court praying for the allotment of the balance land of 825.68 acres to it, which was allowed by the High Court.

6. Aggrieved thereby, IDCO approached the Supreme Court.

7. Decision: Appeal allowed.

8. Reason and Observations:

i) In the instant case it is apparent that possession had been enjoyed by Mesco without execution of the lease deed.

ii) The conduct of IDCO was also not diligent.

iii) Notice was served in the year 1997 for resumption but thereafter up to July, 2003 nothing was done by either IDCO or Mesco. Not even a single communication has been placed on record by Mesco containing its proposal to remedy breach and on a specific query being made to the learned counsel appearing for Mesco, they were unable to explain as to what transpired between 1997 and 2003 except a vague submission was made that it was mired in certain litigations which fact has not been even pleaded.

iv) Thus, no explanation, good, bad or otherwise has been placed on record for inaction on the part of Mesco.

v) The transaction became void, due to Mesco's own lapse and negligence, and it has forfeited the right to get the lease deed executed. After taking possession, it could not have waited for so many years. What was required to be performed by Mesco was not done. It also failed to make any development of worth on the land.

vi) We find no force in the submission that they have spent a sum of Rs.22 crores as they were unable to explain how they spent the said amount, and only a bald statement was made that they have constructed a boundary wall. It has not been established that a sum of Rs.22 crores had been spent by Mesco. Apart from that, having failed to execute the lease deed, they were to invest at their own peril. In case they have invested some amount, on that basis they cannot claim any legal or equitable right.

vii) IDCO is a statutory authority and it can act only on the basis of written lease deed. The execution of lease deed is necessary and it is in public interest to prevent unauthorized leasing out of property on its behalf. Lease is required to be executed in a prescribed format in the shape of formal document which is sine qua non. In the absence thereof, it would not be permissible to hold that relationship of lessor and lessee came into being. It is apparent that there is a manner of executing the lease deed with the Corporation.

viii) Prescribed form of draft lease deed had been sent by IDCO to Mesco but it failed to execute it. Thus, there was no contract which could have been enforced and it became void due to inaction of Mesco itself.

ix) It was submitted on behalf of Mesco that IDCO is bound by promissory estoppel. We find the submission to be wholly unworthy of acceptance. It is not the case of Mesco that there was any assurance given to it on the basis of which it has acted upon. The State Government had withdrawn its initial offer of equity participation of Rs.25 crores well before the order of allotment was issued. It was made clear in the order that the State Government had directed IDCO to allot 2500 acres of land subject to execution of lease deed. In such a situation there is no room to entertain the plea of promissory estoppel and it is not the case that any of the authorized persons had at any point of time, without execution of lease deed, asked Mesco to do anything. Any such assurance even if it had been given, would be of no consequence as held by this Court in Mumbai International Airport Private Ltd. v. Golden Chariot Airport &Anr (2010) 10 SCC 422. Therein a question arose that the Airports Authority of India being a statutory body constituted under section 3 of the Airports Authority of India Act, 1944 was required to execute the contract in a particular form as provided under the Act and the Regulations. As such it was held that even if oral assurance of execution of licence is proved, such assurance cannot bind the statutory body.

x) In the facts of the instant case, the principle of promissory estoppel is not attracted at all. IDCO is a statutory body and can act only in the mode prescribed and Mesco was informed of the lease deed to be executed in prescribed format.

xi) Thus the High Court could not have issued the impugned direction. The High Court has totally misdirected itself in directing to lease out the balance land. The High Court has also ignored that certain intervening events have taken place and there was total failure on the part of Mesco to carry out its obligations. The High Court could not have issued the direction more so in the changed situation and in view of the defaults committed by Mesco.

xii) As a matter of fact, Mesco was never inclined to abide by the terms of the letter dated 4.7.2003. When resumption was made on 25.7.2003, a representation was submitted on 20.8.2003 by Mesco. In that, an attempt was made to dictate its own terms in the garb of prayer for payment. As a matter of fact, it is apparent from the conduct of Mesco that it had no justification at any point of time not to execute the lease deed. It was delaying the same for the reasons best known to it which was wholly impermissible conduct, particularly after taking possession. The breach was not remedied for several years much less for three months in which it was to be remedied. Thus, High Court mis-adventured into holding the action of IDCO of resumption of land to be illegal.

xiii) There was no equitable or legal consideration in favour of the respondent herein and a writ is not issued to perpetuate an illegality. Not only the conduct of Mesco was unfair, third party rights had also intervened. Lawful method had been exercised for resumption of land and cancellation of letter of handing over the possession.

xiv) Resultantly, the impugned order passed by the High Court is hereby set aside.

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