IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN, JAIPUR BENCH, JAIPUR. JUDGMENT S. B. CIVIL WRIT PETITION NO. 5987/ 2005 Infocom (India) Pvt. Ltd. v. State of Rajasthan & Others S. B. Civil Writ Petition under Article 226 of the Constitution of India. Date of Judgment: February 3rd, 2010. PRESENT Hon'ble Mr. Justice R. S. Chauhan Mr. Paras Kuhad with Ms. Nupur Kabra and Ms. Priyanka Nahata for the petitioner Mr. S. N. Kumawat, AAG for respondent No. 1, Mr. Alok Sharma with Ms. Sheetal Mirdha for respondent No. 3. REPORTABLE: (Per Court): Greed, whether in an individual, or in a Corporation, or even in a State, is a cardinal sin. Allured by the elusive El Dorado, like the conquistadors, at times, the State can plunder the Constitutional treasure trove of rights and duties. When the State behaves like a drunken elephant in a lotus pond, the task of reining in the mammoth falls on the Judiciary. For, State excess invite judicial intervention. The present case is a paradigm example of the State acting as a modern day King Midas. The bone of contention between the petitioner, on the one hand, and the State and the Urban Improvement Trust, Kota (the ‘UIT’, for short), on the other hand, is a piece of land which initially belonged to the Instrumentation Ltd. (‘IL’ for short), a Central Government undertaking. In order to fully comprehend the dispute in the present case, it is imperative to first understand the history of the land. In order to encourage industrialization in Rajasthan, the Central Government decided to establish the IL in Kota. For this purpose, on 16-4-1970, the Revenue department of the Government of Rajasthan allotted about 400 acres of land to the IL in Kota. However, despite the best of efforts, after three decades, the IL became a sick industry. The task of reviving the sick industry fell on the State Government and on others. Therefore, a decision was taken that out of the 400 acres of land allotted to the IL, about 90 acres of land would be surrendered to the State Government. The said land would be referred to as ‘the surplus land’. In order to dispose of the surplus land, vide order dated 3-6- 1999, the State Government constituted a Committee headed by the Collector, Kota. The said Committee consisted of the following persons namely, the Collector, Kota as the Chairperson, the General Manager of the Instrumentation Ltd., the Chief Accounts Officer of the Industry Department, and the Senior Regional Manager of Rajasthan State Industrial Development & Investment Corporation (‘RIICO’, for short). According to the order dated 3-6-1999, the Committee was to dispose of the surplus land in accordance with the local laws or bye- laws. However, for the purpose of the present case it is essential to notice that the said Committee was an independent entity which had nothing to do whatsoever with the UIT, Kota. Further, vide letter dated 1-4-2000, the Deputy Secretary, Industries informed the Collector, Kota that the Government has decided to dispose of the surplus land through RIICO. RIICO was to act as “an agency of the State Government” and was to dispose of the land in accordance with the RIICO Disposal of Land Rules, 1979. Moreover, the surplus land was to be disposed of through pubic auction under the supervision of the Committee constituted for the purpose under the chairmanship of the Collector, Kota. Further, RIICO was required to deposit the proceeds from the sale of the surplus land with the State Government. The State Government would then transfer the amount to the Instrumentation Ltd. as interest free loan. However, subsequently, vide letter dated 14-8-2000 the Deputy Secretary informed the Collector that vide order dated 3-6-1999, a Committee was constituted for disposing of the surplus land of IL. In pursuance of the letter dated 1-4-2000, the Government has granted approval for substituting the UIT, Kota in place of RIICO for the purpose of conversion and sale of the surplus land. The surplus land was being placed at the disposal of the UIT, but the sale was to be under the supervision of the Committee. Moreover, the other conditions contained in the letter dated 1-4-2000 would continue. Thus, the UIT would act only as an “agent of the Government” while converting and selling the surplus land. These facts make the following conclusions obvious: firstly, the surplus land did not “vest” in the UIT. It merely holds the land as an “agent” of the Government. Secondly, the UIT is to sell of the land under the supervision of the Committee, and not on its own. Thirdly, although the Collector is the Ex-officio Chairman of the UIT, but the Committee is independent of the UIT. Merely because the Committee and the UIT are headed by the Collector, it would not fuse the two separate entities into one entity namely, the UIT. This distinction is not only real, but is also essential to keep in mind while dealing with the issues in controversy. On 12-10-2000, out of 90 acres of land, the IL finally surrendered only 80 acres, 1 Bigha, and 5 Biswa of land to the State. On 21-3-2001, the land was declared as ‘Siwai Chak’ (Government land). Vide order dated 29-3-2001, the Collector demarcated and specified the land. He further set the land apart under Section 92 of the Rajasthan Land Revenue Act, 1956 (‘the Revenue Act’, for short). He further placed the land at the disposal of the UIT under Section 102-A of the Revenue Act, but with certain condition: the UIT would dispose of the land in terms of the letter dated 14-8-2000. According to Section 102-A of the Land Revenue Act, the UIT was to hold the land “for and on behalf of the State Government” and “subject to such conditions and restrictions as the State Government may lay down and in such manner as it may prescribe”. Thus, obviously, the land did not ‘vest’ in the UIT; the UIT was holding the land only as an “agent” of the Government; the UIT was bound by “the conditions and restriction prescribed by the Government”. Lastly, the disposal of the land was to be under the supervision of the Committee. Thus, the UIT could not deal with the land independently of the Government or of the Committee. In order to encourage foreign investment in Rajasthan, in 2003, the then Chief Minister of Rajasthan participated in the Rajasthan Association of North America (RANA) Convention held at New York City. Dr. Mukesh Chatter, a member of the Governing Body of RANA, along with his other brother, Dr. Peeyush Chatter showed interest in establishing a state of the art Hospital and a Biotech Research Centre in Kota. It was proposed that initially, in Phase-I, a hospital of 120 beds would be constructed. Subsequently, in Phase-II, another 120 beds would be added. In Phase-II, the project also envisaged the establishment of Center for Biotech Research and Studies. Since Rajasthan lacks biotechnology institutes, it was felt that the founding of a Biotech institute would fill the prevailing vacuum. The Hospital would be a super-specialty one. It would provide services of visiting doctors from around the world. Lastly, it was proposed that the institute would not only have modern incinerators in order to eliminate environment pollution, but would also have a green belt and landscaping in order to ensure a healthy environment. The institute would be established by the petitioner company, which is a private company incorporated under the Companies Act, 1956. The petitioner had also assured that it would get enough investment from abroad for establishing the Hospital and the Biotech Research Centre in Kota. Since the Government was convinced about the project, vide order dated 30-9-03, the Government gave permission for allotment of 7946 sq. meters of land @ Rs. 2750/- per sq. meter by the UIT to the petitioner. The said allotment was to be made subject to four conditions imposed by the Government namely, i) the construction of the main building should commence within one year of the allotment, ii) the 240 bed hospital and Biotech Research Centre should be completed within five years from the date of allotment, iii) in case the construction work of the main building were not started within one year of allotment, the allotment of land would stand cancelled automatically without any compensation and the Government would take over the possession of the building constructed and over the allotted land, iv) in case the allottee wants an extension of time, he will have to satisfy the Department of Industries. In case the period is extended for a period of one year, 25 % price shall be paid. In pursuance of the letter dated 30-9-03, on 1-10-03, the UIT issued an allotment letter in favor of the petitioner. According to the allotment letter, 7949 sq. mts of land was to be allotted out of the land which belonged to the IL and which fell under the Rajiv Gandhi Nagar Yojana. The said allotment was made under the Rajasthan Improvement Trust (Disposal of Urban Land) Rules, 1974 (‘the Rules of 1974’, for short). However, while making the said allotment, the UIT imposed sixteen other conditions. The petitioner was aggrieved by some of the conditions. Therefore, the petitioner immediately brought the objectionable conditions to the notice of the UIT. The UIT agreed to delete some of the conditions. But the petitioner continued to be aggrieved by few of the remaining conditions. Vide letter dated 18-10-03, the petitioner pointed out to the Collector about the unreasonableness of some of the remaining conditions. The petitioner specifically pleaded that the condition prohibiting the transfer of the land and building, for 99 years without the permission of the UIT is highly arbitrary. However, this letter did not elicit any response from the UIT. Hence, began the petitioner’s marathon run from the pillar to post in the corridors of the bureaucracy. On 8-12-03, the petitioner wrote to the Manager, Bureau of Investment Promotion (‘BIP”, for short), as at the relevant time, BIP was acting as a single window clearance point for large investments being made in the State; hence, the letter to the Manager. On 30-12- 03, the petitioner wrote to the Commissioner, BIP, again pointing out the unreasonableness of the conditions imposed by the UIT. Since no response was forthcoming, the petitioner sent another letter on 8-1- 04 to the Commissioner, BIP. Again another letter was sent to the Commissioner, BIP on 28-2-04. However, all these letters fell on deaf ears. Ironically, the Government, which had invited businessmen and entrepreneurs, like the petitioner, to invest their capital and to establish their projects in Rajasthan, turned a blind eye to their plight. While ignoring the petitioner’s plea, vide letter dated 1-4-2004, the Secretary UIT wrote to the Deputy Secretary, Urban Improvement Department, about the fact that the petitioner had failed to pay the total price of the land within the stipulated period. He therefore, requested that the process for cancellation of the allotment be started. A copy of this letter was endorsed to the petitioner. Immediately, the petitioner wrote to the Commissioner, BIP on 8-5- 04, requesting him to intervene in the matter. However, even this letter failed to solicit any reaction from the BIP. Since the petitioner could not convince the BIP to intervene, vide its letter dated 16-12- 2004, the petitioner also sought personal hearing from the Principal Secretary, Industries. On 1-1-05, the petitioner also wrote to the Secretary, Urban Development & Housing Department (`the UDH', for short), requesting that he should issue the necessary directions to the UIT. Since no response was forthcoming, vide letter dated 27-1- 05, the petitioner canvassed its difficulties before the Minister for UDH. Vide letter dated 8-3-05, the petitioner informed the Additional Chief Secretary that it is willing to deposit the entire price of the land. While fulfilling its promise, on 11-3-05, the petitioner did deposit Rs. 2, 64, 99, 994/- with the UIT. However, vide letter dated 22-3-05, the UIT not only returned the said amount to the petitioner, but also informed the petitioner that the allotment stands cancelled. Vide letter dated 28-3-05, the petitioner sought a personal hearing from the then Chief Minister. Simultaneously, the petitioner sought an appointment with the Minister for Urban Development and Local Self Government. Vide letter dated 2-5-05, the petitioner was informed that the Minister would meet the officers of the petitioner company on 17-5-05 in order to discuss their difficulties. But before the meeting could take place, on 12-5-05, the Cabinet decided to cancel the allotment of land. Vide letter dated 23-7-05, the UIT communicated the Cabinet decision to the petitioner. Hence, this petition before this court. Mr. S. N. Kumawat, the learned Additional Advocate General, and Mr. Alok Sharma, the learned counsel for the UIT, have raised the same set of preliminary objections: firstly, the writ petition is not maintainable as neither the fundamental rights, nor the civil rights of the petitioner have been violated. Secondly, the petitioner is cleverly trying to get the conditions of the contract modified through this court. The petitioner would like this court to modify the lock-in period and to reduce the price of the land. Such a subterfuge should not be entertained as the petitioner is trying to abuse the process of the court. On the other hand, Mr. Paras Kuhad, the learned counsel for the petitioner, has contended that the counsel for the respondents have misunderstood the entire thrust of the petition. The petitioner is not aggrieved by the price of the land. It is willing to pay the price of the land. It had already done so; it is willing to pay even now. The petitioner is, in fact, challenging the arbitrary action of the UIT and of the State. According to the petitioner, the UIT does not have the power to impose conditions while allotting the land. The imposition of the conditions by the UIT is, thus, an arbitrary, unreasonable and unjust act. Thus, the petitioner is questioning the imposition of the conditions by the UIT. Secondly, the conditions are per se unfair and unjust. The condition with regard to perpetual ban on transfer of the property is illegal as it interferes with the petitioner’s right as the owner of the property. The conditions with regard to automatic cancellation of the allotment both in case of non-payment of monies within the stipulated period, and for non-construction of the buildings within the stipulated period are unwarranted under the Rules of 1974. Thirdly, both the UIT and the State have cancelled the allotment without giving the petitioner an opportunity of hearing. Ironically, the concerned Minister had fixed a date for hearing the petitioner, yet even before the said date, the Cabinet decided to cancel the allotment. Such an action is clearly in violation of the principles of natural justice. Fourthly, once the State Government itself had invited investment into the state, it was legally bound to facilitate the investment of the capital in the state. After all, due to the promises made by the Government at the RANA Convention in New York, the petitioner had changed its legal position; it had motivated investors in the United States of America to invest their money in the project, it had tried to convince the authorities in Rajasthan to implement the project in Kota. Thus, the petitioner had invested its capital, its energy, its goodwill. The petitioner had a legitimate expectation that the promise made by the Government would be honored. Yet, the State has left the petitioner high and dry. Fifthly, any action of the State which is arbitrary, unfair and unjust is ipso facto in violation of Art. 14 of the Constitution of India. Lastly, it is the duty of the State to protect and to promote the fundamental rights of the people. The people have the fundamental right to engage in business under Art. 19 of the Constitution of India. Therefore, the State should endeavor to promote the business of the people rather than trying to create hindrance in it. In the present case, the State has created more obstacles than facilities for the petitioner. Hence, both the civil rights and the fundamental rights of the people have been violated by the UIT and the State. Thus, the writ petition is, indeed, maintainable. Heard the learned counsel for the parties on the preliminary objections. The Social Contract theorist like Locke, Hobbes and Rousseau tell us that Man entered into a social contract for the creation of a political State in order to protect and promote his interests and rights. Thus, it is “We the people” who created the Constitution of India. The Preamble of the Constitution contains our dreams and aspirations. Justice, both social and economic, is one of our great expectations. It is the duty of the State to ensure and implement social and economic justice to the people. Art. 19 also guarantee the fundamental right to carry out any business. Economic justice imposes a constitutional duty upon the State to create favorable conditions for business. Thus, it is the sacred duty of the State to facilitate, to encourage economic activities, rather than to create impediments, for the smooth functioning of the business world. Moreover, under the Directive Principles, the raising of living standards of the people, the providing of a better health care system to the people is one of the goals of State policy. Hence, the State is constitutionally bound to create more hospitals, more health care units. Even while deciding individual cases, like the petitioner’s, the State cannot be oblivious of its constitutional obligations towards the people. The State is the custodian of the people; it is patriarch of the people; it is the Karta of the people; it is the trustee of the people. It holds the national assets as a trustee. Thus, it is under a legal obligation to dispose of the land to the best interest of the people. While dispensing State largesse, it is legally bound to keep in mind the interest of the people. State largesse should be so distributed as to achieve the goals laid down in the Preamble of the Constitution. Moreover, as a trustee of the people, the State is constitutionally bound to act in a fair, just and reasonable manner. Any action of the State which is arbitrary, unfair or unjust is ipso facto an anathema to the concept of equality enshrined in Art. 14 of the Constitution of India. In Ramana Dayaram Shettty v International Airport Authority of India & Ors [(1979) 3 SCC 489], the Hon’ble Supreme Court had observed as under: Today the Government in a welfare State is the regulator and dispenser of special services and provider of a large number of benefits, including jobs, contracts, licences, quotas, mineral rights, etc. The Government pours forth wealth, money, benefits, services, contracts, quotas and licences. The valuables dispensed by Government take many forms, but they all share one characteristic. They are steadily taking the place of traditional forms of wealth. These valuables which derive from relationships to Government are of many kinds. They comprise social security benefits, cash grants, for political sufferers and the whole scheme of State and local welfare. Licences are required before one can engage in many kinds of businesses or work….There is growth in the Government largesse and more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. The Apex Court further observed: The law has not been slow to recognize the importance of this new kind of wealth and the need to protect individual interest in it and with that end in view, it has developed new forms of protection. Some interests in Government largesse, formerly regarded as privileges, have been recognized as rights while others have been given legal protection not only by forging procedural safeguards but also by confining / structuring and checking Government discretion in the matter of grant of such largesse. The discretion of the Government has been held to be not unlimited in that the Government cannot give or withhold largesse in its arbitrary discretion or at its sweet will. It is insisted, “that Government action be based on standards that are not arbitrary or unauthorized”. The Government is still the Government when it acts in the matter of granting largesse and it cannot act arbitrary. It does not stand in the same position as a private individual. The Hon’ble Supreme Court further held as under: It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant, and if the Government departs from such standard or norm in any particular case, or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory. The actions of the Executive and of the Legislature are subject to judicial review. The power of judicial review is a basic structure of the Constitution of India. Under Art. 226 of the Constitution, the High Court have been bestowed with the role of protector of the rights of the people. In turn, the people have a right to challenge the action of the Executive, and the laws enacted by the legislature before this court. Where the action is in violation of the civil or fundamental rights of the people, this court is constitutionally bound to rush to the rescue of the people. In Kumari Shrilekha Vidyarthi & Ors v State of U.P. & Ors [(1991) 1 SCC 212] dealing with judicial review of State’s contractual obligation, the Hon’ble Supreme Court observed as under: The requirement of Articles 14 should extend even in the sphere of contractual matters for regulating the conduct of the Sate activity. Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, the State cannot thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more. The personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co-exist. The Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. Therefore, total exclusion of Article 14—non-arbitrariness which is basic to rule of law—from State actions in contractual field is not justified. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts by standard form contracts between unequals. The Apex Court further held as under: Unlike the private parties the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of