1989 (1) TMI 315 - SC - VAT and Sales Tax

Whether there were breaches and non-performance of the covenants and conditions of the lease justifying the forfeiture of the lease, and that these matters, pertained to a private law situation and were not appropriately matters for enforcement of public law remedies? Whether the purported forfeiture and cancellation of the lease were valid or not should not have been allowed to be agitated in proceedings under Article 226? Held that - The show cause notice itself an impalpable congeries of suspicions and fears, of relevant or irrelevant matter and has included some trivia. On a matter of such importance where the stakes are heavy for the Lessees who claim to have made large investments on the project and where a number of grounds require the determination of factual matters of some complexity, the statutory authority should, in the facts of this case, have afforded a personal heating to the lessees. Therefore, agree with the conclusion of the High Court that both the show cause notice dated 9-1.1986 and the subsequent order dated 19.4-1986 would require to be quashed, however, leaving it open to the statutory authority, should it consider it necessary, to issue a fresh show cause notice setting out the precise grounds, and afford a reasonable opportunity including an opportunity of personal heating and of adducing evidence wherever necessary to the Respondent-Lessees.

Summary

Issues Involved:
1. Legality of the cancellation of the lease.
2. Legality of the cancellation of the development permission.
3. Competence of the Vice-Chairman to revoke the permission.
4. Denial of natural justice to the lessees.

Detailed Analysis:

1. Legality of the Cancellation of the Lease:
The High Court quashed the cancellation of the lease by the State Government, finding the grounds for cancellation either irrelevant or insufficient. The Supreme Court held that the High Court should not have examined the legality or correctness of the cancellation of the lease in proceedings under Article 226 of the Constitution, as this involved disputed questions of fact. The Court emphasized that the question of the validity of the purported forfeiture and cancellation of the lease should be agitated in appropriate legal proceedings. The Supreme Court stated, "A lessor, with the best of title, has no right to resume possession extra-judicially by use of force, from a lessee, even after the expiry or earlier termination of the lease by forfeiture or otherwise."

2. Legality of the Cancellation of the Development Permission:
The High Court quashed the order of the Vice-Chairman, LDA, cancelling the development permission. The Supreme Court found that the Vice-Chairman had the inherent and incidental power to revoke the permission if it was obtained by fraud or misrepresentation or if there were violations of the terms and conditions of the grant. The Court stated, "The power to regulate with the obligations and functions that go with and are incidental to it, are not spent or exhausted with the grant of permission." However, the Supreme Court upheld the High Court's finding that the Vice-Chairman had denied the lessees a reasonable opportunity of being heard, thus violating the principles of natural justice.

3. Competence of the Vice-Chairman to Revoke the Permission:
The High Court held that the Vice-Chairman had no power to review the earlier order granting permission unless directed by the Government under Section 41(1) of the Act. The Supreme Court disagreed, stating that the Vice-Chairman, as a statutory authority, had the power to revoke or cancel the permission as incidental or supplemental to the power to grant. The Court noted, "The power to grant must be held to include the power to revoke or cancel the permit, even in the absence of any other express statutory provisions in that behalf."

4. Denial of Natural Justice to the Lessees:
The High Court found that the Vice-Chairman had denied the lessees a reasonable opportunity of being heard before cancelling the permission. The Supreme Court agreed, emphasizing that the show cause notice was vague and included irrelevant matters. The Court stated, "On a matter of such importance where the stakes are heavy for the Lessees who claim to have made large investments on the project... the statutory authority should, in the facts of this case, have afforded a personal hearing to the lessees." The Supreme Court quashed the show cause notice and the subsequent order of cancellation, leaving it open to the statutory authority to issue a fresh show cause notice with specific grounds and afford a reasonable opportunity, including a personal hearing, to the lessees.

Conclusion:
The appeals of the State of Uttar Pradesh and the Lucknow Development Authority (LDA) were partly allowed. The Supreme Court dismissed the writ petitions challenging the cancellation of the lease, leaving the question of the legality and validity of the purported cancellation open to be urged in appropriate legal proceedings. The Court quashed the show cause notice and the order of cancellation of the development permission, directing the statutory authority to issue a fresh show cause notice if necessary. The parties were directed to bear their own costs.