ORISSA INDUSTRIAL INFRASTRUCTURE DEVELOPMENT CORPORATION versus M/S. MESCO KALINGA STEEL LTD. & ORS.

Citation: [2017] 1 S.C.R. 876 · Decided: 14-02-2017 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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[2017] l S.C.R. 876 
ORISSA INDUSTRIAL INFRASTRUCTURE 
DEVELOPMENT CORPORATION 
v. 
M/S. MESCO KALINGA STEEL LTD. & ORS. 
(Civil Appeal No. 2545of2017) 
FEBRUARY 14, 2017 
[ARUN MISHRA AND AMITAVA ROY, JJ.] 
Orissa Industrial Infrastructure Development Corporation 
Act, 1980 - s. 33 - Request made to appellant-Corporation for 
allotment of land (for establishing steel plant) - Corporation's 
request to State Government to issue orders to process the allotment 
- The State approved the allotment in principle subject to certain 
terms and conditions - The proposed allottee was required to pay 
the cost of the land in twenty half-yearly equal instalments -
Execution of lease-deed was condition precedent for allotment of 
land - On deposit of first instalment, advance possession of a 
portion of land was given by the Corporation to the proposed 
allottee - Lease deed was not executed even after the possession of 
the land was taken over - After about more than five years, 
appellant-Corporation gave final notice to deposit balance 
defaulted amount toward the cost of the land - On failure to execute 
the lease deed and to pay the defaulted amount, possession of the 
land was cancelled and was resumed by the Corporation - The 
amount deposited towards the one instalment was adjusted towards 
compensation for use and occupation of the land and damages -
After resumption, the land was further allotted to third parties -
Cancellation of possession and resumption of land was questioned 
in court - High Court held that the Corporation had not complied 
with Cl. I 8 of the policy decision whereby 3 month's notice was 
required to be given before resuming the possession of the land and 
directed the Corporation to lease out the fond to the proposed 
allottee - On appeal, held: Under s. 33, Corporation can dispose 
of the land subject to directions given by the State Government and 
subject to such terms and conditions as are necessary - Execution 
of lease-deed was condition precedent for allotment of land - Since 
th:· r_-:.;.;e-deed was never executed, the relationship of lessor-lessee 
876 
ORISSA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 
M/S. MESCO KALINGA STEEL LTD. 
never came into being - Thus Cl. 18 of policy decision never came 
into force as no concluded contract came into being and the 
transaction became void - Therefore, it is not necessary to serve 
three months' notice before resumption of land and resumption was 
;ustified - Forfeiture of amount for use and occupation of land 
and for damages was also appropriate as compensation could be 
claimed u/s. 70 of Contract Act - In the facts of the case, principle 
of promissory estoppel is not attracted as no assurance was given 
by the Corporation - Cost of Rs. 5 lakhs imposed on the respondent 
(proposed al/ottee) - Contract Act, 1872 - s. 70 - Administrative 
Law - Principle of Promissory Estoppel. 
Allowing the appeals, the Court 
HELD: 1.As provided in section 33 of the Orissa Industrial 
Infrastructure Development Corporation Act, 1980, the 
Corporation can dispose of the land subject to directions given 
by the State Government in such a manner and subject to such 
terms and conditions as may be necessary. The allotment letter 
itself contemplated the execution of the lease deed as a condition 
precedent. Condition No.18 of the general terms and conditions 
to be inserted in lease deed provided that the lessee had to 
remedy the breach within three months after notice. Aforesaid 
condition No.18 never came into force and remained.inoperative 
in the facts of·the instant case as lease deed itself had not been 
executed. Even otherwise, more than three months' time was 
given to Mesco (respondent-proposed allottee) to remedy the 
breach inasmuch as notice for resumption was initially given in 
1997 and for more than 5Yz years till resumption in July, 2003, 
breach was not remedied. In spite of receiving the advance 
possession, there was failure on the part of Mesco to execute 
the lease deed though draft lease deed was sent to it in January, 
1996 for execution. The relationship of lessor and lessee never 
came into being, in the absence of execution of lease deed. The 
execution of lease deed was necessary as the State Government 
had only accorded in principle approval and advised the 
Corporation to allot the land that could only be done by execution 
of lease deed. As a matter of fact, the Gorporation ought not to 
have handed over

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