Industrial Land Dispute in Lucknow: Supreme Court Directs Public Auction for Fair Allotment

The Supreme Court of India delivered its judgment in Civil Appeal No. 361 of 2016, resolving a long-standing industrial land dispute involving M/s Metal Seam Co. of India (P) Ltd. and M/s Avadh Delicacies & Others. The case revolved around the allotment of an industrial shed in Talkatora Industrial Estate, Lucknow, and raised crucial questions about fairness in government land allotment, procedural lapses, and compliance with industrial policies.

Background of the Dispute

In 1956, Shed No. B-5, including its appurtenant open space, was allotted to M/s Surya Chemicals under a hire-purchase agreement with the Director of Industries, Uttar Pradesh. The agreement had a strict condition:

“Not to sell, mortgage, assign or otherwise transfer the factory building except with the previous permission in writing of the Director of Industries, U.P., till the price has been fully paid.”

This condition was meant to prevent unauthorized transfers and ensure that industrial land served its intended purpose.

However, due to financial difficulties, M/s Surya Chemicals struggled to meet its payment obligations, eventually falling into arrears. The authorities considered canceling its allotment. Meanwhile, M/s Metal Seam Co. of India, which had been allotted the adjacent Shed No. B-6 in 1968, sought additional space for expansion. The company manufactured containers and drums and required larger premises to scale operations.

Transfer of the Shed to Avadh Delicacies

Despite M/s Metal Seam Co.’s request, the Joint Director of Industries recommended the cancellation of M/s Surya Chemicals’ allotment and, instead of considering a fresh allotment, transferred it to M/s Avadh Delicacies, a newly registered small-scale unit.

The appellant M/s Metal Seam Co. challenged this transfer in Writ Petition No. 1166 of 1984 before the Allahabad High Court, arguing that:

The authorities failed to consider its pending application for allotment.
The transfer to Avadh Delicacies lacked transparency and was arbitrary.
The allocation was not in the public interest.

The High Court ruled in favor of the appellant on March 4, 1987, holding:

“The allotment which has been permitted without considering other applications is unreasonable and lacks good faith and could not be said to be in public interest.”

The authorities were directed to reassess the claims of both M/s Metal Seam Co. and M/s Avadh Delicacies.

Further Developments and Appeals

While the matter was under litigation, M/s Metal Seam Co. received allotments for two other sheds, C-1 (1997) and C-2 (2006). Meanwhile, Avadh Delicacies’ appeal against the 1987 ruling was dismissed by the Supreme Court in 1997, finalizing the High Court’s decision.

In response, the District Industries Centre, Lucknow, canceled M/s Surya Chemicals’ allotment on June 9, 1998 and reallocated Shed No. B-5 to M/s Metal Seam Co. on June 15, 1998. Avadh Delicacies challenged this order in Writ Petition No. 1840 of 1998, arguing that:

The reallocation was conducted without a public bidding process.
It was denied a fair chance to reclaim the shed.
The decision violated the principles of natural justice.

The High Court, in its ruling on March 28, 2014, accepted Avadh Delicacies’ arguments and set aside the reallocation.

Arguments Before the Supreme Court

When the matter reached the Supreme Court, both parties presented their respective positions:

Arguments by M/s Metal Seam Co.:

Its request for the shed predated Avadh Delicacies’ application.
The authorities followed due process in canceling M/s Surya Chemicals’ allotment.
The decision to reallocate the shed was consistent with government policies.
Avadh Delicacies had ceased operations in 1997 and did not qualify for reallocation.

Arguments by Avadh Delicacies:

The authorities failed to properly consider its claim before reallocating the shed.
It was running an industrial unit and had started production.
The reallocation violated the 1987 High Court order, which mandated an impartial assessment of claims.

Supreme Court’s Ruling

After considering the arguments, the Supreme Court concluded that:

Avadh Delicacies’ claim was weak as it had ceased operations in 1997.
M/s Metal Seam Co. already had three other sheds, negating any special equity in its favor.
The government’s reallocation of the shed without a transparent process violated industrial land allotment norms.

The Court issued the following directives:

“The authorities are directed to conduct public auction or invite tenders for allotment of the concerned shed at the present market value.”

Additionally:

Avadh Delicacies was ordered to vacate Shed No. B-5.
The authorities were instructed to initiate a fair and transparent auction process.
Both parties were permitted to participate in the auction.

Implications of the Judgment

The Supreme Court’s ruling reinforces the importance of fairness and due process in industrial land allocation. Key takeaways include:

Public auctions ensure transparency: Arbitrary allocations without open bidding can be overturned.
Past operations impact eligibility: Companies must demonstrate ongoing industrial activity to qualify for land allotments.
Judicial scrutiny prevents misuse: Courts can intervene in cases of unfair government decisions.

Conclusion

This case serves as a precedent for future industrial land allocation disputes, ensuring that public resources are distributed fairly. The ruling also highlights the importance of adhering to legal procedures and preventing favoritism in industrial policies.

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Download Judgment: Ms Metal Seam Co. o vs Ms Avadh Delicacies Supreme Court of India Judgment Dated 19-01-2016.pdf

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