Madras HC Rejects Tamil Nadu’s Bid To Resume DCW’s Leased Lands, Citing State’s Promise To Sell After Factory Investment

In 1959, the Government granted DCW Limited a 30-year lease over 978.38 acres for establishing a caustic soda factory, subject to a requirement that the company purchase the lands during the lease or within six months of its expiry.

The Government determined the land cost in 1973; the company deposited that amount in 1989 and sought assignment of the lands, but the Government did not act on its request.

In 2017, the Government rejected assignment, demanded rental arrears and ordered resumption of 793 acres. The company challenged that decision. The Single Judge set aside the Government’s order and directed reconsideration, including determination of the land cost at current market value; the company did not appeal that valuation direction. The Government appealed.

The Court treated proprietary estoppel as the applicable equitable principle where a claimant, relying on an assurance relating to identified land, acts to its detriment and it would be unconscionable for the landowner to insist on strict legal rights; the relevant elements include assurance, reliance and detriment, assessed in context.

It distinguished proprietary estoppel from promissory estoppel and legitimate expectation, which have different foundations and requirements.

The Court also noted that the High Court’s jurisdiction under Article 226 is equitable and that relief may be shaped to avoid an unconscionable result.

It relied on Ramsden v. Dyson, In re Basham, Thorner v. Major and Andrew Morris Davies v. Debra Ann Davies in explaining proprietary estoppel.

The Court found that the 1959 grant, read in light of its purpose and the obligation to purchase the lands, conveyed an assurance that assignment would be available.

The company had sought to pay for and obtain the lands before the lease expired, deposited the land cost determined by the Government, and established and continued to operate its factory on the leased lands; the Government’s prolonged inaction contributed to the failure to complete the assignment.

Given the company’s reliance and the detriment that resumption would cause, allowing the Government to resume the lands would be unconscionable. The Court therefore upheld the setting aside of the Government’s order.

It considered payment in instalments unnecessary, noting that the company could pay the land cost in one lump sum.

The company’s land cost is to be determined at current market value, with the company given an opportunity to participate in the valuation; payment need not be permitted by instalments.