M/s Swati Ferro Alloys Pvt. Ltd. v. Orissa Industrial Infrastructure Development Corporation (IDCO) & Ors.
Background
An industrial plot in Cuttack originally allotted to one company changed hands through a series of informal transfers and name changes over the years: first to "Eastern Fans" and then, after a 1989-90 arrangement to clear outstanding loan liability, allegedly to the appellant company, Swati Ferro Alloys. When the appellant asked the land-owning corporation (IDCO) to formally transfer the lease into its name, IDCO took no action for years, and the appellant's writ petition to the High Court was dismissed because the chain of ownership involved genuinely disputed facts unsuitable for a writ proceeding.
Decision Breakdown
The Supreme Court agreed with the High Court that the case was riddled with disputed questions of fact, including gaps in how the land supposedly passed between the various companies, that could not be resolved in writ jurisdiction under Article 226, and upheld the dismissal. Going further, the Court noted that it was unclear whether either the original allottee or the appellant had actually used the land for its intended industrial purpose, as opposed to simply using it as loan collateral under successive company names. It therefore directed IDCO to conduct its own inquiry, issuing notice to all interested parties, into whether the land was being improperly exploited through repeated mortgaging under different corporate identities, leaving IDCO free to pass an appropriate order after that inquiry.
Lesson Learnt
A writ petition under Article 226 is the wrong tool to resolve a genuinely disputed chain of title or contractual transfer: such disputes must go to a civil court; and when public land appears to be used mainly as rotating loan security rather than for its sanctioned purpose, the allotting authority can be directed to independently investigate regardless of how the private dispute is resolved.