Promissory estoppel and secured creditor rights barred resumption of allotted industrial land after government-approved charges were created.

Land allotted for an industrial unit could not be resumed on the basis of an unsigned and unenforceable allotment agreement, and the corporation had no independent enforceable right to invoke resumption machinery. Leave to resume was not shown to be barred by limitation because the relevant enquiry is whether the proposed proceeding would itself be time-barred. No sufficient breach was established to justify cancellation and resumption where the unit had been partially implemented and secured creditors held charges. Promissory estoppel also operated against the Government after it permitted creation of mortgages and charges, preventing resumption that would prejudice financial institutions.

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Issues: (i) whether the allotment agreement and the asserted power of the Andhra Pradesh Industrial Infrastructure Corporation Ltd. to resume the land were valid and enforceable; (ii) whether the applications for leave to resume the land were barred by limitation; (iii) whether the allottee had committed such breach of the allotment conditions as to justify cancellation and resumption of the land ignoring the interests of the secured creditors; and (iv) whether the Government was estopped from resuming the land after permitting the creation of mortgage and charge in favour of financial institutions.

Issue (i): whether the allotment agreement and the asserted power of the Andhra Pradesh Industrial Infrastructure Corporation Ltd. to resume the land were valid and enforceable.

Analysis: The land was acquired and allotted for establishment of the refractories unit, but the agreement relied upon by the corporation remained unsigned by it and no valid contractual execution in the manner required for a company was shown. The corporation functioned only as a facilitator in the acquisition process and had no independent proprietary role enabling it to cancel the allotment or invoke public premises machinery for eviction. The drastic power of resumption could not be founded on an incomplete and unenforceable instrument.

Conclusion: The corporation had no enforceable independent right to resume the land, and the agreement could not sustain the proposed action against the allottee.

Issue (ii): whether the applications for leave to resume the land were barred by limitation.

Analysis: Leave under section 446 of the Companies Act is not tested by limitation in the abstract; the relevant enquiry is whether the proposed proceeding itself would be time-barred on the date leave is sought. The Government's claim was treated as one that, if pursued by suit, would fall within the longer period applicable to Government claims, and the applications were not shown to be barred on that footing.

Conclusion: The applications were not barred by limitation.

Issue (iii): whether the allottee had committed such breach of the allotment conditions as to justify cancellation and resumption of the land ignoring the interests of the secured creditors.

Analysis: The unit had been set up in phases, production had commenced, and part of the land had been utilised. The failure was not a case of total non-use or dishonest conduct warranting the extreme step of resumption. In view of the winding-up proceedings and the existing charges in favour of banks and financial institutions, the land could not be resumed in a manner that defeated the rights of secured creditors. The proposed action was disproportionate and inconsistent with the equitable protection owed to chargeholders.

Conclusion: No sufficient breach was established to justify cancellation and resumption against the secured creditors.

Issue (iv): whether the Government was estopped from resuming the land after permitting the creation of mortgage and charge in favour of financial institutions.

Analysis: The Government had permitted the creation of charges, and the financial institutions altered their position by advancing funds on that footing. In such circumstances, the Government could not resile from its assurance in a manner that would defeat the mortgagees' rights and the equitable distribution of the company's assets in liquidation. The doctrine of promissory estoppel operated against the Government.

Conclusion: The Government was estopped from enforcing resumption so as to prejudice the financial institutions.

Final Conclusion: The proposed resumption of the land could not be sustained in liquidation proceedings, and the applications for leave to resume the land failed.

Ratio Decidendi: Where land allotted to a company has been mortgaged with governmental permission and secured creditors have acquired charge rights, the Government cannot invoke cancellation or resumption in a manner that defeats those rights, particularly when the allottee has partially implemented the project and the proposed action is not supported by a valid enforceable basis.

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