Industrial land vesting and auction transfer upheld where the Corporation held title and State sanction was unnecessary.

Land acquired for industrial development vested in the Corporation, not the State Government, because the compensation and acquisition charges were paid by the Corporation and possession was delivered directly to it. Section 17A prior sanction was therefore not attracted, as the land had already vested in the Corporation and the original public purpose had not changed. A court-supervised auction of the Society's leasehold rights was upheld because the State had no proprietary interest in the land and showed no illegality or material irregularity in the sale process. The challenge to the auction sale and its confirmation could not succeed.

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Issues: (i) whether the acquired lands vested in the State Government or in the Gujarat Industrial Development Corporation after compensation was paid and possession was delivered; (ii) whether prior sanction of the State Government under Section 17A was necessary before the leasehold rights could be transferred in auction; (iii) whether the State Government could successfully challenge the auction sale and confirmation of sale.

Issue (i): whether the acquired lands vested in the State Government or in the Gujarat Industrial Development Corporation after compensation was paid and possession was delivered.

Analysis: The land was acquired for industrial development at the instance of the Corporation, the compensation and acquisition charges were borne by the Corporation, and possession was delivered directly to it by the landholders. The scheme of Section 30(2) of the Gujarat Industrial Development Act, 1962 provides that once the compensation and other charges are paid by the Corporation, the land vests in the Corporation. Section 16 of the Land Acquisition Act, 1894 operates only when the Collector takes possession after award; no material showed that the State Government or the Collector took such possession. The payment of a nominal contribution by the State did not make it the owner of the land.

Conclusion: The lands vested in the Gujarat Industrial Development Corporation and not in the State Government.

Issue (ii): whether prior sanction of the State Government under Section 17A was necessary before the leasehold rights could be transferred in auction.

Analysis: Section 17A applies where land vests in the State Government or in a corporation owned by the State Government and is sought to be used for another public purpose with previous sanction. Since the lands had already vested in the Corporation under Section 30(2) and the original public purpose was not altered, the statutory condition for prior sanction was not attracted. The transfer by the Liquidator of the Society's leasehold rights through court-supervised auction did not violate the land acquisition regime or the industrial development framework.

Conclusion: Prior sanction under Section 17A was not required, and the auction transfer was not illegal on that ground.

Issue (iii): whether the State Government could successfully challenge the auction sale and confirmation of sale.

Analysis: The auction was conducted under the Court's supervision, the sale was confirmed, the proceeds were distributed to the secured creditors, and the respondent purchasers had acted under the confirmed sale and subsequent permissions from the Corporation. The State Government had no proprietary right in the land and, therefore, no legal basis to invalidate the auction proceedings. In the absence of any demonstrated illegality or material irregularity in the conduct of the sale, the challenge could not be sustained.

Conclusion: The State Government could not set aside the auction sale or the confirmation of sale.

Final Conclusion: The writ petition failed on merits, and the Court directed the concerned authorities to complete the remaining formalities without obstruction so that the auction purchasers could use the land for the intended industrial or allied purpose.

Ratio Decidendi: Where land is acquired for a Corporation, the compensation and acquisition charges are paid by the Corporation, and possession is delivered to it directly, the land vests in the Corporation under the special statute rather than in the State, and a challenge based on State ownership or prior sanction under the general acquisition law cannot defeat a court-supervised auction of the Society's leasehold rights.

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