Read Time: 12 minutes

Synopsis

The Supreme Court, on February 17, 2025, said that no indefeasible right can be claimed based on a grant that is patently illegal, as the State or government cannot extend a promise arising from an invalid order issued by a department.

A bench of Justices Sudhanshu Dhulia and K Vinod Chandran rejected a plea by Jagdish Chand Memorial Trust against the Himachal Pradesh government's decision to withdraw a no objection certificate issued to it to establish an Ayurvedic Medical College and Hospital. 

Court found that the NOC in the case was issued unilaterally at the instance of a minister, though the Rule of Business required such a policy decision was to be placed by the Council of Ministers.

The appellant's counsel pointed out that based on the NOC issued by the department, the trust had set up a hospital of 60 beds, and on that short ground, the high court ought not to have sustained the withdrawal. 

He also submitted the State would only benefit by the establishment of an Ayurvedic College and Hospital and the decision to the contrary, taken by the government, was arbitrary and went against the public interest. 

The appellant also argued that having established the hospital, on the basis of the NOC, the government subsequently could not have resiled from the grant, thus putting the appellant to prejudice. The withdrawal was also without hearing the appellant and hence in violation of principles of natural justice, it said.

The state counsel, on the other hand, submitted that the NOC itself was issued by the department without following the Rules of Business, which required a policy decision to be taken after placing it before the Council of Ministers. In fact, the Chief Minister had placed the matter before the Council of Ministers, which was later withdrawn by the minister of the concerned department, and the NOC issued, based on the minister’s order, by the department. The State was well within its power to withdraw the NOC since the NOC itself was issued without following the Rules of Business, it said.

The bench, however, said, "We have gone through the judgment of the High Court which considered the ground of the grant having created an indefeasible right, not liable to be withdrawn and also those raised on promissory estoppel and violation of principles of natural justice; all of which were rejected after referring to a wealth of precedents of this court".

The court also pointed out, the impugned judgment had relied upon M/s Jit Ram Shiv Kumar Vs State of Haryana (1980), which stated when the officers of the government act outside the scope of authority, the plea of promissory estoppel would not be available, especially since the doctrine of ultra vires comes into operation and the government cannot be held bound by the unauthorised actions of its officers.

In the facts of the matter, the court noted that during an investment meeting held in the year 2014, a proposal was made to set up an Ayurvedic College and Hospital. An NOC was claimed to have been issued on February 20, 2017 by the Principal (Secretary), Ayurveda. The appellant applied for affiliation and obtained it from the Himachal Pradesh University on March 14, 2017.   

The state government contended that the NOC issued by the department was legally valid. 

It was found that the Chief Minister had once placed the matter before the Cabinet, later withdrawn and then again, at the instance of the Minister for Ayurveda, placed it before the Cabinet. While the matter was thus pending, the minister unilaterally called back the files and opined that there was no requirement to place the matter regarding the issuance of NOC before the Council of Ministers and directed the department to issue the NOC, especially since no financial implication was involved.

The court noted the high court's division bench also examined Rules 14 and 16 of the Rules of Business of the government. It was found that the only discretion available to the Chief Minister, as per Rule 16, was to take a decision by circulation in the Council of Ministers; that too only if the council was unanimous. 

If there is a dissent and also if the Chief Minister opines that there should be a discussion, it has to be placed before the Council of Ministers. As per the Schedule, the High Court found that item no 17 was regarding an important change of policy or practice having statewide application, which had to be necessarily placed before the Council of Ministers, the court noted. 

"We perfectly agree with the bench of the High Court that there could not have been a NOC issued as per the Rules of Business of the government without the concurrence of the Council of Ministers; before which the matter was already placed by the Chief Minister, when the NOC was issued on the orders of the Minister for Ayurveda," the bench said.

The court also noted the grant in the case was made on February 20, 2017 and the withdrawal on March 14, 2017. The appellant was sanctioned a loan of Rs. 5 Cr by a Cooperative Bank on March 03, 2017, just 11 days before the grant was withdrawn.

"We cannot accept the contention of the appellant that based on the grant, the Hospital was constructed by the appellant in less than a month’s time," the bench said. 

With regard to the argument of violation of principles of natural justice, in the teeth of the decision of the Council of Ministers, the court said that the department which made the grant, even if afforded an opportunity of hearing, could have done nothing against the decision of the Council of Ministers. An opportunity granted by the department would have been a useless formality, it added.

"We find absolutely no reason to interfere in the well-considered judgment of the High Court," the bench said, dismissing the appeal.

Case Title: Jagdish Chand Memorial Trust Vs State of Himachal Pradesh