The land was handed over on a promise to revive the factories and re-employ the workers. Then came a fire, a housing scheme and a tourism proposal

The Rajasthan High Court upholds the cancellation of seven leases over industrial land at Kota, holding that the fraud lay not in any single false statement but in the promise of revival and everything the buyer did afterwards.

Industrial land is allotted by a State at concessional terms for a reason: the public gets a working factory and the jobs that come with it. When the factory closes and the land is worth far more as real estate, the allottee and the State want different things from the same acres — and the lease conditions are all that stands between them.

On 28 September 2026, in a judgment running to 170 paragraphs, Justice Anand Sharma decided what happens when a court concludes that the promise on which such land was obtained was never meant to be kept.

Seventy years of allotments

The story begins in 1958, when 70 acres at Kota were leased for 99 years to J.K. Synthetics Limited to set up a nylon factory. In 1965 the Industries Department allotted a further 200.87 acres for 99 years — 162 acres for an acrylic fibre industry and 38.87 acres for an art silk industry. Lease deeds followed in 1967 and 1972.

In 1979 the State transferred its industrial areas to the Rajasthan State Industrial Development and Investment Corporation, though the District Collector and State authorities continued in practice to deal with this land. Fresh lease deeds were executed in the 1980s after Rule 12 was inserted into the Rajasthan Industrial Areas Allotment Rules, 1959.

The company eventually became a sick industrial undertaking and went before the Board for Industrial and Financial Reconstruction. A rehabilitation scheme was framed, and it is that scheme — with its assessment of which units were viable, and its provisions for revival and for the workmen — that supplies the standard against which everything later was measured.

The petitioners acquired the Kota complex in that context. The seven lease deeds now cancelled came to them on the footing of the rehabilitation arrangement.

What happened after the land changed hands

The Court's findings on the sequence are what decide the case, and it sets them out cumulatively rather than singly.

Almost immediately after the purportedly revived unit was taken over, it was closed — under cover of a fire incident, followed by reports of non-viability. No meaningful attempt was made to revive six of the seven units, although the rehabilitation scheme had earlier assessed their viability.

The conduct that followed pointed the same way. Proposals were made for a Jan Awas Yojna housing scheme, for a denim unit and for other uses impermissible under the lease, and supplementary lease deeds were obtained despite the statutory restrictions. A later proposal to use the entire leased area for a tourism unit was unsupported by any concrete or viable project and failed for want of material before the Tourism Department.

Viewed together, the Court held, these circumstances are wholly inconsistent with the foundational representation on which the land was allotted.

Where the fraud was located

The petitioners' answer on fraud was a forensic one: the State must identify the specific false statement, and had not. The judgment's response to that is its most quotable passage.

The fraud, it held, lies not in any isolated statement which the respondents were required to identify with mathematical precision, but in the representation and undertaking of revival and re-employment which formed the foundation for obtaining Government land — coupled with conduct immediately afterwards demonstrating abandonment of that very purpose, and repeated attempts to secure impermissible alternative uses. The circumstances disclose both the representation on which the authorities acted and the subsequent conduct rendering its bona fides untenable.

That is a workable test for a promissory representation. A statement about a future intention is false when it is made, if the intention is absent — and because intention is not observable directly, it is proved by what the promisor does next. Closing the plant, then seeking housing, denim and tourism uses in succession, is evidence about the intention held at the outset.

From that finding the settled consequences followed: fraud vitiates every solemn act, and an advantage obtained by fraud is a nullity, on the authority of S.P. Chengalvaraya Naidu and Meghmala. The Court also invoked the doctrine of public trust, the land having been granted for a public purpose.

An argument founded on payments made towards labour dues did not displace this. Nor did the contention that the State itself had been party to some of the intervening arrangements — a point the Court addressed on the material rather than as an estoppel.

The constitutional arguments

The petitioners invoked Article 19(1)(g) and Article 300A — the freedom to carry on trade, and the right not to be deprived of property save by authority of law.

Neither succeeded. A leasehold interest obtained on a representation the Court has found to be fraudulent is not property held by authority of law in the relevant sense, and the right to carry on business does not extend to retaining land granted for an industrial purpose that has been abandoned.

The limits of judicial review

The Court closed its analysis by identifying what the petition actually asked of it.

The petitioners had established no jurisdictional infirmity, no demonstrable prejudice, no denial of meaningful opportunity, no perversity, and no non-application of mind such as would warrant interference under Article 226. In substance the challenge sought a reappraisal of the factual conclusions recorded by the competent authority about compliance with the rehabilitation arrangement and the lease conditions — and such reappraisal falls outside the permissible limits of judicial review.

Both writ petitions were dismissed. The orders of 24 June 2025 cancelling the seven lease deeds, and of 7 March 2025 rejecting the proposal for change of land use for a tourism unit, were upheld. All interim orders were vacated, and the respondents left at liberty to deal with the land in accordance with law.

A direction the State did not ask for

The judgment does not end there, and the final direction is the part that looks beyond the parties.

Noting the Supreme Court's observations in Bishambhar Prasad about the need to find a viable solution and to ensure that the object of industrial development and rehabilitation is not lost sight of, the Court directed the State Government to undertake a time-bound exercise examining the feasibility of reviving the industrial units, and to formulate a plan for productive industrial utilisation of the land — within six months of receiving the judgment, with consequential steps to follow expeditiously.

In doing so the State must take into account both the larger public interest in productive use of valuable industrial land and the legitimate interests of the erstwhile workmen, including rehabilitation or re-employment, so far as the statutory framework and the relevant scheme permit.

The Court was careful about the limits of that direction. It does not require the State to adopt any particular industrial activity, or to create employment contrary to law, financial viability or governmental policy; the competent authority retains the discretion to determine the appropriate mode of utilisation. What it does require is that the land not remain indefinitely unutilised, and that the public purpose underlying its grant be served.

That last sentence is the point of the whole judgment. The State has recovered 270-odd acres at Kota from a lessee who, on these findings, obtained them by promising to run factories there. Recovering the land vindicates the public trust only if something is then done with it — and the Court has given the State six months to say what.