Supreme Court Upholds Withdrawal of NOC for Ayurvedic Medical College: “No Indefeasible Right Can Be Claimed Based on an Illegal Grant”; Rejects Promissory Estoppel Plea

Court’s Decision

The Supreme Court upheld the High Court’s decision, affirming that the withdrawal of the No Objection Certificate (NOC) for establishing an Ayurvedic Medical College and Hospital was valid. The Court ruled that the NOC had been issued in violation of the Government’s Rules of Business and, therefore, did not create any enforceable right for the appellant. The Court also rejected the plea of promissory estoppel, stating that government decisions made beyond the scope of legal authority cannot bind the State. Additionally, it held that there was no violation of natural justice, as the grant itself was unauthorized and an opportunity of hearing would have been meaningless.

Facts

• The appellant, a registered trust, was established in 2012 with the objective of setting up educational and research institutions in the medical sector.
• During an investment meet in 2014, the appellant proposed to establish an Ayurvedic Medical College and Hospital.
• The Department of Ayurveda considered the proposal and required a project report in compliance with the Central Council of Indian Medicine (CCIM) guidelines.
• A site inspection was conducted by the Departmental Committee in 2015, as reflected in official documents.
• Following this, an NOC was issued on 20.02.2017 by the Principal Secretary (Ayurveda).
• The appellant applied for affiliation and was granted it on 02.03.2017 by the Himachal Pradesh University.
• However, on 14.03.2017, the State Government withdrew the NOC, citing procedural irregularities.

Issues

1. Whether the withdrawal of the NOC for establishing an Ayurvedic College and Hospital was legal and justified.
2. Whether the NOC had created an indefeasible right in favor of the appellant.
3. Whether the withdrawal of the NOC violated the principles of natural justice.
4. Whether the doctrine of promissory estoppel applied in this case.

Petitioner’s Arguments

• The appellant trust argued that it had already established a 60-bed hospital based on the NOC, and its sudden withdrawal was arbitrary and against public interest.
• The State would actually benefit from the establishment of the Ayurvedic College and Hospital, and the decision to withdraw the NOC was unreasonable.
• The government, having once granted the NOC, could not later withdraw it, as it had already induced reliance.
• The withdrawal was done without granting the appellant an opportunity to be heard, violating principles of natural justice.

Respondent’s Arguments

• The State contended that the NOC was issued without following the Rules of Business, which required a policy decision to be approved by the Council of Ministers.
• Initially, the Chief Minister had placed the matter before the Council of Ministers, but it was later withdrawn by the concerned Minister, who unilaterally ordered the issuance of the NOC without proper authorization.
• Since the NOC was granted in violation of procedural rules, the State was within its rights to withdraw it.

Analysis of the Law

• The High Court had examined the legality of the NOC issuance and found that it was granted in violation of the Government’s Rules of Business.
• The Rules of Business of the Government require that important policy decisions must be placed before the Council of Ministers.
• The Chief Minister initially placed the matter before the Cabinet, but the Minister later withdrew it and issued the NOC unilaterally, which was procedurally flawed.
• The High Court examined Rules 14 and 16 of the Rules of Business, which stated that:
  • Rule 14 requires that every matter included in the Schedule must be brought before the Council of Ministers.
  • Rule 16 allows the Chief Minister to take a decision by circulation among the Council of Ministers only if the Council is unanimous.
  • If there is any dissent or the Chief Minister believes a discussion is necessary, the matter must be placed before the full Council of Ministers.
• The High Court found that Item No. 17 of the Schedule covered important policy changes affecting the entire state, requiring approval from the Council of Ministers.
• Since the NOC was granted in contravention of these rules, the Court held that it was invalid.

Precedent Analysis

The Supreme Court relied on the case of M/s Jit Ram Shiv Kumar v. State of Haryana (1980 SCC OnLine SC 145), holding that:

• When government officers act outside their authority, the plea of promissory estoppel is not available.
• The doctrine of ultra vires applies, meaning the government cannot be held liable for unauthorized actions of its officers.
• Promissory estoppel cannot override statutory provisions or procedural mandates.

Court’s Reasoning

• The Supreme Court agreed with the High Court that the NOC was issued illegally because it was not approved by the Council of Ministers.
• The appellant could not claim an indefeasible right on the basis of an unauthorized grant.
• The doctrine of promissory estoppel did not apply, because:
  • The appellant failed to prove that it had irreversibly changed its position based on the NOC.
  • The appellant claimed that it had already constructed a hospital, but the loan of ₹5 crore was sanctioned only 11 days before the NOC was withdrawn, making it highly improbable that a fully functioning hospital was established in that short time.
• The principles of natural justice were not violated, as:
  • Even if the Department had granted a hearing, it could not have overturned the decision of the Council of Ministers.
  • The Supreme Court called this argument a “useless formality”.

Conclusion

The Supreme Court dismissed the appeal, affirming that:

1. The NOC was issued illegally, bypassing mandatory approval from the Council of Ministers.
2. No enforceable right arose from an illegal grant.
3. The withdrawal of the NOC did not violate natural justice, since a hearing would not have changed the decision.

Implications of the Judgment

• Government decisions must strictly adhere to procedural norms; unauthorized actions by Ministers or departments can be revoked.
• Promissory estoppel does not apply where the initial action was ultra vires (beyond legal authority).
• The judgment clarifies that merely issuing an NOC does not create an indefeasible right if the grant itself was procedurally flawed.
• The ruling serves as a precedent for cases where government approvals are revoked due to procedural violations.
• Educational institutions and investors must ensure that approvals are obtained through proper legal channels before making investments.

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