‘State lost its right on land in toto’: Rajasthan HC quashes 2008 sale-bar on Tonk leather company’s land

Jaipur: The Rajasthan High Court has quashed conditions imposed by the State Government in 2008 that barred Rajasthan Leather Industries Ltd from selling or commercially using land transferred to it under a 1992 disinvestment deal. A division bench of Acting Chief Justice Sanjeev Prakash Sharma and Justice Shubha Mehta held that once the State had handed over its 100% shareholding and the underlying property, it had no power to add fresh curbs on alienation. The court called the post-transfer conditions “void ab initio” and a colourable exercise of power.

The State had acquired around 193 bighas in Tonk in 1971 for M/s Rajasthan State Tanneries, a state-run undertaking. After the unit ran into continuous losses, the cabinet decided in 1988 to privatise it. By an agreement dated 12 November 1992, the State transferred 100% of its shareholding in the company that became Rajasthan Leather Industries Ltd. Clause (j) allowed the buyer to expand and diversify operations.

In June 2008, a meeting chaired by the Industries Minister imposed two fresh conditions: the land could not be sold or alienated, and any commercial use would require State approval. These curbs were later carried into the Patwari’s mutation entries in 2009. After representations failed, the company filed a writ petition in 2021. A Single Judge, by an order dated 12 May 2025, partly allowed the petition by lifting the diversification curb but kept the bar on sale or alienation, prompting cross-appeals.

The company contended the 2008 conditions were imposed unilaterally and violated Sections 10 (restraint on alienation) and 11 (restriction repugnant to interest) of the Transfer of Property Act, 1882. The State countered that the transfer was conditional on revival of industry and employment generation, which the company had failed to deliver in over 33 years.

The bench found that the 1992 agreement contained no express prohibition on alienation, only a clause permitting expansion and diversification. It held that mutation entries are fiscal records that “neither create nor extinguish title”, relying on Jitendra Singh v. State of Madhya Pradesh (2021), and could not be used to impose substantive curbs on proprietary rights. The court rejected the State’s reliance on Sections 90-A and 102 of the Rajasthan Land Revenue Act, 1956, holding that the discretion to impose conditions had been exhausted at the time of allotment. The bench added that arbitrary post-transfer curbs also offended Article 300A (no deprivation of property save by authority of law) and Article 14, citing Samiullah v. State of Bihar (2026).

The bench observed: “After the agreement has been entered into and the property having been handed over, the state government lost its right on the land and the factory in toto. There was no occasion therefore for the state government to hold a meeting on 13.06.2008 and impose subsequent restrictions on the subsequent owners of the land. The restrictions on alienation issued by the state government itself are per say illegal and come within the four corners of being declared void ab initio. The power exercised by the state government is a colourable exercise of power and would be in violation of Articles 14 and 19 for imposing unnecessary restrictions.”

Accordingly, the High Court allowed D.B. Special Appeal Writ No. 850/2025 filed by Rajasthan Leather Industries Ltd and set aside the Single Judge’s order to the extent it had upheld the State’s bar on sale or alienation. The connected cross-appeal filed by the State, D.B. Special Appeal Writ No. 168/2026, was dismissed both on merits and as barred by limitation.

Case details