Case Background
This case arises from a dispute over an industrial plot allotted by the Bihar Industrial Area Development Authority (BIADA) to a private company. The private company had challenged a decision cancelling its allotment.
The dispute first reached the Patna High Court through a writ petition, registered as C.W.J.C. No. 8521 of 2023. Against the decision in that writ case, a Letters Patent Appeal (L.P.A. No. 1418 of 2023) was filed.
On 08.01.2025, a Division Bench of the Patna High Court decided the L.P.A. The Bench held against BIADA on the specific ground that the Managing Director did not have the authority to cancel the allotment, because, according to an earlier decision in Deepak Paints (P) Ltd., only the “Authority” – a body consisting of the Chairman, Managing Director and other officials – could do so.
Feeling aggrieved by this finding, BIADA filed Civil Review No. 37 of 2025 in the Patna High Court. Through this review, BIADA asked the Court to reconsider and modify its earlier judgment in the appeal, especially in light of changes made to the BIADA Act, 1974 by an amendment in 2017.
What the Court Examined and Decided
The review petition was heard by a Bench consisting of Hon’ble the Acting Chief Justice and Hon’ble Mr. Justice Partha Sarthy. The main question before the Court was a narrow but crucial one: after the 2017 amendment to the BIADA Act, can the Managing Director or Joint Managing Director of BIADA legally cancel an allotment of industrial land, if such power is delegated to them by the Authority?
The earlier judgment in the L.P.A. had relied on the decision in Deepak Paints (P) Ltd. & Ors. vs. The State of Bihar & Ors., reported in 2008 (2) PLJR 293. In Deepak Paints, the Patna High Court had read Section 6 of the BIADA Act, 1974 as it then stood and held that only the Authority, as a collective body, could cancel allotments or leases. Any cancellation order issued solely by the Managing Director was held to be null and void.
Section 6, which falls in Chapter 3 of the BIADA Act, lays down the general duties and powers of the Authority. As noted in Deepak Paints, Section 6(2) clearly stated that the Authority would be responsible for planning, development and maintenance of industrial areas and amenities, allotment of land or sheds or buildings, execution of leases, modification and cancellation of allotment or lease, realization of fees and rents, and related matters.
Therefore, before the 2017 amendment, the legal position was that the power to cancel an allotment was vested only in the Authority as such, and not in the Managing Director acting alone.
In the review, BIADA pointed out that this legal landscape changed after the Amendment Act of 2017. By this amendment, a new sub-section (4a) was added to Section 3 of Chapter 2 of the BIADA Act, 1974.
The new Section 3(4a) empowers the Authority, by a general or special order in writing, to delegate to any officer of the Authority such of its powers and functions under the Act as it may deem necessary, subject to any conditions specified in that order.
The Court identified the core question: does this new provision in Section 3(4a) “control” or affect the earlier understanding of Section 6, which reserved functions like cancellation of allotment to the Authority?
To answer this, the Court examined the structure of the Act. Section 3 falls in Chapter 2 and deals with the constitution, structure and internal functioning of the Authority, including the role of the Managing Director. Section 6, in Chapter 3, sets out the general duties and powers of the Authority, including the power to cancel allotments and leases.
The Bench noted that the 2017 amendment clearly allows the Authority to delegate its powers and functions “to any officer of the Authority” by written order, subject to conditions. This includes, potentially, the Managing Director and the Joint Managing Director.
The Court then considered the role of the Managing Director under Section 3(4). Section 3(4) already specifies certain functions of the Managing Director as Chief Executive Officer of the Authority, such as:
(a) receiving all money on behalf of the Authority, issuing receipts and maintaining proper accounts;
(b) drawing money from the fund of the Authority for disbursement of salaries, allowances and other expenses;
(c) authenticating any order of the Authority; and
(d) performing any other duty that may be assigned to him by the Authority or the State Government from time to time.
On this basis, learned Senior Counsel for BIADA, Mr. Lalit Kishore, argued that Section 3(4a) could not be read narrowly or ejusdem generis with Section 3(4). In his submission, clauses (a) to (d) of Section 3(4) are only illustrative of the Managing Director’s functions, not exhaustive. Clause (d), which states that the Managing Director may perform “any other duty” assigned by the Authority or the State Government, is a clear opening for broader delegation.
The Court agreed that there is no caveat in Section 3(4) limiting the Managing Director’s role only to the four listed functions. Rather, the provision contemplates that he can perform additional duties assigned to him.
Read along with the newly inserted Section 3(4a), this means the Authority has a statutory power to delegate its own powers and functions under the Act, including those listed in Section 6, to the Managing Director or any other officer by a general or special written order.
Therefore, the Bench held that the power of cancellation of an allotment or lease, though originally vested in the Authority under Section 6, can now lawfully be exercised by the Managing Director or Joint Managing Director if and only if they are properly authorized as delegates of the Authority under Section 3(4a).
On this reasoning, the Court found force in Mr. Kishore’s submissions. It held that, in light of the 2017 amendment, the ratio of Deepak Paints cannot be applied in the same way to present disputes, because the statutory scheme has changed since that judgment was delivered.
Accordingly, the Bench modified its earlier judgment in L.P.A. No. 1418 of 2023 to clarify that the Managing Director or Joint Managing Director of BIADA can pass an order cancelling a lease deed as delegatee of the Authority, provided there is a general or special authorization in writing by the Authority.
However, the Court also laid down important safeguards to protect the rights of the allottee. It emphasized that the Authority or its delegatee – meaning the Managing Director or Joint Managing Director – can consider cancellation of the plot only after giving the respondent-company a fair opportunity.
Specifically, the Court directed that the respondent must be allowed to file its objection, if it has not already done so. The issue of cancellation must then be considered on the basis of the inspection reports and the objections.
The Authority or its delegatee is also permitted to conduct a further inspection if necessary. Importantly, the Court directed that the request of the respondent for some more time to establish the industry must be considered. Any order passed on cancellation must be a “speaking order” – that is, it must contain clear reasons.
With these clarifications, the Civil Review No. 37 of 2025 was disposed of on 29.04.2025.
Why This Judgment Matters
This judgment is significant for all entrepreneurs and companies who have taken or plan to take industrial plots from BIADA in Bihar.
First, it clarifies that after the 2017 amendment to the BIADA Act, it is legally possible for the Managing Director or Joint Managing Director of BIADA to cancel an allotment or lease, if the Authority has properly delegated this power to them in writing. This means a cancellation order need not always come from the full Authority body.
Second, the judgment protects allottees by insisting on due process. Even if the Managing Director or Joint Managing Director is acting as a delegatee, they cannot cancel a plot arbitrarily. They must give the allottee an opportunity to file objections, consider inspection reports, and, if required, conduct further inspection.
Third, the Court directs that requests by an allottee for more time to establish the industry must be considered. This is important for industrial units that may be delayed due to genuine difficulties. The Authority cannot simply cancel the lease without considering such requests.
Finally, the requirement that any cancellation order must be a speaking order ensures transparency. The allottee will know the reasons for cancellation and can decide whether to accept them or challenge them further in accordance with law.
Legal Issues and Answers
- Issue: After the 2017 amendment to the BIADA Act, can the Managing Director or Joint Managing Director of BIADA lawfully cancel an industrial land allotment or lease, or is this power confined only to the Authority as a collective body under Section 6?
Answer: The Patna High Court held that, in view of Section 3(4a) inserted by the 2017 Amendment, the Authority can delegate its powers and functions, including the power to cancel allotments or leases under Section 6, to the Managing Director or any other officer (including the Joint Managing Director) by a general or special written order. Therefore, cancellation by the Managing Director/Joint Managing Director is valid if such delegation exists. - Issue: What procedural safeguards must BIADA or its delegatee follow while considering cancellation of an industrial plot allotment?
Answer: The Court held that the Authority or its delegatee must give the allottee an opportunity to file objections, consider inspection reports and objections together, may conduct further inspection if needed, must consider any request for time to establish the industry, and finally pass a speaking (reasoned) order on cancellation. - Issue: Does the earlier decision in Deepak Paints (P) Ltd. still govern the question of who can cancel BIADA allotments after the 2017 amendment?
Answer: The Court held that the ratio of Deepak Paints, which was based on the unamended BIADA Act, does not automatically apply after the 2017 amendment. The legal position now allows delegation of cancellation power to the Managing Director or other officers, which was not contemplated when Deepak Paints was decided.
Cases Cited by the Court
- Deepak Paints (P) Ltd. & Ors. vs. The State of Bihar & Ors., 2008 (2) PLJR 293
Case Details
Case Number: Civil Review No. 37 of 2025 in Letters Patent Appeal No. 1418 of 2023 (arising out of C.W.J.C. No. 8521 of 2023)
Case Title: The Bihar Industrial Area Development Authority & Ors. vs. I.G. Foods and Beverage Pvt. Ltd. & Ors.
Coram: Hon’ble the Acting Chief Justice; Hon’ble Mr. Justice Partha Sarthy
Date of Judgment: 29.04.2025
Citation: 2025(3) PLJR 762
Advocates:
For the petitioners/BIADA: Mr. Lalit Kishore, Senior Advocate; Mr. Sanchay Srivastava, Advocate; Mr. Sushant Srivastava, Advocate; Mr. Kanishka Shankar, Advocate; Mr. Ashish Kumar Palit, Advocate.
For Opposite Party No. 1 (writ petitioner/allottee): Mr. Alok Ranjan, Advocate.
For the State of Bihar: Mr. Amish Kumar, Advocate.
Nature of the Case: Civil review petition against a Division Bench judgment in a Letters Patent Appeal arising from a writ petition, concerning validity of cancellation of BIADA industrial plot allotment and the authority of the Managing Director/Joint Managing Director to cancel leases.
Link to Judgment: Patna High Court Judgment – Civil Review No. 37 of 2025
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