Transferring Public Property At Nominal Price Arbitrary; States' Right Can Be Sold Only By Auction/Transparent Process : Supreme Court

The Supreme Court observed that the rights of the State in the property/land can be transferred only by adopting a fair and transparent process by which the State fetches the best possible price.

“The rights of the State as the lessor can only be sold by a public auction or by any other transparent method by which, apart from the lessee, others too get a right to submit their offer. Selling the plot to its alleged lessee at a nominal price will not be a fair and transparent method at all. It will be arbitrary and violative of Article 14 of the Constitution of India.”, the bench comprising Justice Abhay S Oka and Justice Augustine George Masih said.

The case relates to the conversion of a leasehold land to a freehold hold in the favour of the lessee in an auction sale despite the lessee's bid not being the highest bid. Instead, it was the appellant who submitted the highest bid for the purchase of the suit land, but its bid was rejected by the State.

The Court drew reference to the case of Akhil Bhartiya Upbhokta Congress v. State of Madhya Pradesh and Other reported in (2011) 5 SCC 29 to hold that the State action would be deemed as arbitrary if the act/decision of the State to confer the benefit of the suit land was not founded on a sound, transparent, discernible and well-defined policy.

“Any allotment of land or grant of other form of largesse by the State or its agencies/instrumentalities by treating the exercise as a private venture is liable to be treated as arbitrary, discriminatory and an act of favouritism and/or nepotism violating the soul of the equality clause embodied in Article 14 of the Constitution.”, the court observed in Akhil Bhartiya Upbhokta Congress case.

Since the appellant's bid was first accepted and later rejected, the court held that the entire process cannot be a fair and transparent process of transferring the State's ownership rights to the lessee.

“We have already stated the facts leading to the cancellation of the highest bid of the school and acceptance of the second highest bid of the sons of the alleged lessee. It is important to note that the Special Nazul officer passed an order on 26th November 2001, by which the consideration for converting leasehold rights into freehold rights was fixed at Rs. 67,022.21. This amount was less than 10% of the bid offered by the school about 16 years before the order dated 26th November 2001. On the face of it, this cannot be a fair and transparent process of transferring the State's ownership rights.”, the Judgment authored by Justice Abhay S Oka said.

The court clarified that since more than 20 years have passed since the auction, therefore, it would be unjust to restore the order of acceptance of the bid passed in favour of the school, about 20 years back.

“If, at this stage, the school is allowed to purchase the plot at the price offered by the school 20 years back, the sale will not be fair, as it is a property of the State.”, the court said.

Therefore, the impugned judgment of the High Court, by which the order of conversion and the deed of conversion in favour of the alleged lessee were set aside, was not interfered with.

Appearance:

For Petitioner(s) Mr. Jayant Bhushan, Sr. Adv. Mr. Ashim Vachher, Adv. Mr. Shantanu Kumar, AOR Mr. Pritish Kumar, Adv. Mr. Vaibhav Dabas, Adv. Mr. Vinay Navare, Sr. Adv. Mr. R. P. Gupta, AOR

For Respondent(s) Mr. Vinay Navare, Sr. Adv. Mr. R. P. Gupta, AOR Mr. Ravindra Raizada, Sr. Advocate, A.A.G. Mr. Shaurya Sahay, AOR Mr. Aditiya Kumar, Adv. Mr. Abhishek Chaudhary, AOR Mr. Shantanu Kumar, AOR Mr. Jayant Bhushan, Sr. Adv. Mr. Ashim Vachher, Adv. Mr. Honey Jain, Adv. Mr. Ashish Batra, Adv.

Case Details: City Montessori School Versus State of U.P. & Ors., CIVIL APPEAL NO. 8355 OF 2024

Citation : 2024 LiveLaw (SC) 545

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