Summary
A Nazul garden plot in Lucknow, owned by the State, was auctioned in 1995; the school's highest bid was cancelled, and while the school's writ petition (with a status quo order) was pending, the authority converted the plot to freehold in favour of the claimed lessee for a sum less than 10% of the school's bid. The Supreme Court upheld the High Court's setting aside of the conversion and freehold deed as arbitrary and a covert way of defeating the interim order, but refused to restore the school's bid after some 20 years, leaving the lease's validity and any fresh auction open.
Issues
- Whether the State could transfer its ownership rights in a Nazul plot to the claimed lessee by converting the lease to freehold at a nominal price, without a fair and transparent process.
- Whether the school's amendment challenging the conversion and the freehold deed was properly before the High Court.
- Whether the conversion order, passed while the school's writ petition and a status quo order were pending, was valid.
- Whether the order of 1995 accepting the school's highest bid should be restored.
Provisions considered
- Article 14, Constitution of IndiaFollowing Akhil Bhartiya Upbhokta Congress, State largesse must be distributed under a transparent, non-arbitrary policy. Selling the State's rights in the plot to the claimed lessee at a nominal price, rather than by public auction or another transparent method open to others, was held arbitrary and violative of Article 14. (¶¶ 8, 9, 11, 14)
- Section 109, Transfer of Property Act, 1882Because a lessor's transferee takes subject to the lease, a sale of the State's interest as lessor would not prejudice a lawful lessee, whose tenancy would attorn to the purchaser. So there was no reason to sell the reversion only to the lessee rather than by an open process. (¶ 9)
- Article 226, Constitution of IndiaThe school's writ petition challenged cancellation of its bid; the parties' pleadings and submissions in the High Court proceeded on the footing that the conversion and freehold deed were also under challenge, so the objection that the amendment was never allowed was rejected. (¶¶ 4, 10)
Held
- The State and its instrumentalities cannot distribute largesse at will; every grant must rest on a sound, published, non-discriminatory policy and be made fairly, ordinarily through a process open to all eligible persons. (¶ 8)
- Even assuming the claimed lessee held leasehold rights, the State's rights as owner and lessor could be transferred only by a fair and transparent process, such as a public auction, that secures the best price and lets others besides the lessee make offers. A lawful lessee's rights are protected by attornment under Section 109 of the Transfer of Property Act, and selling the plot to the lessee at a nominal price is arbitrary and violates Article 14. (¶ 9)
- The conversion order of 26.11.2001 cited no Government Order permitting conversion and fixed consideration of Rs. 67,022.21, less than 10% of the school's earlier auction bid of Rs. 8,51,043.15; it was not a fair and transparent transfer and was illegal. (¶¶ 11, 14)
- The High Court's 2000 order disposing of the lessee's first appeal merely recorded statements of counsel and directed that his conversion application be considered in accordance with law; it left the trial court's findings against him undisturbed and did not mandate that conversion be granted. (¶¶ 12, 13)
- The State and the authority were bound to disclose to the High Court, in the lessee's appeal, that the school's writ petition with a status quo order was pending, and propriety required them to seek the writ court's permission before converting the plot. The conversion, with the lessee aware of the interim order passed after hearing his sons, was a covert method of defeating that order. (¶ 14)
- Since the parties' pleadings and submissions in the High Court proceeded on the basis that the conversion was under challenge, the objection that the school's amendment had not been allowed did not survive. (¶ 10)
- Even if the cancellation of the school's highest bid was illegal, restoring its acceptance more than 20 years later, at the price then offered, would be an unfair sale of State property, given the rise in property prices. (¶ 15)
Result
Both appeals dismissed; High Court judgment setting aside the conversion and freehold deed upheld; validity of the lease and any fresh auction left open, with the State to decide on auction under current policy; lessee not to be dispossessed without due process; school and lessee may apply for refunds, to be made within six weeks; no costs.