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[Reportable]

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 7184­7185 OF 2013

J.S. Luthra Academy & Another                  ........Appellants

Versus

State of Jammu and Kashmir & Others .......Respondents

J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.

The judgment of the Division Bench of the High Court of

Jammu and Kashmir at Jammu in L.P.A. (OW) No. 38/2008 and

L.P.A. (OW) No. 39/2008 dated 01.04.2009 is the subject matter

of these appeals.

2. The brief facts leading to these appeals are that the

Appellant­J.S. Luthra  Academy (hereinafter referred to as the

‘Academy’), an educational institution, initially was situated on a

Wakf  property in  Jammu. Vide  order  dated 27.12.1995 of the

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authority constituted under the J&K Wakf Act,  1978, the said

educational institution was ordered to be evicted from the Wakf

property.  Against the said order, the Academy approached the

Jammu & Kashmir Special Tribunal, and an interim order of stay

on eviction was granted by the tribunal on 09.01.1996. During

the interregnum, the Academy made representations to the State

Government requesting  for  allotment of  a piece of land at any

place mentioned in the representations for shifting and running

the school. The concerned minister in the meeting dated

14.1.1998 considered the question of allotment of land in favour

of the Academy. Subsequently, a note was prepared by the

Managing Director of the J & K Housing Board on 25.1.1999,

proposing that  the Board had 4 kanals  of land  in Sector 2 of

Channi Himmat, Jammu earmarked for schools which could be

considered for allotment to the Appellant at Rs. 8,00,000/­ per

kanal. In a subsequent meeting on 29.4.1999 after completion of

formalities, four kanals in Sector 2 of Channi  Himmat  were

alloted to the Academy at Rs. 8,00,000/­ per kanal on lease for

40 years and the Academy was directed to deposit 50% of the

said amount, the remaining amount to be deposited

subsequently. In a  meeting dated 28.6.2000, a decision was

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taken by the J & K Housing Board in pursuance of the orders of

the Chief Minister, that two kanals of land would be allotted to

the  Academy at the rate  of  Rs.  8,00,000/­  per  kanal  and the

other two kanals free of cost. Further, in a Cabinet meeting dated

18.8.2000, it was decided that the Jammu Development

Authority was to be compensated for the free allocation of land in

the form of allotment of alternate land to the  Authority. The

allotment of land to the Academy was sanctioned by the Principal

Secretary, Government of J&K, vide letter dated 24.8.2000. The

Academy finally paid a total of Rs.16,00,000/­ for two kanals of

land and obtained two more kanals free of cost. A lease deed was

executed, and possession was handed over on 12.12.2001. The

Academy constructed the school building thereon and the school

is being run on this premises, having shifted from the  wakf

property.

3. The residents of Channi Himmat vide Writ Petition No. 1093

of 2002 questioned the allotment made in favour of the Academy,

on the ground that the piece of land was meant for a playground

but the  same was allotted to the  Academy  in  violation of the

original scheme and plan of the Channi Himmat Housing Colony.

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One Mr. Naresh Kumar, a proprietor of the United Public School

situated at Channi Himmat, filed a writ petition being O.W.P. No.

10/2003, questioning the allotment made in favour of the

Academy on the ground that  the property ought to have been

auctioned by the Government, so that he could have also applied

for the allotment of the plot, which he required for the

upgradation of his school to the higher secondary level. Both the

writ petitions were clubbed, heard and decided together by the

learned  Single Judge of the  High  Court and  were dismissed.

However, the Division Bench by the impugned judgment set aside

the order of the Single Judge and allowed the writ petitions and

consequently quashed the allotment made in favour of the

Academy with the following observations:

“The  board is  directed to  hold  public  auction of the land for the purpose of leasing the same out on the same terms and conditions it had leased it to the private respondent, except that the  premium  thereof shall  be fixed at the highest  price to  be obtained at such auction to be held by inviting people interested in setting up of a secondary school on the plot of land in question by publishing at least two advertisements in newspapers widely circulated in Jammu and also published therefrom. The Board is directed to fix the minimum bid price at Rs.16.00  lacs plus the cost of construction ascertained  in  the  manner as above. In the event the bid to be had at the public auction does not exceed the minimum reserved bid price, the Board

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shall execute a fresh lease in favour of the private respondent upon obtaining payment of  Rs.16.00  lacs from him. In the event the bid price to be had at the auction exceeds the minimum reserved bid price and the same is not given by the private respondent, the Board shall give an opportunity to the private respondent to  meet the same and, if he  meets the same, to execute the lease in favour of the private respondent  upon accepting the  amount  of such  bid, less the cost of construction ascertained in the manner as above, as premium. In the event the private respondent fails to match the bid price, the Board shall grant the lease in favour of the highest bidder and from the amount so to be received, first pay the cost of construction ascertained in the manner as above to the private respondent.”

4. The contesting respondents  herein, i.e., the original  writ

petitioners  who were  before the learned Single  Judge and  the

Division Bench, have chosen to remain absent before this Court

despite service of notice on them. Heard the learned counsel for

the Academy, the State and the Housing Board. Learned counsel

for the Academy taking us through the material on record

submitted that the allotment of the site was done following due

procedure. The Academy was asked to vacate the wakf property,

where it was running the school earlier, since the wakf wanted

the property for its personal purposes. As the school was catering

to the needs of hundreds of students and as it was being run

successfully, the Managing Committee of the Academy did not

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want to close the academy, inasmuch as the closure would have

been detrimental  to the interests of  the students.  The Cabinet

being competent to allot the land had duly considered the matter

and had taken the decision on 18.8.2000 to allot the land to the

Appellant keeping in mind the plight of the students and urgency

of  the matter  inasmuch as the school had to be shifted at an

early date. The sum and substance of the argument of the

Academy, the State and the Housing Board is that the allotment

was made keeping in mind the public interest at large and the

personal interest of any personality involved in running the

Academy was not given any importance at all.

5. Learned Advocate for the State of Jammu and  Kashmir

submitted that the allotment of 2 Kanals of land to the Appellant

free of cost was a policy decision of the Government inasmuch as

such allotment was in the nature of an exchange for eviction of

the Appellant, who was running a school on the Wakf  land in the

main city area.   The object was twofold,  firstly, to ensure

continuity of the school/public purpose, and  secondly, to

expeditiously evict the appellant from the wakf land and

consequently, free such land from prolonged litigation.   He

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further  submitted that  neither  was there  any  violation of  any

policy for allotment of land to educational institutions in the

State of Jammu and Kashmir at the relevant time, nor was there

any loss caused to the State qua the 2 Kanals of land (out of total

4 Kanals of land) that was allotted to the Appellant.  Under such

facts and circumstances of the case, he argued that the judgment

of this Court in the case of Institute of Law Chandigarh v. Neeraj

Sharma,  (2015) 1 SCC 720 wherein the allotment of land to an

educational institution without inviting competitive bidding was

cancelled is distinguishable on two counts:  

a) At para 32 of the judgment, the Development authority was  found not to have adhered to the applicable policy, i.e. the allotment of land to Educational Institutions (Schools), etc. on lease hold basis in Chandigarh Scheme, 1996 for allotment of land.  

b) At Para 17 of the judgment it is recorded that the  audit  department of the UT Chandigarh Administration found that the allotment caused a loss of Rs.139 crores to the public exchequer.   

Lastly, he submitted that the allotted land was earmarked

for schools and playfields in the Master Plan and hence, there

was no violation of the Master Plan in allotment of land to the

Appellant.

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6. This Court in a series of cases including  Centre for Public

Interest Litigation v.  Union of India,  2012  3  SCC 1 (popularly

known as the “2G case”), in Natural Resources Allocation, In Re.

Special Reference No. of 1/2012, (2012) 10 SCC 1,  Manohar Lal

Sharma v. Principal Secy., (2014) 9 SCC 516, Bharti Airtel Limited

v. Union Of India, (2015) 12 SCC 1, and Goa Foundation v. Sesa

Sterlite Ltd., (2018) 4 SCC 218 has formulated the guidelines for

allocation of natural resources by the State. In Bharti Airtel Ltd.

v. Union of India, (2015) 12 SCC 1, this Court summed up the

principles  governing  the allocation of  natural  resources by the

State laid down in Centre for Public Interest Litigation v. Union of

India, (2012) 3 SCC 1 (“the 2G case”) as follows:

“41. The licensor/Union of India does not have the freedom to act  whimsically. As pointed out by this Court in 2G Case [Centre for Public Interest Litigation v. Union of India, (2012) 3  SCC  1] in the above­extracted paragraph, the authority of the Union is fettered by two constitutional limitations:  

firstly, that any decision of the State to grant access to natural resources,  which belong to the people,  must ensure that the people are adequately compensated and, secondly, the  process  by  which such  access is granted  must  be just,  non­arbitrary  and transparent, vis­à­vis private parties seeking such access.”

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     (emphasis supplied)

Referring to the observations in the 2G case, the  Court also

highlighted that the State is bound to act in consonance with the

principles of equality and public trust and ensure that no action

is taken which may be detrimental to public interest, and that it

must always adopt a rational  method for disposal of public

property,  and ensure that a non­discriminatory method is

adopted for distribution and alienation, which would necessarily

result in national/public interest.  

The principles governing the distribution of natural resources by

the State were also discussed in the decision of the constitutional

bench of this Court in Natural Resources Allocation, In Re, Special

Reference No. 1 of 2012, (2012) 10 SCC 1. In para 149 thereof,

the Court observed as follows:

“149. Regard being had to the aforesaid precepts, we have opined that auction as a mode cannot be conferred the status of a constitutional principle. Alienation  of natural resources is a policy decision, and the means adopted for the same are thus, executive  prerogatives.  However,  when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximising private entrepreneurs, adoption of means other than

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those that are competitive and maximise revenue may be arbitrary  and  face the  wrath of  Article  14 of the Constitution.”

This decision emphasised that the ultimate goal to be served was

that of the public good, and all methods of distribution of natural

resources that ultimately served the public good would be valid,

as reflected in the following observations:

“120. …There is no constitutional imperative in the matter of economic policies—Article 14 does not predefine any economic policy as a constitutional mandate. Even the mandate of Article 39(b) imposes no restrictions on the means adopted to subserve the public good and uses the broad term “distribution”, suggesting that the methodology of distribution is not fixed. Economic logic establishes that alienation/allocation of natural resources to the highest bidder may not necessarily be the only way to subserve the common good, and at times, may run counter to public good. Hence, it needs little emphasis that disposal of all natural resources through auctions is clearly not a constitutional mandate.”

It would be useful to note at this juncture that in this decision,

the Court assessed the position of law developed through a

catena of decisions, including Netai Bag & Ors. v. State of W.B. &

Ors., (2000) 8 SCC 262, 5 M&T Consultants v. S.Y. Nawab, (2003)

8 SCC 100, and Villianur Iyarkkai Padukappu Maiyam v.  Union of

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India, (2009)  7  SCC 561,  wherein it  has  been held that  non­

floating of tenders or holding of auction by itself is not sufficient

to  hold that the exercise  of  power  was  arbitrary. It  would  be

useful to reproduce the following  observations  from  Netai  Bag

(supra),  which  were  also relied  upon  by the  Court in  Natural

Resources Allocation, In Re  (supra) to highlight that the ultimate

test is only that of fairness of the decision­making process and

compliance with Article 14 of the Constitution:

 “19.  … There cannot be any dispute  with the proposition that generally when any State land is intended to be transferred or the  State largesse decided to be conferred,  resort should be had to public auction or transfer by way of inviting tenders from the people. That  would be a sure method of guaranteeing compliance with the mandate of Article 14 of the  Constitution.  Non­ floating of tenders or not holding of public auction would not in all cases be deemed to be the result of the exercise of the executive power in an arbitrary manner. Making an exception to the general rule could be justified by the State executive, if challenged in appropriate proceedings. The constitutional courts cannot be expected to presume the alleged irregularities, illegalities or unconstitutionality  nor  can  the  courts  substitute their opinion for the bona fide opinion of the State executive. The courts are not concerned with the ultimate decision but only with the fairness of the decision­making process.”

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The above principles were also reiterated in Manohar Lal Sharma

(supra), wherein this Court observed at para 110:

“It is not the domain of the Court to evaluate the advantages of competitive  bidding vis­à­vis other methods of distribution/disposal of natural resources. However, if the allocation of subject coal blocks is inconsistent with Article 14 of the Constitution and the procedure that has been followed in such allocation is  found to be unfair, unreasonable, discriminatory, non­transparent, capricious or suffers from favouritism or nepotism and violative of the mandate of  Article  14 of the Constitution, the consequences of such unconstitutional or illegal allocation must follow.”

In  Ajar Enterprises (P) Ltd. v. Satyanarayan Somani, (2018)

12 SCC 756, this Court affirmed the above principles in the

following terms:

“49. …Where a public authority exercises an executive prerogative, it must nonetheless act in a manner which would subserve public interest and facilitate the distribution of scarce natural resources in a manner that would achieve public good. Where a public authority implements a policy, which is backed by a constitutionally recognised social purpose intended to achieve the welfare of the community, the considerations which would govern would be different from those when it alienates natural resources for commercial exploitation. When a public body is actuated by a constitutional  purpose embodied in the  Directive

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Principles, the considerations which weigh with it in  determining the  mode of  alienation should be such as would achieve the underlying object.”  

The position of law developed through these decisions was

summed up in the following  manner by this Court in  Goa

Foundation v. Sesa Sterlite Ltd., (2018) 4 SCC 218, after adverting

to the various decisions referred to above:

“80.1. It is not obligatory, constitutionally or otherwise, that a natural resource (other than spectrum)  must be disposed of or alienated or allocated only through an auction or through competitive bidding;

80.2. Where the distribution, allocation, alienation or  disposal  of  a  natural resource is to  a  private party for a commercial pursuit of maximising profits, then an auction is a more preferable method of such allotment;

80.3. A decision to not auction a natural resource is liable to challenge and subject to restricted and limited judicial review under Article 14 of the Constitution;

80.4. A decision to  not  auction a natural  resource and sacrifice  maximisation of revenues  might be justifiable if the decision is taken, inter alia, for the social good or the public good or the common good;

80.5. Unless the alienation or disposal of a natural resource is for the common good or a social or welfare purpose, it cannot be dissipated in favour of a private entrepreneur virtually free of cost or for a

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consideration not commensurate with its worth without attracting Article 14 and Article 39(b) of the Constitution.”  

 (emphasis supplied)

From the above decisions, the following principles may be culled

out:

(i) Generally, when any land is intended to be transferred by the state, or any state largesse is to be conferred, resort should be had to public auction or transfer by  way of inviting tenders from the people.  The state  must ensure  that it receives adequate  compensation  for the  allotted resource. However, non­floating of tender or non­ conducting of public auction would not be deemed in all cases to be an arbitrary exercise of executive power. The ultimate decision of the executive must be the result  of  a  fair  decision­ making process.

(ii) The allocation must be guided by the consideration of the common good as per Article 39(b), and must not be violative of Article 14. This does not necessarily entail  auction  of the resource; however, allocation of natural resources to private persons for commercial exploitation solely for private benefit, with no social or welfare purpose, attracts higher judicial scrutiny and may be held to be violative of Article 14 if done by non­competitive and non­revenue maximizing means.

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Keeping in mind the aforementioned principles formulated

by this Court in the aforementioned judgments, we have

considered the entire material on record. It must be determined

as to whether the allocation made in favour of the Academy fell

foul of the above principles. In the instant case, the allocation

has evidently been done to a private educational institution by

non­revenue maximizing means. Assuming that the Academy is

engaged in commercial activities while engaging in its main

activity of imparting education to students, two questions remain

to be seen: first, whether there was any social or welfare purpose

underlying the  allocation, i.e., if the furtherance  of the  public

good was the ultimate goal of the allocation so as to justify the

non­auctioning of the land, and second, if the allocation is bad

for lack of adequate compensation.

7. As far as the underlying objective of the allocation is

concerned, in our considered opinion, the Division Bench of the

High Court was not justified in rejecting the submission of the

Academy that the allocation of land was done keeping in mind

the  plight of the students of the school.  One of the reasons

assigned by the Division Bench in rejecting this contention was

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that there was no discussion about the plight of the students in

the correspondence between the Appellant­Academy and the

Government. However, a mere lack of explicit statements to that

effect does not imply that the action was not motivated by welfare

considerations, inasmuch as the displacement and uprooting of

several hundreds of students from their school was the obvious

underlying concern in the representation  made by the Appellant

and the order passed by the State  Government. It  would be

appropriate at this stage to quote the following observation made

by this court in  Shrilekha Vidyarathi vs. State of U.P.,  (1991) 1

SCC 212:

“36. The meaning and true import of arbitrariness is more easily  visualized  than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is  ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness.  Where a  mode is prescribed for doing an act and there is no impediment in following that  procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness.”

(emphasis supplied)

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 As a corollary of the above, it is evident that an executive

action would not be arbitrary merely because the action is not

explicitly  stated to have been taken for a particular  reason or

based on a particular principle  which in itself is reasonable;

rather, it  would  be  open  to the  Court to  see  whether  such a

reasonable principle is discernible from the facts and

circumstances of the case. Just like the Court has the power to

look into the underlying purpose of an executive action to

determine whether it is motivated by extraneous  reasons while

examining it for arbitrariness, so also the Court may determine

whether there is a germane objective being served through the

execution of the action, by examining the surrounding facts and

circumstances in which the executive action was effected.

Though the Appellant is a private educational institution, it

cannot be said that the action of the government was not backed

by a welfare purpose merely because it is not stated in so many

words in the correspondence between the Academy and the State

Government that the alternative land sought for allotment was to

protect the interests of children studying at the school. This is

because the same is clearly discernible from the facts and

circumstances of the case. It has been stated that the Appellant

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was evicted from the wakf land not because of any wilful default

or unauthorized use, but because the wakf required the land for

its own use. In such circumstances, having no other alternative,

the Appellant approached the government for allotment of

suitable land for running the school. It seems that the  State

Government also preferred to peacefully settle the issue of getting

the school vacated from the  wakf  property, at an early  date,

without disturbing the education of the students and peace in

the locality.

8. Articles 38 and 39 of the Constitution of India provide that

the State must strive to promote the welfare of the people of the

State by protecting all their economic, social and political rights.

These rights  may cover  means of livelihood, health and the

general well­being of all sections of the people in the society, of

which education is an important aspect.  

9. Imparting basic education is a constitutional obligation on

the State as well  as societies running educational  institutions.

Children are the future of our nation. Education is a basic tool

for individuals to lead an economically productive life and is one

of the most vital elements for the preservation of the democratic

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system of government. The Constitution of India bestows

considerable attention to the field of education. It recognizes the

need for regulating the various facets of activity of education and

also the need for not only establishing and administering

educational institutions but also providing financial support for

educational institutions run by private societies. (See: Secretary,

Mahatama Gandhi  Mission  v.  Bhartiya  Kamgar  Sena, (2017)  4

SCC 449, paras 33­36 and 39).  

Thus, in our considered opinion, the State Government

proceeded to allot the land in favour of the Appellant keeping in

mind the public interest in the education of hundreds of children

as well as considering the urgency of the matter and it cannot be

said that the action was not backed by a social or welfare

purpose. It is worth emphasizing that the test of Article 14 must

be applied from the perspective of substantive rather than formal

equality, and must be mindful of the effect of the action or rule

that is  being tested.  While  under  ordinary  circumstances, the

usual practice of allocation of sites on the basis of advertisements

or auction was being followed, the instant situation warranted a

deviation from the standard procedure to prevent prejudicing the

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future  of the children  studying  at the  Academy. In  our view,

taking a holistic view of the matter, the action taken by the State

Government did not suffer from the vice of arbitrariness insofar

as it was backed by a welfare purpose.

10. In addition, we do not find any reason to reject the

contention of the State Government that the allotment of 4

Kanals of land to the Appellant was in the nature of an exchange,

inasmuch as the State Government wanted to evict the Appellant

who was running a school at Wakf land situated in the main city

area.  Such a decision seems to have been taken by the State

Government to avoid any unrest in the locality or city.   In such

circumstances, we do not find any arbitrariness in the decision

taken by the State in allotting 4 Kanals of property. On the other

hand, we are of the opinion that the action of the State was fair,

reasonable, transparent, unbiased, without favourtism and

nepotism.

11. We now turn to the second question, regarding the

adequacy of compensation recovered by the State. In this respect,

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we note the following  observations  made  by  Khehar  J. in  his

concurring opinion in Natural Resources Allocation, In Re (supra):

“200. I would, therefore, conclude by stating that no part of the natural resource can be dissipated as a matter of largesse, charity, donation or endowment, for private exploitation. Each bit  of  natural resource expended must bring back a  reciprocal consideration.  The consideration may be in the nature of earning revenue or may be to “best subserve the common good”. It may well be the amalgam of the two.  There cannot be a dissipation of material resources free of cost or at a consideration  lower than their  actual  worth.  One set of citizens cannot prosper at the cost of another set of citizens, for that would not be fair or reasonable.”  

 (emphasis

supplied)

Thus, the  impugned transaction must be probed to  determine

whether it leads to an adequate consideration being received by

the State.

12. In our view, the action of the authorities can be assailed to

the extent that the allotment of two kanals free of cost was bad in

law.   It is evident that the consideration paid by the Appellant

was only  with respect to two kanals and the remaining two

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kanals of land were allotted for free to the Appellant. It is not in

dispute that Rs. 8,00,000/­ per kanal was the average auction

sale price which was fetched around the time of allotment.

Keeping this figure in  mind, the State  Government fixed the

allotment price at Rs. 8,00,000/­ per kanal.  It is clear that there

was no arbitrariness in fixing the  price  at  Rs.  8,00,000/­  per

kanal.  However, we are unable to accept the contention that the

allotment of 2 Kanals of land for free was justified.  This is all the

more significant in light of the absence of any material on record

to show that the school was being run purely for charitable and

educational purposes. In this regard it would be pertinent to refer

to the observations of this Hon’ble Court in the matter of Union of

India and another v. Jain Sabha, New Delhi and another, (1997) 1

SCC 164 wherein the following observations are made:  

“11.   Before  parting  with this case,  we think it appropriate to observe that it is high time the Government reviews the entire policy relating to allotment of land to schools and other charitable institutions.  Where the  public  property is  being given to such institutions practically free, stringent conditions have to be attached with respect to the user of the land and the manner in which schools or other institutions established thereon shall function. The conditions imposed should be consistent with public interest and should always stipulate that in case of violation of

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any of those conditions, the land shall be resumed by the Government. Not only such conditions should be stipulated but constant monitoring should be done to  ensure  that those conditions are being observed in practice. While we cannot say anything about the particular school run by the respondent, it is common knowledge that some of the schools are being run on totally commercial lines. Huge amounts are being charged by way of donations and fees. The question is whether there is any justification for allotting land at throw­away prices to such institutions. The  allotment of land  belonging to the people at practically no price is  meant for serving the public interest, i.e., spread of education or other charitable purposes; it  is not meant to enable the allottees to make money or profiteer with the aid of public property. We are sure that the Government would take necessary measures in this behalf in the light of the observations contained herein.”

The aforementioned observations suggest that while in the case

of a non profit­oriented educational institution serving the public

interest, public property can be allotted to it at a concessional

price or for free by imposing stringent conditions for the use of

the land,  it  is questionable whether the same can be done for

profit­oriented institutions.      

13. Thus, in our considered opinion, there is a loss to the public

exchequer to the extent of Rs.16,00,000/­ for two kanals as on

the date of allotment. However, having regard to the fact that the

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Appellant­Academy has been running on the allotted site since

many years, after constructing a new building, the transfer may

be saved by giving the transferee an opportunity to make good

the shortfall in the consideration. In this context, it is relevant to

note certain observations made by this Court in the case of  ITC

Limited vs. State of U.P., (2011) 7 SCC 493 :

“107.1  If the transferee had acted bona  fide and was blameless, it may be possible to save the transfer but that again  would depend  upon the answer to the further question as to whether public interest has suffered or will suffer as a consequence of the violation of the regulations:

(i) If public interest has neither suffered, nor is likely to suffer,  on account of the violation,  then the transfer may be allowed to stand as then the violation will be a mere technical procedural irregularity without adverse effects.

(ii)  On the other hand,  if the violation of the regulations leaves or is likely to leave an everlasting adverse effect or impact on public interest  (as for example when it results in environmental degradation or results in a loss which is not reimbursable),  public interest should  prevail  and the transfer should be rescinded or cancelled.

(iii)  But where the consequence of the violation is merely a short­recovery of the consideration, the transfer may be saved by giving the transferee an opportunity to make good the shortfall in consideration.

107.2   The aforesaid exercise  may seem to be cumbersome, but is absolutely necessary to protect

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the sanctity of contracts and transfers. If the Government or its instrumentalities are seen to be frequently resiling from duly concluded solemn transfers, the confidence of the public and international community in the functioning of the Government will be shaken. To save the credibility of the  Government and its instrumentalities, an effort should always be made to save the concluded transactions/transfers wherever possible,  provided (i) that it will not prejudice the public interest, or cause  loss to  public  exchequer  or lead  to  public mischief,  and (ii) that the transferee  is blameless and  had  no  part to  play in the violation of the regulation.

107.3   If  the concluded transfer cannot be saved and has to be cancelled, the innocent and blameless transferee should be reimbursed all the payments made by him and all expenditure incurred by him in regard to the transfer with appropriate interest. If some other relief can be granted on grounds of equity without harming public interest and public exchequer, grant of such equitable relief should also be considered.”

                                               (emphasis supplied)

14. On an examination of the facts and circumstances of the

case in the light of the above observations, it is evident that it is

appropriate to give the Appellant the opportunity to make good

the shortfall in consideration, as the loss to the public exchequer

caused  by the free  allocation  cannot  be  said to  have  had an

everlasting effect or impact on public interest.   Moreover, we do

not  find any high­handedness on the part  of the Appellant in

seeking the allotment  in  its favour,  as  it  acted  in a bona fide

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manner.   This would also be in consonance with the principle

stated by us in the beginning of the judgment that the public

must be adequately  compensated  for  the  alienation of  natural

resources by the State.

15. Therefore,  the Appellant should pay consideration for two

kanals of land received gratuitously, at the rate of Rs. 8,00,000/­

per kanal, which was the average auction price prevailing at the

time of allocation. The Appellant is also liable to pay interest at

the rate of 6% per annum from the date of the allotment till the

date of payment. The payment should be  made  within three

months from this date.

16. In view of the above, the appeals are allowed, the impugned

judgment passed by the Division Bench dated 01.04.2009 is set

aside and the judgment of the learned Single Judge dated

25.04.2008 passed in O.W.P No. 1093 of 2002 and O.W.P No.10

of 2003 is restored, with the aforementioned modification.  

……………………………………..J.        (N.V. RAMANA)

      ……………………........................J.

               (MOHAN M. SHANTANAGOUDAR) New Delhi, October 30, 2018

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