A) Abstract / Headnote

This case involved a dispute over the transfer of leasehold land owned by the State Government in Lucknow, Uttar Pradesh. The main issues revolved around the transparency of the transfer process, the validity of conversion of leasehold rights to freehold rights, and the procedural fairness under Article 14 of the Constitution of India. The Supreme Court emphasized that any transfer of State-owned land must follow a fair and transparent process, such as a public auction, to ensure non-arbitrariness and equal opportunity. The rights of lawful lessees are protected under Section 109 of the Transfer of Property Act, 1882, even after the sale of leasehold property.

Keywords

State largesse, Leasehold land, Auction, Freehold rights, Section 109 of Transfer of Property Act, 1882.

B) Case Details

• i) Judgement Cause Title: City Montessori School v. State of U.P. & Ors.
• ii) Case Number: Civil Appeal No. 8355 of 2024
• iii) Judgement Date: August 2, 2024
• iv) Court: Supreme Court of India
• v) Quorum: Justice Abhay S. Oka, Justice Augustine George Masih
• vi) Author: Justice Abhay S. Oka
• vii) Citation: [2024] 8 S.C.R. 23; 2024 INSC 570
• viii) Legal Provisions Involved:
  • Article 14 of the Constitution of India
  • Section 109 of the Transfer of Property Act, 1882
• ix) Judgments Overruled: None
• x) Case is Related to: Constitutional Law, Property Law, Administrative Law

C) Introduction and Background of Judgement

The dispute began with the State Government’s ownership of a Nazul property in Lucknow, which was leased in 1961. Subsequent transfers and governmental orders provided for converting leasehold lands to freehold. However, a contentious auction in 1995 led to legal proceedings over allegations of favoritism and procedural lapses. The Allahabad High Court held that the conversion and subsequent transfer of the leasehold land were invalid due to a lack of transparency. This judgment was appealed in the Supreme Court.

D) Facts of the Case

1. The land in question, measuring approximately 2238.5 sq. ft., was initially leased to Gursharan Lal Srivastava by the Governor of Uttar Pradesh in 1961.
2. The lessee sold his rights to Shri M.M. Batra via a registered deed in 1962.
3. In 1995, the State issued a tender for auctioning Nazul lands, including the disputed plot.
4. City Montessori School (CMS) emerged as the highest bidder, but procedural errors led to the cancellation of its bid.
5. The lease was later converted to freehold and transferred to Shri Batra at a significantly reduced price without public auction, raising questions about fairness.

E) Legal Issues Raised

• i) Whether the cancellation of the highest bid by CMS in 1995 was justified.
• ii) Whether the conversion of leasehold rights to freehold rights complied with constitutional principles.
• iii) Whether the auction process adhered to Article 14 of the Constitution.

F) Petitioner/Appellant’s Arguments

1. Procedural Errors in Auction: The appellant argued that the cancellation of its highest bid violated auction rules. CMS had purchased the tender on the auction day itself, and this should not invalidate its bid.
2. Illegality in Conversion: CMS challenged the conversion of leasehold rights to freehold rights, arguing that it was done without public auction and transparency.
3. Loss to State Revenue: The conversion price was less than 10% of the auction bid, resulting in financial loss to the State.

G) Respondent’s Arguments

1. Delay in Challenge: The respondents argued that CMS delayed its challenge to the conversion order and related deeds.
2. Adherence to Policy: The respondents contended that the conversion was consistent with government policies allowing such transformations.
3. Possession Rights: They emphasized the long-standing possession of the land by the lessee’s successors, justifying the transfer.

H) Related Legal Provisions

• Article 14 of the Constitution of India: Ensures equality and prohibits arbitrary State action.
• Section 109 of the Transfer of Property Act, 1882: Protects the rights of lawful lessees during property transfers.

I) Judgment

a. Ratio Decidendi

1. The Court ruled that State largesse must be distributed transparently, adhering to Article 14. Public auction or similar methods must ensure fairness and equity.
2. The Court invalidated the conversion order, noting the lack of competitive bidding, which caused financial loss and violated constitutional principles.

b. Obiter Dicta

The Court remarked that long-term possession does not entitle the lessee to ownership without following due process.

c. Guidelines

1. All transfers of State property must prioritize fairness and transparency.
2. Public auctions must be conducted to ensure the State fetches the best value.
3. Any conversion of leasehold land to freehold must consider market value.

J) Conclusion and Comments

The judgment underscores the importance of transparency in public asset distribution. It criticizes arbitrary practices that undermine constitutional guarantees of equality. The Court’s refusal to restore the original auction bid highlights its pragmatic approach, considering changed circumstances and market realities.

References

1. Akhil Bhartiya Upbhokta Congress v. State of Madhya Pradesh, [2011] 5 SCR 77: (2011) 5 SCC 29.
2. Constitution of India, Article 14.
3. Transfer of Property Act, 1882, Section 109.