CITY MONTESSORI SCHOOLversusSTATE OF U.P. & ORS.

                   [2024] 8 S.C.R. 23 : 2024 INSC 570

                          City Montessori School
                                     v.
                            State of U.P. & Ors.
                       (Civil Appeal No. 8355 of 2024)
                                 02 August 2024
           [Abhay S. Oka* and Augustine George Masih, JJ.]

                            Issue for Consideration
       The issue pertains to rights of the parties to a lease of a Plot
       vested with the State Government and the manner in which the
       said rights can be transferred.

                                   Headnotes†
       State Largesse – Grant of – Method to be adopted:
       Held: Rights of the State as the owner and lessor of a Plot can
       be transferred only by adopting a fair and transparent process by
       which the State fetches the best possible price – 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 at a nominal price
       will not be a fair and transparent method and shall be arbitrary and
       violative of Article 14 of the Constitution of India. [Para 9]
       Lease – Transfer of Property Act, 1882 – Section 109 – Rights
       of Lessee – Sale of Plot by the Lessor – Consequence of:
       Held: In case of the sale of a leasehold plot by the lessor, the
       rights of the lawful lessees do not get affected, as their tenancy
       will be attorned to the purchaser in view of Section 109 of the
       Transfer of Property Act,1882. [Para 9]

                                 Case Law Cited
       Akhil Bhartiya Upbhokta Congress v. State of Madhya Pradesh
       and Others [2011] 5 SCR 77 : (2011) 5 SCC 29 – relied on.

                                   List of Acts
       Constitution of India, 1950; Transfer of Property Act, 1882.



* Author
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                             List of Keywords
      State Largesse; Leasehold land; Auction; Free hold rights; Section
      109 of Transfer of Property Act, 1882.

                            Case Arising From

      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8355 of 2024
      From the Judgment and Order dated 25.09.2014 of the High Court of
      Judicature at Allahabad, Lucknow Bench in CWP No. 2101 of 1996
      With
      Civil Appeal No. 8356 of 2024

                         Appearances for Parties

      Ravindra Raizada, Sr. Adv./A.A.G., Jayant Bhushan, Vinay Navare,
      Sr. Advs., Ashim Vachher, Shantanu Kumar, Pritish Kumar, Vaibhav
      Dabas, R. P. Gupta, Shaurya Sahay, Aditiya Kumar, Abhishek
      Chaudhary, Honey Jain, Ashish Batra, Advs. for the appearing parties.

                 Judgment / Order of the Supreme Court

                                 Judgment

      Abhay S. Oka, J.
1.    Leave granted.
      FACTUAL ASPECTS
2.    These appeals take an exception to the same judgment of a Division
      Bench of Allahabad High Court. The dispute is essentially between
      the City Montessori School (for short, ‘the school’) and one Shri
      M.M. Batra regarding plot no.90-A/A-754, measuring 2238.5 sq.
      ft. situated at Maha Nagar, Lucknow (for short, ‘the plot’). It is not
      in dispute that the plot vests in the State Government. By a lease
      dated 4th January 1961, the Hon’ble Governor of Uttar Pradesh,
      through Nazul Officer, Lucknow, granted the lease of the plot to
      one Gursharan Lal Srivastava which was described as a ‘garden
      lease.’ A separate lease was granted on the same day in respect of
      the building on the plot. By a registered sale deed dated 26th June
      1962, Gursharan Lal Srivastava sold his leasehold interest in the
      plot to Shri M.M. Batra (the alleged lessee). Rajat Batra and Raman
[2024] 8 S.C.R.                                                            25

              City Montessori School v. State of U.P. & Ors.


     Batra are the sons of the alleged lessee. It appears that the plot is
     a Nazul property. Several Government Orders (G.Os.) have been
     issued, either providing for the conversion of leasehold lands into
     freehold or auction thereof.
3.   The alleged lessee filed a Civil Suit in the year 1994 in the Civil Court.
     The suit was filed to protect possession. Later on, by amendment, he
     sought the benefit of G.O. of 17th February 1996 and 1st December
     1998, which permitted the conversion of Nazul properties given on
     lease into freehold properties. On 13th March 1995, an auction notice
     was published for the auction of various Nazul lands, including the
     plot. The school and the sons of the alleged lessee submitted their
     bids. The school was found to be the highest bidder and therefore,
     the bid offered by the school was accepted. As provided in the auction
     notice/tender notice, the tender document had to be purchased by
     23rd March 1995 since 24th March 1995 was a holiday, and the
     auction was fixed for 25th March 1995. It was alleged that the school
     purchased the tender document on 25th March 1995. The acceptance
     of the school’s bid was cancelled. However, the authorities again
     called upon the school to deposit the bid amount. Ultimately, on
     20th June 1996, the State Government cancelled the bid offered by
     the school on the ground of the failure to purchase the tender form
     within the outer limit provided in the tender notice. While cancelling
     the school’s bid, the State Government decided to accept the bid
     offered by the sons of the alleged lessee.
4.   Aggrieved by the action of the rejection of the bid, the school filed a
     Writ Petition under Article 226 of the Constitution of India before the
     Allahabad High Court. The impugned judgment is the final judgment
     in the said Writ Petition. By an interim order dated 18th July 1996,
     Allahabad High Court directed the status quo to be maintained with
     respect to the plot. Also, it directed that the Lucknow Development
     Authority (for short, ‘the authority’) shall not execute the sale deed
     in favour of the sons of the alleged lessee. The school applied for
     impleadment in the suit filed by the alleged lessee. The said application
     was rejected. However, on 3rd February 2011, the school impleaded
     the alleged lessee as a party to the Writ Petition. The alleged lessee’s
     suit was dismissed by the Civil Court by judgment dated 24th July
     2000. The alleged lessee preferred an appeal against the decree of
     dismissal of the suit before the High Court. By recording statements
     of the counsel representing the alleged lessee and the authority, a
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      Division Bench of the High Court, by order dated 6th December 2000,
      disposed of the appeal by directing the authority to expeditiously
      consider the application of the alleged lessee for conversion of his
      leasehold rights into freehold in accordance with law. The High Court
      also directed that the alleged lessee can be dispossessed only in
      accordance with the law. However, the High Court did not interfere
      with the findings recorded by the Trial Court on merits.
5.    Based on the application made by the alleged lessee on 26th
      November 2001, the Special Nazul Officer of the authority converted
      the plot into freehold subject to the alleged lessee depositing a
      total amount of Rs.67,022.21. On the basis of the said order, on
      29th January 2002, a deed of freehold was executed on behalf of
      the Governor of the State in respect of the said plot in favour of the
      alleged lessee. After becoming aware of the deed and conversion
      of the plot during the pendency of the Writ Petition, the school
      applied for amendment of the Writ Petition seeking to incorporate
      the additional prayers for challenging the order dated 20th June 1996
      of cancellation of the highest bid of the school, for challenging the
      order of conversion in favour of the alleged lessee and consequently,
      the deed dated 29th January 2002. There is some controversy about
      whether the amendment was allowed. By the impugned judgment,
      the High Court held that the order of conversion from leasehold to
      freehold was illegal as even the market value of the plot was not
      ordered to be paid by the alleged lessee. Therefore, the High Court
      held that the deed executed in favour of the alleged lessee was a
      nullity. However, the High Court kept open the question of whether
      the plot could be subjected to a fresh auction. Both the school and
      the alleged lessee have filed these two appeals.
      SUBMISSIONS
6.    Shri Vinay Navare, the learned senior counsel appearing for the
      school, has taken us through the relevant documents. He also pointed
      out that the plot is a garden plot, which is adjacent to the land held
      by the school. He pointed out that the High Court has not accepted
      that the bid offered by the school could have been cancelled on
      the ground that the school purchased the tender document on the
      last date. The learned counsel submitted that the order dated 6th
      December 2000 passed by the Allahabad High Court in the appeal
      filed by the alleged lessee against dismissal of his suit is a collusive
      order. He submitted that the Trial Court decided all issues framed
[2024] 8 S.C.R.                                                          27

              City Montessori School v. State of U.P. & Ors.


     against the alleged lessee except the issue of his possession.
     The learned counsel urged that the lease claimed by the alleged
     lessee is not in subsistence. He pointed out that the alleged lessee
     is a defaulter who has not paid rent for a long time. He submitted
     that, in any case, the original lessee could not have transferred
     the leasehold rights regarding the plot to the alleged lessee. The
     learned senior counsel, therefore, submitted that, firstly, the order
     of cancellation of the highest bid offered by the school was bad in
     law. Secondly, during the pendency of the Writ Petition, the authority
     had no right to consider the prayer made by the alleged lessee for
     conversion. He submitted that the conversion order and consequent
     deed executed in favour of the alleged lessee are entirely illegal.
     He would, therefore, submit that the order of acceptance of the bid
     offered by the school be passed.
7.   Shri Jayant Bhushan, the learned counsel representing the alleged
     lessee and his sons, submitted that the order of conversion was passed
     in favour of the alleged lessee in terms of the prevailing policy of the
     State Government and there is nothing illegal about the same. He
     submitted that the deed executed based on the order of conversion
     is legal and valid. He submitted that the school belatedly made the
     application for amendment of the Writ Petition for challenging the
     conversion and for the sale deed, which was never allowed. Therefore,
     the High Court committed gross illegality by setting aside the order of
     conversion and the sale deed executed by the authority in favour of
     the alleged lessee. He submitted that there was a delay on the part
     of the school in purchasing the tender document, and as the same
     was purchased after the expiry of the outer limit provided in the tender
     notice, the school’s bid could not have been accepted. He urged
     that, as the alleged lessee has been in possession for decades, the
     conversion order cannot be faulted. Shri Ravindra Raizada, learned
     senior counsel representing the State Government, stated that the
     present legal position is that such leasehold plots cannot be converted
     to freehold and cannot be auctioned.
     CONSIDERATION OF SUBMISSIONS
     GRANT OF STATE LARGESSE
8.   Before we consider the rival contentions, the legal position regarding
     the State largesse succinctly laid down by this Court in the case of
     Akhil Bhartiya Upbhokta Congress v. State of Madhya Pradesh
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       and Others1 needs to be reiterated. In paragraphs 65 to 67 of the
       said decision, this Court held thus:
               “65. What needs to be emphasised is that the State and/
               or its agencies/instrumentalities cannot give largesse
               to any person according to the sweet will and whims of
               the political entities and/or officers of the State. Every
               action/decision of the State and/or its agencies/
               instrumentalities to give largesse or confer benefit
               must be founded on a sound, transparent, discernible
               and well-defined policy, which shall be made known
               to the public by publication in the Official Gazette and
               other recognised modes of publicity and such policy
               must be implemented/executed by adopting a non-
               discriminatory and non-arbitrary method irrespective
               of the class or category of persons proposed to be
               benefited by the policy. The distribution of largesse like
               allotment of land, grant of quota, permit licence, etc.
               by the State and its agencies/instrumentalities should
               always be done in a fair and equitable manner and the
               element of favouritism or nepotism shall not influence the
               exercise of discretion, if any, conferred upon the particular
               functionary or officer of the State.
               66. We may add that there cannot be any policy, much
               less, a rational policy of allotting land on the basis of
               applications made by individuals, bodies, organisations
               or institutions dehors an invitation or advertisement by
               the State or its agency/instrumentality. By entertaining
               applications made by individuals, organisations or
               institutions for allotment of land or for grant of any other
               type of largesse the State cannot exclude other eligible
               persons from lodging competing claim. 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.


1     [2011] 5 SCR 77 : (2011) 5 SCC 29
[2024] 8 S.C.R.                                                               29

              City Montessori School v. State of U.P. & Ors.


           67. This, however, does not mean that the State can
           never allot land to the institutions/organisations engaged in
           educational, cultural, social or philanthropic activities or are
           rendering service to the society except by way of auction.
           Nevertheless, it is necessary to observe that once a piece
           of land is earmarked or identified for allotment to institutions/
           organisations engaged in any such activity, the actual
           exercise of allotment must be done in a manner consistent
           with the doctrine of equality. The competent authority
           should, as a matter of course, issue an advertisement
           incorporating therein the conditions of eligibility so as to
           enable all similarly situated eligible persons, institutions/
           organisations to participate in the process of allotment,
           whether by way of auction or otherwise. In a given case
           the Government may allot land at a fixed price but in that
           case also allotment must be preceded by a wholesome
           exercise consistent with Article 14 of the Constitution.”
                                                       (emphasis added)
9.   In the facts of the case, there is no dispute that the plot vests in the
     State. Even assuming that the alleged lessee has leasehold rights
     concerning the plot, the rights of the State as the owner and lessor
     can be transferred only by adopting a fair and transparent process by
     which the State fetches the best possible price. In case of the sale
     of a leasehold plot by the lessor, the rights of the lawful lessees do
     not get affected, as their tenancy will be attorned to the purchaser in
     view of Section 109 of the Transfer of Property Act, 1882. Therefore,
     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.
     ISSUE OF AMENDMENT OF THE WRIT PETITION
10. There is a controversy raised by the alleged lessee about whether
    the application to amend the Writ Petition made by the school to
    incorporate the challenge to the conversion and the deed was
    allowed. However, on page 12 of the impugned judgment, the High
    Court recorded the submission of the learned counsel for the alleged
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      lessee that there was a delay on the part of the school in challenging
      the order of conversion. The submissions recorded in the impugned
      judgment show that the parties proceeded on the footing that there was
      a challenge to the conversion order. The counter filed by the alleged
      lessee before the High Court shows that it refers to the amended Writ
      Petition and paragraph 45 of the counter raises a contention of the
      delay in challenging the conversion deed. Therefore, the argument
      that the amendment was not allowed need not detain us.
      ON MERITS
11. Coming back to the facts of the case, the plot was put to auction in
    1995. The Special Nazul Officer accepted the highest bid offered by
    the school of Rs. 8,51,043.15, out of which a sum of Rs. 85,105 was
    paid along with the tender. 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.
12. We have perused the judgment of the Civil Court dated 24th July
    2000 which dismissed the suit filed by the alleged lessee. The Trial
    Court held that the alleged lessee was not entitled to the benefits
    of G.Os. dated 17th February 1996 and 1st December 1998. In the
    suit, the alleged lessee sought conversion from leasehold to freehold
    based on these two G.Os. All findings were recorded against the
    alleged lessee except the finding that he was in possession of the
    plot. Being aggrieved by the decree of dismissal of the suit, the
    alleged lessee preferred First Appeal No.81 of 2000. The appeal was
    disposed of by the order dated 6th December 2000. The said order
    makes an interesting reading. The High Court heard the counsel for
    the alleged lessee, the authority, and the State Government. The
    first paragraph refers to the appearances of the learned counsel.
    The second paragraph gives the facts in brief. The same paragraph
    also notes that the alleged lessee sought the relief of mandatory
    injunction for the grant of conversion in terms of the G.Os. dated
[2024] 8 S.C.R.                                                            31

              City Montessori School v. State of U.P. & Ors.


     17th February 1996 and 1st December 1998 and that the Trial Court
     declined to grant the said relief. The further paragraphs of the said
     order, which are relevant, read thus:
           “……………………………………
           During the course of hearing learned Counsel for the Parties
           agreed that in case the Plaintiff makes an application to
           the Vice Chairman of the Lucknow Development Authority,
           Respondent No. 3, in terms of the Government Orders
           dated 17.2.1996 and 1.12.1998, the same shall be
           considered by the Vice-Chairman, Lucknow Development
           Authority in accordance with law expeditiously. It was further
           stated on behalf of the Respondents that they shall not
           evict the Plaintiff from the property in question except in
           accordance with law.
           In this view of the matter, although we do not consider
           it expedient to interfere in the findings recorded in the
           Trial Court, yet in view of the statements made at Bar,
           the Vice-Chairman, Lucknow Development Authority
           has to consideration application of the Plaintiff for
           conversion of leasehold into Freehold rights in respect
           of the Garden Lease in question and pass appropriate
           order expeditiously and it goes without saying that the
           Respondents entitled to evict the Plaintiff-Appellant, as
           stated by them only in accordance with law.
           Subject to these observations, the Appeal is dismissed.
           No order as to costs.”
                                                     (emphasis added)
13. Thus, only the statements of the parties were recorded, and it was
    observed that the authority would have to consider the application
    made by the alleged lessee for the conversion of leasehold rights
    into freehold rights and to pass appropriate orders expeditiously. It
    is important to note that the High Court specifically recorded that it
    did not interfere with the findings recorded by the Trial Court. Subject
    to the direction to consider the application made by the alleged
    lessee to the authority for conversion in accordance with the law,
    the appeal preferred by the alleged lessee was dismissed. There
    was no binding order passed by the High Court giving a mandate
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      to the authority or to the State Government to grant the application
      which the alleged lessee may make for conversion. On the contrary,
      the High Court upheld the decree passed by the Trial Court, which
      held that the alleged lessee was disentitled to the benefit of G.Os.
      issued in 1996 and 1998.
14. The order dated 26th November 2001 does not refer to any G.O.
    under which conversion was permitted. The conversion was allowed
    against payment of the consideration, which was less than 10% of
    the price offered in a public auction, 16 years back. Therefore, we
    agree with the High Court that the order was illegal. There is another
    aspect of the matter. When the aforesaid order and the order of
    conversion were passed, the Writ Petition filed by the school was
    pending. The alleged lessee’s sons were parties to the Writ Petition.
    After hearing all the parties, on 18th July 1996, an interim order was
    passed in the Writ Petition directing maintenance of the status quo
    and restraining the State Government and the authority from executing
    a sale deed in favour of the alleged lessee’s sons. It was the duty
    of the State Government and the authority who were parties to the
    appeal preferred by the alleged lessee to point out to the Court
    that a Writ Petition filed by the school arising out of the auction of
    the plot was pending. The said fact was suppressed from the High
    Court by all the parties to the appeal. When the Writ Petition was
    pending, the propriety demanded that before directing conversion
    in favour of the alleged lessee, the State Government should have
    applied to the High Court, to seek permission to do so, in the pending
    Writ Petition. That was not done. The alleged lessee cannot plead
    ignorance about the knowledge of the Writ Petition as the interim
    orders were passed in the Writ Petition after hearing his sons. The
    alleged lessee and his sons were together, and the same counsel
    represented them even before this Court. The order passed by the
    State Government of conversion is a covert method of defeating the
    High Court’s interim order of 18th July 1996.
15. Now, we come to the school’s argument to restore the earlier order
    of 1995 accepting the bid offered by it. We must note that more
    than 20 years have passed since the auction. During this period, the
    property prices in Lucknow must have been substantially increased.
    Even assuming that the learned senior counsel appearing for the
    school is right in contending that illegality has been committed by
[2024] 8 S.C.R.                                                                33

                 City Montessori School v. State of U.P. & Ors.


     setting aside the highest bid of the school, now it will 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.
16. Therefore, in our view, 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, calls for no interference.
17. We, therefore, dismiss both the appeals. Whether the lease claimed
    by the alleged lessee is valid and subsisting and whether the plot can
    be put to auction are the questions left open which can be agitated by
    the parties in appropriate proceedings. However, the alleged lessee
    shall not be dispossessed without due process of law. It is for the
    State Government to decide, whether it is permissible to put the plot
    to fresh auction in the light of the current policies/laws prevailing. It
    will be open to the school to apply for a refund of the money paid
    towards the bid amount. It will also be open to the alleged lessee
    to apply for a refund of the amount paid for converting the plot from
    leasehold to freehold. The State Government/authority will issue
    the necessary refund within six weeks of making such applications.
18. There will be no order as to costs.

     Result of the case: Appeals dismissed.



     †
         Headnotes prepared by: Prastut Mahesh Dalvi, Hony. Associate Editor
                                 (Verified by: Abhinav Mukerji, Sr. Adv.)