Holding

The lease renewal was invalid as there is no absolute right of renewal; UDA must act in accordance with public interest and Article 14, and the High Court’s order cancelling the renewal and conversion is affirmed, with protection for bona‑fide third‑party purchasers.

Summary

The Supreme Court examined the renewal of a 30‑year lease granted by the Ujjain Development Authority (UDA) to Mis Ajar Enterprises Private Limited (Ajar) after the leasehold interest was acquired from the liquidated IISCO. The Court held that Rule 24 and Rule 25 of the Madhya Pradesh Nagar Tatha Gram Nivesh Vikasit Bhoomiyo Rules do not confer an absolute right of renewal; the authority must exercise its discretion in accordance with Article 14 and public‑interest considerations. Consequently, the High Court’s cancellation of the lease renewal and conversion of the leasehold land to free‑hold was upheld. The Court also protected the rights of bona‑fide third‑party purchasers who had executed sale deeds before the judgment, while ordering refunds to other purchasers. The transfer fee was to be calculated on the basis of the 2011‑12 guidelines.

Issues considered

The scope of Rule 24 and Rule 25 of the 1975 Rules – whether they create an indefeasible right of lease renewal for the lessee.
Whether UDA’s decision to renew the lease and convert the land to free‑hold complied with the requirements of Article 14 and public‑interest policy.
Whether the High Court was correct in cancelling the renewal deed and directing a public auction of the land.
The status of rights of third‑party plot purchasers who bought plots from Ajar during the pendency of the writ petition.
The appropriate basis for computing the transfer fee payable by Ajar to UDA.

Legislation cited

Constitution of Indias. Article 14, s. Article 142
Government Grants Act, 1895
Land Acquisition Act, 1894
Madhya Pradesh Land Revenue Code, 1959s. Section 181, s. Section 181-A, s. Section 182
Madhya Pradesh Nagar Tatha Gram Nivesh Vikasit Bhoomiyo, Griho, Bhavano Tatha Anya Sanrachanao Ka Vyayan Niyams. Rule 24, s. Rule 25, s. Rule 26

Subjects

lease renewalpublic interestArticle 14discretionary powerconversion to freeholdthird‑party purchasersMadhya Pradesh land rulesUjjain Development Authorityfraudnatural resources allocation

Judgment

[2017] 8 S.C.R. 388

A MIS AJAR ENTERPRISES PRIVATE LIMITED
v.
SATYANARAYAN SOMANI AND ORS.
(Civil Appeal No. 10852 of 2017)
B AUGUST 24, 2017
[JAGDISH SINGH KHEHAR, CJI, AND
DR. D. Y. CHANDRACHUD, JJ.[
Madhya Pradesh Nagar Tatha Gram Nivesh Vikasit Bhoomiyo,
Griho, Bhavano Tatha Anya Sanrachanao Ka Vyayan Niyam, 1975
C - rr. 24 and 25 - Right of renewal of lease by lessor - Held: Rule
24 does not embody an absolute or indefeasible right of renewal -
A development authority as a public body cannot act arbitrarily or
at its own whims, in deciding whether or not to renew the lease - its
decisions must be fair, reasonable and guided by public interest -
D Public interest postulates both protecting the interests of the authority
and ensuring fairness to the leaseholder who may have constructed
on the land in pursuance of the leasehold interest - Neither r. 24
nor r. 25 cun be read to divest the authority of the element of
discretion on whether to renew the lease - However, exercise of
discretion must meet the touchstone of Art. 14 of the Constitution -
E 011 facts, order passed by the High Court cancelling the renewal of
lease deed by the Development Authority in favour of appellant
company-auction purchaser as also the conversion of leasehold
right to freehold, does not call for interference - Public body acted
oblivious to and in disregard of public interest - Land allotted to
F the company in liquidation was not for the purpose for which the
appellant company stepped in - Purpose for allotment was for
developing a residential colony for its employees, and not for
commercial exploitation to a developer - There was no absolute or
indefeasible right to renewal either in company in liquidation or in
appellant-company which succeeded to the leasehold interest -
G Development Authority chose to blink at its obligations by conferring
a largesse on appellant-company - Mere acquisition by appellant-
company of the leasehold interest for the remainder of the term
together with the benefits of the original lease covenants, did not
ipso jure entitle appellant-company to renewal of the lease -As also
H subsequent conversion of the land to freehold cannot enure to the
388
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 389
SATYANARAYAN SOMANI

benefit of appellant since the underlying basis of the entire A
transaction stood vitiated by fraud - When public bodies are vested
with control over land which was acquired for facilitating planned
development, no authority can claim an immunity from its
accountability to matters of public interest - Thus, the order passed
by the High Court is upheld - However, rights created in favour of B
third party purchasers of plots through execution of registered sale
deeds by the appellant-company would not be disturbed - Madhya
Pradesh Land Revenue Code, 1959 - ss. 181 and 182.
UDA-Ujjain Development Authority granted leasehold rights to
USO for a period of thirty years to construct residential houses. IISCO C
was ordered to be wound up by the High Court. The Official Liquidator
took over and auctioned the assets of the company, including the leasehold
rights. The leasehold rights were purchased by the appellant company.
UDA's case that it had cancelled its allotment and re-entered upon the
land. However, UDA was not entitled to seek possession of the land
from official liquidator. The appellant was assigned leasehold rights for D
the residuary period. After expiry of the period, UDA renewed the lease
agreement for another period of thirty years. Thereafter, leasehold rights
were converted into freehold rights. The deed of renewal was challenged.
The High Court cancelled the renewal oflease deed by UDA in favour
of appellant company as also the conversion ofleasehold right to freehold;
directed that the possession ofland be taken back; that in order to fetch E
the best price land be put to public auction; and that the transfer fee be
charged on the basis of the guidelines for 2011-2012 and the differential
be recovered with eight percent per annum. Hence the instant appeals.
Disposing of the appeals, the Court
F
HELD: 1.1 The Madhya Pradesh Nagar Tatha Gram Nivesh
Vikasit Bhoomiyo, Griho, Bhavano Tatha Anya Sanrachanao Ka
Vyayan Niyam, 1975 contain elaborate provisions for the transfer
of government land vested in or maintained by the Town and
Country Development Authority and in respect of other land. Rule
24 stipulates that every transfer of land has to be (subject to the G
provisions contained in the Rules) by lease. Moreover, while rule
24 does contemplate a provision for renewal, the expression right
of renewal by the lessor is of significance. The provision does
not embody an absolute or indefeasible right of renewal.
Undoubtedly, a development authority as a public body cannot H
390 SUPREME COURT REPORTS [2017] 8 S.C.R.

A act arbitrarily or at its own whims, in deciding whether or not to
renew the lease. Its decisions must be guided by public interest.
Public interest postulates both protecting the interests of the
authority and ensuring fairness to the leaseholder who may have
constructed on the land in pursuance of the lease. Neither Rule
24 nor Rule 25 can be read to divest the authority of the element
B
of discretion on whether to renew the lease. However, exercise
of discretion must meet the touchstone of Article 14 of the
Constitution. As a public authority, the decision must be fair,
reasonable and guided by public interest. Under Rule 25, where
the period of lease is thirty years, renewal is provided for two
c terms, each of thirty years subject to the payment of ground rent
enhanced on the occasion of each renewal by an amount not
exceeding fifty percent. Rules 24 and 26, read together indicate
the extent of the enhancement in ground rent where the lease is
renewed. [Para 34][415-B-Ff
D 1.2 Under the terms of the lease, there was a prohibition
on the transfer of the land unless the lessee, which had been
granted the land to develop a colony and construct residential
houses had done so. In the event that the lessee wished to
transfer the land due to 'special circumstances', UDA could
consider such a request subject to the payment of stipulated
E transfer fees. The original lease agreement contemplated that
the term of the lease could be renewed for two further periods,
each of thirty years, with an enhancement of the lease rent at the
time of every renewal. [Para 3711416-G-Hf
1.3 A close reading of the clause for renewal would make it
F abundantly clear that there was no absolute or indefeasible right
of renewal. The language contained in the clause for renewal
indicates that parties contemplated that the term of the lease
could on its expiry be renewed for two further terms each of thirty
years. Rule 24 indicates that subject to the provisions of the
G Rules, every transfer would be by way of lease; the lease would
be either for thirty years or ninety nine years as determined by
the authority which would be renewal by the lessor. Rule 25
posited, in the case of a lease for a term of thirty years, that there
would be a right of renewal for two further periods each of thirty
years subject to the payment of enhanced ground rent not
H
M/S AJAR ENTERPRISES PRIVATE LIMITED v. 391
SATYANARAYAN SOMANI

exceeding fifty percent. A large tract of land admeasuring 43,407 A
square metres was granted on lease to it with a specific purpose
of constructing residential houses and for developing a colony,
evidently for the benefit of the employees of IISCO. [Para
38][417-D-F; 418-F)
1.4 When UDA decided to renew the lease it proceeded on B
the basis that after the decision of the High Court, it had no option
but to renew the lease. Even before this Court, the submission
of UDA is that once its objections were overruled by the High
Court it had no option but to renew the lease. This submission
betrays a lack of understating of the judgment of the High Court C
as well as of the terms of the original lease. The judgment of the
High Court made it abundantly clear both to the assignee who
had successfully bid for the leasehold interest as well as to UDA
that what was being transferred was the interest of the company
liquidation under the lease deed dated 16.07.1985. Undoubtedly,
this comprised besides the residue of the unexpired term of seven D
years, the benefit of the original lease agreement which contains
a renewal clause. However, both on the interpretation of that
clause by the High Court as well as on the plain terms of the
clause, it is evident that there was no indefeasible right of renewal.
The clause for renewal provided that the lease could be renewed,
not that it must or shall be renewed. Moreover, Rules 24 and 25 E
cannot be read to preclude UDA, as the lessor, from having due
regard to all relevant circumstances Maring upon the public
interest while deciding whether to renew the lease. Several
aspects bearing upon the public interest were required to be
borne in mind. These included the fact that the purpose for which F
the land was originally granted to IISCO namely the construction
of a residential colony for the employees of IISCO could not be
achieved by the appellant; whether the breach of the covenant~
contained in the lease agreement would disentitle the grant of
renewal; the fact that the assignment of the land was to a private
developer who was evidently intending to use it not for the .G
original purpose for which the land was allotted to IISCO but for
commercial development; the value of the land on the date when
the renewal was sought; and that public interest would best be
subserved by ensuring that UDA realised the best possible price
for the land after following an open and transparent process. [Para H
392 SUPREME COURT REPORTS [2017] 8 S.C.R.

A 4111419-D-H; 420-A-BI
1.5 The instant case does not fall into the category of that
class of cases where a person or entity to whom the land is allotted
in the first place has fulfilled the purpose of the allotment and
seeks a renewal of the grant. For instance, where a person to
B whom the land has been allotted for residential construction
completes the construction and, upon the expiry of the term of
the lease seeks a renewal of the lease, a distinct set of
considerations will apply. Such an individual or a co-operative
society of flat purchasers may legitimately contend that having
due regard to the provisions contained in the lease document
C and in Rules 24 and 25, it would be manifestly unfair to re-auction
the land at the time of renewal. The instant case does not fall in
such a category simply because the purpose for which the land
was allotted to the company in liquidation was not the purpose
for which appellant had stepped in. Appellant could not be oblivious
D to the observations contained in the judgment of the High Court
particularly when the clause for renewal in the original lease deed
did not stipulate an absolute or indefeasible right of renewal. In
taking the view that UDA had no option but to renew the lease,
UDA has acted in a manner which betrays a total lack of
understanding of its rights and of the trust placed in it as a
E custodian of public interest. UDA has acted in a manner that has
ensured the conferment of a largesse upon the private developer
in disregard of the public interest in ensuring the disposal of lands
belonging to the authority in a transparent manner which ensures
the realization of the best possible return. The renewal of the
F lease dated 10 May 2012 for a further term of thirty years from
20 December 2012 to 21 December 2042 was manifestly flawed.
Once the renewal is seriously flawed and invalid, the conversion
of the land to freehold would in consequence also be
unsustainable. !Paras 42, 4311420-C-G; 421-G-HI
G 1.6 The public interest litigation before the High Court was
instituted on 2 July 2013. By that date, the developer had on 10
May 2012 obtained a renewal of the lease for a period of thirty
years and had applied for com·ersion of the land into freehold.
UDA executed a deed for the conversion of the leasehold land to
freehold on 12 July 2013. It is thereafter on 19 September 2013
H
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 393
SATYANARAYAN SOMANI

that appellant claims to have obtained approvals for construction A
and development on the property. Even according to appellant,
the third party transactions were entered into by it during the
pendency of the writ proceedings before the High Court. The
developer was aware of the pendency of the proceedings before
the High Court and it is in this background that the claim of his B
having created third party rights needs to be evaluated. Appellant
tendered during the course of these proceedings, a summary
containing the third party rights stated to have been created on
the land in dispute. According to the statement, the total land
available for sale is 24,688.06 square meters and the remaining
area has to be developed for roads, open spaces, gardens and C
services. The saleable area has been carved up into 178 plots.
The position which appellant claims is that out of the 178 plots
third party rights have been created in respect of 124 plots while
54 plots remain unsold; sale deeds have been executed in respect
of 67 plots; agreements to sell have been executed in respect of D
20 plots; and allotments have been made in respect 37 plots.
[Para 46)(422-D-H; 423-AJ
1. 7 The disclosures which have been made in the statement
tendered on behalf of the developer indicate that the agreements
to sell as well as the sale deeds were executed during the
pendency of the writ proceedings before the High Court. Except E
for eight sale deeds, the others have been executed after
appellant-company was served with notice of the writ proceedings
on 15 September 2014. The submission that from the statement
produced by the developer on the record it emerges that even
after the High Court reserved judgment, the developer continued F
to execute agreements to sell and sale deeds before the final
judgment came to be delivered, is borne out from the statement
which has been placed on the record by the developer. The
developer executed agreements to sell in 2014, 2015 and even
as late as January 2016 shortly before the High Court delivered
its decision on 8 February 2016. Sixty seven sale deeds, of which G
details have been furnished on the record, indicate execution of
the document of sale in 2014, 2015 and 2016. The summary
indicates that of the sale deeds, as many as 21 were executed
between November 2015 and February 2016 after judgment has
been reserved and before it was delivered by the High Court. H
394 SUPREME COURT REPORTS [2017] 8 S.C.R.

A There is an evident lack of bona fides on the part of appellant-
company. [Para 47][423-B-DI
1.8 Undoubtedly, disposal of natural resources by auction
is not a mandatory principle for, individual statutes may provide
for modalities of transfer by alternate modes which subserve
B public interest. In the instant case, Rule 5 of the 1975 Rules
provides four modalities: (i) direct negotiations; (ii) auction; (iii)
inviting tenders; and (iv) concessional terms. Where the statute
has provided for several modes of disposal, the choice among
one of the available methods must facilitate the fulfilment of public
C interest. That inter alia requires consideration being given to all
aspects of the matter including the nature and value of the land,
the purpose of the allotment and the need for the authority to
generate funds to facilitate the objects for which it was constituted,
such as planned development. The choice of one of a range of
permissible choices can never be based on the anvil of conferring
D an undeserved benefit on a commercial developer. The choice of
methods is not left to the unbridled discretion of a public authority.
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
E 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
F constitutional purpose embodied in the Directive Principles, the
considerations which weigh with it in determining the mode of
alienation should be such as would achieve the underlying object.
In certain cases, the dominant consideration is not to maximize
revenues but to achieve social good such as when the alienation
is to provide affordable housing to members of the Scheduled
G Castes or Tribes or to implement housing schemes for Below
the Poverty Line (BPL) families. In other cases where natural
resources are alienated for commercial exploitation, a public
authority cannot allow them to be dissipated at its unbridled
discretion at the cost of public interest. [Para 49][424-D-H; 425-
H A-Bl
M/S AJAR ENTERPRISES PRIVATE LIMITED v. 395
SATYANARAYAN SOMANI

1.9 In the instant case, a public body has acted oblivious to A
and in disregard of public interest. The land was originally leased
out to IISCO, a subsidiary of SAIL (government undertaking).
The purpose for allotting such a large tract of land admeasuring
43,407 square meters was to enable IISCO to construct and
develop a residential colony for its employees. The land was not B
being allotted for commercial exploitation to a developer. The
terms of the lease clearly evince the manner in which the land
was to be utilized and the consequences of breach. When IISCO
went into liquidation, the Official Liquidator placed its assets
including the leasehold land for sale. Appellant under the deed of
assignment acquired the leasehold rights for the remaining term C
of the lease on 1.09.2005 together with the rights and benefits
arising out of the original lease of 16.07.1985. The High Court
observed, while rejecting UDA's claim of forfeiture and re-entry,
that the transfer was of the residual term of seven years and that
if UDA did not intend to _renew the lease, the land would revert D
to it. There was no absolute or indefeasible right to renewal either
in IISCO or in appellant-company which succeeded to the
leasehold interest. As a matter of fact, when UDA decided to
renew the lease, it was duty bound to evaluate all aspects bearing
upon the public interest which included the. purpose for which
the land was granted under the original lease agreement; the E
extent to which the purpose had been fulfilled; whether the
original purpose underlying the grant of the land would be
subserved by the renewal sought by a commercial developer;
the market value of the land; the revenue which would be
generated for the activities of UDA if the land would be transferred
on commercial terms that would realise the best price. UDA F
choose to blink at its obligations by conferring a largesse on
appellant-company. It did so on the hypothesis that after the High
Court had rejected its objections to the assignment of the
leasehold interest, it was precluded from doing anything other
than to renew the lease. Clearly this was a misreading of the G
judgment of the High Court. The issue as to whether the lease
should be renewed was a matter distinct from whether the original
assignment of the lease in favour of IISCO to appellant-company
was valid. The mere acquisition by appellant-company of the
leasehold interest for the remainder of the term together with
H
396 SUPREME COURT REPORTS [2017] 8 S.C.R.

A the benefits of the original lease covenants, did not ipso jure entitle
appellant-company to renewal of the lease. UDA was complicit in
renewing the lease and granting an undeserved windfall on a
commercial developer. Fraud, unravels everything. The
subsequent conversion of the land to freehold in September 2013
B cannot enure to the benefit of appellant since the underlying basis
of the entire transaction stands vitiated by fraud. There can be
no manner of doubt about the principle which accepts the sanctity
of contracts. Equally, no court can be a hapless spectator when a
public authority forsakes the trust with which valuable resources
such as land under its control are impressed. Land is a scarce
C public resource. When public bodies are vested with control over
land which was acquired for facilitating plann~d development, no
authority can claim an immunity from its accountability to matters
of public interest. (Para 50J (425-C-H; 426-A-E(
1.10 The direction of the High Court is not interfered to
D the effect that the transfer charges for the deed of assignment of
lease shall be determined on the basis of the guidelines prevailing
in 2011-2012. There is no reason to interfere with the judgment
of the High Court. However, in the exercise of jurisdiction under
Article 142 of the Constitution the relief is suitably moulded so
as to ensure the protection of persons with whom the developer
E
has entered into registered sale deeds prior to the judgment of
the High Court. This is done so after finding some weight in the
equities asserted on behalf of this class of purchasers who have
registered sale deeds in their favour against the payment of full
consideration. They have taken loans from public financial
F institutions and have invested hard-earned earnings towards the
plots which they have purchased. (Paras 51, 52((426-E-F, G-H;
427-AJ
1.11 All direction issued by the High Court is confirmed
subject to the condition that the (i) rights which have been created
G in favour of third party purchasers of plots through the execution
of registered sale deeds prior to the date of the judgment of the
High Court would not be disturbed. The benefit shall only extend
to those cases found to be genuine on verification; and in respect
of third parties (other than above) with whom there are no
registered sale deeds, appellant-company shall refund the
H
. MIS AJAR ENTERPRISES PRIVATE LIMITED v. 397
SATYANARAYAN SOMANI

consideration paid by the respective purchasers within a period A
of three months together with interest at the rate of nine percent
computed from the date on which payments were received. [Para
53][427-B-D)
Re: Natural Resources Allocation (2012) 10 SCC 1 :
[2012) 9 SCR 311 - referred to. B
Case Law Reference
[2012] 9 SCR 311 referred to Para 25
CIVIL APPELLATE JURISDICTION: Civil Appeal No.10852
of2017. c
From the impugned Judgment and final Order dated 08.02.2016
passed by the High Court of Madhya Pradesh, Indore Bench in Writ
Petition (PIL) No.8199 of2013
WITH
D
Civil Appeal No.10853 and 10854 of2017.
Shyam Divan, C. U. Singh, Ravindra Shrivastava, Sr. Advs., Senthil
Jagadeesan, T. Srinavasa Murthy, Abhinav Malhotra, Ms. Shruti Iyer,
Ms. Liz Mathew, Arjun Garg, Manish Yadav, Rohit Chandra, Advs. for
the Appellants
E
Ms. Kamini Jaiswal, Pranilv Sachdeva, Jatinder Pal Singh,
Ms. Neha Rathi, Ms.Amiy Shukla, Samir Ali Khan, Ms. Sakshi Kakkar,
C.D. Singh, T. Harish Kumar, Mishra Saurabh,Advs. for the Respondents
The Judgment of the <?ourt was delivered by
DR. D. Y. CHANDRACHUD, J. 1. Leave granted. F

2. The appellant, Ajar Enterprises Private Limited ("Ajar")has
called into question a judgment of a Division Bench of the Madhya
Pradesh High Court, in its Bench at Indore, dated 8 February 2016. The
High Court (i) set aside the renewal of a lease granted by Ujjain
Development Authority ("UDA") to Ajar for the period from 21 G
December 2012 till 20 December 2042; (ii) directed that possession of
the land in dispute be taken back;(iii) that in order to fetch the best price,
the land be put to a public auction; and (iv) directed that the transfer fee
which was charged to Ajar should be fixed on the basis of the guidelines
for 2011-2012 and the differential be recovered with interest at eight H
398 SUPREME COURT REPORTS [2017] 8 S.C.R.

A percent per annum. These directions have been issued by the High Court
while entertaining a petition filed in public interest by the first and second
respondents.
3. UDA is a statutory body constituted under the Madhya Pradesh
Town and Country Planning Act, 1973. On 16 July 1985, a deed oflease
B was executed by UDA of land admeasuring 43,407.00 square meters,
situated at Sanwer Road and comprised in Nanakheda Scheme No. 23
at Ujjain in favour of a company by the name of llSCO Stanton Pipe &
Foundry Company Ltd 1("IISCO"). The term of the lease was thirty
years and an amount of Rs 4,34,070 was charged as premium. The
annual lease rent was fixed at Rs 8, 681 at the rate of two percent of the
C total premium. The salient provisions of the lease were:
(i) The purpose of the lease was to enable IISCO to construct
residential houses and develop a colony on the land;
(ii) The term of the lease was thirty years;
D (iii) The lease contemplated that it could be extended, upon the
expiry of the initial term for two further periods each of thirty
years subject to the payment of an enhanced lease rent of fifty
percent above that payable for the previous term. The clause
on renewalwas as follows :
E "The lease period and lease rent is effective from 21.12.82.
Thereafter the term of lease can be extended (renewed) for
two further periods of 30-30 years. At the time of every
extension the lease rent can be increased by 50%."
(iv) Since the land was granted on lease for the development of a
F residential colony, the lessee was ordinarilynot permitted to
transfer it until the construction was complete. Clause 4 of the
lease provided as follows :
"The lessee has been given the land to develop the colony and
construct residential houses. Therefore, until houses are
G constructed on this plot, this plot cannot be transferred to
anyone in any manner. So long as the lessee does not construct
the houses on this plot as per the sanctioned plan, he cannot
mortgage, gift or in any other manner transfer this plot without
the permission of the Authority. If the lessee wishes to transfer
1
The original name of the company was changed to Ujjain Stanton Pipe & Foundry Co.
H
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 399
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

his plot to any other person due to any special circumstances A
then on the basis of the pros and cons of the case, on condition
ofpayment of transfer fees to the Ujjain Development Authority
of 10 % on the amount that is arrived at by adding 20 times the
annual lease rent to the premium, the permission for transfer
can be given. If the transfer is desired in the interests of the B
transferor's natural justice then on deposit of transfer fee of
Rs 100/- the plot of land can be transferred. This permission
shall be given only when the lessee obtains a permission letter
from the competent authority under the urban Land Ceiling
Act, 1976 and submit it." ·
{v) The lessee had to submit building plans for approval within six r
months of receiving possession and to commei:ce construction
.within two years. An extension of time could be granted limited
to one year (Clause 5);
(vi) If construction was not commenced within the specified period,
the lessor had a right of re-entry, upon which the amount paid D
by the lessee would be refunded with a deduction of twenty
percent (Clause 6); and
(vii) The lease would be governed by other requirements of UDA,
the municipal corporation and by the bye-laws of the
government then prevailing or as would be made applicable E
from time to time (Clause 12).
4. IISCO,which was a subsidiary of Steel Authority of India Limited
(a public sector undertaking of the Union government), was ordered to
be wound up by the High Court of Judicature at Calcutta in BIFR Case
No. 503 ofl 994 instituted under the Sick Industrial Companies (Special F
Provisions) Act 1985. The Official Liquidator took over the movable and
immovable assets of the company, including the leased land in dispute.
5. On 9 May 2003, the Official Liquidator invited offers for the
purchase of the assets of IISCO including the leased land on an"as is
whereis whatever there is basis". The leasehold rights were valued at G
Rs 1.35 crores.
6. On 6 June 2003, UDA issued a notice to the Official Liquidator
stating that it had cancelled the lease and would re-enter upon the land.
The ground for cancellation was that in breach of the lease conditions,
IISCO had defaulted in the payment of the lease rent for the period H
400 SUPREME COURT REPORTS [2017] 8 S.C.R.

A from June 1995 to May 2003 and had, in addition, failed to constrnct on
a portion o~land admeasuring 14,570 square metres.
7. On 29 June 1999, UDA wrote to the Official Liquidator seeking
return of an area admeasuring 13,600 square metres on the ground that
no construction had been carried out by llSCO, under the terms of the
B lease. The Official Liquidator wrote back to the Chief Executive Officer
of UDA on 9 August 1999, stating that possession of the vacant land
could not be handed back without an order of the High Court. UnA was
advised to move the High Court for appropriate directions.
8. On 4 July 2003, a Single Judge of the Calcutta High Court
c while exercising company jurisdiction accepted the highest offer submitted
by an individual by the name of Narendra Jain in the amount of Rs 20
crores, though it was lower than the valuation of the land. The judgment
of the learned Single Judge observes that:
"From the valuation report it appears that the valuer valued the
D assets of Rs. 73,68,96,313/-. The said figure includes the value of
land, which has been valued at Rs6 l ,50,00,000/-."
The order of the Company Judge noted thus:
"I am constrained to accept the offer of Rs. 20 crores although
the same is not matching the valuation report inasmuch as the
E Official Liquidator submits that the monthly expenses for keeping
the security guards is about Rs. 1.03 lakh, and it is, further,
submitted by him that already about Rs. 75 lakhs have been spent
from his establishment fund as there is no secured creditor in the
case. It is suggested before me that unless this offer is accepted
F the valuation of the Company (in liquidation) will get further
diminished and there will beno future offer in the matter. I am,
therefore, constrained to accept the highest offer of Rs 20 crores
although it is not matching the valuation n:port."
The offer of Rs20 crores, it may be noted, was for the sale of all
G the assets of the company liquidation including the plant, machinery and
the lands held by the company, both freehold and leasehold.
9. On 22 July 2003, UDA informed the Official Liquidator that it
had cancelled the lease and re-entered on the land on 7 July 2003 as a
result of a breach of the conditions of lease. On 28 July 2003, UDA
forwarded a cheque in the amount of Rs 2,44 ,0 52 after deducting twenty
H
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 401
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

percent of the premium paid. This, it was stated was as a result of the A
failure oflISCO to utilise 30,506.50 square meters out of the leased land
admeasuring 43,407 square metres.
10. On 4August 2003, the Official Liquidator informed UDA that
·the leasehold rights had already been sold, together with the other assets
of the company, by an order dated 4 July 2003 of the High Court in B
consequence of which the cheque for refund was returned.
11. By an order dated 18 August 2003, the Company Judge rejected
an application filed by a third party for setting aside the sale of the assets
of the company liquidation. The sale consideration was, however,
enhanced from Rs20 crores to Rs 20.50 crores. The sale consideration c
is stated to have been deposited on 17 September 2003 and Ajar was
nominated by the purchaser as the entity to whom the assets which
were sold in the auction were to be transferred. According to Ajar,
possession of the land and assets was handed over to it on 30 September
2003.
D
12. Ajar, by its letter dated 29 March 2004 requested UDA to
mutate and transfer the land in its favour. UDA by its letter dated 18
May 2004 declined to do so on the ground that the lease stood cancelled
and that it had re-entered upon the land.
13. UDA filed an application before the Calcutta High Court E
objecting to the transfer of the leasehold land. A learned Single Judge of
the High Court, by an order dated 16 August 2004, declined to grant an
interim stay and directed theOfficial Liquidator to conclude the sale and
toexecutea conveyance in favour of the purchaser. In an appeal against
the order of the Company Judge, a Division Bench by an order dated 22
February 2005 directed that the status quo be maintained in regard to F
the leasehold land and expedited the final disposal of the application filed
by UDA. Eventually, the Single Judge, by an order dated 5 August 2005,
dismissed the application filed by UDA. The Single Judge held thus:
"It appears that the learned Company Judge sold the lease-hold
interest of the un-expired portion of the lease for about seven G
years. The deed of lease stipulated a renewal clause. For such
renewal clause the parties would have to agree to the modalities.
The official liquidator could not have sold any right higher than
the right enjoyed by the lessee under the Deed of Lease. The
official liquidator in fact sold such right which he derived from the H
402 SCPREME COURT REPORTS (2017] 8 S.C.R.

A company in liquidation. The property belonged to the applicant
and it would remain with the applicant. If they do not agree to the
terms and conditions after expiry of seven years the lease would
not be renewed and they would automatically get possession back.
Whether the company in liquidation constructed residential flats
or not or whether there was any violation of clause 6 or not, was
B
a question to be decided by a Civil Court. The applicant could not
have taken up this cause upon themselves to decide that there
had been in fact a violation of clause 6 and they could take
possession forcibly. The official liquidator was in possession of
the land in question at material time meaning thereby this Court
c being the winding up court was in custody of the land in question.
The applicant could not have entered into the possession without
specific leave being obtained from this Court."
In consequence, it was held that the termination of the lease and
re-entry were ofno consequence and that UDA was not entitled to seek
D possession of the land from the Official Liquidator.
14. On 1 September 2005, the Official Liquidator assigned all the
leasehold rights of IISCO in favour of Ajar. The deed of assignment
records that out of a total sale consideration of Rs 20.50 crores, the
valuation of the leased land had been apportioned at Rs 1,35,20, 183. The
E recital in the deed of assignment reads thus :
"(n) For the purpose of valuation the said property has been valued
at Rs. 1,35,20,183/-(Rupees One Crore Thirty Five lakhs Twenty
thousand One hundred Eighty Three) only being the apportioned
purchase price of the said property out of the total sale
F consideration of Rs. 20,50,00,000/-(Rupees Twenty Crores Fifty
Lacs only) as was directed to be apportioned by an order dated
6lh July 2004, passed by the Hon'ble High Court at Calcutta."
The deed of assignment records that (i) the assignment of the
leasehold land to Ajar was for the remainderof the lease term that is,
G upto 21December2012; (ii) the lease was being assigned subject to the
rights and privileges of the original lessee under the lease agreement
dated 16 July 1985. The material recitals in the deed of assignment are
thus:
"(o) In or about August, 2004 the said Ujjain Vikash Pradhikaran,
the said original lessor filed an application before the Hon'ble
H
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 403
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

High Court at Calcutta, inter-aha, Praying therein for cancellation A
of the lease of the demised lease hold property and for possession
thereof intended to be assigned hereunder. By an order dated 5
August 2005 the Hon'ble High Court in dismissing the said
application interalia held that the said lease hold land was sold by
the official liquidator, the assignor herein to the purchaser being B
the assignee herein for the residuary period of the first lease term
i.e. upto 21.12.2012. By the said order, the said application of
Ujjain Vikash Pradhikaran was dismissed.
(p) In view of the above order passed by the Honb'le High Court
at Calcutta, the demised lease hold land is capable of being assigned
by the assignor herein in favour of the assignee with effect from C
the execution of his deed upto the expiry of the residuary period
of the first term of the original deed of Lease i.e., upto 21.12.2012
with the existing terms and conditions contained therein.
(q) In the aforesaid circumstances, the Assignor is transferring
and assigning the said property to the Assignee in accordance D
with the existing terms and conditions mentioned in the said Deed
of Lease dated l61h July, 1985 referred to above and with the
rights and privileges of the Original Lessee thereunder."
Accordingly, in consideration of an amount of Rs· 1.3 5 crores, the
appellant was assigned the leasehold rights under the deed oflease dated E
16 July 1985 "with effect from the date of execution of this deed
upto the residuary period of the first term of the said original
deed of lease".
15. A Letters Patent Appeal filed by UDA against the order of
the Single Judgewas dismissed by a Division Bench of the High Court F
on 22 July 2009. The Division Bench held that UDA had knowledge that
IISCO was in liquidation and of the notice of sale. The court held that
since the properties were sold only for the residuary part of the first
term of the lease, no case for interference was made out.The delay of
UDA weighed in the balance. The findings of the Division Bench are
extracted below : G
"After considering the facts of this case and after scmtinizing the
facts in this matter, it appears to us that the appellant had knowledge
of the fact that the company has gone into liquidation and, further
notice of sale was duly published in the newspaper which is
admittedly within the knowledge of the appellant since the appellant H
404 SUPREME COURT REPORTS [2017] 8 S.C.R.

A did not take any steps in the matter for a long time. After the sale
was confirmed, the properties were handed over and that too,
only for the residuary part of the first terms of the lease. The
appellant filed this application and there is no reasons has been
(sic) shown in the petition in support of such delay caused by the
appellant.
B
In these circumstances, we have to come to the conclusion that
the appellant had due notice of the facts of this case including the
fact that the properties have been transferred and sold at this
state.
c In our considered opinion, the possession of the property cannot
be changed in any manner whatsoever since the order has given
effect to. It is to be noted that the appellant did not taken any
steps in the matter for a long period."
16. On 28 February 2011, the Governing Board of UDA resolved
D to file a Special Leave Petition before this Court. The Special Leave
Petition was dismissed on the ground of delay on 29 April 2011.
17. In the meantime,Ajar had, by its letters dated 16 February
2006 and 8 July 20 I0 requested UDA to transfer the leasehold land in its
name.
E 18. On 25 May 2011, the first respondent addressed a
communication to UDA, requesting it not to effect a mutation of the
property in the name of Ajar. On 1June2011, the Governing Board of
UDA resolved to transfer and mutate the property in the name of Ajar.
The transfer fee was to be determined in accordance with the guidelines
F prescribed by the Collector as prevalent on 22 July 2009 when the Division
Bench of the Calcutta High Court dismissed UDA's appeal. On 3 June
2011, UDAcalled upon the appellant to pay an amount of Rs 64,20,228
towards transfer fees; Rs 1,56,258 towards arrears oflease rent and Rs
1,99,833 towards interest. On 6 June 2011, Ajar paid the dues and on 7
June 2011, an agreement was executed by which the leasehold rights
G were transferred in favour of Ajar in terms of the lease deed dated 16
July 1985 and subject to the applicable rules and regulations ofUDA.
19. On 8 June 2011, Ajar wrote to UDA seeking a renewal of the
lease for a period of thirty years on a lease rent enhanced by fifty percent
over the existing lease rent. On I0 May 2012, UDA renewed the lease
H
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 405
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

in favour of Ajar for a period of thirty years from 21 December 2012 to A
20 December 2042.The lease rent for the renewed term was fixed at
Rs 13,022 per annum, representing a fifty percent enhancement over
the annual lease rent of Rs 8,681 for the original term. The lease for the
renewed term was registered and Ajar paid the lease rent for the first
fifteen years of the lease.
B
20. ln pursuance of a public notice issued by UDA on 3 December
2012 inviting applications for conversion ofleasehold lands into freehold,
Ajar applied on 4 December 2012. On 28 May 2013, UDA called
uponAjar to pay an amount of Rs 74,57,323 towards conversion fees
which Ajar deposited on 29 May 2013.
c
21. On 2 July 2013, the first and second respondents instituted a
public interest litigation before the Indore Bench of the Madhya Pradesh
High Court to challenge the deed of renewal dated 10 May 2012 and the
agreement for transfer dated 7 June 2011. The petition also sought a
direction to UDA to conduct a fresh allotment of the land by auction and
for an enquiry into alleged acts of corrnption by the officers of UDA. D
During the pendency of the writ proceedings, UDA executed a deed of
conveyance on 12 July2013 by which the land was converted to freehold.
Leave was granted by the High Court to amend the writ petition to
challenge the order of UDA dated 28 May 2013 and the deed of
conveyancedated 12 July 2013 .During the pendency of the writ E
proceedings, Ajar claims to have obtained on 19 September 2013
permissions and approvals for building upon and developing the land.
Ajar claims to have entered into registered sale deeds in respect of 67
plots and to have incurred an expenditure of Rs 18.39 crores on the
project. Ajar claims to have received notice of the writ petition on 15
September 2014. F

22. By its judgment and order dated 8 February 2016, the High
Court cancelled the deed of renewal dated 21 May 2012 executed by
UDA in favour of Ajar and directed that possession of the land be taken
over. The High Court also directed UDAto obtain the best price for the
land by putting it to public auction. UDA was also directed to calculate G
the transfer fees on the basis of the guidelines prevailing in 2011-2012
and to recover the differential together with interest at eight percent per
annum in regard to the transfer of the lease from ITSCO to Ajar.
23. The principal findings of the High Court are summarised below :
H
406 SUPREME COURT REPORTS [2017] 8 S.C.R.

A (i) Though the resolution of the Board ofUDA for the transfer of
the land was dated 3 June 2011, inexplicably, the transfer fee
was charged in accordance with the guidelines of the Collector
prevailing on 22 July 2009 (the date of the decision of the
Calcutta High Court). When the transfer of the leasehold
interest was effected on 3 June 2011, there was no justification
B
to compute the transfer fee as of 2009;
(ii) The court noted the submission of the writ petitioners that in
2011-2012, UDAhad realised a price of Rs22,777 per square
meter when it invited tenders for scheme No. 48 of Vasant
Vihar, situated in closeproximityto the land. The market value
c of the land in question in 2011-2012 would be Rs 65.11 crores.
As a result, UDA had suffered a loss of Rs 65 croreswhile
renewing the lease in favour ofAjar and thereafter converting
it into freehold;
(iii) The well-defined principles for the disposal of public land,
D emerging from the decisions of this Court, lay down that the
disposal of public property assumes the character of a trust.
The state is duty bound to ensure that it realises the best price
for the transfer ofland in order to generate funds for its welfare
activities. Inviting tenders with open participation or a public
E auction would ensure the realisation of the best price. Private
negotiations should be eschewed. It is only in exceptional cases
that the modalities of a tender or auction can be departed from,
where the state acts in pursuance of a constitutionally recognised
public purpose embodied in the Directive Principles containedin
Part IV of the Constitution;
F
(iv) UDA had incorrectly proceeded on the basis that it had no
option except to renew the lease inview of the judgment of the
Calcutta High Court. The Calcutta High Court did not hold
that UDA was bound to renew the lease.On the contrary,the
finding was that if UDA did not agree to the terms and
G conditions for renewal after the expiry of the residuary term,
the lease would not be renewed;
(v) The fact that UDA had cancelled the lease on the ground that
nsco had violated its covenants ought to have been taken
into consideration by UDA while deciding whether to renew
H the lease;
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 407
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

(vi) Though there was a clause for renewal in the original lease A
deed dated 16 July 1985, UDA ought to have taken into
consideration (a) the location of the land; (b) market value of
adjoining land;and (c) the fact that the land had not been leased
to Ajar to achieve a constitutionally sanctioned purpose under
Part IV of the Constitution. UDA ought to have made efforts B
to obtain the best available price while renewing the lease.
UDArenewed the lease on a nominal premium to confera
benefit on a private developer;
(vii) The actions of UDA were contrary to public interest and it
acted in a manner in which a responsible authority would C
conduct its affairs.
24. The judgment and order of the High Court has been questioned
in three proceedings initiated under Article 136 of the Constitution before
this Court. One of them has been initiated by Ajar Enterprises Private
Limited, the transferee of the leasehold interest and in whose favour the D
lease was initially renewed before the land was eventually converted
into freehold 2• The court has also been moved on behalfofthird party
purchasers who claim to have purchased plots from the developer. They
were not parties to the proceedings before the High Court 3• The third
set of proceedings has been initiated by UDA4 .In addition, I.A. 6 of
2017 has been filed by 54 applicants who claim to have entered into E
transactions for the sale of plots with the developer. We allow the
intervention application and have heard the learned Senior Counsel in
support.
25. Mr Shyam Divan learned Senior Counsel representing Ajar
and Mr Chander Uday Singh learned Senior Counsel representing the F
interests of purchasers have broadly adopted the same line of submissions
in assailing the judgment of the High Court. The submissions are thus:
(i) None of the purchasers of plots were impleaded, though they
were necessary parties, in the proceedings before the High Court. The
decision of the High Court seriously impacts upon their rights. The G
purchasers, it has been urged, exercised due diligence and obtained loans

'SLP (C) 7116 of2016
'SLP (C) 8145 of2016
4
SLP (C) 13455 of2016
H
408 SUPREME COURT REPORTS [2017] 8 S.C.R.

A from public sector financial institutions. Though, the High Court was
informed that eighty purchasers had paid valuable consideration for the
purchase of plots, the PIL petitioners did not implead them. The
purchasers, it has been submitted, are bona.fide purchasers, for value
without notice. At the least, if they were impleaded before the High
Court, they could have urged that the relief, if any, should be suitably
B
moulded to protect their interest;
(ii) Ajar perfected its title in stages. The approval by the Official
Liquidator was in the nature of an assignment for the remaining term of
the leasehold rights held by HSCO,and on the same tem1s and conditions
as those contained in the original lease of 16 July 1985. Ajar could
c legitimately assert a right to renew the lease on the expiration of the
original term;
(iii) All aspects of the lease including its tenure, right ofrenewal,
rates and conversion to freehold are comprehensively regulated by
statutory provisions which are devoid of any discretionary element. The
D lease deed dated 16 July 1985 is granted statutory sanction under Sections
181 and 182 of the Madhya Pradesh Land Revenue Code 1959. The
provisions for renewal contained in the original lease deed are in accord
with Rules 24 and 25 of the Madhya Pradesh NagarTatha Gram Nivesh
Vikasit Bhoomiyo, Griho, Bhavano Tatha Anya Sanrachanao Ka Vyayan
E Niyam, 1975 notified in 1977 5.Rule 25 mandates that where the period
of lease is thirty years, there shall be a right of renewal for two periods
of thirty years each subject to the payment of increased ground rent on
each renewal, not exceeding fifty percent. The clause for renewal in the
lease is enforceable both under Section 182(1) and Rule 25. Moreover
Section 181-A empowers the state government to convert leases granted
F for residential or commercial purposes in urban areas into freehold. The
state government has promulgate the Madhya Pradesh Grant of Freehold
Rights in respect of Land on Lease situated in Urban Area Rules 20 I 0.
UDA had issued a public notice inviting applications for conversion to
freehold. UDA processed as many as 425 renewals in the city ofUjjain;
G (iv) All transactions were in terms of statutory provisions and
were effected by duly registered instruments. The provisions of Sections
181, 181-A and 182 as well as tht: provisions contained in the Rules of
1977 and 2010 have not been challenged by the original petitiorn:rs before
the High Court. Hence, they were not entitled to question the mode of
H 'These mies arc referred to as the Ru ks of 1977.
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 409
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

renewal or the rate at which the renewal of the lease or conversionto A
freehold could be affected. The High Court ignored the statutory
provisions holding the field;
(v) The decision of the Constitution Bench of this Court, in re:
Natural Resources Allocation 6 indicates that a public auction is not a
mandatory requirement in all circumstances. When a statute provides B
for any other mode, other than auction or tender, such a provision must
be foll owed;
(vi) In any event, the option of an open auction or tender arises
only where it is proposed to alienate natural resources or land belonging
to or in the possession of the government or its instrumentality. There c
can be no recourse to an auction or tender where land is held by a lessee
under a lease deed protected by Sections 181 and 182,orof land which
has been converted to freehold under the 2010 Rules. In such a case,
the government does not hold a right in praesenti;
(vii) The High Court erred in ignoring the statements made by D
UDA and by the State to the effect that full market value was charged
to IISCO when the land was leased to it for building residential housing
for its officers and workmen;
(viii) Ajar obtained a sanction for its residential layout from the
Town and Country Planning Department on 19 August 2013. lt carved E
out 178 plots and has sold 124 plots out of which 67 are in accordance
with registered sale deeds;and
(ix) Ajar has obtained its interest in the leasehold land in pursuance
of a court sanctioned sale of the assets and properties of IISCO which
was in liquidation. The sanctity of contracts must be maintained. The- F
effect of the order of the High Court would be to unfairly displace the
legitimate expectations of a commercial entity which has acted in
pursuance of a court sanctioned sale in its favour.
26. On behalf of UDA, it has been urged by Mr Ravindra
Srivastava, learned Senior Counsel that it had taken all possible steps to G
cancel the lease and to take back possession of the property. Having
lost before all courts including this Court in the Special Leave Petition
under Article 136, UDA had no option but to transfer the lease. The
lease was renewed in accordance with the terms of the deed and the
• (2012) 10 sec 1
H
410 SUPREME COURT REPORTS [2017] 8 S.C.R.

A statutory rules holding the field. 425 such renewals were effected by
UDA and the land was converted to freehold pursuant to a policy of the
state government. There has been no loss to the public exchequer. UDA
acted in pursuance oflegal advice received by it. In 2005, the leasehold
rights were assigned for a consideration of Rs 1.3 5 crores.F or the purpose
B of computing the transfer fees, UDA adopted the date of the order of
the Calcutta High Court (22 July 2009) as a result of which it obtained a
further sum of Rs 64 lacs. UDA was bound by the terms of lease as
well as the 1977 Rules while effecting renewal and it could not have
demanded the market value of the land in 2012. The conversion to
freehold is in accordance with the Rules of 2010. UDA issued
C advertisements for such conversion and approved as many as 152
properties for conversion to freehold.
27. On the other hand, it has been urged on behalf of first and
second respondents by Ms Kamini Jaiswal learned counsel that :
(i) According to the Rules of 1977, land can be allotted by only
D four modes: (i) by direct negotiations; (ii) by auction; (iii) by tender; or
(iv) under concessional terms. In the present case, the land was
transferred to IISCO on concessional terms.Upon a default by IISCO
ofits obligations under the original lease deed, UDA cancelled its allotment
and re-entered upon the land. The Official Liquidator could not have
E conveyed a better title than that which was held by IISCO. The fresh
agreement between UDA and Ajar was for th~ residuary term of the
original lease namely, for seven years ending on 20 December 2012.
Under Rule 25, only a person holding a lease of thirty years is eligible for
renewal and hence Ajar was not entitled to renewal of the lease;
F (ii) The Calcutta High Court in its order dated 5 August 2005
noted that the leasehold interest of lISCO was being conveyed for the
remaining term of seven years after which it would be at the absolute
discretion ofUDA to determine whether or not to renew the lease;
(iii) When the lease of Ajar expired in December 2012, UDAas a
G public authority fairly ought to have protected the public interest by bearing
in mind: (a) the nature of the lease and the original purpose of the allotment
ofland to IISCO; (b) the default by IISCO; (c) the order of the Calcutta
High Court which recognised that the lease was being assigned only for
the residual term after which UDA could decide as to whether it should
be renewed; (d) public interest; and (e) considerations of protecting the
H revenue;
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 411
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

(iv) Under the terms of the lease dated 16 July 1985, there was A
no automatic right of renewal. Suchrenewal clauses are meant for
leaseholders who have constructed houses or buildings on leasehold land.
When land is alienated for commercial gain, a policy which does not
maximize the return for a public body would be violative ofArticle 14. In
the present case, UDA was not acting in pursuance of a goal enshrined B
in Part IV of the Constitution;
(v)Ajar, acting as a builder and developer intended to develop the
lan(j in a commercial venture, contrary to the purpose for which the land
was allotted to USCO. UDA by renewing the lease and converting it to
freehold land, has virtually handed over a huge tract admeasuring 43,407 C
square meters to a private developer for a negligible price;
(vi) UDA hurriedly effected the renewal for thirty years despite
legal notices issued by the first and second respondents.The hurried
conversion of the land to freehold indicates ma/a fides. The CEO of
UDA who took these decisions has nearly twenty corruption cases D
pending against him;
(vii) The third party purchasers cannot obtain a better title than
Ajar. As a matter offact,Ajar ought to have informed the buyers of the
pending writ proceedings. Ifthe buyers have been informed, they have
dealt with the plots at their own peril.If they have not been informed, E
Ajar must make good the loss by returning the entire sale consideration
together with interest; and
(viii) From the documents produced before this Court by Ajar it
emerges that nearly one~fourth of the sale deeds were executed post
September 2015 after the hearing in the writ petition had concluded. F
Ajar has hence acted with a lack of bona fides only to defeat the final
orders that would be passed in the public interest petition.
28. These submissions need to be considered,
29. Chapter XXlll of the Madhya Pradesh Land Revenue Code G
1959 is titled "Government Lessees and Service Land". Section 181, as
its marginal note indicates, deals with government lessees. Sub-section
1 of Section 181 provides as follows :
"181. Government Lessees.-{ 1) Every person who holds land
H
412 SUPREME COURT REPORTS [2017] 8 S.C.R.

A from the State Government or to whom a right to occupy land is
granted by the State Government or Collector and who is not
entitled to hold land as a bhumiswami shall be called a Government
lessee in respect of such land".
Section 182 provides for the rights and liabilities of government
B lessees:
"182. Rights and liabilities of a Government lessee.-
( I) A Government lessee shall, subject to any express provisions
in this Code, hold his land in accordance with the terms and
conditions of the grant, which shall be deemed to be a grant within
c the meaning of the Government Grants Act, 1895 (XV of 1895);
(2) A Government lessee may be ejected from his land by order
of a Revenue Officer on one or more of the following grounds,
namely : - (i) that he has failed to pay the rent for a period of
three months from the date on which it became due; or (ii) that he
D has used such land for purposes other than for which it was
granted; or (iii) that the term of his lease has expired; or (iv) that
he has contravened any of the terms and conditions of the grant
provided that no order for ejectment of a Government lessee under
this subsection shall be passed without giving him an opportunity
E ufbeing heard in his defence".
Section 181-A provides for the conve1~ion ofleasehold rights into
freehold and is in the following terms :
"Conversion of lease hold right into free hold right-
Notwithstanding anything contained in Chapter VI and this Chapter
F of the Code, the State Government or any officer authorised by
the State Government may convert various leases granted for
residential and commercial purposes in urhan areas in tu free: hold
in such manner as may be prescribed."
30. These provisions indicate that a government lessee is a person
G who holds land from the state government or to whom a right ofoccupation
is granted by government and who is not entitled to hold land as a
bhumiswami. Subject to the express provisions contained in the Code, a
government lessee holds land in accordance with the terms and condition~
of the grant. The grant is deemed to be a grant within the meaning 0fthe
Government Grants Act 1895. Ejcctment of a government lessee can be
H
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 413
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

on one or more of the grounds specified in sub-section 2 of Section 182; A
which are : (i) failure to pay the rent for a period of three months after it
has become due; (ii) use of land for purposes other than that for which
it was granted; (iii) expiry of the term of the lease; and (iv) contravention
of the conditions of the grant:
31. The Rules of 1977 contain elaborate provisions for the transfer B
of government land vested in or maintained by the Town and Country
Development Authority and in respect of other land. Rule 3 requires the
general or special sanction of the state government to the transfer of
government land which has been vested in or which is maintained by the
Authority. Under Rule 4 all other land shall be transferred in accordance
with the rules which follow. Four modes have been stipulated in Rule 5 c
for transfer of Authority land. These are : (i) direct negotiations; (ii)
public auction; (iii) invitation of tenders; and (iv) on concessional terms.
If any other mode is to be used, Rule 5(A) (inserted on 26 September
2005) stipulates that the Director Town and Country Planning Department
shall forward his opinion to the state government which shall take a D
decision on the proposal.
32. The rules contain specific provisions in regard to the modalities
to be followed for the disposal of land. Rule 6 adverts to the procedure
where land is disposed of by direct negotiations. Rule 6 inter alia provides
for (i) the mode of fixing the premium by the authority in accordance E
with a scale of premium sanctioned by the government; (ii) due publicity
of the proposed negotiations in newspapers and in stipulated public
offices; (iii) invitation of offers accompanied by the stipulated earnest
money deposit; (iv) procedure to be followed where more than one person
makes an offer to take on lease the same plot; (v) mode of deposit of the
balance premium. Rule 7 provides for the fixation of premium after the F
authority has auctioned a few plots of each category in the layout and
the sanction of the state government has been obtained. Rule 6 indicates
that even when the authority embarks upon direct negotiations for the
transfer oflands vested in it, it is required to ensure adequate publicity
for a proposed disposal of land. This ensures that competing offers are G
duly considered. Even in regard to the fixation of the premium, the
authority is not left to its own discretion and the manner of fixing premium
is indicated in the rules.
33. Similarly, Rules 8 to 17 embody detailed provisions in regard
to the transfer ofland by auction. Rule 18 provides for the modalities to H
414 SUPREME COURT REPORTS [2017] 8 S.C.R.

A be followed in disposing oflands by inviting tenders. Rule 19 allows the
authority, with the previous permission of the state government, to lease
out land on concessional terms to a public institution or body registered
under any law for the time being inforce. Rule 20 stipulates that ordinarily
no lease or sale of land on concessional terms shall be allowed for
B purposes other than a charitable purpose such as a hospital, educational
institution and orphanage. Under Rule 22, every lease of land on
concessional terms is subject to the condition that ifthe land leased or
sold is not utilized within three years for the purpose for which it was
given, the authority shall have the power to cancel the lease and to
resume possession.
c Rules 24, 25 and 26 provide as follows :
"24. Subject to provision of these rules every transfer of land
shall be made by lease and every lease in respect of any piece of
Authority land shall be either for 30 years or 99 years as may be
determined by the Authority with the right of renewal by the lessor.
D
25. Where the period of lease is fixed at 30 years there shall be
right ofrenewal for 2 further periods of 30 years each subject to
payment of increased ground rent on each renewal not excee.ding
50 percent.

E 26. Where the purchaser by an application in writing requests the
Authority to convert the period oflease from 30 years to 90 years,
the Authority may do so after charging in addition 15 percent of
the premium fixed for 30 years oflease with proportionate increase
in annual ground rent."

F
The Rules in Hindi are set out below :
24. f-1 f.liFn ~ ~iit1Hi att:znfl;r '8i) ~.1l 1!11 • • ~ m ~ iiITT!'11
om ~ 'jJ'l If; f.lml 'IT'! 1\1 WiA1 'i ~ ~ m<ii 30 <lllf If; Foil? m99 ~ If; Foil?
g)in~~lllfit.m!ilRl~fill<rllif!'lwti!l-~~11';~~

G mi.

25. iilif ~ <t ~301'4 f.mo Ill< <!l ~ nl ~ i!i1 ~.

~ lR ~ ~ 'l·\J!Ci!i $so mmi ij 3fM illT !fKlR il1"l $ 3lUlllR '8i) r
$ 30 1lli! 1fil iii Ji!H!R'l1lf1Wl'i If; fell( m.
H
.MIS AJAR ENTERPRISES PRIVATE LIMITED v. 415
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

A
2.s. iil1! Wmi Mil~ • ;m ~ ~ qi <fi'I ~ .m 30 'l1f ~ 99
IA il «q~11Ma ~ ~ ~ m*-n im if! ~ . 30 ll!!'T ~ ~ ~ ~ f.Rri:I
~'!'I?~ !J!l 15~ ~ ~ ~·~ ~ $wmi.
~p~tl~~~~.~~-.
B
34. Rule 24 stipulates that every transfer ofland has to be (subject
· to the provisions contained in the rules) by lease. Every lease has to be
either for thirty years or ninety nine years as determined by the authority
with a right of renewal by the lessor. Rule 24 indicates that it is subject
to the provisions contained in the Rules. Moreover, while Rule 24 does C
contemplate a provision for renewal, the expression "right of renewal by
the lessor" is of significance. The provision does not embody an absolute
or indefeasible right ofrenewal. Undoubtedly, a development authority
as a public body cannot act arbitrarily or at its own whims, in deciding
whether or not to renew the lease. Its decisions must be guided by public D
interest. Public interest postulates both protecting the interests of the
authority and ensuring fairness to the leaseholder who may have
constructed on the land in pursuance of the leasehold. Neither Rule 24
nor Rule 25 can be read to divest the authority of the element of discretion
on whether to renew the lease. However, exercise of discretion must
meet the touchstone ofArticle 14 of the Constitution. As a public authority, E
the decision must be fair, reasonable and guided by public interest. Under
Rule 25, where the period of lease is thirty years, renewal is provided
for two terms, each of thirty years subject to the payment of ground rent
enhanced on the occasion of each renewal by an amount not exceeding
fifty percent. Rules 24 and 26, read together indicate the extent of the F
enhancement in ground rent where the lease is renewed.
35. Now it is in this background that it would be necessary to
appreciate the facts pertaining Jo the acquisition of the land and its
allotment to IISCO under the original lease agreement dated 16 July
1985. UDA intended to prepare a town development scheme for the G
development of residential colonies, commercial centres, public offices
and public amenities - among other things - for which an area bound by
(i) Ujjain Dewas Road; (ii) Ujjain Sanwer Road; and (iii) Government
Engineering College Road was proposed. A declaration was issued under
Section 50(2) of the Madhya Pradesh Nagar Tatha Gram Nivesh
H
416 SUPREME COURT REPORTS [2017] 8 S.C.R.

A Adhiniyam, 1973 on 18 August 1977 which was gazetted on 23 September
1977. On 20 January 1978, a notice was issued under Section 50(3)
inviting objections and suggestions to the draft development scheme. On
17 June 1978, a notification was issued under Section 50(7) specifying
the lands included in the scheme. The notification was published in the
B Gazette on 11 August 1978.
36. Subsequently, a notification under Section 4( 1) of the Land
Acquisition Act 1894 was issued on 20 January 1979 which was published
in the Gazette on 16 February 1979. Under the notification 275 hectares
of land were proposed to be acquired. A declaration under Section 6
was issued on 20 March 1979 which was gazetted on 13 April 1979. A
C total area admeasuring 275 hectares was acquired in four phases. In the
first phase, 150.856 hectares of land were acquired against a
compensation of Rs 61.35 lacs at an average rate of acquisition of Rs
4.06 per square meter. The subject land, it has been stated, was taken
possession of on 19 May 1979 and 26 May 1979. The land owners had
D • claimed compensation of Rs 7000 per bigha (Rs 3.34 per square meter)
for some part and Rs 6000 per bigha (Rs 2.87 per square meter) for the
remaining land. These rates were agreed upon and compensation was
paid in 1979. The premium for the grant of leasehold interests to IISCO
was fixed at Rs 10 per squaremetre, excluding development charges.
UDA claims on this basis that the premium to IISCO was charged at a
E market rate. What is, however of significance is that UDA has not
disclosed before this Court the rate at which other adjoining lands were
transferred.
37. The original lease deed dated 16 July 1985 was executed in
favour oflISCO specifically for the purpose of the constructing residential
F houses and for the development of a colony. The total extent of the land
leased was 43,407 squaremeters. The premium was Rs 4,34,070 with
an annual lease rent of Rs 8681 computed at two percent of the premium.
Under the terms of the lease, there was a prohibition on the transfer of
the land unless the lessee, which had been granted the land to develop a
G colony and construct residential houses had done so. In the event that
the lessee wished to transfer the land due to 'special circumstances',
UDA could consider such a request subject to the payment of stipulated
transfer fees. The original lease agreement contemplated that the term
of the lease could be renewed for two further periods, each of thirty
years, with an enhancement of the lease rent at the time of every renewal.
H
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 417
SATYANARAYA~ SOMANI [DR. D. Y. CHANDRACHUD, J.]

We have duly considered both English translation of the clause for renewal A
as set out in the lease deed annexed to these proceedings as well as the
original in Hindi which read as follows :
" 1,_The above land is being given on lease for first 30 years for
construction of residential houses on lease.
The lease period is ineffective from 21.12.82. Thereafter the term 8
of lease can be extended (renewed) for two further periods of
30-30 years. At the time of every extension the lease rent can be
increased by 50 %. "

i. eftl m~oll\;f ~ ~ 21.12.a2 'f!ll'lJ!lillr! ~.~~ill?.~~ <fil • 30.30 c
lfll'lii 1R1l <:T ~ ~ (~J ii!1 ~. m ~ Wlll • lffl so mami oll\;f ~
~ii!!<Jl!iin.

38. A close reading of the clause for renewal would make it
abundantly clear that there was no absolute or indefeasible right of D
renewal. The language contained in the clause for renewalindicates that
parties contemplated that the term of the lease could on its expiry on 20
December 1982 be renewed for two further terms each of thirty years.
As discussed above, Rule 24 of the 1977 Rules indicates that subject to
the provisions of the Rules, every transfer would be by way oflease; the E
lease would be either for thirty years or ninety nine years as determined
by the authority which would be renewal by the lessor. Rule 25 posited,
in the case of a lease for a term of thirty years, that there would be a
right ofrenewal for two further periods each of thirty years subject to
the payment of enhanced ground rent not exceedirig fifty percent. A
large tract of land admeasuring 43,407 square metres was granted on F
lease to it with a specific purpose of constructing residential houses and
for developing a colony. If land is proposed to be granted by direct
negotiations [as stipulated in Rule 5(a)] the modalities are prescribed in
cRule 6 of the 1975 Rules. These modalities include (i) fixation of the
premium in accordance with the general or special sanction of the state G
government to the scale of premium; (ii) due publicity of the proposal to
dispose ofland by the authority by negotiations, in atleast two newspapers
one of which should be a local Hindi newspaperand in another newspaper
· that has wide circulation in the state together with the publication of
notices in prominent public offices; (iii) submission of offers together
with earnest money depositnot less than one-fifth of the premium and; H
418 SUPREME COURT REPORTS [2017] 8 S.C.R.

A (iv) procedure to be followed where more than one offer is received.
UDA has in its additional affidavit dated 14 August 2017 filed in these
proceedings adverted to the manner in which the first phase of land
admeasuring 150.856 hectares was acquired against the payment of
compensation and the allotment of land on lease to IISCO. UDA has
B produced no material to indicate that it had followed the procedure laid
down in Rule 6 of the 1975 Rules when it proceeded to make the original
allotment in favour of IISCO. While UDA claims that the land was
allotted to IISCO at Rs 10 per square metre excluding development
charges "without any concession", it has remained silent on the rates at
which other adjoining land was allotted to parties other than IISCO.
C There is intrinsic merit in the submission which has been urged by Ms
Kamini Jaiswal, learned counselfor the first and second respondents
that the allotment in the present case was not referable to Rule 5(a)
which speaks of a transfer of land by direct negotiations. Since the
allotment to IISCO was neither by way of public auction under Rule
D 5(b) nor by inviting tenders under Rule 5(c) the allotment would only be
referable to Rule 5(d) which is an allotment on concessional terms. The
power to grant land on concessional terms is subject to Rule 19 under
which a grant is contemplated to a public institution or body registered
under any law for the time being in force. Ordinarily, as Rule 20
prescribes, such a grant can be made only for charitable purposes. The
E expression 'ordinarily' indicates a general though not an invariable or
mandatory requirement. This aspect of the matter, in our view, is of
importance since the purpose for which the land which was granted to a
subsidiary of a publicsector undertaking was the development of a
residential colony, evidently for the benefit of the employees ofllSCO.
F 39. When IISCO went into liquidation, its assets and properties
including the leasehold interest, were put up for sale under the auspices
of the Official Liquidator. When the Official Liquidator issued a notice
on 9 May 2003, UDA informed him on 6 June 2003 that it was cancelling
the allotment of the land for violation of the terms of the lease both on
account of a default in the payment of the lease rent and because of a
G violation of the lease condition mandating construction on the land. The
Official Liquidator was informed of the re-entry by UDA. After the
Calcutta High Court had accepted the highest bid for the sale of the
assets of the company in liquidation, UDA raised an objection before the
High Court by filing an application 7•
H 7
CA 520/2014 in B!FR Case No 503/2003
M/S AJAR ENTERPRISES PRIVATE LIMITED v. 419
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

40. The learned Company Judge in his judgment dated 5 August A
2005 clearly indicated that what was sold was the leasehold interest in
the unexpired portion of the lease which was to still run for a period of
seven years. While noting that the deed of lease contains a clause for
renewal, the Calcutta High Court carefully noted that: "for such renewal
clause the parties would have to agree to the modalities". The B
Official Liquidator was held to have assigned the interest of the company
liquidation in the leasehold land. The Calcutta High Court noted that if
UDA did not agree to the terms and conditions for renewal after the
expiration of seven years, the lease would not be renewed and UDA
"would automatically get possession back". It was in this view of
the matter that the High Court did not enquire into the question as to C
whether there, was any breach by the company in liquidation of its
obligations under the original lease deed. The judgment of the Single
Judge was confirmed in appealby the Division Bench and eventually a
special leave petition was dismissed by this Court as well.
41. When UDA decided to renew the lease it proceeded on the D
basis that after the decision of the Calcutta Hjgh Court, it had no option
but to renew the lease. Even before this Court, the submission ofUDA
is that once its objections were overruled by the Calcutta High Court it
had no option but to renew the lease. This submission betrays a lack of
understating of the judgment of the Calcutta High Court as well as of
the terms of the original lease. The judgment of the Calcutta High Court E
made it abundantly clear both to the assignee who had successfully bid
for the leasehold interest as well as to UDA that what was being
transferred was the interest of the company liquidation under the lease
deed dated 16 July 1985. Undoubtedly, this comprised besides the residue
of the unexpired term of seven years, the benefit of the original lease F
agreement which contains a renewal clause.However, both on the
interpretation of that clause by the Calcutta High Court as well as on the
plain terms of the clause, it is evident that there was no indefeasible right
of renewal. The clause for renewal provided that the lease could be
renewed, not that it must or shall be renewed. Moreover, Rules 24 and
25 of the 1977 Rules cannot be read to preclude UDA, as the lessor, G
from having due regard to all relevant circumstances bearing upon the
public interest while deciding whether to renew the lease. Several aspects
bearing upon the public interest were required to be borne in mind. These
included : firstly, the fact that the purpose for which the land was originally
granted to llSCO namely the construction of a residential colony for the H
420 SUPREME COURT REPORTS [2017] 8 S.C.R.

A employees of IISCO could not be achieved by Ajar; secondly, whether
the breach of the covenants contained in the lease agreement would
disentitle the grant of renewal;thirdly, the fact that the assignment of the
land was to a private developer who was evidently intending to use it not
for the original purpose for which the land was allotted to IISCO but for
commercial development; fourthly, the value of the land on the date
B
when the renewal was sought;and fifthly that public interest would best
be subservedby ensuring that UDA realised the best possible price for
the land after following an open and transparent process.
42. We must note at this stage that the present case does not fall
into the category of that class of cases where a person or entity to
c whom the land is allotted in the first place has fulfilled the purpose of the
allotment and seeks a renewal of the grant. For instance, where a person
to whom the land has been allotted for residential constrnction completes
the constrn;tion and, upon the expiry of the term of the lease seeks a
renewal of thelease,a distinct set of considerations will apply.Such an
D individual or a cooperative society of flat purchasers may legitimately
contend that having due regard to the provisions contained in the lease
document and in Rules 24 and 25, it would be manifestly unfair to re-
auction the land at the time of renewal. The present case does not fall in
such a category simply because the purpose for Nhich the land was
allotted to the company in liquidation was not the purpose for which Ajar
E had stepped in. Ajarcould not be oblivious to the observations contained
in the judgment of the Calcutta High Court particularly when the clause
for renewal in the original lease deed did not stipulate an absolute or
indefeasible right ofrenewal. ln taking the view that UDA had no option
but to renew the lease, UDA has acted in a manner which betrays a
F total lack of understanding of its rights and of the trnst placed in it as a
custodian of public interest. UDA has acted in a manner that has ensured
the conferment of a largesse upon the private developer in disregard of
the public interest in ensuring the disposal of lands belonging to the
authority in a transparent manner which ensures the realization of the
best possible return. The renewal of the lease dated I 0 May 2012 for a
G further term of thirty years from 20 December 2012 to 21 December
2042 was manifestly flawed.
43. The conversion of the land to freehold in favour of Ajar has
evidently followed upon the renewal of the lease deed infavour of Ajar
on I0 May 2012. Rule 5 of the 2010 Rules for the grant of freehold
H rights provides as follows:
M/S AJAR ENTERPRISES PRIVATE LIMITED v. 421
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

"5. Class of land eligible for conversion -Any land situated in an A
urban area and which is, -
(a) Granted on leasehold basis for a period of thirty years or more
by the State Government or by an Officer authorised to do so for
residential or commercial purpose; or
B
(b) given on leasehold right of thirty years or more for residential
or commercial purpose, by virtue of a lease executed in favour of
any person by the Madhya Pradesh Housing Board or a
Development Authority or a Housing Co-operative Society on
producing of a no-objection certificate from such Board or
Authority or Society, as the case may be, shall be eligible for C
conversion :
Provided that such land as has been allotted without charging full
premium as prescribed under the Revenue Book Circular shall
not be eligible for conversion :
D
Provided fu1ther that land allotted to an urban local body shall
note be eligible for conversion :
Provided also that no such leasehold land shall be converted whose
lease conditions specifically prohibit conversion or on which
leasehold rights have accrued under the Madhya Pradesh Nagariya E
Kshetro Ke Bhoomihin Vyakti (Pattadhruti Adhikaron Ka Pradan
Kiya Jana) Adhiniyam, 1984 (No. 15 of 1984) or Rajiv Gandhi
Patta Aashtya Yojana or Mukhyamantri Aashrya Yojana."
Both Clauses (a) and (b) of Rule 5 stipulate that, to be eligible for
conversion to freehold, the land in an urban area should have been granted F
on a leasehold basis for a period of thirty years or more.In the present
case, the conversion to freehold on 12 July 2013 has its foundation in the
lease deed dated 10 May 2012 under which the term of the lease was
renewed for a period of thirty years from 21 December 2012 to 20
December 2042. But for the renewal, the term of the original lease
expired on 20 December 2012. Once the renewal which was granted in G
favour of Ajar is seriously flawed and invalid, the conversion of the land
to freehold would in consequence also be unsustainable.
44. The third party purchasers were not partiesto the proceedings

H
422 SUPREME COURT REPORTS [2017) 8 S.C.R.

A before the High Court. However, we have heard them in the present
proceedings both on the merits of the decision of the High Court as well
as on the equities which they assert in their favour. In so faras the validity
of the renewal is concerned that is something which concerns Ajar,
through whom the purchasers assert their claim. However, leaving aside
B technicalities, we have heard them on all aspects.
45. The judgment of the High Court has been assailed on the
ground that the proceedings were concluded without furnishing third
party purchasers an opportunity of being heard. The submission that
there has been a violation of the principles of natural justice has been
urged by both Ajar as well as on behalf of the purchasers. The interests
C of the purchasers have been pursued both in a special leave petition and
in the interim application. The purchasers of plots claim their interest
through the developer.
46. It is necessary to note in this context that the public interest
litigation before the High Court was instituted on 2 July 2013. By that
D date, the developer had on 10 May 2012 obtained a renewal of the lease
for a period of thirty years and had applied for conversion of the land
into freehold. UDA executed a deed for the conversion of the leasehold
land to freehold on 12 July 2013. It is thereafter on 19 September 2013
that Ajar claims to have obtained approvals for construction and
E development on the property. Even according to Ajar, the third party
transactions were entered into by it during the pendency of the writ
proceedings before the High Court. The developer was aware of the
pendency of the proceedings before the High Court and it is in this
background that the claim of his having created third party rights needs
to be evaluated. Ajar tendered during the course of these proceedings, a
F summary containing the third party rights stated to have been created on
the land in dispute. According to the statement, the total land available
for sale is 24,688.06 square meters and the remaining area has to be
developed for roads, open spaces, gardens and services. The saleable
area has been carved up into 178 plots. The position which Ajar claims
G is as follows :
(i) out of the 178 plots third party rights have been created in
respect of 124 plots while 54 plots remain unsold;
(ii) sale deeds have been executed in respect of 67 plots;
(iii) agreements to sell have been executed in respect of20 plots;
H and
M/S AJAR ENTERPRISES PRIVATE LIMITED v. 423
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

(iv) allotments have been made in respect 37 plots. A
47. The disclosures which have been made in the statement
tendered on behalf of the developer indicate that the agreements to sell
as well as the sale deeds were executed during the pendency of the writ
proceedings before the High Court. Except for eight sale deeds, the
others have been executed after Ajar was served with notice of the writ B
proceedings on 15 September 2014. Ms Jaiswal urged before the court
that from the statement produced by the developer on the record it
emerges that even after the High Court reserved judgment, the developer
continued to execute agreements to sell and sale deeds before the final
judgment came to be delivered. This submission is borne out from the C
statement which has been placed on the record by the developer. The
developer executed agreements to sell in 2014, 2015 and even as late as
January 2016 shortly before the High Court delivered its decision on 8
February 2016. Sixty seven sale deeds, of which details have been
furnished on the record, indicate execution of the document of sale in
2014, 2015 and 2016. The summary indicates that of the sale deeds, as D
many as 21 were executed between November2015 and February 2016
after judgment has been reserved and before it was delivered by the
High Court. There is an evident lack of bonafideson the part of Ajar.
48. A Constitution Bench of this Court has held in its decision in
re: Natural Resources (supra) that auction is not the onty eermissible E
means for the disposal of natural resources. The court noticed that
legislation does permit or prescribe methods other than auction, Justice
DK Jain delivering the judgment of four judges held that:
"149 ... auction as a mode cannot be conferred the status of a
constitutional principle. Alienation of natural resources is a policy F
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
maximizing private entrepreneurs, adoption of means other than G
those that are competitive and maximize revenue may be arbitrary
and face the wrath ofArticle 14 of the Constitution. Hence, rather
than prescribing or proscribing a method, we believe, a judicial
scrutiny of methods of disposal of natural resources should depend

H
424 SUPREME COURT REPORTS [2017) 8 S.C.R.

A on the facts and circumstances of each case, in consonance with
the principles which we have culled out above. Failing which, the
Court, in exercise of power of judicial review, shall term the
executive action as arbitrary, unfair, unreasonable and capricious
due to its antimony with Article 14 of the Constitution."
B Justice Jagdish Singh Khehar (as the learned Chief Justice then
was) in his concurringjudgment held that:
"200. 1 would therefore conclude by stating that no part of the
natural resource can be dissipated as a matter of largess, charity,
donation or endowment, for private exploitation. Each bit ofnatural
c 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
D set of citizens, for that would not be fair or reasonable."
49. Undoubtedly, disposal ofnatural resources by auction is not a
mandatory principle for, as the Constitution Bench held, individual statutes
may provide for modalities of transfer by alternate modes which subserve
public interest. In the present case, as we have noted, Rule 5 of the 1975
E Rules provides four modalities: (i) direct negotiations; (ii) auction; (iii)
inviting tenders; and (iv) concessional terms. Where the statute has
provided for several modes of disposal, the choice among one of the
available methods must facilitate the fulfilment of public interest. That
inter alia requires consideration being given to all aspects of the matter
F including the nature and value of the land, the purpose of the allotment
and the need for the authority to generate funds to facilitate the objects
for which it was constituted, such as planned development. The choice
of one of a range of permissible choices can never be based on the anvil
of conferring an undeserved benefit on a commercial developer. The
choice of methods is not left to the unbridled discretion of a public
G authority. 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
H intended to achieve the welfare of the community, the considerations
MIS AJAR ENTERPRISES PRIVATE LIMITED v. 425
SATYANARAYAN SOMANI [DR. D. Y. CHANDRACHUD, J.]

which would govern would be different from those when it alienates A
natural resources for commercial exploitation. When a public body is
actuated by a constitutional purpose embodied in the Directive Principles,
the considerations which weigh with it in determining the mode of
alienation should be such as would achieve the underlying object. In
certain cases, the dominant consideration is not to maximize revenues
8
but to achieve social good such as when the alienation is to provide
affordable housing to members of the Scheduled Castes or Tribes or to
implement housing schemes for Below the Poverty Line (BPL) families.
In other cases where natural resources are alienated for commercial
exploitation, a public authority cannot allow them to be dissipated at its
. unbridled discretion at the cost of public interest. C
50. The present case is indeed an illustration of a situation where
a public body has acted oblivious to and in disregard of public interest.
The land was originally leased out to IISCO, a subsidiary of SAIL (an
undertaking of the Government oflndia). The purpose for allotting such
a large tract of land admeasuring 43,407 square meters was to enable D
IISCO to construct and develop a residential colony for its employees.
The land was not being allotted for commercial exploitation to a developer.
The terms of the lease clearly evince the manner in which the land was
to be utilized and the consequences of breach. When IISCO went into
liquidation, the Official Liquidator placed its assets including the leasehold
land for sale. Ajar under the deed of assignment acquired the leasehold E
rights for the remaining tenn of the lease on 1 September 2005 together
with the rights and benefits arising out of the original lease of 16 July
1985. The Calcutta High Court had clearly and expressly observed,
while rejecting UDA's claim of forfeiture and re-entry, that the transfer
was of the residual term of seven years and that if UDA did not intend F
to renew the lease, the land would revert to it. There was no absolute or
indefeasible right to renewal either in IISCO or in Ajar, which succeeded
to the leasehold interest. As a matter of fact, when UDA decided to
renew the lease, it was duty bound to evaluate all aspects bearing upon
the public interest which included (i) the purpose for which the land was
granted under the original lease agreement; (ii) the extent to which the G
purpose had been fulfilled; (iii) whether the original purpose underlying
the grant of the land would be subserved by the renewal sought by a
commercial developer; (iv) the market value of the land; (v) the revenue
which would be generated for the activities ofUDA if the land would be
H
426 SUPREME COURT REPORTS [2017] 8 S.C.R.

A transfeITed on commercial terms that would realise the best price. UDA
choose to blink at its obligations by conferring a largesse on Ajar.It did
so on the hypothesis that after the Calcutta High Court had rejected its
objections to the assignment of the leasehold interest, it was precluded
from doing anything other than to renew the lease. Clearly this was a
misreading of the judgment of the Calcutta High Court. The issue as to
B
whether the lease should be renewed was a matter distinct from whether
the original assignment of the lease in favour of IISCO to Ajar was
valid. The mere acquisition by Ajar of the leasehold interest for the
remainder of the term together with the benefits of the original lease
covenants, did not ipso jure entitle Ajar to renewal of the lease. UDA
C was complicit in renewing the lease and granting an undeserved windfall
on a commercial developer. Fraud, it is well-settled unravels everything.
The subsequent conversion of the land to freehold in September 2013
cannot enure to the benefit of Ajar since the underlying basis of the
entire transactionstands vitiated by fraud. There can I'..: nu manner of
D doubt about the principle which accepts the sanctity of contracts. Equally,
no court can be a hapless spectator when a public authority forsakes the
trust with which valuable resources such as land under its control are
impressed. Land is a scarce public resource. When public bodies are
vested with control over land- in this case over land which was acquired
for facilitating planned development, no authority can claim an immunity
E from its accountability to matters of public interest.
51. We will not interfere with the direction of the High Court to
the effect that the transfer charges for the deed of assignment of lease
shall be determined on the basis of the guidelines prevailing in 2011-
2012. The relevant date would have to be 7 June 2011 on which the
F deed of assignment was executed by UDA.
52. For the above reasons, we find no reason to interfere with the
judgment of the High Court. However, we must, in the exercise of our
· jurisdiction under Article 142 of the Constitution suitably mould the relief
so as to ensure the protection of persons with whom the developer has
G entered into registered sale deeds prior to the judgment of the High
Court. We have done so after finding some weight in the equities asserted
on behalf of this class of purchasers who have registered sale deeds in
their favour against the payment of full consideration. We have been
informed that they have taken loans from public financial institutions and
have invested hard-earned earnings towards the plots which they have
H
MIS AJAR ENTERPRISES PRIVATE LIMltED v. . . 427 ·
SATYANARAYAN SOMANI,[DR. D. Y. CHANDRAC}:IUD, J.]

purchased. In the exercise of the power under Article 142 of the A-
Constitution, the court has the duty to render completejustice.
53. In consequence we confirm all the direction~ issued by the
High Court subject to the following:
(i) rights which have been. created in favour of third party
purchasers of plots through the execution ofregistered sale deeds prior B ·
to the date of the judgment of the High Court shall not be disturbed;
(ii) UDA shall through its Chief Officer verify the correctness of
the statement submitted by Ajar that it has executed sixty seven registered
sale deeds in respect of individual plots prior to the judgment of the High
Court. This shall be completed within one month with ·notice to the C
. individual purchasers and Ajar. The benefit of direction (i) above shall
only extend to those cases found to be genuine on verification; and
(iii) in respect of third parties (other than : above) with whom
there are no registered sale deeds, Ajar shall refund the consideration
paid by the respective purchasers within a period of three months together D
with interest at the rate of nine percent computed from the date on
which payments were received. -
54. The judgment of the High Court is affirmed in the above terms,
and the appeals are gisposed of.
E

Nidhi Jain Appeals disposed of.