Read Time: 10 minutes

Synopsis

The Supreme Court has said the rights of the State as the owner and lessor can be transferred only by adopting a fair and transparent process which fetches the best possible price for it.

"The rights of the State as the lessor can only be sold by a public auction or by any other transparent method by which, apart from the lessee, others too get a right to submit their offer. Selling the plot to its alleged lessee at a nominal price will not be a fair and transparent method at all. It will be arbitrary and violative of Article 14 of the Constitution," a bench of Justices Abhay S Oka and Augustine George Masih said.

The court dismissed appeals filed by Lucknow's City Montessori School against the Allahabad High Court's division bench judgment, which set aside the order for conversion and the deed of conversion in favor of the alleged lessee in respect of a plot, measuring 2238.5 sq ft, situated at Maha Nagar in the capital of Uttar Pradesh.

"There is no dispute that the plot vests in the State. Even assuming that the alleged lessee has leasehold rights concerning the plot, the rights of the State as the owner and lessor can be transferred only by adopting a fair and transparent process by which the State fetches the best possible price. In the case of the sale of a leasehold plot by the lessor, the rights of the lawful lessees do not get affected, as their tenancy will be attorned to the purchaser in view of Section 109 of the Transfer of Property Act, 1882," the bench said.

The nazul plot was put to auction in 1995. The state officer accepted the highest bid offered by the school of Rs 8,51,043.15, out of which a sum of Rs 85,105 was paid along with the tender. However, it was canceled for filing the tender bid by the school after the due date. The officer accepted the second highest bid of the sons of the alleged lessee.

On November 26, 2001, the officer concerned fixed consideration for converting leasehold rights into freehold rights at Rs 67,022.21. "This amount was less than 10% of the bid offered by the school about 16 years before the order dated 26th November 2001. On the face of it, this cannot be a fair and transparent process of transferring the State's ownership rights," the bench said.

The court thus agreed with the High Court's view that the conversion order was illegal.

The bench said the order passed by the State Government of conversion was a "covert method of defeating the High Court's interim order of July 18, 1996" by which status quo was ordered.

"It was the duty of the State Government and the authority who were parties to the appeal preferred by the alleged lessee to point out to the court that a writ petition filed by the school arising out of the auction of the plot was pending. The said fact was suppressed from the High Court by all the parties to the appeal. When the writ petition was pending, the propriety demanded that before directing conversion in favor of the alleged lessee, the State Government should have applied to the High Court, to seek permission to do so, in the pending writ petition. That was not done," the bench said.

The court also opined the alleged lessee cannot plead ignorance about the knowledge of the writ petition as the interim orders were passed after hearing his sons. The alleged lessee and his sons were together, and the same counsel represented them even before this court, it pointed out.

With regard to the school's argument to restore the earlier order of 1995 accepting the bid offered by it, the bench said, "We must note that more than 20 years have passed since the auction. During this period, the property prices in Lucknow must have substantially increased."

The court further said even assuming that the school is right in contending that illegality has been committed by setting aside the highest bid of the school, now it will be unjust to restore the order of acceptance of the bid passed in favor of the school, about 20 years back.

"If, at this stage, the school is allowed to purchase the plot at the price offered by the school 20 years back, the sale will not be fair, as it is a property of the State," it said.

The court directed that the alleged lessee should not be dispossessed without due process of law. The court also allowed the state government to decide whether it is permissible to put the plot to fresh auction in the light of the current policies/laws prevailing.

The bench also said it will be open to the school to apply for a refund of the money paid towards the bid amount and for the alleged lessee to seek a refund of the amount paid for the conversion of the plot from leasehold to freehold, which would be done by the state government within six weeks.

Case Title: City Montessori School Vs State of UP & Ors