Rights Of State As Lessor Can Be Transferred Only By Adopting A Fair & Transparent Process Fetching Best Possible Price: SC
The Supreme Court observed that 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.
The Court stated that the rights of the lawful lessees do not get affected if the lessor makes sale of a leasehold plot, as their tenancy is attorned to the purchaser in view of Section 109 of the Transfer of Property Act,1882 (TPA).
A Bench of Justice Abhay S. Oka and Justice Augustine George Masih observed, “In the facts of the case, there is no dispute that the plot vests in the State. Even assuming that the alleged lessee has leasehold rights concerning the plot, the rights of the State as the owner and lessor can be transferred only by adopting a fair and transparent process by which the State fetches the best possible price. In case of the sale of a leasehold plot by the lessor, the rights of the lawful lessees do not get affected, as their tenancy will be attorned to the purchaser in view of Section 109 of the Transfer of Property Act, 1882.”
AOR Shantanu Kumar appeared for the appellant, while Sr. Advocate Ravindra Raizada represented the respondents.
The alleged lessee had initiated legal proceedings to protect his possession of the plot and sought the benefits of government orders for converting Nazul properties from leasehold to freehold. An auction notice issued in 1995 saw City Montessori School (School) as the highest bidder, but the bid was later canceled on the ground of the failure to purchase within the outer limit provided in the tender notice. While cancelling the school's bid, the State Government accepted the bid offered by the sons of the alleged lessee.
The School challenged the cancellation of the auction in the Allahabad High Court, which directed the parties to maintain the status quo and restrained the Lucknow Development Authority (LDA) from executing a sale deed in favour of the alleged lessee’s sons.
The High Court in its impugned judgment held that the order of conversion from leasehold to freehold was illegal as even the market value of the plot was not ordered to be paid by the alleged lessee. Therefore, the High Court held that the deed executed in favour of the alleged lessee was a nullity.
In 2001, the plot was converted to freehold, with a deed of freehold executed in 2002. The School amended its writ petition to challenge this conversion and the resultant deed, leading to the High Court declaring the conversion and deed as null and void due to non-payment of market value.
The Supreme Court stated that “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.”
Consequently, the Court held, “Even assuming that the learned senior counsel appearing for 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 favour of the school, about 20 years back.”
Accordingly, the Supreme Court dismissed the appeals.
Cause Title: City Montessori School v. State of U.P. & Ors. (Neutral Citation: 2024 INSC 570)
Appearance:
Appellant: AOR Shantanu Kumar and R. P. Gupta; Advocates Honey Jain and Ashish Batra
Respondents: Sr. Advocate Ravindra Raizada; AOR Shaurya Sahay and Abhishek Chaudhary; Advocates Aditiya Kumar and Sudhir Sharma
