India: SC Rules That Public Property Cannot Be Alloted To Profit-Oriented Educational Institutions At A Concessional Price Or For Free

Last Updated: 27 December 2018
Article by Sairam Subramaniam and Urvashi Mehta

The Supreme Court in the case of J. S. Luthra Academy & Anr. v State of Jammu & Kashmir and Ors. vide its judgement delivered on 30 October 2018 held that a public property can be allotted to non-profit oriented institutions serving public interest, at a concessional price or without any consideration by imposing certain stringent conditions for the use of the land. However, it was also clarified by the Hon'ble Supreme Court of India ("Supreme Court") that in case of commercial and profit-oriented institutions, a public property shall not be allotted without adequate consideration.

Background

  1. The J.S. Luthra Academy ("Appellant"), an educational institution, was initially situated on a Wakf property in Jammu. Vide an eviction order dated 27 December 1995 passed by the authority constituted under the Jammu & Kashmir Wakf Act, 1978, the Appellant was directed to vacate the said Wakf property.
  2. In view of the aforesaid eviction, the Appellant made representations to the State Government requesting for allotment of a piece of land in lieu of vacating the Wakf property for shifting and running the educational institution. Accordingly, a decision was taken by the Jammu & Kashmir Housing Board on 28 June 2000, that two kanals of land would be allotted to the Appellant at the rate of Rs. 8,00,000/­ per kanal and the other two kanals free of cost. The said kanals of land were situated in Channi Himmat, Jammu. The Appellant paid the said amount to which effect a lease deed was executed and possession of the land was handed over on 12 December 2001. The Academy constructed the school building thereon and the school is being run on this premises.
  3. Pursuant thereto, the residents of Channi Himmat vide writ petition no. 1093 of 2002 questioned the allotment made in favour of the Appellant as it was in violation of the original scheme and plan of the Channi Himmat Housing Colony. Subsequently, the proprietor of United Public School situated at Channi Himmat, filed a writ petition O.W.P. No. 10/2003, challenging the allotment made in favour of the Appellant on the ground that the property ought to have been auctioned by the State Government, so that he could have also applied for the allotment of the plot, which he required for the upgradation of his school.
  4. Both the writ petitions were heard together and dismissed by the learned single judge of the Jammu & Kashmir High Court (Hon'ble High Court). The Petitioners thereafter preferred an appeal before the division bench of the Hon'ble High Court. The Division Bench of the Hon'ble Court, by the impugned judgment set aside the order of the single judge and allowed the writ petitions and consequently quashed the allotment made in favour of the Appellant directing the Board to hold a public auction of the land for the purpose of leasing the same out on the same terms and conditions as it had leased it to the Appellant.

Issue for Consideration

Whether a public property could be allocated to a private institution at a concessional price or free of cost, by imposing stringent conditions?

Appellant's Contentions

The Appellant contended that the allotment of land in Channi Himmat was done following due procedure and upon confirmation from the State Government after duly considering the circumstances in the matter. The Appellant educational institution was catering to the needs of hundreds of students and its closure would have been detrimental to the interests of the students. The Appellant further sought to distinguish the Supreme Court decision in the case of Institute of Law Chandigarh v Neeraj Sharma reported in (2015) 1 SCC 720 ("ILI v Neeraj Sharma") from the instant case, wherein the allotment of land to an educational institution without inviting competitive bids was cancelled by the Supreme Court. It was submitted that the same is distinguishable from the instant case as due procedure had not been followed in the aforesaid case as the concerned authority had not adhered to the applicable policy while allocating public land to the educational institution.

Findings and Conclusion

Upon assessing the position of law developed through a catena of decisions, the Supreme Court held that the ultimate test, with respect to analysing whether the allotment of public property is appropriate or not, is two-fold in nature i.e. first, whether there was any social or welfare purpose underlying the allocation, and if the furtherance of the public good was the ultimate goal of the allocation so as to justify the non-auctioning of the land, and second, if the allocation is bad for lack of adequate compensation.

Accordingly, the Supreme Court upheld the allocation of the public property by State Government in favour of the Appellant in the instant case despite the tender not having been floated for the property as the same was decided in furtherance of public interest i.e. education of children. The Supreme Court further stated that the instant situation warranted a deviation from the standard procedure to prevent prejudicing the future of the children studying at the Appellant academy and thus, the action taken by the State Government did not suffer from the vice of arbitrariness as it was backed by a socio-welfare purpose. Therefore, the Supreme Court altered the position of law laid down in ILI v Neeraj Sharma insofar as the requirement of floating of tender for allocation of such public property was concerned, and test for determining the same was made less onerous than the one set our earlier.

However, the Supreme Court clarified that the allotment of public property (i.e. two kanals of land in the instant case) in favour of a private educational institution without any consideration is not justified especially when it cannot be shown that the educational institution was being run purely for charitable and educational purpose and thus, the Supreme Court held that the Appellant shall make good the shortfall in the consideration to the extent of Rs. 16,00,000/- for two kanals as on the date of allotment.

Comment

This decision of the Supreme Court clearly sets out the test for assessing and determining the correctness of allotment of public property to private institutions after analysing various decisions of the Supreme Court in relation to and arising out of similar disputes. It further clarifies the validity of any decision taken by the concerned authorities as regard the allocation of public property to a private institution when it is motivated by welfare considerations and public interest. The same shall not be held arbitrary and unfair solely on the basis of certain procedural lapses. Apart from providing clarity on the aforementioned allotment process, the Supreme Court has rightly held that the private educational institutions shall not be allotted public property for free. This decision ensures that public property is not allotted to private institutions at concessional prices as it is not meant to enable the allottees to make money or profiteer with the aid of public property.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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