Case: J S LUTHRA ACADEMY Vs. THE STATE OF JAMMU AND KASHMIR

per kanal. It is clear that there was no arbitrariness in fixing the price at Rs. 8,00,000/- per kanal. However, we are unable to accept the contention that the allotment of 2 Kanals of land for free was justified. This is all the more significant in light of the absence of any material on record to show that the school was being run purely for charitable and educational purposes. In this regard it would be pertinent to refer to the observations of this Hon?ble Court in the matter of Union of India and another v. Jain Sabha, New Delhi and another, (1997) 1 SCC 164 wherein the following observations are made:?11. Before parting with this case, we think it appropriate to observe that it is high time the Government reviews the entire policy relating to allotment of land to schools and other charitable institutions. Where the public property is being given to such institutions practically free, stringent conditions have to be attached with respect to the user of the land and the manner in which schools or other institutions established thereon shall function. The conditions imposed should be consistent with public interest and should always stipulate that in case of violation of any of those conditions, the land shall be resumed by the Government. Not only such conditions should be stipulated but constant monitoring should be done to ensure that those conditions are being observed in practice. While we cannot say anything about the particular school run by the respondent, it is common knowledge that some of the schools are being run on totally commercial lines. Huge amounts are being charged by way of donations and fees. The question is whether there is any justification for allotting land at throw-away prices to such institutions. The allotment of land belonging to the people at practically no price is meant for serving the public interest, i.e., spread of education or other charitable purposes; it is not meant to enable the allottees to make money or profiteer with the aid of public property. We are sure that the Government would take necessary measures in this behalf in the light of the observations contained herein.?The aforementioned observations suggest that while in the case of a non profit-oriented educational institution serving the public interest, public property can be allotted to it at a concessional price or for free by imposing stringent conditions for the use of the land, it is questionable whether the same can be done for profit-oriented institutions. 13. Thus, in our considered opinion, there is a loss to the public exchequer to the extent of Rs.16,00,000/- for two kanals as on the date of allotment. However, having regard to the fact that the Appellant-Academy has been running on the allotted site since many years, after constructing a new building, the transfer may be saved by giving the transferee an opportunity to make good the shortfall in the consideration. In this context, it is relevant to note certain observations made by this Court in the case of ITC Limited vs. State of U.P., (2011) 7 SCC 493 :?107.1 If the transferee had acted bona fide and was blameless, it may be possible to save the transfer but that again would depend upon the answer to the further question as to whether public interest has suffered or will suffer as a consequence of the violation of the regulations:(i) If public interest has neither suffered, nor is likely to suffer, on account of the violation, then the transfer may be allowed to stand as then the violation will be a mere technical procedural irregularity without adverse effects.(ii) On the other hand, if the violation of the regulations leaves or is likely to leave an everlasting adverse effect or impact on public interest (as for example when it results in environmental degradation or results in a loss which is not reimbursable), public interest should prevail and the transfer should be rescinded or cancelled.(iii) But where the consequence of the violation is merely a short-recovery of the consideration, the transfer may be saved by giving the transferee an opportunity to make good the shortfall in consideration.107.2 The aforesaid exercise may seem to be cumbersome, but is absolutely necessary to protect the sanctity of contracts and transfers. If the Government or its instrumentalities are seen to be frequently resiling from duly concluded solemn transfers, the confidence of the public and international community in the functioning of the Government will be shaken. To save the credibility of the Government and its instrumentalities, an effort should always be made to save the concluded transactions/transfers wherever possible provided (i) that it will not prejudice the public interest, or cause loss to public exchequer or lead to public mischief, and (ii) that the transferee is blameless and had no part to play in the violation of the regulation.107.3 If the concluded transfer cannot be saved and has to be cancelled, the innocent and blameless transferee should be reimbursed all the payments made by him and all expenditure incurred by him in regard to the transfer with appropriate interest. If some other relief can be granted on grounds of equity without harming public interest and public exchequer, grant of such equitable relief should also be considered.?(emphasis supplied)14. On an examination of the facts and circumstances of the case in the light of the above observations, it is evident that it is appropriate to give the Appellant the opportunity to make good the shortfall in consideration, as the loss to the public exchequer caused by the free allocation cannot be said to have had an everlasting effect or impact on public interest. Moreover, we do not find any high-handedness on the part of the Appellant in seeking the allotment in its favour, as it acted in a bona fide manner. This would also be in consonance with the principle stated by us in the beginning of the judgment that the public must be adequately compensated for the alienation of natural resources by the State.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]From the above decisions, the following principles may be culled out:(i) Generally, when any land is intended to be transferred by the state, or any state largesse is to be conferred, resort should be had to public auction or transfer by way of inviting tenders from the people. The state must ensure that it receives adequate compensation for the allotted resource. However, non-floating of tender or non- conductingof public auction would not be deemed in all cases to be an arbitrary exercise of executive power. The ultimate decision of the executive must be the result of a fair decision- making process.allocation must be guided by the consideration of the common good as per Article 39(b), and must not be violative of Article 14. This does not necessarily entail auction of the resource; however, allocation of natural resources to private persons for commercial exploitation solely for private benefit, with no social or welfare purpose, attracts higher judicial scrutiny and may be held to be violative of Article 14 if done by non-competitive and non-revenue maximizing means.Keeping in mind the aforementioned principles formulated bythis Court in the aforementioned judgments, we have considered the entire material on record. It must be determined as to whether the allocation made in favour of the Academy fell foul of the above principles. In the instant case, the allocation has evidently been done to a private educational institution by non-revenue maximizing means.ar asve of theallocation is concerned, in our considered opinion, the Division Bench of the High Court was not justified in rejecting the submission of the Academy that the allocation of land was done keeping in mind theplight of the students of the school. One of the reasons assigned by the Division Bench in rejecting this contention was that there was no discussion about the plight of the students in the correspondencebetween the Appellant-Academy and the Government. However, a mere lack of explicit statements to that effect does not imply that the action was not motivated by welfare considerations, inasmuch as the displacement and uprooting of several hundreds of students from their school was the obvious underlying concern in the representationmade by the Appellant and the order passed by the State Government.a corollary of the above, it is evident that an executive action would not be arbitrary merely because the action is not explicitly stated to have been taken for a particular reason or basedon a particular principle which in itself is reasonable; rather, it would be open to the Court to see whether such a reasonable principle is discernible from the facts and circumstances of the case. Just like the Court has the power to lookinto the underlying purpose of an executive action to determine whether it is motivated by extraneous reasons while examining it for arbitrariness, so also the Court may determine whether there is a germane objective being served through the execution of the action, by examining the surrounding facts and circumstancesin which the executive action was effected. Though the Appellant is a private educational institution, it cannot be said that the action of the government was not backed by a welfare purpose merely because it is not stated in so many words in the correspondence between the Academy and the State Government that the alternative land sought for allotment was to protect the interests of children studying at the school. This is becausethe same is clearly discernible from the facts and circumstances of the case. It has been stated that the Appellant was evicted from the wakf land not because of any wilful default or unauthorized use, but because the wakf required the land for its own use. In such circumstances, having no other alternative, the Appellant approached the government for allotment of suitable land for running the school. It seems that the State Government also preferred to peacefully settle the issue of getting the school vacated from the wakf property, at an early date, without disturbing the education of the students and peace in the. Articles 38 and 39 of the Constitution of India provide that the State must strive to promote the welfare of the people of the State by protecting all their economic, social and political rights. Theserights may cover means of livelihood, health and the general well-being of all sections of the people in the society, of which education is an important. Imparting basic education is a constitutional obligation on the State as well as societies running educational institutions. Children are the future of our nation. Education is a basic tool for individuals to lead an economically productive life and is one of the most vital elements for the preservation of the democratic system of government. The Constitution of India bestows considerable attention to the field of education. It recognizes the need for regulating the various facets of activity of education and also the need for not only establishing and administering educational institutions but also providing financial support for educational institutions run by private societies. (See: Secretary, Mahatama Gandhi Mission v. Bhartiya Kamgar Sena, (2017) 4 SCC 449  , paras 33-36 and 39).Thus, in our considered opinion, the State Government proceeded to allot the land in favour of the Appellant keeping in mind the public interest in the education of hundreds of children as well as considering the urgency of the matter and it cannot be said that the action was not backed by a social or welfare purpose. It is worth emphasizing that the test of Article 14 must be applied from the perspective of substantive rather than formal equality, and must be mindful of the effect of the action or rule that is being tested. While under ordinary circumstances, the usual practice of allocation of sites on the basis of advertisements or auction was being followed, the instant situation warranted a deviation from the standard procedure to prevent prejudicing the future of the children studying at the Academy. In our view, taking a holistic view of the matter, the action taken by the State Government did not suffer from the vice of arbitrarinessas it wasbacked by a welfare. In addition, we do notfind any reason to reject the contention of the State Government that the allotment of 4 Kanals of land to the Appellant was in the nature of an exchange, inasmuch as the State Government wanted to evict the Appellant who was running a school at Wakf land situated in the main city area. Such a decision seems to have been taken by the State Government to avoid any unrest in the locality or city.In such circumstances, we do not find any arbitrariness in the decision taken by the State in allotting 4 Kanals of property. On the other hand, we are of the opinion that the action of the State was fair, reasonable, transparent, unbiased, without favourtism and. In our view, the action of the authorities can be assailed to the extent that the allotment of two kanals free of cost was bad in law.It is evident that the consideration paid by the Appellant was only with respect to two kanals and the remaining two kanals of land were allotted for free to the Appellant. It is not in dispute that Rs. 8,00,000/- per kanal was the average auction saleprice which was fetched around the time of allotment. Keeping this figure in mind, the State Government fixed the allotment price at Rs. 8,00,000/- per kanal. It is clear that there was no arbitrariness in fixing the price at Rs. 8,00,000/- per kanal.However, we are unable to accept the contention that the allotment of 2 Kanals of land for free was justified. This is all the more significant in light of the absence of any material on record to show that the school was being run purely for charitable and educational purposes.aforementioned observations suggest that while in the case of a non profit-oriented educational institution serving the public interest, public property can be allotted to it at a concessional price or for free by imposing stringent conditions for the use of the land, it is questionable whether the same can be done for profit-oriented. Thus, in our considered opinion, there is a loss to the public exchequer to the extent of Rs.16,00,000/- for two kanals as on the date of allotment. However, having regard to the fact that the Appellant-Academy has been running on the allotted site since many years, after constructing a new building, the transfer may be saved by giving the transferee an opportunity to make good the shortfall in the consideration.On an examination of the facts and circumstances of the case in the light of the above observations, it is evident that it is appropriate to give the Appellant the opportunity to make good the shortfall in consideration, as the loss to the public exchequer caused by the free allocation cannot be said to have had an everlasting effect or impact on public interest.Moreover, we do not find any high-handedness on the part of the Appellant in seeking the allotment in its favour, as it acted in a bona fide manner. This would also be in consonance with the principle stated by us in the beginning of the judgment that the public must be adequately compensated for the alienation of natural resources by the State.