City Montessori School vs. State of U.P.
Background
A dispute arose over a State-owned ("Nazul") plot in Lucknow originally given on a garden lease in 1961, which was later transferred to one Shri M.M. Batra ("the alleged lessee"). In 1995 the plot was put up for public auction; City Montessori School was the highest bidder, but its bid was cancelled on a technical ground (allegedly buying the tender form a day late), and the second-highest bid, from the alleged lessee's sons, was accepted instead. Years later, while the school's writ petition challenging this was still pending in the Allahabad High Court, the State converted the alleged lessee's leasehold rights into freehold ownership for a fraction of the auction price and executed a sale deed in his favour. The High Court struck down this conversion and deed as illegal, and both the school and the alleged lessee appealed to the Supreme Court.
Decision Breakdown
The Supreme Court upheld the High Court's decision that the conversion and sale deed in favour of the alleged lessee were illegal, reiterating that State-owned land ("State largesse") can only be transferred through a fair, transparent process, normally public auction, and never at a nominal price to a favoured private party, as that would violate Article 14. The Court found the conversion price (less than 10% of the school's 1995 bid, fixed 16 years later) was not a bona fide transaction, and noted the State had suppressed the pending writ petition and violated an existing status-quo order when it proceeded with the conversion. However, the Court declined to revive the school's 20-year-old bid, holding it would now be unfair to let the school buy the land at a two-decade-old price. Both appeals were dismissed, with the question of a fresh auction left open for the State to decide, and both parties allowed to seek refunds of amounts they had paid.
Lesson Learnt
Government cannot hand over public land to a private, favoured party at a below-market price outside a transparent process like public auction, doing so is arbitrary and unconstitutional, even if a legal dispute over the land drags on for decades; but courts will also weigh how much time has passed before restoring old commercial claims like an unexecuted bid.