# J. S. LUTHRA ACADEMY & ANOTHER v. STATE OF JAMMU AND KASHMIR & OTHERS

- **Citation:** [2018] 10 S.C.R. 1098
- **Court:** Supreme Court of India
- **Decided:** 2018-10-30
- **Case number:** Civil Appeal Nos. 7184-7185 of 2013
- **Bench:** N. V. Ramana, Mohan M. Shantanagoudar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/j-s-luthra-academy-another-v-state-of-jammu-and-kashmir-others-32547
- **Pages:** 21

## Headnote

Natural Resources Allocation:
Allotment of land - To educational institution - By the State -
For shifting the institution from a Waqf property, pursuant to order
by the Waqf Authority to evict the premises - Out of the 4 kanals
allotted land State charged the institution only for 2 kanals
@ Rs. 8,00,000/- per kanal while 2 kanals were allotted free of cost
- Writ petitions challenging the allotment, on the ground interalia
that the property was not put in auction - Single Judge dismissed
the writ petitions - Division Bench of High Court quashed the
allotment - On appeal, held: When there is transfer of land by the
State, allocation must be guided by consideration of the common
good as per Art. 39(b) and must not be violative of Art. 14 - This
does not necessarily entail auction of the resources - It is discernible
from the facts and circumstances of the case that the land was allotted
keeping in mind public interest in education of hundreds of children
- The circumstances of the case warranted deviation from the
standard procedure of auction, to prevent prejudicing future of the
children studying at the institution - Moreover, the allotment was in
the nature of an exchange of the Waqf land - The action of the
State in allotting the land does not suffer from vice of arbitrariness
as the same is backed by a welfare purpose - the action of the State
was fair, reasonable, transparent, unbiased, without favoritism and
nepotism - However, the action of the State in allotting 2 kanals
free of cost was bad in law as there is nothing on record to show
that the institution was being run purely for charitable and
educational purposes - The allotment/transfer (of the land allotted
fee of cost) can be saved by giving the transferee an opportunity to
make good the shortfall in the consideration by paying for the two
kanals @ Rs. 8,00,000/- per kanal with interest @ 6% per annum
from the date of allotment, till the date of payment - Constitution of
India - Arts. 14 and 39(b) - Auction. - Tender.
1098
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Constitution of India:
Art. 14 - Arbitrariness under - Test of - Held: An executive
action would not be arbitrary merely because the action is not
explicitly stated to have been taken for a particular reason or based
on a particular principle which in itself is reasonable - It is open to
the Court to see whether such a reasonable principle is discernible
from the facts and circumstances of the case.
Arts. 38 and 39 - Rights under - Held: The rights u/Arts. 38
and 39 covers means of livelihood, health and the general wellbeing of all the sections of the people in society, of which education
is an important part.
Auction/Tender:
Need of public auction or floating of tenders - In case of
allotment/transfer of land by State - Held: Generally the State should
resort to public auction or floating of tenders for transfer of its
land - However, non-floating of tender or non-conducting of public
auction cannot be deemed in all cases to be an arbitrary exercise
of executive power, if the decision of the executive is result of a fair
decision-making process - Constitution of India - Art. 14.
Allowing the appeals, the Court
HELD: 1.1 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, nonfloating of tender or non-conducting of 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. The 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
J. S. LUTHRA ACADEMY v. STATE OF JA

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SUPREME COURT REPORTS
[2018] 10 S.C.R.
 J. S. LUTHRA ACADEMY & ANOTHER
v.
STATE OF JAMMU AND KASHMIR & OTHERS
(Civil Appeal Nos. 7184-7185 of 2013)
OCTOBER 30, 2018
[N. V. RAMANA AND MOHAN M. SHANTANAGOUDAR, JJ.]
Natural Resources Allocation:
Allotment of land - To educational institution - By the State -
For shifting the institution from a Waqf property, pursuant to order
by the Waqf Authority to evict the premises - Out of the 4 kanals
allotted land State charged the institution only for 2 kanals
@ Rs. 8,00,000/- per kanal while 2 kanals were allotted free of cost
- Writ petitions challenging the allotment, on the ground interalia
that the property was not put in auction - Single Judge dismissed
the writ petitions - Division Bench of High Court quashed the
allotment - On appeal, held: When there is transfer of land by the
State, allocation must be guided by consideration of the common
good as per Art. 39(b) and must not be violative of Art. 14 - This
does not necessarily entail auction of the resources - It is discernible
from the facts and circumstances of the case that the land was allotted
keeping in mind public interest in education of hundreds of children
- The circumstances of the case warranted deviation from the
standard procedure of auction, to prevent prejudicing future of the
children studying at the institution - Moreover, the allotment was in
the nature of an exchange of the Waqf land - The action of the
State in allotting the land does not suffer from vice of arbitrariness
as the same is backed by a welfare purpose - the action of the State
was fair, reasonable, transparent, unbiased, without favoritism and
nepotism - However, the action of the State in allotting 2 kanals
free of cost was bad in law as there is nothing on record to show
that the institution was being run purely for charitable and
educational purposes - The allotment/transfer (of the land allotted
fee of cost) can be saved by giving the transferee an opportunity to
make good the shortfall in the consideration by paying for the two
kanals @ Rs. 8,00,000/- per kanal with interest @ 6% per annum
from the date of allotment, till the date of payment - Constitution of
India - Arts. 14 and 39(b) - Auction. - Tender.
1098
[2018] 10 S.C.R. 1098
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1099
Constitution of India:
Art. 14 - Arbitrariness under - Test of - Held: An executive
action would not be arbitrary merely because the action is not
explicitly stated to have been taken for a particular reason or based
on a particular principle which in itself is reasonable - It is open to
the Court to see whether such a reasonable principle is discernible
from the facts and circumstances of the case.
Arts. 38 and 39 - Rights under - Held: The rights u/Arts. 38
and 39 covers means of livelihood, health and the general wellbeing of all the sections of the people in society, of which education
is an important part.
Auction/Tender:
Need of public auction or floating of tenders - In case of
allotment/transfer of land by State - Held: Generally the State should
resort to public auction or floating of tenders for transfer of its
land - However, non-floating of tender or non-conducting of public
auction cannot be deemed in all cases to be an arbitrary exercise
of executive power, if the decision of the executive is result of a fair
decision-making process - Constitution of India - Art. 14.
Allowing the appeals, the Court
HELD: 1.1 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, nonfloating of tender or non-conducting of 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. The 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
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR
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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.
[Para 6] [1111-G-H; 1112-A-C]
Institute of Law Chandigarh v. Neeraj Sharma (2015)
1 SCC 720 : [2014] 11 SCR 1096; Centre for Public
Interest Litigation v. Union of India, 2012 3 SCC 1 :
[2012] 3 SCR 147; In Re Natural Resources Allocation
(2012) 10 SCC 1 : [2012] 9 SCR 31; Manohar Lal
Sharma v. Principal Secy. (2014) 9 SCC 516 : [2014] 8
SCR 446; Bharti Airtel Limited v. Union Of India (2015)
12 SCC 1 : [2015] 5 SCR 867; Goa Foundation v.
Sesa Sterlite Ltd. (2018) 4 SCC 218 : 2018 (2)
 SCR 361; Netai Bag & Ors. v. State of W.B. & Ors.
(2000) 8 SCC 262 : [2003] 4 Suppl. SCR 187; 5 M&T
Consultants v. S.Y. Nawab (2003) 8 SCC 100 : [2003]
4 Suppl. SCR 187; Villianur Iyarkkai Padukappu
Maiyam v. Union of India (2009) 7 SCC 561 : [2009] 9
SCR 225; Ajar Enterprises (P) Ltd. v. Satyanarayan
Somani (2018) 12 SCC 756; Goa Foundation v. Sesa
Sterlite Ltd. (2018) 4 SCC 218 : [2018] 2 SCR 361 -
relied on.
1.2 An executive action would not be arbitrary merely
because the action is not explicitly stated to have been taken for
a particular reason or based on 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 look into 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
circumstances in which the executive action was effected.
[Para 7] [1113-C-E]
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Shrilekha Vidyarathi v. State of U.P. (1991) 1
SCC 212 : [1990] 1 Suppl. SCR 625 - relied on
1.3 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
because the 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 locality.
[Para 7] [1113-E-H]
1.4 Articles 38 and 39 of the Constitution 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.
These rights 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 aspect. [Para 8] [1114-A-B]
1.5 Imparting basic education is a constitutional obligation
on the State as well as societies running educational institutions.
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. [Para 9] [1114-B-D]
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR
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Secretary, Mahatama Gandhi Mission v. Bhartiya
Kamgar Sena, (2017) 4 SCC 449 - referred to.
1.6 Thus, 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. 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. Taking a holistic view of the matter, the action taken
by the State Government did not suffer from the vice of
arbitrariness insofar as it was backed by a welfare purpose. [Para
9] [1114-E-F]
1.7 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, there is no arbitrariness
in the decision taken by the State in allotting 4 Kanals of property.
On the other hand, the action of the State was fair, reasonable,
transparent, unbiased, without favourtism and nepotism. [Para
10] [1114-G-H; 1115-A]
2.1 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 sale price
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, the
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allotment of 2 Kanals of land for free was not 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. [Para 12] [1115-E-G]
In Re. Natural Resources Allocation (2012) 10 SCC 1 :
[2012] 9 SCR 31; Union of India and another v. Jain
Sabha, New Delhi and another (1997) 1 SCC 164 :
[1996] 9 Suppl. SCR 1 - relied on.
2.2 Thus, 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. [Para 13] [1116-G]
ITC Limited v. State of U.P., (2011) 7 SCC 493 : [2011]
7 SCR 66 - relied on.
2.3 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, there is no 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 that the public must be adequately compensated for the
alienation of natural resources by the State. [Para 14] [1118-B-C]
2.4 Therefore, the appellant should pay consideration for
two kanals of land received gratuitously, at the rate of
Rs. 8,00,000/- per kanal, which was the average auction price
prevailing at the time of allocation. The appellant is also liable to
pay interest at the rate of 6% per annum from the date of the
allotment till the date of payment. [Para 15] [1118-D-E]
Case Law Reference
[2014] 11 SCR 1096
relied on
Para 5
[2012] 3 SCR 147
relied on
Para 6
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR
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[2012] 9 SCR 31
relied on
Para 6, 11
[2014] 8 SCR 446
relied on
Para 6
[2015] 5 SCR 867
relied on
Para 6
[2018] 2 SCR 361
relied on
Para 6
[2003] 4 Suppl. SCR 187
relied on
Para 6
[2003] 4 Suppl. SCR 187
relied on
Para 6
[2009] 9 SCR 225
relied on
Para 6
(2018) 12 SCC 756
relied on
Para 6
[1990] 1 Suppl. SCR 625
relied on
Para 7
(2017) 4 SCC 449
referred to
Para 9
[1996] 9 Suppl. SCR 1
relied on
Para 12
[2011] 7 SCR 66
relied on
Para 13
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
7184-7185 of 2013
From the Judgment and Order dated 01.04.2009 of the High
Court of Jammu and Kashmir in LPA (OW) Nos. 38 and 39 of 2008.
Vikas Singh, Sr. Adv., Bimal Roy Jad, Ms. Shreya Handoo, Advs.
for the Appellants.
M. Shoeb Alam, Ujjwal Singh, Mojahid Karim Khan, Advs. for
the Respondents.
The Judgment of the Court was delivered by
MOHAN M. SHANTANAGOUDAR, J. 1. The judgment of
the Division Bench of the High Court of Jammu and Kashmir at Jammu
in L.P.A. (OW) No. 38/2008 and L.P.A. (OW) No. 39/2008 dated
01.04.2009 is the subject matter of these appeals.
2. The brief facts leading to these appeals are that the AppellantJ.S. Luthra Academy (hereinafter referred to as the 'Academy'), an
educational institution, initially was situated on a Wakf property in Jammu.
Vide order dated 27.12.1995 of the authority constituted under the J&K
Wakf Act, 1978, the said educational institution was ordered to be evicted
from the Wakf property. Against the said order, the Academy approached
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the Jammu & Kashmir Special Tribunal, and an interim order of stay on
eviction was granted by the tribunal on 09.01.1996. During the
interregnum, the Academy made representations to the State Government
requesting for allotment of a piece of land at any place mentioned in the
representations for shifting and running the school. The concerned
minister in the meeting dated 14.1.1998 considered the question of
allotment of land in favour of the Academy. Subsequently, a note was
prepared by the Managing Director of the J & K Housing Board on
25.1.1999, proposing that the Board had 4 kanals of land in Sector 2 of
Channi Himmat, Jammu earmarked for schools which could be
considered for allotment to the Appellant at Rs. 8,00,000/- per kanal. In
a subsequent meeting on 29.4.1999 after completion of formalities, four
kanals in Sector 2 of Channi Himmat were alloted to the Academy at
Rs. 8,00,000/- per kanal on lease for 40 years and the Academy was
directed to deposit 50% of the said amount, the remaining amount to be
deposited subsequently. In a meeting dated 28.6.2000, a decision was
taken by the J & K Housing Board in pursuance of the orders of the
Chief Minister, that two kanals of land would be allotted to the Academy
at the rate of Rs. 8,00,000/- per kanal and the other two kanals free of
cost. Further, in a Cabinet meeting dated 18.8.2000, it was decided that
the Jammu Development Authority was to be compensated for the free
allocation of land in the form of allotment of alternate land to the Authority.
The allotment of land to the Academy was sanctioned by the Principal
Secretary, Government of J&K, vide letter dated 24.8.2000. The
Academy finally paid a total of Rs.16,00,000/- for two kanals of land
and obtained two more kanals free of cost. A lease deed was executed,
and possession was handed over on 12.12.2001. The Academy
constructed the school building thereon and the school is being run on
this premises, having shifted from the wakf property.
3. The residents of Channi Himmat vide Writ Petition No. 1093
of 2002 questioned the allotment made in favour of the Academy, on the
ground that the piece of land was meant for a playground but the same
was allotted to the Academy in violation of the original scheme and plan
of the Channi Himmat Housing Colony. One Mr. Naresh Kumar, a
proprietor of the United Public School situated at Channi Himmat, filed
a writ petition being O.W.P. No. 10/2003, questioning the allotment made
in favour of the Academy on the ground that the property ought to have
been auctioned by the Government, so that he could have also applied
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR
[MOHAN M. SHANTANAGOUDAR, J.]
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for the allotment of the plot, which he required for the upgradation of his
school to the higher secondary level. Both the writ petitions were clubbed,
heard and decided together by the learned Single Judge of the High
Court and were dismissed. However, the Division Bench 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
Academy with the following observations:
"The board is directed to hold public auction of the land for the
purpose of leasing the same out on the same terms and conditions
it had leased it to the private respondent, except that the premium
thereof shall be fixed at the highest price to be obtained at such
auction to be held by inviting people interested in setting up of a
secondary school on the plot of land in question by publishing at
least two advertisements in newspapers widely circulated in
Jammu and also published therefrom. The Board is directed to
fix the minimum bid price at Rs.16.00 lacs plus the cost of
construction ascertained in the manner as above. In the event
the bid to be had at the public auction does not exceed the
minimum reserved bid price, the Board shall execute a fresh
lease in favour of the private respondent upon obtaining payment
of Rs.16.00 lacs from him. In the event the bid price to be had at
the auction exceeds the minimum reserved bid price and the
same is not given by the private respondent, the Board shall give
an opportunity to the private respondent to meet the same and, if
he meets the same, to execute the lease in favour of the private
respondent upon accepting the amount of such bid, less the cost
of construction ascertained in the manner as above, as premium.
In the event the private respondent fails to match the bid price,
the Board shall grant the lease in favour of the highest bidder
and from the amount so to be received, first pay the cost of
construction ascertained in the manner as above to the private
respondent."
4. The contesting respondents herein, i.e., the original writ
petitioners who were before the learned Single Judge and the Division
Bench, have chosen to remain absent before this Court despite service
of notice on them. Heard the learned counsel for the Academy, the
State and the Housing Board. Learned counsel for the Academy taking
us through the material on record submitted that the allotment of the site
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was done following due procedure. The Academy was asked to vacate
the wakf property, where it was running the school earlier, since the
wakf wanted the property for its personal purposes. As the school was
catering to the needs of hundreds of students and as it was being run
successfully, the Managing Committee of the Academy did not want to
close the academy, inasmuch as the closure would have been detrimental
to the interests of the students. The Cabinet being competent to allot the
land had duly considered the matter and had taken the decision on
18.8.2000 to allot the land to the Appellant keeping in mind the plight of
the students and urgency of the matter inasmuch as the school had to be
shifted at an early date. The sum and substance of the argument of the
Academy, the State and the Housing Board is that the allotment was
made keeping in mind the public interest at large and the personal interest
of any personality involved in running the Academy was not given any
importance at all.
5. Learned Advocate for the State of Jammu and Kashmir
submitted that the allotment of 2 Kanals of land to the Appellant free of
cost was a policy decision of the Government inasmuch as such allotment
was in the nature of an exchange for eviction of the Appellant, who was
running a school on the Wakf land in the main city area. The object was
twofold, firstly, to ensure continuity of the school/public purpose, and
secondly, to expeditiously evict the appellant from the wakf land and
consequently, free such land from prolonged litigation. He further
submitted that neither was there any violation of any policy for allotment
of land to educational institutions in the State of Jammu and Kashmir at
the relevant time, nor was there any loss caused to the State qua the 2
Kanals of land (out of total 4 Kanals of land) that was allotted to the
Appellant. Under such facts and circumstances of the case, he argued
that the judgment of this Court in the case of Institute of Law
Chandigarh v. Neeraj Sharma, (2015) 1 SCC 720 wherein the allotment
of land to an educational institution without inviting competitive bidding
was cancelled is distinguishable on two counts:
a) At para 32 of the judgment, the Development authority was
found not to have adhered to the applicable policy, i.e. the
allotment of land to Educational Institutions (Schools), etc. on
lease hold basis in Chandigarh Scheme, 1996 for allotment of
land.
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR
[MOHAN M. SHANTANAGOUDAR, J.]
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b) At Para 17 of the judgment it is recorded that the audit
department of the UT Chandigarh Administration found that the
allotment caused a loss of Rs.139 crores to the public exchequer.
Lastly, he submitted that the allotted land was earmarked for
schools and playfields in the Master Plan and hence, there was no
violation of the Master Plan in allotment of land to the Appellant.
6. This Court in a series of cases including Centre for Public
Interest Litigation v. Union of India, 2012 3 SCC 1 (popularly known
as the "2G case"), in Natural Resources Allocation, In Re. Special
Reference No. of 1/2012, (2012) 10 SCC 1, Manohar Lal Sharma v.
Principal Secy., (2014) 9 SCC 516, Bharti Airtel Limited v. Union Of
India, (2015) 12 SCC 1, and Goa Foundation v. Sesa Sterlite Ltd.,
(2018) 4 SCC 218 has formulated the guidelines for allocation of natural
resources by the State. In Bharti Airtel Ltd. v. Union of India, (2015)
12 SCC 1, this Court summed up the principles governing the allocation
of natural resources by the State laid down in Centre for Public Interest
Litigation v. Union of India, (2012) 3 SCC 1 ("the 2G case") as follows:
"41. The licensor/Union of India does not have the freedom to
act whimsically. As pointed out by this Court in 2G Case [Centre
for Public Interest Litigation v. Union of India, (2012) 3 SCC 1]
in the above-extracted paragraph, the authority of the Union is
fettered by two constitutional limitations:
firstly, that any decision of the State to grant access to natural
resources, which belong to the people, must ensure that the
people are adequately compensated and, secondly, the
process by which such access is granted must be just, nonarbitrary and transparent, vis-à-vis private parties seeking
such access."
(emphasis supplied)
Referring to the observations in the 2G case, the Court also highlighted
that the State is bound to act in consonance with the principles of equality
and public trust and ensure that no action is taken which may be
detrimental to public interest, and that itmust always adopt a rational
method for disposal of public property,and ensure that a nondiscriminatory method is adopted for distribution and alienation, which
would necessarily result in national/public interest.
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The principles governing the distribution of natural resources by the State
were also discussed in the decision of the constitutional bench of this
Court in Natural Resources Allocation, In Re, Special Reference No.
1 of 2012, (2012) 10 SCC 1. In para 149 thereof, the Court observed as
follows:
"149. Regard being had to the aforesaid precepts, we have opined
that auction as a mode cannot be conferred the status of a
constitutional principle. Alienation of natural resources is a policy
decision, and the means adopted for the same are thus, executive
prerogatives. However, when such a policy decision is not backed
by a social or welfare purpose, and precious and scarce natural
resources are alienated for commercial pursuits of profit
maximising private entrepreneurs, adoption of means other than
those that are competitive and maximise revenue may be arbitrary
and face the wrath of Article 14 of the Constitution."
This decision emphasised that the ultimate goal to be served was that of
the public good, and all methods of distribution of natural resources that
ultimately served the public good would be valid, as reflected in the
following observations:
"120. ...There is no constitutional imperative in the matter of
economic policies-Article 14 does not predefine any economic
policy as a constitutional mandate. Even the mandate of Article
39(b) imposes no restrictions on the means adopted to subserve
the public good and uses the broad term "distribution", suggesting
that the methodology of distribution is not fixed. Economic logic
establishes that alienation/allocation of natural resources to the
highest bidder may not necessarily be the only way to subserve
the common good, and at times, may run counter to public good.
Hence, it needs little emphasis that disposal of all natural
resources through auctions is clearly not a constitutional
mandate."
It would be useful to note at this juncture that in this decision, the Court
assessed the position of law developed through a catena of decisions,
including Netai Bag& Ors. v. State of W.B. & Ors., (2000) 8 SCC 262,
5 M&T Consultants v. S.Y. Nawab, (2003) 8 SCC 100, and Villianur
Iyarkkai Padukappu Maiyam v. Union of India, (2009) 7 SCC 561,
wherein it has been held that non-floating of tenders or holding of auction
by itself is not sufficient to hold that the exercise of power was arbitrary.
It would be useful to reproduce the following observations from Netai
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR
[MOHAN M. SHANTANAGOUDAR, J.]
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[2018] 10 S.C.R.
Bag (supra), which were also relied upon by the Court in Natural
Resources Allocation, In Re (supra) to highlight that the ultimate test is
only that of fairness of the decision-making process and compliance
with Article 14 of the Constitution:
 "19. ... There cannot be any dispute with the proposition that
generally when any State land is intended to be transferred or
the State largesse decided to be conferred, resort should be had
to public auction or transfer by way of inviting tenders from the
people. That would be a sure method of guaranteeing compliance
with the mandate of Article 14 of the Constitution. Non-floating
of tenders or not holding of public auction would not in all cases
be deemed to be the result of the exercise of the executive power
in an arbitrary manner. Making an exception to the general rule
could be justified by the State executive, if challenged in
appropriate proceedings. The constitutional courts cannot be
expected to presume the alleged irregularities, illegalities or
unconstitutionality nor can the courts substitute their opinion for
the bona fide opinion of the State executive. The courts are not
concerned with the ultimate decision but only with the fairness
of the decision-making process."
The above principles were also reiterated in Manohar Lal Sharma
(supra), wherein this Court observed at para 110:
"It is not the domain of the Court to evaluate the advantages of
competitive bidding vis-à-vis other methods of distribution/disposal
of natural resources. However, if the allocation of subject coal
blocks is inconsistent with Article 14 of the Constitution and the
procedure that has been followed in such allocation is found to
be unfair, unreasonable, discriminatory, non-transparent,
capricious or suffers from favouritism or nepotism and violative
of the mandate of Article 14 of the Constitution, the consequences
of such unconstitutional or illegal allocation must follow."
In Ajar Enterprises (P) Ltd. v. Satyanarayan Somani, (2018) 12 SCC
756, this Court affirmed the above principles in the following terms:
"49. ...Where a public authority exercises an executive
prerogative, it must nonetheless act in a manner which
would subserve public interest and facilitate the distribution of
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scarce natural resources in a manner that would achieve public
good. Where a public authority implements a policy, which is
backed by a constitutionally recognised social purpose intended
to achieve the welfare of the community, the considerations which
would govern would be different from those when it alienates
natural resources for commercial exploitation. When a public
body is actuated by a constitutional purpose embodied in the
Directive Principles, the considerations which weigh with it in
determining the mode of alienation should be such as would
achieve the underlying object."
The position of law developed through these decisions was summed up
in the following manner by this Court in Goa Foundation v. Sesa Sterlite
Ltd., (2018) 4 SCC 218, after adverting to the various decisions referred
to above:
"80.1. It is not obligatory, constitutionally or otherwise, that a
natural resource (other than spectrum) must be disposed of or
alienated or allocated only through an auction or through
competitive bidding;
80.2. Where the distribution, allocation, alienation or disposal of
a natural resource is to a private party for a commercial pursuit
of maximising profits, then an auction is a more preferable method
of such allotment;
80.3. A decision to not auction a natural resource is liable to
challenge and subject to restricted and limited judicial review
under Article 14 of the Constitution;
80.4. A decision to not auction a natural resource and
sacrifice maximisation of revenues might be justifiable if the
decision is taken, inter alia, for the social good or the public
good or the common good;
80.5. Unless the alienation or disposal of a natural resource
is for the common good or a social or welfare purpose, it
cannot
be
dissipated
in
favour
of
a
private
entrepreneurvirtually free of cost or for a consideration not
commensurate with its worth without attracting Article 14 and
Article 39(b) of the Constitution."
(emphasis supplied)
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR
[MOHAN M. SHANTANAGOUDAR, J.]
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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-conducting of 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.
(ii)
The 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 by this
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. Assuming that
the Academy is engaged in commercial activities while engaging in its
main activity of imparting education to students, two questions remain to
be seen: first, whether there was any social or welfare purpose underlying
the allocation, i.e., 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.
7. As far as the underlying objective of the allocation 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 the plight of the students of the school.
One of the reasons assigned by the Division Bench in rejecting this
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contention was that there was no discussion about the plight of the students
in the correspondence between 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
representation made by the Appellant and the order passed by the State
Government. It would be appropriate at this stage to quote the following
observation made by this court in Shrilekha Vidyarathi vs. State of
U.P., (1991) 1 SCC 212:
"36. The meaning and true import of arbitrariness is more easily
visualized than precisely stated or defined. The question, whether
an impugned act is arbitrary or not, is ultimately to be answered
on the facts and in the circumstances of a given case. An obvious
test to apply is to see whether there is any discernible principle
emerging from the impugned act and if so, does it satisfy the test
of reasonableness. Where a mode is prescribed for doing an act
and there is no impediment in following that procedure,
performance of the act otherwise and in a manner which does
not disclose any discernible principle which is reasonable, may
itself attract the vice of arbitrariness."
 (emphasis supplied)
As 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 based on 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 look into the underlying purpose of an executive action to determine
whether it is motivated by extraneousreasons 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 circumstances in 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
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR
[MOHAN M. SHANTANAGOUDAR, J.]
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SUPREME COURT REPORTS
[2018] 10 S.C.R.
children studying at the school. This is because the 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 locality.
8. 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. These rights 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 aspect.
9. 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
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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 arbitrariness insofar as it was backed by a welfare purpose.
10. In addition, we do not find 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.