Public authority cannot act arbitrarily: Supreme Court

New Delhi: A public authority cannot act arbitrarily and its decisions must be guided by public interest, the Supreme Court has said while cancelling the allotment of leasehold rights by Ujjain Development Authority (UDA) to a private entity.

A bench, comprising then Chief Justice J S Khehar and Justice D Y Chandrachud, had upheld the Madhya Pradesh High Court order cancelling the allotment of leasehold rights by UDA.

In the order, pronounced on August 24 but uploaded recently, the bench said no court could be a "hapless spectator" when a public authority forsakes the trust.

"Land is a scarce public resource. When public bodies are vested with control over land in this case over land which was acquired for facilitating planned development, no authority can claim an immunity from its accountability to matters of public interest," the bench said.

"A development authority as a public body cannot act arbitrarily or at its own whims, in deciding whether or not to renew the lease. Its decisions must be guided by public interest.

"Public interest postulates both protecting the interests of the authority and ensuring fairness to the leaseholder who may have constructed on the land in pursuance of the leasehold," the apex court said.

UDA had initially granted leasehold rights for 30 years to IISCO Ltd, a subsidiary of Steel Authority of India Ltd.

IISCO Ltd went into liquidation before the Calcutta High Court and its rights and assets were auctioned by the Official Liquidator.

The leasehold rights were purchased in auction by a private firm Ajar. At the time of auction purchase, only seven years of initial lease period of 30 years were remaining. The auction purchase of Ajar was approved by Calcutta High Court.

After its expiry in 2012, the UDA renewed the lease agreement for another period of 30 years. The leasehold right was converted into freehold right by UDA after the renewal.

The PIL filed before the Madhya Pradesh High Court alleged that the rights were parted away at a throwaway price.

Allowing the petition, the high court had quashed the renewal and conversion of leasehold as freehold.

The apex court asked the UDA to verify the correctness of the statement submitted by Ajar that it has executed 67 registered sale deeds in respect of individual plots prior to the judgment of the high court.

It also said that in case of third parties, other than 67 registered sale deeds, with whom there are no registered sale deeds, Ajar shall refund the consideration paid by the respective purchasers within a period of three months.