J. S. LUTHRA ACADEMY & ANOTHERversusSTATE OF JAMMU AND KASHMIR & OTHERS

1098                     [2018] REPORTS
                SUPREME COURT   10 S.C.R. 1098              [2018] 10 S.C.R.


 A                   J. S. LUTHRA ACADEMY & ANOTHER
                                          v.
               STATE OF JAMMU AND KASHMIR & OTHERS
                       (Civil Appeal Nos. 7184-7185 of 2013)
 B                              OCTOBER 30, 2018
       [N. V. RAMANA AND MOHAN M. SHANTANAGOUDAR, JJ.]
              Natural Resources Allocation:
              Allotment of land – To educational institution – By the State –
 C     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
 D     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
 E     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
 F     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
 G     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
 H     India – Arts. 14 and 39(b) – Auction. – Tender.
                                         1098
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1099


      Constitution of India:                                               A

      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        B
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 well-
being of all the sections of the people in society, of which education     C
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     D
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.
                                                                           E
      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
                                                                           F
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. The allocation must be guided           G
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


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1100            SUPREME COURT REPORTS                       [2018] 10 S.C.R.


 A     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]
 B           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
 C           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
 D           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
 E           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
 F     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
 G     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]

 H
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1101


      Shrilekha Vidyarathi v. State of U.P. (1991) 1                   A
      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          B
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        C
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              D
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.   E
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.    F
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         G
establishing and administering educational institutions but also
providing financial support for educational institutions run by
private societies. [Para 9] [1114-B-D]

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1102            SUPREME COURT REPORTS                     [2018] 10 S.C.R.


 A           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
 B     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
 C     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
 D     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
 E     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
 F     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
 G     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
 H     in fixing the price at Rs. 8,00,000/- per kanal. However, the
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1103


allotment of 2 Kanals of land for free was not justified. This is all   A
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               B
      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           C
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]           D
      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.            E
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]
                                                                        F
      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]                G
                       Case Law Reference
[2014] 11 SCR 1096             relied on               Para 5
[2012] 3 SCR 147               relied on               Para 6
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1104             SUPREME COURT REPORTS                         [2018] 10 S.C.R.


 A     [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
 B     [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
 C
       [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
 D
             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.
 E            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
 F
             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.

 G           2. The brief facts leading to these appeals are that the Appellant-
       J.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
 H
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1105
           [MOHAN M. SHANTANAGOUDAR, J.]

the Jammu & Kashmir Special Tribunal, and an interim order of stay on             A
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
                                                                                  B
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           C
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
                                                                                  D
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              E
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
                                                                                  F
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                      G
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
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1106            SUPREME COURT REPORTS                          [2018] 10 S.C.R.


 A     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
 B
       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
 C             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
 D             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
 E             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.
 F             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.”
 G            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
 H
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1107
           [MOHAN M. SHANTANAGOUDAR, J.]

was done following due procedure. The Academy was asked to vacate             A
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
                                                                              B
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            C
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     D
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            E
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          F
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          G
        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.

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1108             SUPREME COURT REPORTS                         [2018] 10 S.C.R.


 A             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
 B     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.
 C     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
 D     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
 E             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, non-
 F             arbitrary 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
 G
       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 non-
       discriminatory method is adopted for distribution and alienation, which
       would necessarily result in national/public interest.
 H
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1109
           [MOHAN M. SHANTANAGOUDAR, J.]

The principles governing the distribution of natural resources by the State      A
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        B
         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               C
         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       D
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         E
         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.          F
         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,            G
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            H
1110            SUPREME COURT REPORTS                          [2018] 10 S.C.R.


 A     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
 B             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
 C             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
 D             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
 E     (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
 F             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
 G
       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
 H
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1111
           [MOHAN M. SHANTANAGOUDAR, J.]

       scarce natural resources in a manner that would achieve public        A
       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
                                                                             B
       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     C
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             D
       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;                                                    E

       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                F
       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
                                                                             G
       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)
                                                                             H
1112             SUPREME COURT REPORTS                          [2018] 10 S.C.R.


 A     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
 B                   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.
 C
               (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
 D                  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
 E     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
 F     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.
 G
               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
 H
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1113
           [MOHAN M. SHANTANAGOUDAR, J.]

contention was that there was no discussion about the plight of the students   A
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
                                                                               B
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     C
        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         D
        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)      E
       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       F
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          G
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      H
1114             SUPREME COURT REPORTS                          [2018] 10 S.C.R.


 A     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
 B
       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
 C     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
 D     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
 E     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).
 F
              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
 G     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
 H     from the standard procedure to prevent prejudicing the future of the
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1115
           [MOHAN M. SHANTANAGOUDAR, J.]

children studying at the Academy. In our view, taking a holistic view of       A
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              B
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,       C
reasonable, transparent, unbiased, without favourtism and nepotism.
      11. We now turn to the second question, regarding the adequacy
of compensation recovered by the State. In this respect, we note the
following observations made by Khehar J. in his concurring opinion in
Natural Resources Allocation, In Re (supra):                                   D

        “200. I would, therefore, conclude by stating that no part of the
        natural resource can be dissipated as a matter of largesse, charity,
        donation or endowment, for private exploitation. Each bit of
        natural resource expended must bring back a reciprocal
        consideration. The consideration may be in the nature of               E
        earning revenue or may be to “best subserve the common
        good”. It may well be the amalgam of the two. There cannot
        be a dissipation of material resources free of cost or at a
        consideration lower than their actual worth. One set of citizens
        cannot prosper at the cost of another set of citizens, for that        F
        would not be fair or reasonable.”
                                                      (emphasis supplied)
Thus, the impugned transaction must be probed to determine whether it
leads to an adequate consideration being received by the State.
                                                                               G
       12. 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
                                                                               H
1116             SUPREME COURT REPORTS                          [2018] 10 S.C.R.


 A     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,
       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
 B
       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:
 C             “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
 D             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
 E             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
 F             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
 G             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
 H
J. S. LUTHRA ACADEMY v. STATE OF JAMMU AND KASHMIR 1117
           [MOHAN M. SHANTANAGOUDAR, J.]

property can be allotted to it at a concessional price or for free by imposing   A
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-             B
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:
                                                                                 C
        “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:
                                                                                 D
             (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         E
        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.
                                                                                 F
             (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
                                                                                 G
        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
                                                                                 H
1118              SUPREME COURT REPORTS                           [2018] 10 S.C.R.


 A              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.
 B
                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
 C              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
 D     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
 E     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.
               15. Therefore, the Appellant should pay consideration for two
       kanals of land received gratuitously, at the rate of Rs. 8,00,000/- per
 F     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. The
       payment should be made within three months from this date.
               16. In view of the above, the appeals are allowed, the impugned
 G     judgment passed by the Division Bench dated 01.04.2009 is set aside
       and the judgment of the learned Single Judge dated 25.04.2008 passed
       in O.W.P No. 1093 of 2002 and O.W.P No.10 of 2003 is restored, with
       the aforementioned modification.


 H     Kalpana K. Tripathy                                             Appeals allowed.