14 May 2025 Property Law >> Personal Law  

The Supreme Court recently overturned judgments by the Telangana High Court, reaffirming the State's power to impose conditions on land allotted under statutory schemes, even if market value is paid. The case centered on a dispute between the State of Telangana and a Respondent-Trust regarding a 3.01-acre parcel of land in Chinnathimmapur village. The High Court had previously ruled that the Respondent-Trust was the absolute owner, citing Section 10 of the Transfer of Property Act, 1882 (TPA), which voids conditions absolutely restraining alienation.

The Genesis of the Dispute: Allotment vs. Sale

The core of the legal battle revolved around whether the transfer of land from the State to the Respondent-Trust constituted a sale or an allotment under a statutory scheme.

The Appellant-State argued that the land was allotted under a statutory scheme governed by the Telangana Land Revenue Act, particularly Sections 25 and 172, and the Telangana Alienation of State Lands and Land Revenue Rules, 1975. These rules, along with G.O.Ms. No.635 dated July 2, 1990, and Board Standing Order 24, permit the State to alienate land for public benefit, subject to specific conditions. Crucially, these conditions include the land being used only for the stated purpose and the Government's right to resume the land upon infringement of these conditions without compensation.

The State emphasized that the District Collector's order dated February 8, 2001, which allotted the land, was issued under this statutory framework and explicitly laid down three conditions:

1. The land was to be utilized only for the purpose for which it was allotted.
2. Construction work was to be completed within two years.
3. Trees were to be planted in the open space.

Any deviation, the order stated, would lead to the resumption of the land by revenue authorities. The State contended that the Respondent-Trust, being a charitable organization, was allotted the land for charitable purposes, even if the specific purpose wasn't explicitly detailed beyond "the purpose for which it is allotted."

Respondent's Stance and the High Court's View:

The Respondent-Trust, on the other hand, argued that the land was sold to them on payment of market value, and therefore, they were the absolute owners. They heavily relied on Section 10 of the TPA, which states that any condition absolutely restraining alienation of property is void. Their contention was that a general condition to use the land "only for the purpose for which it is allotted" was a restriction on usage that violated Section 10. They also argued that the resumption order was passed in violation of natural justice.

Both the learned Single Judge and the Division Bench of the High Court sided with the Respondent-Trust, holding that since the land was purchased on payment of market value, the Government could not place conditions restricting its enjoyment, and such restrictions were void under Section 10 of the TPA.

Supreme Court's Reasoning: Allotment, Not Sale:

The Supreme Court, after hearing both sides, meticulously analyzed the facts and the statutory framework. The Court highlighted several key points in its reasoning:

• Statutory Scheme Prevails: The Court found that the transfer was clearly an allotment under a statutory scheme, not a regular sale. The allotment letter itself explicitly mentioned the conditions and the power of resumption.
• Respondent's Admission: The Respondent-Trust's own contemporaneous correspondence and the writ petition filed by them acknowledged that the allotment was conditional and for a charitable purpose, and that they had been "scrupulously" following these conditions. This contradicted their later argument that no specific purpose was mentioned or that it was an unfettered sale.
• Government's Role in Land Disposal: The Court emphasized that when the government sells land, especially without a specific social, economic, or welfare policy, it must generally obtain the "maximum value" for its resources. In this case, the allotment was to a charitable trust for a public purpose, placing it in a different category than a simple inter vivos transfer between private parties. Public interest, the Court asserted, is supreme and must prevail.
• Section 10 TPA's Inapplicability: The Court held that Section 10 of the TPA applies to inter vivos transfers between private parties and does not eclipse or override statutory schemes of allotment by the State, especially when public interest is involved. The State's power to impose conditions in such allotments is distinct from restrictions on alienation in private sales.
• Malafides and Fraud on Statute: The Court took a dim view of the General Power of Attorney (GPA) executed by the Respondent-Trust, which failed to disclose the conditions of the allotment. Furthermore, the Court found the Respondent-Trust's action of cutting a colony, subdividing the land into plots, and selling them to third parties to be a clear violation of the allotment conditions and termed it a "fraud on the statute." The land, granted for a charitable purpose, was instead being commercially exploited.

Conclusion:

The Supreme Court unequivocally set aside the impugned judgments of the High Court, ruling that the alienation of land by the District Collector was an allotment under a statutory scheme, subject to conditions. The Court concluded that these conditions were imposed with the Respondent-Trust's knowledge and acceptance, and their subsequent actions constituted a violation of these conditions and a fraud on the statute. The Appeal was therefore allowed, and the State's right to resume the land was upheld.

This judgment underscores the distinction between a governmental allotment under specific statutory provisions and a conventional sale between private parties, particularly when public purpose and conditional grants are involved.

Section 10, Transfer of Property Act - 1882  

Transfer of Property Act, 1882