'Allotment should be in public interest': SC upholds cancellation of land given to Kamla Nehru trust

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A bench of Justices Surya Kant and N Kotiswar Singh dismissed the appeal of the KNMT, a charitable institution started in 1975, against a 2017 Allahabad High Court order that cancelled the allotment of the subject land situated in the Utelwa Industrial Area of Jagdishpur in the state's Sultanpur district.

The court flagged the hasty allotment of the large tract of land by the Uttar Pradesh State Industrial Development Corporation (UPSIDC) to the trust in 2003 for floriculture purpose and the "remarkable alacrity" shown by the corporation in considering alternative allotments to Jagdishpur Paper Mills Limited after litigation began.

"In light of our detailed examination of the contentions raised by the parties, the comprehensive analysis of the factual and legal matrix and the resultant conclusions, we uphold the cancellation of the allotment by UPSIDC," the bench said.

It added that the actual allotment or any offer thereof made by the UPSIDC in favour of Jagdishpur Paper Mills Limited for the subject land "is also declared to be illegal, contrary to public policy and is consequently annulled".

The bench said if any earnest money or payment has been received from the said prospective allottee, the same is directed to be refunded along with interest at the rate granted by the nationalised banks.

It said while the court has upheld the cancellation due to the KNMT's default, the circumstances reveal systemic concerns in the original allocation process.

"UPSIDC allotted the subject land to KNMT within merely two months of application, raising questions about the thoroughness of the evaluation. Furthermore, during the pendency of this dispute, UPSIDC demonstrated remarkable alacrity in considering alternative allotments to M/s Jagdishpur Paper Mills Limited," it said.

The court noted that the prolonged litigation initiated by the KNMT has spanned over 15 years, unnecessarily burdening the judicial system and impeding the efficient functioning of public authorities.

Such protracted disputes highlight the need for more stringent initial evaluation processes to prevent chronic defaults, it said.

The bench said the hasty allotment, followed by years of litigation, exemplifies systemic deficiencies in the allocation process.

"This necessitates comprehensive directions to ensure that future allocations uphold principles of transparency and accountability, thereby preventing prolonged disputes while ensuring that public resources genuinely promote industrial development and economic growth," it said.

The court added that it is necessary that the procedure for industrial land allotment meets the standards of administrative propriety, particularly in light of the public trust doctrine mandating that "public resources be managed with due diligence, fairness and in conformity with public interest".

"The allocation of 125 acres of industrial land to KNMT without a competitive process fundamentally violated the doctrine, which demands proper procedure and substantive accountability in public resource allocation," the bench said.

It pointed out that the UPSIDC ought to have considered verifiable evidence of economic benefits, employment-generation potential, environmental sustainability and alignment with regional development objectives to demonstrate that the decision serves the collective benefit.

"The failure to adopt transparent mechanisms not only deprived the public exchequer of potential revenue -- as evidenced by the substantial appreciation in the value of such a large tract of land -- but also created a system where privileged access supersedes equal opportunity. This betrays the fiduciary relationship between the State and its citizens," the top court said.

It added that when a substantial tract of industrial land is allocated without a comprehensive evaluation, it raises critical questions about adherence to the public-trust doctrine, which requires that allocation decisions be preceded by a thorough assessment of public benefits, beneficiary credentials and safeguards, ensuring continued compliance with the stated purposes.

"The state government of Uttar Pradesh and UPSIDC are directed to ensure that any such allotment in the future be made in a transparent, non-discriminatory and fair manner by ensuring that such allotment process fetches maximum revenue and also achieves the larger public interest like industrial development priorities, environmental sustainability and regional economic objectives," the court said.

It further directed the authorities that the subject land of 125 acres in Sultanpur be allotted in the manner as suggested by the court.