(2011) 5 SCC 29.
(2022) 16 SCC 703.
ii. They contended that IAMC is not a statutory body.
According to them, it is a private body making profits and
also enjoying grant-in-aid from the government. Support of
such private institutions, according to the Petitioners, is
illegal and is not supported by any law.
iii. In relation to G.O. Ms. No. 365 dated 16.07.2022 granting
annual financial aid, the Petitioners contended that the
IAMC charges huge fee to conduct arbitration and mediation
proceedings and makes money. Therefore, the government's
decision to provide financial assistance to the institution is
arbitrary.
iv. Likewise, in relation to G.O. Ms. No. 6 dated 17.03.2022,
the Petitioners contended that the government's decision to
refer all its disputes to the IAMC creates additional financial
burden on the exchequer, given the high fee charged by
IAMC to conduct arbitrations and mediations.
v. The Petitioners also expressed an apprehension that the
allotment of land, the financial assistance, and the reference
of government disputes to the IAMC involves favourtisim
and possible misuse of the allotted land. Relying on the trust
deed which created the IAMC, the Petitioners argued that the
board of trustees of the IAMC have the power to sell the
properties vested in them. Therefore, government land,
worth crores of rupees, has been vested in a trust which has
the power to sell the same. The allotment of land to the
IAMC is also challenged on the ground that no justifiable
public purpose exists.
vi. In relation to the high-level committee report dated
30.07.2017 based on which the IAMC was established and
the impugned G.O.s were issued, the Petitioners contended
that the said committee is not a statutory body. Therefore,
the recommendations of such a committee should not have
been accepted by the State Government and land could not
have been allotted free of cost.
4. CONTENTIONS OF THE RESPONDENTS:
i. Respondent Nos. 1 and 2 (Government of Telangana)
contended that the allotment of land in favour of the IAMC
was justified on the ground that a high-level committee
constituted by the Central Government had submitted its
recommendations vide a letter dated 30.07.2017 to promote
institutional arbitration in India. In the said letter, the
committee suggested that there is a need for an institution
similar to that of Singapore International Arbitration Centre
(hereinafter 'SIAC'), London Court of International
Arbitration (hereinafter 'LCIA'), Hong Kong International
Arbitration Centre (hereinafter 'HKIAC'), etc. in India.
Therefore, the IAMC was formed vide a trust deed dated
20.08.2021 executed by the then Chief Justice of India.
Pursuant to the said trust deed, a Memorandum of
Understanding (hereinafter 'MoU') was entered into between
the State of Telangana and the IAMC, whereby it was agreed
that the State will support the IAMC by allotting land.
ii. Respondent Nos. 1 and 2, in their counter affidavit, further
stated that they had the power to allot the subject land under
Section 25 of the Telangana Land Revenue Act, 1317 Fasli.
They justified the allotment on the ground that the same was
for a public purpose and permissible under the Telangana
Land Revenue Act, 1317 Fasli.
iii. Respondent No. 3 (the Revenue Department of the
Government of Telangana) also reiterated the submissions
made by Respondent Nos. 1 and 2. They justified the
allotment of the land on the ground that IAMC is a public
charitable trust and is a 'not for profit organization'. They
contended that the allotment was for a public purpose i.e.,
for providing 'world class mediation and arbitration centre
for all sections of the society'.
iv. Respondent No. 4, i.e., the IAMC also took the same stand
as that of the Government of Telangana. Extensive and
heavy reliance was placed on the high-level committee
report dated 30.07.2017 which stated that institutional
arbitration in the country should be supported by the
government. It was argued that government support to
arbitral institutions is common across the globe and all the
well-known international arbitration centres were supported
by their respective governments.
v. Referring to the trust deed dated 20.08.2021, the IAMC
highlighted that the board of trustees includes Supreme
Court judges, the Law Minister for the State of Telangana,
and the Chief Minister for the State of Telangana. Therefore,
the composition of the board involves elected public officials
and the judges themselves. This, according to the IAMC,
ensures transparency and autonomy. Further, the IAMC, in
its counter affidavit, contended that the budgetary allotment
by the Government of Telangana is transparent.
vi. Like the other Respondents, the IAMC relied on Section 25
of the Telangana Land Revenue Act, 1317 Fasli to contend
that the government can allot land for any suitable public
purpose. In addition to the Telangana Land Revenue Act,
1317 Fasli, the IAMC also relied on Part 4 of the
Government Land Allotment policy which lays down the
procedure for allotment of land. The IAMC contended that
the said procedure was followed while allotting the subject
land.
vii. In addition to the above submissions, the IAMC also
contended that the PILs are not maintainable as the
Petitioners have no locus standi. It was contended that the
Petitioners failed to make out any case against the land
allotted to the IAMC as no illegal or improper conduct has
been averred or attributed.
5. To sum up, all the Respondents contended that the land
was allotted and financial assistance was rendered pursuant to the
recommendations of the high-level committee constituted by the
Central Government. All the Respondents relied on Section 25 of
the Telangana Land Revenue Act, 1317 Fasli to contend that the
subject land was allotted under the said provision.
FINDINGS OF THE COURT:
6. Before going into the merits of the case, this Court would
like to point out that though the IAMC (Respondent No. 4)
contended that the Petitioners have no locus standi, the same was
not seriously contested by them or any of the other Respondents.
Further, considering the nature of the case and the contentions
raised by the parties, this Court deems it appropriate to decide the
present PILs on merits.
7. Since the dispute concerns allotment of land and financial
assistance to the IAMC, it is important to discuss its establishment.
A trust deed dated 20.08.2021 was authored by the then Chief
Justice of India creating and declaring the IAMC as a public
charitable trust. The recitals of the trust deed stated that the Trust
was being formed with the object to encourage alternative dispute
resolution process in India. Further, it was stated that the
Government of Telangana had offered to extend infrastructure and
financial assistance to the IAMC. One of the important features of
the trust deed is that it is managed by a board of trustees. Clause 4
of the trust deed states that the board will include (i) two life
trustees; (ii) two ex-officio trustees; and (iii) three term trustees.
8. Clause 4.5 provides that the term of the life trustees will
be the end of their life or till they resign. In case of a vacancy to the
post of a life trustee, the remaining members of the board will
appoint a new life trustee. Clause 4.6 provides that the ex-officio
trustees will always be the (i) Chief Justice of the Telangana High
Court; and (ii) the Minister of Law, Government of Telangana. The
term trustees, as per Clause 4.4, are to be nominated by the life
trustees. The term trustees can be retired Telangana High Court
judges or Supreme Court judges or experts from the industry.
Clause 5.2(c) provides that the properties of the IAMC will include
gifts, grants and contributions by the governments. Another
important clause relevant to the case is Clause 6(d), which states
that the board of trustees will have the power to sell the properties
of the IAMC. Clause 5.3 provides that trustees will not be paid out
of any of the funds of the Trust by way of remuneration, profit,
interest, dividend, or otherwise. Likewise, Clause 12 states that the
trustees are not entitled for any remuneration.
9. Pursuant to the trust deed dated 20.08.2021, the IAMC
and the Government of Telangana entered into an MoU dated
27.10.2021. Clause 2 of the MoU, relying on the high-level
committee report dated 30.07.2021, stated that there is a need to
support arbitral institutions like the IAMC. Under Clause 3 of the
MoU, the Government of Telangana agreed to provide land,
building and IT infrastructure to the IAMC. Under the said Clause,
the Government of Telangana agreed to allot five (05) acres of land
at a business-friendly location to the IAMC. The Government of
Telangana also undertook to construct the building for the IAMC.
Further, till the allocation of land and the construction of the
building, the Government of Telangana agreed to provide an office
space to the IAMC. Under Clause 4, the Government of Telangana
agreed to provide financial assistance of Rs. 3 crores to the IAMC
for a minimum period of 05 (five) years.
10. In terms of the MoU, the impugned government order
i.e., G.O. Ms. No. 126 dated 26.12.2021 was issued by the
Government of Telangana allotting the subject land to the IAMC.
The said G.O. stated that the land shall be used for the purpose of
an arbitral institution and that the terms of allotment will be
informed separately. It is pertinent to note that no terms of
allotment have been placed on record before this Court. Further,
under the said G.O., the Telangana State Industrial Infrastructure
Corporation Ltd. (hereinafter 'TSIIC') was directed to handover
the possession of the subject land to the IAMC. The said G.O. is
extracted below:
11. On 02.02.2022, the TSIIC issued a possession certificate
handing over the possession of the subject land to the IAMC. It is
noteworthy that as on the date of handing over the possession, no
terms of allotment were formulated and communicated to the
IAMC.
12. Similarly, pursuant to the MoU, the Government of
Telangana issued the other impugned government orders viz., G.O.
Ms. No. 76 dated 12.11.2021 and G.O. Ms. No. 365 dated
16.07.2022 granting Rs. 3 crores as financial aid to the IAMC; and
G.O. Ms. No. 6 dated 17.03.2022 whereby Respondent No. 1
directed all its departments and public sector undertakings to refer
all its disputes above Rs. 03 crores to the IAMC for arbitration.
13. The relevant portion of G.O. Ms. No. 6 is extracted
below:
14. Before going into the legality of the impugned G.O.s,
this Court would like to point out that allotment of government
land and distribution of other state largesse falls within the realm of
government policy. Such policy decisions are discretionary. Such
discretion, however, is to be exercised in a fair and transparent
manner. While the grounds to challenge such policy decisions are
limited, the courts can interfere with a policy decision where the
discretionary allotment of state largesse is patently arbitrary,
marred with favouritism, grossly unreasonable, flagrantly
discriminatory, and contrary to any applicable law. However,
where the distribution and allotment of state largesse is for a public
purpose and is supported by law, the courts should be slow in
interfering.
15. In this regard, it is relevant to note that the Supreme
Court in Saroj Screens (P) Ltd. v. Ghanshyam6, held that
discretionary allotment of state resources is subject to the test of
reasonableness and the applicable statutory law. The relevant
paragraphs are extracted below:
33. The concept of the "State" as it was known before
the commencement of the Constitution and as it was
understood for about two decades after 26-1-1950 has
undergone drastic change in recent years. Today, the State
(2012) 11 SCC 434.
cannot be conceived of simply as a coercive machinery
wielding the thunderbolt of authority. Now the
Government is a regulator and dispenser of special
services and provides to the large public benefits including
jobs, contracts, licences, quotas, mineral rights, etc. The
law has also recognised changing character of the
governmental functions and the need to protect individual
interest as well as public interest. The discretion of the
Government has been held to be not unlimited. The
Government cannot give or withhold largesse in its
arbitrary discretion or according to its sweet will. The
Government cannot now say that it will transfer the
property (land, etc.) or will give jobs or enter into
contracts or issue permits or licences only in favour of
certain individuals.
34. In V. Punnen Thomas v. State of Kerala [AIR 1969
Ker 81] , K.K. Mathew, J. (as he then was) observed: (AIR
p. 90, para 19)
"19. ... the Government is not and should not be as
free as an individual in selecting the recipients for its
largesse. Whatever its [activities,] the Government is still
the Government and will be subject to restraints, inherent
in its position in a democratic society. A democratic
Government cannot lay down arbitrary and capricious
standards for the choice of persons with whom alone it
will deal."
35. The traditional view that the executive is not
answerable in the matter of exercise of prerogative
power has long been discarded. Prof. H.W.R. Wade in
his work Administrative Law, 6th Edn. highlighted the
distinction between the powers of public authorities and
those of private persons in the following words:
"... The common theme of all the authorities so far
mentioned is that the notion of absolute or unfettered
discretion is rejected. Statutory power conferred for public
purposes is conferred as it were upon trust, not
absolutely--that is to say, it can validly be used only in
the right and proper way which Parliament when
conferring it is presumed to have intended. Although the
Crown's lawyers have argued in numerous cases that
unrestricted permissive language confers unfettered
discretion, the truth is that, in a system based on the rule of
law, unfettered governmental discretion is a contradiction
in terms.
The whole conception of unfettered discretion is
inappropriate to a public authority, which possesses
powers solely in order that it may use them for the public
good.
There is nothing paradoxical in the imposition of such
legal limits. It would indeed be paradoxical if they were
not imposed. Nor is this principle an oddity of British or
American law; it is equally prominent in French law. Nor
is it a special restriction which fetters only local
authorities: it applies no less to Ministers of the Crown.
Nor is it confined to the sphere of administration: it
operates wherever discretion is given for some public
purpose, for example where a Judge has a discretion to
order jury trial. It is only where powers are given for the
personal benefit of the person empowered that the
discretion is absolute. Plainly this can have no application
in public law.
For the same reasons there should in principle be no
such thing as unreviewable administrative discretion,
which should be just as much a contradiction in terms as
unfettered discretion. The question which has to be asked
is what is the scope of judicial review, and in a few special
cases the scope for the review of discretionary decisions
may be minimal. It remains axiomatic that all discretion is
capable of abuse, and that legal limits to every power are
to be found somewhere."
36. In Padfield v. Minister of Agriculture, Fisheries
and Food [1968 AC 997 : (1968) 2 WLR 924 : (1968) 1
All ER 694 (HL)] the Court was called upon to decide
whether the Minister had the prerogative not to appoint a
committee to investigate the complaint made by the
members of the Milk Marketing Board that majority of the
Board had fixed milk prices in a way which was unduly
unfavourable to the complainants. While rejecting the
theory of absolute discretion, Lord Reid observed: (AC p.
1030 C)
"... Parliament must have conferred the discretion with
the intention that it should be used to promote the policy
and objects of the Act; the policy and objects of the Act
must be determined by construing the Act as a whole and
construction is always a matter of law for the court. In a
matter of this kind it is not possible to draw a hard-and-
fast line, but if the Minister, by reason of his having
misconstrued the Act or for any other reason, so uses his
discretion as to thwart or run counter to the policy and
objects of the Act, then our law would be very defective if
persons aggrieved were not entitled to the protection of the
court."
37. In Breen v. Amalgamated Engg. Union [(1971) 2
QB 175 : (1971) 2 WLR 742 : (1971) 1 All ER 1148
(CA)] Lord Denning, M.R. observed: (QB p. 190 B-C)
"... The discretion of a statutory body is never
unfettered. It is a discretion which is to be exercised
according to law. That means at least this: the statutory
body must be guided by relevant considerations and not by
irrelevant. If its decision is influenced by extraneous
considerations which it ought not to have taken into
account, then the decision cannot stand. No matter that the
statutory body may have acted in good faith; nevertheless
the decision will be set aside. That is established
by Padfield v. Minister of Agriculture, Fisheries and
Food [1968 AC 997 : (1968) 2 WLR 924 : (1968) 1 All
ER 694 (HL)] which is a landmark in modern
administrative law."
38. The question whether the State and/or its
agency/instrumentality can transfer the public property or
interest in public property in favour of a private person by
negotiations or in a like manner has been considered and
answered in negative in several cases. In Akhil Bhartiya
Upbhokta Congress v. State of M.P. [(2011) 5 SCC 29 :
(2011) 2 SCC (Civ) 531] this Court was called upon to
examine whether the Government of Madhya Pradesh
could have allotted 20 acres land to Shri Kushabhau
Thakre Memorial Trust under the M.P. Nagar Tatha Gram
Nivesh Adhiniyam, 1973 read with the M.P. Nagar Tatha
Gram Nivesh VikasitBhoomiyo, Griho, Bhavano Tatha
Anya Sanrachanao Ka Vyayan Niyam, 1975. After
noticing the provision of the Act and the Rules, as also
those contained in the M.P. Revenue Book Circular and
the judgments of this Court in S.G. Jaisinghani v. Union of
India [AIR 1967 SC 1427] , Ramana Dayaram
Shetty v. International Airport Authority of India[(1979) 3
SCC 489] , Erusian Equipment and Chemicals
Ltd. v. State of W.B. [(1975) 1 SCC 70] , Kasturi Lal
Lakshmi Reddy v. State of J&K [(1980) 4 SCC 1]
, Common Cause v. Union of India [(1996) 6 SCC 530]
, Shrilekha Vidyarthi v. State of U.P. [(1991) 1 SCC 212 :
1991 SCC (L&S) 742] , LIC v. Consumer Education &
Research Centre [(1995) 5 SCC 482] and New India
Public School v. HUDA [(1996) 5 SCC 510] , the Court
culled out the following propositions: (Akhil Bhartiya
Upbhokta case [(2011) 5 SCC 29 : (2011) 2 SCC (Civ)
531] , SCC p. 60, paras 65-66)
"65. What needs to be emphasised is that the State
and/or its agencies/instrumentalities cannot give
largesse to any person according to the sweet will and
whims of the political entities and/or officers of the
State. Every action/decision of the State and/or its
agencies/instrumentalities to give largesse or confer
benefit must be founded on a sound, transparent,
discernible and well-defined policy, which shall be
made known to the public by publication in the Official
Gazette and other recognised modes of publicity and
such policy must be implemented/executed by adopting
a non-discriminatory and non-arbitrary method
irrespective of the class or category of persons
proposed to be benefited by the policy. The
distribution of largesse like allotment of land, grant of
quota, permit licence, etc. by the State and its
agencies/instrumentalities should always be done in a
fair and equitable manner and the element of
favouritism or nepotism shall not influence the exercise
of discretion, if any, conferred upon the particular
functionary or officer of the State.
66. We may add that there cannot be any policy,
much less, a rational policy of allotting land on the
basis of applications made by individuals, bodies,
organisations or institutions dehors an invitation or
advertisement by the State or its agency/instrumentality.
By entertaining applications made by individuals,
organisations or institutions for allotment of land or
for grant of any other type of largesse the State cannot
exclude other eligible persons from lodging competing
claim. Any allotment of land or grant of other form of
largesse by the State or its agencies/instrumentalities
by treating the exercise as a private venture is liable to
be treated as arbitrary, discriminatory and an act of
favouritism and/or nepotism violating the soul of the
equality clause embodied in Article 14 of the
Constitution."
(emphasis supplied)
16. Likewise, the courts while adjudicating a challenge to a
government policy will not question the wisdom of the executive.
The role of the courts is limited to examine whether the policy
decision is against any statutory law and does it violate any
fundamental rights. The need for such a policy, its modalities and
the process of its implementation cannot be examined by the
courts.
17. In Narmada Bachao Andolan v. Union of India 7, the
Supreme Court held as follows:
(2000) 10 SCC 664.
229. It is now well settled that the courts, in the
exercise of their jurisdiction, will not transgress into the
field of policy decision. Whether to have an
infrastructural project or not and what is the type of
project to be undertaken and how it has to be executed,
are part of policy-making process and the courts are
ill-equipped to adjudicate on a policy decision so
undertaken. The court, no doubt, has a duty to see that
in the undertaking of a decision, no law is violated and
people's fundamental rights are not transgressed upon
except to the extent permissible under the Constitution.
18. Also, the decision in Directorate of Film Festivals v.
Gaurav Ashwin Jain 8, is relevant. The Supreme Court therein has
held that only the legality of the policy is to be tested and not the
wisdom of the policy. Therefore, a legal policy contrary to the
statutory law can be set aside. The relevant paragraph is extracted
below:
16. The scope of judicial review of governmental policy
is now well defined. Courts do not and cannot act as
Appellate Authorities examining the correctness,
suitability and appropriateness of a policy, nor are courts
advisors to the executive on matters of policy which the
executive is entitled to formulate. The scope of judicial
(2007) 4 SCC 737.
review when examining a policy of the Government is
to check whether it violates the fundamental rights of
the citizens or is opposed to the provisions of the
Constitution, or opposed to any statutory provision or
manifestly arbitrary. Courts cannot interfere with
policy either on the ground that it is erroneous or on
the ground that a better, fairer or wiser alternative is
available. Legality of the policy, and not the wisdom or
soundness of the policy, is the subject of judicial review
(vide Asif Hameed v. State of J&K [1989 Supp (2) SCC
364] , Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3
SCC 223] , Khoday Distilleries Ltd. v. State of
Karnataka[(1996) 10 SCC 304] , BALCO Employees'
Union v. Union of India [(2002) 2 SCC 333] , State of
Orissa v. Gopinath Dash [(2005) 13 SCC 495 : 2006
SCC (L&S) 1225] and Akhil Bharat Goseva Sangh
(3) v. State of A.P. [(2006) 4 SCC 162] )
19. While a policy decision of the government is presumed
to be in public interest, the same can be challenged in exceptional
circumstances like arbitrariness and violation of statutory or
constitutional law. In this regard, it is relevant to note that in State
of U.P. v. Abhay Nandan Inter College, 9 The Supreme Court
held that a policy decision of the government is presumed to be in
(2021) 15 SCC 600.
public interest and can be challenged only in exceptional
circumstances. The relevant paragraph is extracted below:
36. A policy decision is presumed to be in public
interest, and such a decision once made is not amenable to
challenge, until and unless there is manifest or extreme
arbitrariness, a constitutional court is expected to keep its
hands off.
20. In its recent decision in State of A.P. v. Rao, V.B.J.
Chelikani 10, the Supreme Court dealt with government orders
issued by the Government of Telangana allotting lands in prime
commercial areas to a select class of citizens (judges, politicians,
and journalists) at a discounted rate. While setting aside the said
government orders, the Supreme Court held as follows regarding
discretionary land allotment policy:
46. Thus, time and again, this Court has held that while
the power to distribute and redistribute public assets and
resources lie within the State's discretion, such discretion
is not absolute. Article 14 and the logic of equality impose
fetters on the exercise of this discretionary power.
Therefore, it cannot be questioned or contested that state
2024 SCC OnLine SC 3432.
policy and executive action must satisfy the rigours of
Article 14.
21. In Road Metal Industry v. State 11, the erstwhile High
Court of Andhra Pradesh, held that the government cannot allot or
alienate land at its sweet will. The discretion to allot land is not
absolute and such allotments have to be in line with the applicable
statutory rules and must satisfy the test of reasonableness. The
relevant paragraphs are extracted below:
22. The land in question is admittedly a
Government land. It is a public property. It is a
valuable land adjoining the city of Hyderabad. The
executive is entrusted with the duty to protect and
manage the natural resources that vest in the
community. All such natural resources and properties
are held by the Government in trust for and on behalf
of the people. The community is the owner of such
resources. No Government can be heard in saying that
it can grant any Government land on such terms as it
deems fit to any person of its choice. The natural
resources including the land are required to be used
and exploited only for public good. Public interest is
paramount consideration.
2001 SCC OnLine AP 913.
23. The Government has no unlimited discretion in
the matter of granting largesse. The Government
cannot give largesse in its arbitrary discretion or at its
sweet will or on such terms as it chooses in its absolute
discretion. The Supreme Court held that there are two
limitations imposed by law which structure and control
the discretion of the Government in this behalf. The
first is in regard to the terms on which largesse may be
granted and the other, in regard to the persons who
may be recipients of such largesse. (See: Ramana
Dayaram Shetty v. International Airport Authority of
India (1979) 3 SCC 489 : (AIR 1979 SC 1628)
and Kasturi Lal Lakshmi Reddy v. State of J. and
K. (1980) 4 SCC 1 : (AIR 1980 SC 1992).
24. It is very well settled that, unlike a private
individual, the State cannot act as it pleases in the matter
of giving largess. The Government is not free to act as it
likes in selling or leasing out its property. The property is
not of the Government, but of the State. The Government
of the day holds such property as a custodian for and on
behalf of the people. The activity of the Government is
subject to restraints inherent in its position in a democratic
society. A system Governed by rule of law and
constitutionalism does not permit exercise of power
conferred on the Government in an arbitrary,
capricious or in unprincipled manner. It is needless to
reiterate that every activity of the Government has a public
element in it and is required to be informed with reason
and guided by public interest. The actions of the
Government in dealing with the properties of the State are
liable to be tested for its validity on the touchstone of
reasonableness and public interest and if it fails to satisfy
either test, it would be unconstitutional and invalid.
22. In the present case, this Court agrees with the case law
relied upon by the Petitioners that the High Courts in exercise of
their writ jurisdiction can interfere with arbitrary policy decisions
of land allotment and where such land allotment is contrary to the
statutory rules. Given the aforesaid discussion on the scope of
judicial review in government policy, the only questions before this
Court are whether the impugned G.O.s allotting land, providing
financial assistance, and referring its disputes above 03 crores to
the IAMC are arbitrary or contrary to any statutory rules.
23. This Court would first like to consider the validity of
G.O. Ms. No. 126 dated 26.12.2021 whereby the subject land
admeasuring Ac. 3.70 was allotted to the IAMC. In the State of
Telangana, allotment and alienation of government lands is
governed under two sets of law:
(i) Section 25 of the Telangana Land Revenue Act, 1317
Fasli and the rules made thereunder i.e., Andhra
Pradesh (Telangana Area) Alienation of State Lands
and Land Revenue Rules, 1975;
(ii) G.O. Ms. No. 571 dated 14.09.2012 issued by the
Revenue (Assignment I) department whereby uniform
guidelines were laid down and the 'Government Land
Allotment Policy' was farmed.
ALIENATION OF GOVERNMENT LANDS UNDER
SECTION 25 OF THE TELANGANA LAND REVENUE
ACT, 1317 FASLI AND THE RULES THEREUNDER:
24. Section 25 of the Telangana Land Revenue Act, 1317
Fasli recognizes the power of the government to assign lands for
government purposes or for public purposes. The said provision is
extracted below:
25. Assigning of land for special purposes to be lawful.
When a village is under settlement, the Commissioner of
Survey Settlement or the Commissioner of Land Records
in that Village and in other cases with the sanction of the
Board of Revenue, the Collector may, subject to the orders
of the Government set apart any Khalsa land not in the
lawful occupation of any person or class for pasturage of
cattle or for grass reserves or for other Government
purposes or for the purposes of public benefit; provided
that it does not interfere with any right of any person or
class. The land so set apart shall not be otherwise
appropriated without the order of the Board of Revenue.
25. Pursuant to the power under Section 25 and the Rule
making power under Section 172, the erstwhile Government of
Andhra Pradesh, noting that there were no rules governing the
alienation of state lands, framed the Andhra Pradesh (Telangana
Area) Alienation of State Lands and Land Revenue Rules, 1975
(hereinafter 'Rules, 1975'). The preamble of the Rules, 1975 is
extracted below:
26. Under the Rules, 1975, Rule 2(b) defines 'alienation of
land' as disposal of land for a public purpose. Further, Rule 2(f)
defines 'land' as land belonging to the Government in the
Telangana area. Rule 2(h) provides that 'local body' and 'local
authority' include 'gram panchayats' and 'panchayat samithis'.
Rule 2(j) defines 'public purpose' as a purpose which confers a
benefit on a considerable section of the community or locality or
region. Public purpose is said to include construction of schools,
temples, churches, mosques, choultries, roads, hospitals, and office
buildings of local bodies and authorities. The definition of public
purpose is restricted only to primary public purpose. Any ancillary
purpose cannot be termed as public purpose to allot land. The said
provisions are extracted below:
2 (b) Alienation of Land means placing land at the
disposal of ................. for a public purpose [or for any
specified purpose].
2 (f) Land means land belongings to the State Government
of Andhra Pradesh and situate in the Telangana area of the
State of Andhra Pradesh.
2 (h) The terms "Local Body" "Local Authority" and
"Local Fund" wherever they occur in these rules, include
Gram Panchayats under the Andhra Pradesh Gram
Panchayats Act, 1961 and also "Panchayat Samithis"
under the Andhra Pradesh Zilla Parishads and Panchayat
Samithies Act, 1959.
2 (j) Public Purpose means a purpose which confers or is
conductive to the good of a considerable section of the
community at large or of the locality or region, like the
construction of schools, temples, churches, mosques,
choultries, roads, hospitals and office buildings of a local
body or local authority proper but not any purpose which
is but ancillary to a public purpose.
27. Likewise, Rule 3 deals with the general principles of
alienation of state lands. Rule 3(a) provides that state land can only
be alienated for a public purpose. Alienations under the said Rule
can be divided into two parts: (i) alienation in favour of local
bodies and local authorities for unremunerative or remunerative
public purpose; (ii) alienation in favour of a company, private
individual, or institution. Under Rule 3(a), it is pertinent to note
that alienation of state land free of cost is only permissible in
favour of a local body or a local authority for an unremunerative
public purpose. In case where the land is sought to be alienated in
favour of a local body or a local authority, the government should
and is entitled to charge market value of such land. Likewise, in
case, where the land is sought to be alienated in favour of a private
institution or a private individual or a company, the government
should and is entitled to charge market value of such land.
Therefore, land can be alienated in favour of a private individual or
institution or company only after collecting the applicable market
value.
28. It is relevant to also discuss Rule 3(b). It provides that no
alienation in favour of a private individual or a company or an
institution shall be considered unless such private individual or
company or institution is a registered under the Companies Act.
For the sake of convenience, Rule 3 of the Rules, 1975 is extracted
below:
3. General Principles.
(a) Alienation of State land to a local body or local
authority for unremunerative public purposes will
ordinarily be allowed or made free of any initial charge for
occupancy right (i.e.) free of the market value of or the
value of the occupancy right in the land. Where, however,
the land to be alienated has been previously acquired at the
expense of the Government and in the case of alienation of
land to local bodies or local authorities for remunerative
public purposes and of alienation to a company, private
individual or institution for any public purpose the
question of collecting the market value of the land from
the alienation will be considered.
(b) No application for alienation of land under these
Rules to a company, association, society, institution or
any other corporate body should be considered unless
such company, association, society institution or other
corporate body has been registered under the Indian
Companies Act VII of 1913.
(c) Applications for alienation of lands for educational
purposes whether from local bodies or local authorities
(including Gram Panchayat) or from private associations
or individuals should be addressed to the District Collector
through the District Educational Officer in the case of
institutions for boys and through the Inspectors of Girls
Schools in the case of institutions for girls.
(emphasis supplied)
29. It is pertinent to note that Rule 3 of the Rules, 1975 was
considered by a Division Bench of the erstwhile A.P. High Court in
Astapuram Kondaiah v. Govt. of AP 12, to mean that alienation in
favour of a private individual, company, or institution can only be
done where a public purpose exists. Further, such alienation is
subject to collection of the market value. The relevant paragraphs
are extracted below:
"7. It is clear from clause (a) of the Rules that the
alienation of State land to a local body or local
authority shall ordinarily be allowed or made free of
any initial charge when the purpose for which the
alienation is sought is for a public purpose. Clause (b)
1984 SCC OnLine AP 151.
prohibits entertainment of any application for
alienation of State land in favour of a company,
association, society, institution or any other corporate
body unless the said company, association, society,
institution or other corporate body has been registered
under the Indian Companies Act, VII of 1913. Clause
(c) enables the District Collector to entertain an
application for alienation of State Land for educational
purposes whether from local bodies or local
authorities) including Gram Panchayat or from private
associations or individuals. However, the application
should be made through the District Educational
Officer in the case of institutions for boys and the
inspectress of Girls in the case of institutions for girls.
A combined and careful reading of the three clauses of
the rule makes it abundantly clear that:
(1) Alienation of State land could be permitted
for a public purpose, unremunerative or
remunerative;
(2) in case of alienation to a local body or local
authority for an unremunerative public purpose,
the alienation will ordinarily be allowed free of
any initial charge, i.e., free of any market value
and market value may be collected if the public
purpose is remunerative.
(3) When the alienation is in favour of a
company, private individual or institution,
the alienation could be permitted on payment
of the market value of the land by the
alienee;
(4) In the case of an application for alienation of
land by a company, association, society,
institution or other corporate body, such
application shall not be considered unless the
said company, association, society, institution
or other corporate body is one registered
under the Indian Companies Act, VII of 1913
and
(5) Applications for alienation of land for
educational purpose, whether from local bodies
or local authorities or private associations or
individuals should be addressed to the District
Collector through the District Educational
Officer in the case of institutions for boys and
through the Inspectress of girls schools in the
case of institutions for girls.
8. The letter and spirit of the rule appears to be
to permit alienation of State land on payment of
market value in favour of a company, private
individual or institution so long as the purpose for
which the alienation is sought is public purpose.
The determinant for alienation and the protective
armoury of the Government is the real purpose for
which alienation is sought. The Government could
order the alienation, whether it is in favour of a
company, private individual or institution, when the
purpose is a public purpose. Under Rule 4, when the
market value of the alienated land exceeds Rs.
10,000/- the orders of the State Government have to be
obtained. In this case, the State Government
sanctioned the alienation in favour of the management
of Loyola High School authorities. It is not disputed
that the Jesuit Province Society Hyderabad manages
the Loyola High School, Karimnagar, for which the
land is assigned. In effect the alienation is in favour of
Jesuit Province Society, Hyderabad, a society
registered under the Andhra Pradesh (Telangana Area)
Public Societies Registration Act. To interpret the rule
that it prohibits the alienation even when it is for a
public purpose in favour of a registered society would,
in our opinion, be to defeat the very purpose and
object of the rule. We have, therefore, no hesitation to
reject the contention that the alienation falls outside
the purview of rule 3 of the Rules."
(emphasis supplied)
30. In the present case, all the Respondents relied upon
Section 25 of the Telangana Land Revenue Act, 1317 Fasli to
justify the allotment of the subject land in favour of the IAMC.
However, none of the Respondents referred to the Rules, 1975 nor
did they place anything on record evidencing the compliance of the
said Rules. We find that the allotment of the subject land in favour
of the IAMC is contrary to the Rules, 1975.
31. As stated above, alienation of state lands under Rule 3 of
the Rules, 1975 in favour of a private body like the IAMC can only
be done for a public purpose and after collecting the applicable
market value. The Rules, 1975 do not contemplate alienation of
government land to a private body free of cost. Likewise, the
Rules, 1975 provide that allotment in favour of a private body can
only be made if such body is registered under the Companies Act.
As is evident from the MoU dated 27.10.2021 and the impugned
G.O. Ms. No. 126 dated 26.12.2021, the subject land was allotted
in favour of the IAMC without assessing, charging and collecting
the market value. Further, as on the date of allotment, the IAMC
was not registered as a company. Therefore, the allotment of land
in favour of the IAMC is vitiated on account of non-compliance of
the applicable Rules.
32. In this regard, it is relevant to note that the Rules, 1975
were examined in Road Metal Industry (supra). The erstwhile
High Court of Andhra Pradesh held the said Rules were intended
to control governmental discretion in allotting state lands. It was
held that the Rules, 1975 were mandatory in nature and non-
conformity of the said Rules renders the allotment ultra vires. The
Court noted that even if the allotment was not mala fide, non-
compliance of the applicable statutory rules will render such
allotment void. The relevant paragraphs are extracted below:
30. The Alienation Rules are, obviously, intended to
structure and control the discretion of the State
Government and its authorities in the matter of
alienation of Government lands in favour of local
bodies, local authorities as well as private individuals,
companies, societies etc.
31. The record discloses that no attention has been
paid by any of the authorities to these Alienation Rules.
It looks as though none of the authorities were even
aware of the statutory rules governing the alienation of
the State lands in Telangana Area. There is no
assessment of market value of the land sought to be
alienated in favour of respondents 5 and 6. There is no
finding or even an observation that the lands are sought to
be placed at the disposal of respondents 5 and 6 for any
public purpose. It is noteworthy that the Alienation Rules
even define "Public Purpose", which we have already
noticed supra.
XXX
50. The Alienation Rules as well as the Lease Rules
prescribe meaningful statutory standards and realistic
procedural requirements to be followed by the
Government and its officers in the matter of
disposal/alienation/grant of lease of Government lands.
Such meaningful statutory standards are prescribed in
order to avoid the risk of possible arbitrary use of
discretionary power. Those rules are mandatory in
nature. The alienation of the Government lands or the
lease of the same, as the case may be, in Telangana Area
of the State of Andhra Pradesh is to be in conformity with
the prescribed standards under the rules referred to
hereinabove. Any decision by the authority or the
Government contrary to the said rule may have to be
the declared ultra vires.The power to alienate the
Government lands can be exercised only in conformity
with the rules. The wide powers of the State and the
discretion vested in the authority required them to be
exercised in a fair manner andhe surest mode of
exercise of power fairly is by following and observing
the procedures prescribed by the statute or the rules,
as the case may be. The observance of the procedure is
not a matter of secondary importance. The procedural
fairness and regularity have been the great bastion
against arbitrariness.
51. The procedural requirements have not been
followed at any stage by any of the authorities. The
statutory rules are altogether ignored. The decision has
resulted in public mischief. This Court, when such public
mischief is exposed, cannot refuse to interfere on the
ground that such exposure is by a petitioner to whom no
relief could be granted. The petitioner may not get any
relief for itself. The petitioner may not have any right in
the land in question. Lease may not be extended in its
favour. But, those factors do not constitute any ground to
uphold the ex facie illegal and improper decision of the
Government to allot its valuable land to respondents 5 and
6.
XXX
54. It is noteworthy to observe that none of these
factors have been taken into consideration by the
Government for allotment of the land in question to the
5th respondent. The genuineness of the organisation and
its bona fides are not at all doubted. None of the
observations made in this order shall have any bearing
whatsoever upon the bona fides of the 5th respondent
society. The services rendered by the society for better
living of the humanity need not be doubted.
55. But, at the same time, the achievements of the
Society and its further intention to establish an
academy for higher learning may not save the
Government's decision, which is otherwise an illegal
and irregular one. The Court, in this judicial review
proceeding, is concerned with the validity of the
decision making process of the Government to allot the
land. The requirements to observe statutory rules
cannot be given a go bye. A decision, which is contrary
scheme, is liable to be struck down.
XXX
58. Regulatory standards prescribed structuring the
exercise of discretion by the State and its authorities
cannot be violated by the State and the same cannot be
countenanced by this Court even in cases where the
decision taken is not a mala fide one.
XXX
60. Thus the decision, which is ultra vires the rules
or the statute, as the case may be, in a given case, need
not be a mala fide one. But, an ultra vires decision
cannot be sustained even if it is a bona fide one. It is
the duty of this Court to keep the governmental action
within the limits of law, and if there is any
transgression, it is the plainest duty of the Court to
condemn it.
(emphasis supplied)
33. It is pertinent to note that the Supreme Court on multiple
occasions has reiterated that executive power cannot be exercised
contrary to any statutory provisions.
34. In this regard, reference may be made to the decision in
Sk. Abdul Rashid v. State of J&K13, wherein it was held:
15. No executive order could be issued in derogation
of the statutory rules far less a legislative Act. The
Rules being statutory in nature and having been framed
under the Jammu and Kashmir Civil Servants (Removal of
Doubts and Declaration of Rights) Ordinance, 1956 have
statutory force, the executive order in question was
required to be issued in consonance with and not in
derogation thereof.
(emphasis supplied)
35. Likewise, in State of Sikkim v. Dorjee Tshering
Bhutia 14, the Supreme Court has held as follows:
15. The executive power of the State cannot be
exercised in the field which is already occupied by the
laws made by the legislature. It is settled law that any
order, instruction, direction or notification issued in
exercise of the executive power of the State which is
contrary to any statutory provisions, is without jurisdiction
and is a nullity.......
36. As held by the Supreme Court in Proposed Vaibhav
Coop. Housing Society Ltd. v. State of Maharashtra 15, land is a
(2008) 1 SCC 722.
(1991) 4 SCC 243.
precious material resource. The same cannot be allotted in
violation of the applicable procedure. The relevant paragraph is
extracted below:
27. Land is a precious material resource of the
community and therefore the least which is required from
the State is transparency in its distribution. In our opinion,
therefore there has been a complete arbitrariness in the
allotment in favour of Mrchs. As far as the present
appellant is concerned, its case for allotment of a plot is a
matter which is yet to be decided by the authorities, but
the allotment of the plot in favour of Mrchs is not proper,
as it is violative of the procedure as well as eligibility
criteria.
37. All the Respondents, more particularly, the learned
Advocate General on behalf of the Government of Telangana
contended that the allotment of land was for a public purpose i.e.,
promotion of institutional arbitration and alternative dispute
resolution. We would like to say that, even a bona fide allotment
can be set aside, if it is in violation of the applicable procedure. In
this regard, reference may be made to the Supreme Court's
(2025) 2 SCC 128
decision in Humanity v. State of W.B.16, wherein the Supreme
Court repelled the contention of bona fide allotment of land and
held that the ends do not justify the means. The relevant paragraphs
are extracted below:
42. However, it has been repeatedly urged, both by the
learned counsel for the State and also that of the allottee
that both the State Government and the allottee had bona
fide intentions of establishing a school. Therefore, the
Court in public interest should uphold the allotment and
allow the school to be set up and should refrain from
interfering in public interest.
43. This Court is unable to accept the aforesaid
contention. It is axiomatic that in order to achieve a
bona fide end, the means must also justify the end. This
Court is of the opinion that bona fide ends cannot be
achieved by questionable means, specially when the
State is involved. This Court has not been able to get any
answer from the State why on a request by the allottee to
the Hon'ble Minister for Urban Development, the
Government granted the allotment with remarkable speed
and without considering all aspects of the matter. This
Court does not find any legitimacy in the action of the
Government, which has to act within the discipline of the
constitutional law, explained by this Court in a catena of
cases. We are sorry to hold that in making the impugned
(2011) 6 SCC 125
allotment in favour of the allottee, in the facts and
circumstances of the case, the State has failed to discharge
its constitutional role.
(emphasis supplied)
38. We would also like to point out that matters involving
allotment and distribution of state largesse cannot be done free of
cost. Governments shall ensure that they are adequately
compensated for parting with natural resources vested in them and
held by them in public trust. Unless the purpose of allotment is
greater and such allotment is to an institution or person who earns
no profit, free allotment of government largesse cannot be justified.
39. Reference may be made to the Supreme Court's decision
in J.S. Luthra Academy v. State of J&K17, wherein a twin-prong
test was laid down to consider the validity of land allotment.
Firstly, the courts shall see the purpose justifying the allotment and
secondly, it shall be seen whether the government is adequately
compensated. If no public or social purpose exists to allot the land
or if the government is not adequately compensated, such allotment
may be set aside. Relevant paragraphs are extracted below:
(2018) 18 SCC 65
21. 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 maximising
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.
(emphasis supplied)
XXX
30. 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 [Natural Resources Allocation, In re,
Special Reference No. 1 of 2012, (2012) 10 SCC 1] : (SCC
p. 144, para 200)
"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 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 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.
32. In this regard it would be pertinent to refer to the
observations of this Hon'ble Court in the matter of Union
of India v. Jain Sabha [Union of India v. Jain Sabha,
(1997) 1 SCC 164] wherein the following observations are
made : (SCC p. 171, para 11)
"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 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 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 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
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 property can be
allotted to it at a concessional price or for free by
imposing stringent conditions for the use of the land, it
is questionable whether the same can be done for
profit-oriented institutions.
40. In light of the aforesaid discussion, we hold that G.O.
Ms. No. 126 dated 26.12.2021 was issued contrary to Rule 3 of the
Rules, 1975.The allotment of subject land free of cost to the IAMC
is unsustainable and contrary to the procedure. Likewise, the
allotment could not have been done in favour of the IAMC which
was not registered as a company under the Companies Act.
41. We would also like to point out that the conduct of the
government in allotting the land was unduly hasty. It is noteworthy
that possession certificate was issued in favour of the IAMC even
before formulating and communicating the terms of allotment.
Such hasty decisions do not bode well and often result in exercise
of power contrary to the procedure. Discretionary exercise of
power shall not only be fair and transparent, but also should be
seen to be fair and transparent.
ALLOTMENT OF LAND UNDER THE GOVERNMENT
LAND ALLOTMENT POLICY OF 2012:
42. All the Respondents including the IAMC and the
Government of Telangana relied upon Section 25 of the Telangana
Land Revenue Act, 1317 Fasli to justify the land allotment. In
addition to the said provision, the IAMC also relied upon the
Government Land Allotment Policy to contend that the applicable
procedure therein was followed.
43. As the allotting authority never relied upon the Land
Allotment Policy, 2012 to justify the land allotment, we need not
venture into the question whether the allotment of the subject land
to the IAMC was in line with the said policy. However, it is worth
highlighting that even the said policy does not permit free
allotment of land. The policy provides that land can be allotted
only on market value as fixed by the Collector or the A.P. Land
Management Authority. Free allotment of land is contemplated
only in favour of state government departments and below poverty
line families. The relevant portion of the said policy is extracted
below:
b) Rational Norms on Fixing Cost of Land
(i) While fixing the cost of land to be charged, the general
principles laid down in BSO-24, which take into
consideration the purpose of allotment and the nature of
the organization shall be followed. The provisions of
BSO-24 shall apply to all the land allotments along with
the conditions stipulated by the alienating
agencies/departments.
(ii) The allotment / alienation shall be on market value as
recommended by the Collector and the A.P.L.M.A.
(iii) Market value should be ascertained by conducting
local enquiry. However the land value shall not be less
than the basic value of the land. The following officers of
Revenue Department shall be competent for
recommending market value within the limits shown
below.
Officer Market value
competent
Revenue Total land
Divisional value upto
Officer Rs.1.00 crore
Collector Total land
value above
Rs.1.00 crore
(iv) Compensation to the assignees who relinquish their D-Form
patta land and whose land is resumed for public purpose shall be
paid exgratia as per rules in force and on par with private patta
lands.
(v) As regards the sivaijamedars, who have been cultivating the
land for a long period, without D-Form Patta and whose possession
is confirmed by entries in 10(1) and adangal accounts may be paid
exgratia without solatium as follows:
Occupation between 5-10 years - 50% exgratia
equivalent to market value; Occupation 10 years
and above - 100% exgratia equivalent to market
value.
(vi) The persons who have purchased assigned lands from DKT
patta holders, will not be entitled for any exgratia as it is amounts
to violation of the conditions of assignment and contravention of
the provisions of A.P. Assigned Lands (POT) Act, 1977.
(vii) The Government lands may be given free of cost to State
Government Departments for welfare and development
purposes. Lands for houses for Below Poverty Line families
may also be given free of cost.
(viii) The Department of the Government may formulate and
notify, appropriate concessional policies for the promotion of their
respective sector, which inter-alia, may include concessional rate
of land for sale or lease. It shall be incumbent on the administrative
department to ensure compliance with such conditions.
44. Therefore, we hold that G.O. Ms. No. 126 dated
26.12.2021 is also contrary to G.O. Ms. No. 571 dated 14.09.2012
issued by the Revenue (Assignment I) department whereby
uniform guidelines were laid down and the 'Government Land
Allotment Policy' was framed.
45. Now coming to the validity of G.O. Ms. No. 76 dated
12.11.2021 and G.O. Ms. No. 365 dated 16.07.2022 granting an
annual financial aid of Rs. 3 crores to the IAMC; and G.O. Ms. No.
6 dated 17.03.2022 whereby the government altered its dispute
resolution policy directing all its departments and public sector
undertakings to refer all its disputes above Rs. 03 crores to the
IAMC for arbitration. The impugned G.O.s mentioned herein were
justified by the Respondents by relying on the recommendations
and findings of the high-level committee report dated 30.07.2017.
Therefore, it is apt to discuss the relevant aspects of the said report.
46. The high-level committee was constituted by the
Ministry of Law and Justice, Government of India and comprised
of retired Supreme Court judges, senior advocates, research fellows
from independent legal think tanks, and representatives of the
Government of India. The committee, chaired by Justice B.N.
Srikrishna, stated that institutional arbitration needs to be
strengthened in India to promote alternative dispute resolution. To
achieve the goal of promoting arbitration, the committee
recommended establishing institutions providing arbitral services
similar to that of the ICC Court, SIAC, LCIA, and HKIAC.
Highlighting the importance of governmental support in promoting
institutional arbitration, the committee recommended that
governments should facilitate the construction of integrated
infrastructure in major commercial hubs. In addition, the
committee stated that arbitral institutions require initial capital to
support itself and the same may be provided by the government.
The committee also highlighted that the failure of governments to
use institutional arbitration is one of the major reasons for weak
institutional arbitration in India. Perusal of the report satisfies us
that support of arbitral institutions by the governments is and will
be in line with the broad policy objective of creating an arbitration
hub in India.
47. According to this Court, the contents of the high-level
committee report make out an emphatic case for providing
governmental support to promote institutional arbitration in India.
The impugned G.O.s providing financial aid and referring
government disputes to the IAMC are in line with the broad policy
of the government to promote alternative dispute resolution. As
stated above, where policy decisions are involved, it is for the
concerned government to decide how a particular policy is to be
supported and promoted. It is in the wisdom of the government to
provide financial assistance to an institution like the IAMC formed
to reduce pendency of litigation and to make Hyderabad a
business-friendly city and a commercial destination. As far as the
intent of the government to support the IAMC financially is
concerned, the same is justified and we find no arbitrariness in the
said decision. It is pertinent to note that the governments in the past
have financially supported institutions like the International Centre
for Alternative Dispute Resolution (hereinafter 'ICADR') to
promote arbitration in the country.
48. At this stage, we would like to express our concern
regarding the performance of the IAMC and its future. The
statistics of the IAMC were placed before this Court. It was stated
that as on 29.01.2025 only 15 arbitration cases were conducted by
the IAMC. Out of the said 15 cases, 11 arbitration cases were
conducted pro-bono. Likewise, only 57 mediation cases were
conducted by the IAMC, out of which 17 were conducted pro-
bono. The abysmally low caseload raises concerns regarding the
future sustenance of the IAMC on its own. The government, as a
part of its policy, can provide financial assistance to a new
institution like the IAMC. However, such financial assistance to a
private arbitral institution cannot be perpetual.
49. In this regard, we would like to point out how ICADR
despite receiving continuous financial support from the
governments had failed to fulfill its objectives. ICADR was formed
by the Ministry of Law and Justice, Government of India, as a
registered society in 1995 to promote alternative dispute resolution
in the country. As pointed out by the high-level committee report,
since its inception ICADR only received 49 arbitration cases. The
low caseload, despite financial support, made the high-level
committee to recommend the taking over of the ICADR and
cancelling the perpetual lease granted in its favour.
50. We hope that the IAMC does not go the ICADR way.
However, despite the annual financial assistance of Rs. 3 crores for
a continuous period of three (03) years now and the provision of
free office space, the IAMC has not been able to sustain itself nor
does it show signs of financially sustaining itself in the future.
Initial support to the IAMC is justified. However, continuous and
perpetual financial assistance to such institutions may not be
financially viable and prudent for the State Government.
Therefore, we direct the Government of Telangana to review the
performance of the IAMC annually and get its accounts audited by
the Principal Accountant General (Audit), Telangana or any other
competent officer. We also suggest the Government of Telangana
to ensure that any release of funds after the five (05) year period as
mentioned in the MoU dated 27.10.2021, is subject to the
performance of the IAMC.
51. As far as G.O. Ms. No. 6 dated 17.03.2022 is concerned,
the same is a matter of the dispute resolution policy framed by the
government. Like any other litigant, it is for the government to
decide which forum it wants to approach to get its disputes
redressed. The government's decision to refer all its disputes above
Rs. 03 crores to the IAMC for arbitration is a matter of policy. We
cannot adjudicate the wisdom of the government. However, as
public money is involved, we would like to sound a note of
caution. We hope that the government examines the costs incurred
by it by referring its cases to the IAMC. In case, the government
finds that the cost of arbitration through the IAMC is higher and is
causing significant burden on the exchequer, it may alter the
policy.
52. In light of the aforesaid discussion, the present PILs are
partly allowed and we hold as follows:
i. G.O. Ms. No. 126 dated 26.12.2021 is set aside and
consequently, the allotment of land bearing Plot No. 27
admeasuring Ac. 3.70 in Sy. No. 83/1, Raidurg village,
Sherilingampally mandal, Raga Reddy District in favour
of Respondent No. 4 i.e., the IAMC is also set aside;
ii. G.O. Ms. No. 76 dated 12.11.2021 and G.O. Ms. No. 365
dated 16.07.2022 are upheld;
iii. G.O. Ms. No. 6 dated 17.03.2022 is also upheld;
iv. The Government of Telangana (Respondent Nos. 1 to 3)
is directed to review the performance of the IAMC
annually and get its accounts audited by the Principal
Accountant General (Audit), Telangana or any other
competent officer; and
v. Any release of funds after the lapse of five (5) years as
mentioned in the MoU dated 27.10.2021 shall be subject
to the performance of the IAMC/Respondent No.4.
Consequently, pending miscellaneous petitions, if any, in
these W.P.(PILs), shall stand closed.
________________________
JUSTICE K. LAKSHMAN
____________________
JUSTICE K. SUJANA
Date:27.06.2025
Vvr.
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