Municipal Corporation must respect preferential allotment rights arising from subsisting leases in new commercial complex redevelopments.

The Appellants (Municipal Corporation) manage Nazul land owned by the State Government.

Respondents 1 and 2 (original petitioners) held a valid lease for a shop at the old bus stand until 2037–38.

Following the demolition of the old site, the Corporation categorized the respondents under Category “A” (holders of valid leases) but implemented a new policy for the newly constructed "New Imlipara Commercial Complex," restricting all allotments to a maximum of three years via lottery.

The respondents refused the lottery, seeking a lease until 2037–38.

A Single Judge disposed of the writ petition (WPC No. 4503 of 2025), observing that while the Corporation cannot execute leases beyond three years for Nazul land, it should allot the shop to respondents for the period up to 2037–38.

The Corporation appealed, alleging the order was self-contradictory and violated statutory rules.

Chhattisgarh Municipal Corporation (Transfer of Immovable Property) Rules, 1994, which mandate that the disposal of property by the Corporation can only occur through public auction or with prior State Government approval, specifically limiting leases to a maximum of three years for management purposes.

The principle of "legitimate expectation" and "preferential entitlement" for existing leaseholders during the transition to new infrastructure.

The Appellants argued that the Single Judge’s order was paradoxical—acknowledging the three-year limit in paragraph 25 while directing a lease until 2037–38 in paragraphs 26 and 27.

The Division Bench reconciled these findings by reading the order harmoniously, holding that the Single Judge did not grant a "blanket" direction to bypass the law; rather, the direction was to protect the respondents’ "legitimate expectation" arising from their original lease.

The Bench reasoned that the earlier status as Category “A” leaseholders entitled them to preferential treatment even in the new complex.

The Bench clarified that the Single Judge’s order expressly required the allotment to be subject to statutory framework and State Government approval, thus preventing any act dehors the statute.

The Court held that the respondents did not forfeit their rights by refusing the lottery, as they were seeking protection of existing contractual rights.

The final holding directs the Corporation to proceed with the preferential allotment in accordance with the law, ensuring adherence to the Chhattisgarh Municipal Corporation Rules and obtaining necessary State approvals where applicable.