Public auction is not mandatory for municipal property disposal when deviation serves compelling public-interest reasons.

Final Plot No. 139, Town Planning Scheme No. 30, Asarwa, Ahmedabad, measuring approximately 1,260 sq. metres, was reserved for commercial/market purposes in favour of the Ahmedabad Municipal Corporation (“AMC”) under the finalised Town Planning Scheme, which came into force on 11 September 1978.

The plaintiff, Raghavji & Co., had constructed the Meena Bazaar commercial complex on part of the original land and sub-let shops and godowns to various occupants.

By Resolution No. 842 dated 12 September 1984, subsequently approved by the General Body on 25 September 1984, AMC decided to grant a 99-year lease of the relevant portion of Final Plot No. 139 to defendant No. 2. A lease deed was executed on 27 June 1986.

The plaintiff filed Civil Suit No. 6236 of 1987 seeking declarations that the resolutions and lease deed were illegal and injunctions restraining demolition of the existing structure and further construction.

The City Civil Court decreed the suit on 30 June 2000, quashed the resolutions and lease deed, and granted permanent injunctions against AMC and defendant No. 2.

AMC preferred the present first appeal under Section 96 of the Code of Civil Procedure, 1908.

Whether the plaintiff had the locus standi and an enforceable legal interest to challenge AMC’s resolutions and the consequential lease in favour of defendant No. 2.

Whether AMC was legally required to dispose of or lease Final Plot No. 139 only through public auction or public tender.

Whether the lease and resolutions violated Section 79 of the Gujarat Provincial Municipal Corporations Act, 1949, particularly by allegedly disposing of municipal property below prevailing market value.

Whether the Civil Court could interfere with the implementation of a final Town Planning Scheme or restrain AMC from granting demolition and building permissions within its statutory domain.

The Court applied Section 96 of the Code of Civil Procedure, 1908, governing first appeals, and Section 9 CPC concerning the jurisdiction of Civil Courts.

It considered Section 34 of the Specific Relief Act, 1963 in relation to declaratory relief and the requirement of an enforceable legal character or right.

Section 79 of the Gujarat Provincial Municipal Corporations Act, 1949 governs the disposal of municipal property and requires consideration of market value, premium, rent and other consideration; disposal below prevailing market value is prohibited under Section 79(d).

The Court treated the Town Planning legislation and a final Town Planning Scheme as creating a statutory framework which could not ordinarily be indirectly challenged or obstructed through a Civil Suit.

On public property, the Court relied on M/s Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir, (1980) 4 SCC 1; Sachidanand Pandey v. State of West Bengal, (1987) 2 SCC 295; Haji T.M. Hassan Rawther v. Kerala Financial Corporation, (1988) 1 SCC 166; M.P. Oil Extraction v. State of Madhya Pradesh, (1997) 7 SCC 592; Netai Bag v. State of West Bengal, (2002) 8 SCC 262; M & T Consultants v. S.Y. Nawab, (2003) 8 SCC 100; Villianur Iyarkkai Padukappu Maiyam v. Union of India, (2009) 7 SCC 561; and Indian Medicines Pharmaceuticals Corporation Ltd. v. Kerala Ayurvedic Cooperative Society Ltd., (2023) 19 SCC 755.

These authorities establish that public auction or tender is the ordinary method for disposal of public property, but it is not an inflexible constitutional requirement; departure is permissible where supported by compelling, rational, bona fide and non-discriminatory reasons consistent with public interest and Article 14.

The Court held that the plaintiff was neither the owner of the original parcel nor the owner of Final Plot No. 139 and had not shown that the challenged lease affected any personal or legally enforceable right.

The owner, Keshavbaug Cooperative Housing Society, and the sub-lessees in possession had not challenged the transaction, while the plaintiff had previously unsuccessfully litigated against the Town Planning Scheme.

The absence of a public auction, by itself, did not invalidate the resolutions or lease. The relevant inquiry was whether AMC had compelling and rational reasons for departing from auction and whether the decision-making process was arbitrary, biased or mala fide.

On the evidence, AMC had considered the long-standing litigation and the practical impossibility of evicting defendant No. 2 from the commercial premises.

The Corporation and its Standing Committee concluded that granting the lease would facilitate implementation of the final Town Planning Scheme and serve the public interest; the General Body of elected councillors approved that decision.

The plaintiff produced no reliable evidence establishing the prevailing market value or demonstrating that the lease consideration was below market value, and therefore failed to prove a breach of Section 79(d).

The trial court had impermissibly substituted its assessment for that of the municipal authority and had entered the merits of an administrative decision rather than restricting review to legality, irrationality, procedural impropriety, natural justice and ultra vires limits.

It also exceeded its jurisdiction by permanently restraining AMC from exercising its statutory powers regarding demolition and building permissions.

The High Court held that the plaintiff lacked the requisite locus standi to challenge the AMC resolutions and lease, that public auction was not mandatory in the circumstances, that no breach of Section 79 of the GPMC Act had been proved, and that the Civil Court could not obstruct implementation of the final Town Planning Scheme or assume AMC’s statutory functions concerning construction permissions.

The judgment and decree dated 30 June 2000 in Civil Suit No. 6236 of 1987 were quashed and set aside, the Civil Suit was dismissed, and the Registry was directed to draw the decree accordingly.