The Telangana High Court recently invalidated the Telangana government's decision to allot valuable government land in Hyderabad, free of cost, to the International Arbitration and Mediation Centre (IAMC). The judgment was delivered by a Division Bench of Justice K. Lakshman and Justice K. Sujana in W.P.(PIL) Nos. 76 and 79 of 2023, raising critical questions about misuse of state largesse and public property.
Background of the Case
The IAMC, established in 2021 as a public charitable trust under the initiative of the then Chief Justice of India, was granted 3.70 acres of land in Raidurg village, Ranga Reddy District, by the Telangana Government. Along with the land, financial aid of ₹3 crores and preferential referral of disputes from all state departments and PSUs involving sums above ₹3 crores were also sanctioned.
Court’s Observations and Findings
The petitioners, Koti Raghunatha Rao and A. Venkatarami Reddy, challenged the state’s actions through public interest litigations. They contended that:
- The allotment of such valuable land without charging market value was arbitrary and unlawful.
- IAMC is not a statutory or government body and profits from arbitration services.
- The referral of disputes and financial aid imposed an undue financial burden on the public exchequer.
The court agreed with many of these submissions, stating:
“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.”
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It found that the allotment of land violated the Andhra Pradesh (Telangana Area) Alienation of State Lands and Land Revenue Rules, 1975. Rule 3 requires collection of market value when land is alienated to private institutions and mandates that such institutions be registered under the Companies Act. At the time of allotment, IAMC was neither charged any fee nor registered under the required Act.
“The Rules, 1975 do not contemplate alienation of government land to a private body free of cost... Therefore, the allotment... is vitiated on account of non-compliance of the applicable Rules.”
The court emphasized that even if the intention of the government was in public interest, actions violating legal procedures cannot be justified.
Despite canceling the land allotment, the court upheld the government's financial grant and the directive to refer high-value disputes to IAMC:
“The intent of the Government—to support IAMC for promoting institutional arbitration in India—was a policy decision and therefore justified.”
The court, however, directed the State to monitor IAMC’s performance and review its funding periodically.
In its final verdict, the High Court set aside G.O. Ms. No. 126 dated 26.12.2021 that granted the land to IAMC. However, it maintained the validity of G.O. Ms. No. 76, G.O. Ms. No. 365, and G.O. Ms. No. 6 concerning financial support and arbitration referrals.
“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.”
Case Title: Koti Raghunatha Rao vs. The State of Telangana & Others (W.P. (PIL) No. 76 of 2023) & A. Venkatarami Reddy vs. The State of Telangana & Others
(W.P. (PIL) No. 79 of 2023)
