Supreme Court: State Must Get Maximum Value Of Its Resources When State-Owned Assets Are Passed Over To Private Entities

The Court allowed an Appeal filed by the State of Telangana, setting aside a High Court judgment that favoured a charitable trust in a land dispute. The Court's decision centred on whether the transfer of land was a sale or an allotment and the validity of conditions imposed on the land's use.

A Bench of Justice Dipankar Datta and Justice Manmohan held, “It is a settled law that the Government cannot distribute State’s largesse and normally the State ‘must’ get the ‘maximum value’ of the resources, especially when State-owned assets are passed over to private individuals/entities unless there are good and cogent reasons for doing so in special circumstances.”

Senior Advocate S. Niranjan Reddy represented the Appellants, while Senior Advocate Gaurav Agrawal appeared for the Respondent.

Brief Facts

The case involved a land in Chinnathimmapur, initially designated as Government land. The Respondent, Dr. Pasupuleti Nirmala Hanumantha Rao Charitable Trust (Trust), applied for allotment of the land. The District Collector allotted the land to the Trust under specific conditions, including that the land be used for the purpose for which it was allotted.

The High Court had held that the Trust was the absolute owner of the land, stating that once the land was sold for market value, the Government could not restrict its use, citing Section 10 of the Transfer of Property Act, 1882 (TPA).

Court’s Reasoning

The Supreme Court clarified that alienation of land by the Appellant was not a sale, but an allotment under the statutory scheme of Telangana Alienation of State Lands and Land Revenue Rules, 1975.

“Consequently, alienation of land by the District Collector, Medak, Government of Andhra Pradesh vide order dated 8th February, 2001 was not a sale, but an allotment under a statutory Scheme,” it held.

The Bench further emphasised that the allotment was conditional, and the Trust was aware of these conditions. “This would be apparent from the fact that not only in the contemporaneous correspondence, but even in the writ petition filed, there was an admission by the Respondent-Trust that the allotment was made for a charitable purpose, and the land was being used for the said purpose,” it pointed out.

“In fact, the case of the Respondent-Trust in its writ petition filed before the learned Single Judge was not that it was a case of sale, but it had been assured that, “the alienation of land is amounting to sale…”. Consequently, this Court is of the view that the High Court fell in error in making out a case of sale, ignoring the fact that the Appellant-State had allotted land to the Respondent-Trust under a statutory scheme of alienation/allotment,” the Court held.

“This Court is further of the view that when the Government decides to sell its land, as the Respondent-Trust would like this Court to believe, the Government can neither select a buyer nor can it fix a price unless and until the said decision is backed by a social or economic or welfare policy/purpose – which is admittedly absent in the present case,” the Bench remarked,

Consequently, the Court ordered, “Keeping in view the aforesaid findings, the impugned judgments are set aside and the Appeal, is accordingly allowed.”

Accordingly, the Supreme Court allowed the Appeal.

Cause Title: The State Of Telangana & Ors. v. Dr. Pasupuleti Nirmala Hanumantha Rao Charitable Trust (Neutral Citation: 2025 INSC 679)

Appearance:

Appellants: Senior Advocate S. Niranjan Reddy; AOR Devina Sehgal; Advocates Palak Arora and S. Uday Bhanu

Respondent: Senior Advocate Gaurav Agrawal; AOR D. Abhinav Rao; Advocates Abhisek Das, Megha Shaw and Raghav Bherwani

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