State Can't Impose Lease Rent Post-Auction; Bidder Signing Undertaking Doesn't Mean Unqualified Consent To New Conditions: Rajasthan High Court

Rajasthan High Court held that the State could not unilaterally impose an annual lease rent condition after completion of an auction and plot allotment when no such condition was contemplated in the original auction notification.The division bench of Dr. Justice Pushpendra Singh Bhati and Justice Sandeep Taneja further rejected the State's argument of the allotees being bound by promissory estoppel based on their undertaking of signing the lease deed in the prescribed formats. It was opined that such undertaking was not unqualified consent to bear any subsequent financial burden which were not contemplated originally. The State had invited bids for auction of plots which resulted in the respondent being the highest bidder and allotment of plots to the respondent. At the time of allotment an undertaking was given by the respondent of signing the lease deed in government approved formats. Three years after the allotment when the respondent was asked to sign the lease deed, a new condition was included in the proforma of payment of annual lease money equivalent to 5% of the market value of the plot, along with an increment clause of such lease money by 25% after every fifteen years. A petition was filed against this which was accepted by the single judge. Against this order, special appeal was filed by the State. It was the case of the State that once the respondents had voluntarily accepted the terms, that included signing of the prescribed lease deeds, and had taken possession of the plot, they could not challenge the validity of the conditions. On the contrary, it was argued by the respondent and also ruled by the single judge that the original auction conditions which were exhaustive in nature did not contemplate this condition at the time of the auction. Since the allottees already acted upon those conditions, and completed construction thereon, State could not be unilaterally compel them with new financial burdens owing to promissory estoppel. After hearing the contentions and perusing the records, the Court highlighted that after completion of auction and allotment of plots, a subsequent communication, 3 years thereafter, requiring execution of lease deeds that unilaterally added pecuniary burden and altered the initially accepted contractual terms was impermissible in law and contrary to settled principles governing public contracts. Furthermore, it was opined, “…undertaking furnished by the allottees to execute lease deeds in accordance with the terms approved by the State Government cannot be construed as an unqualified consent to bear any subsequent financial burden not contemplated at the time of = auction. The said undertakings were given under circumstances leaving the allottees with no viable option but to comply, failing which they would have forfeited their plots. Therefore, no estoppel can be invoked against them to validate an otherwise arbitrary condition.”Accordingly, the ruling of the single judge was upheld and the special appeal was dismissed. Title: State of Rajasthan & Ors. v Bhai Shankar Lal Jawan Mal, and other connected petitionsCitation: 2025 LiveLaw (Raj) 383Click Here To Read/Download Order

State Can't Impose Lease Rent Post-Auction; Bidder Signing Undertaking Doesn't Mean Unqualified Consent To New Conditions: Rajasthan High Court

Nupur Agrawal

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