Know The Law | Why Supreme Court Frowned Upon Preferential Allotment Of Public Lands To Legislators, Civil Servants, Judges, Professionals Etc

Anmol Kaur Bawa

12 Jan 2025 12:59 PM IST

  • Know The Law | Why Supreme Court Frowned Upon Preferential Allotment Of Public Lands To Legislators, Civil Servants, Judges, Professionals Etc

    The Supreme Court in its recent decision in State of Andhra Pradesh v. Dr Rao VBJ Chelikani , while quashing the preferential allotment of lands to the housing societies of MPs, MLAs, civil servants, Judges, defence personnel, journalists etc, dissected the important parameters in determining arbitrariness in legal challenges under Article 14. Here is a breakdown of CJI Sanjiv Khanna's...

    The Supreme Court in its recent decision in State of Andhra Pradesh v. Dr Rao VBJ Chelikani , while quashing the preferential allotment of lands to the housing societies of MPs, MLAs, civil servants, Judges, defence personnel, journalists etc, dissected the important parameters in determining arbitrariness in legal challenges under Article 14. 

    Here is a breakdown of CJI Sanjiv Khanna's analysis on (1) faults in overreliance on the Twin Test of Reasonable Classification; (2) The element of examining the legislative intent of the challenged law or policy upon which the classification is created and (3) the evolution of the 'Substantive Equality' test from Canadian to Indian Courts. 

    The main issue before the consideration of the bench was “ Can the Government, like any private individual, have the absolute discretion to frame policy, distribute resources and enter into a contract with whomsoever it pleases, on any terms and conditions it so desires?”

    At an initial level, the Court relied on the decision in Erusian Equipment and Chemicals Ltd. v. State of West Bengal, where this question was posed to this Court. The bench noted that the Court here held that when the Government is engaging in public trade, it cannot act as an private individual and exhibit discretion at his/her will but instead ensure that the principles of equality and non-arbitrariness under Article 14 are complied with.

    When the Government is trading with the public, the democratic nature of Government demands equality coupled with an absence of arbitrariness and discrimination in such transactions. The activities of the Government have a public element and, therefore, they should be conducted with fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly, without discrimination and without adopting an unfair procedure.”

    The principle in Erusian Chemicals was also followed in Ramana Dayaram Shetty v. International Airport Authority of India, where the tender awarded by International Airport Authority of India for running an eatery at the Mumbai Airport was challenged. The Court held that

    “…This proposition would hold good in all cases of dealing by the Government with the public, where the interest sought to be protected is a privilege. It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant."

    "The power or discretion of the Government in the matter of grant of largesse including award of jobs, contracts, quotas, licences, etc. must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.”

    Moving Away from Twin Test Under Article 14: Seeing From The Lens Of Non-Arbitrariness

    When considering the right tests to apply to determine a violation of equality principle under Article 14, the Court dissected the well settle twin test of reasonable classification. Notably under this test, the law or executive action being challenged has to satisfy two tests - (1) the existence of an 'intelligible differentia'- which is a reasonable classification between individuals which is clearly visible and (2) rational nexus to the object - the classification should have some reasonable nexus to the object of law on the basis of which the classification is said to be done.

    The Court however cautioned against excessive reliance on this twin test as it may lead to a technical approach overlooking the true essence of ensuring that 'substantive equality' is maintained. That is to say that the test may not necessarily determine if the object on which the classification is done is fair, non-arbitrary. The Court observes:

    The basis of classification, and object of the legislation are distinct things. Article 14 postulates the need for a rational nexus. Therefore, mere designation of a classification based on an identified objective does not lead to an automatic satisfaction of Article 14. Such an approach can devolve into legal formalism, which risks disregarding the substantive implications of the constitutional guarantee of equality. This Court, to avoid such formalism, has transitioned from an exclusive reliance on the test of classification to a concurrent application of the doctrine of arbitrariness when actions are not grounded in valid reasons. Article 14 of the Constitution prohibits class discrimination by conferring privileges or imposing liabilities on individuals arbitrarily selected from a larger group in similar circumstances concerning the privileges sought or the liabilities imposed. The classification must never be arbitrary, artificial or evasive.”

    (1) Why Twin Test Of Reasonable Classification Is Not Enough? 

    Supreme Court Judge, Justice Vivian Bose in his decision  in State of West Bengal v. Anwar Ali Sarkar and subsequently in Kathi Raning Rawat v. State of Saurashtra had first questioned the propriety of the classification test. Justice Bose noted that the test of reasonable classification is not enough as it is possible to classify even discriminatory actions into some kind of category. 

    Dwelling further on this, CJI Khanna explained that classification itself cannot be an indicator to see if the law/ executive action is fair, but instead the focus should also be the end result of the classification, the reason why it was done to begin with. He observes : 

    "Classification is nothing more than dividing of one group of things from another, and unless some difference or distinction is made in a given case, no question under Article 14 can arise. Mere classification is only a means of attaining the desired result. Therefore, the ends cannot be entirely ignored and consequently, the Court in a limited way is not precluded from examining the legitimacy of the legislative object." 

    The CJI also placed reliance on the decision in State of Jammu and Kashmir v. Triloki Nath Khosa,where "this Court cautioned that classification could pose a danger of creating artificial inequalities and thus to overdo classification is to undo equality. Therefore, classification has to be demonstrably based upon substantive differences and should promote relevant goals that have constitutional validity." 

    In Triloki Nath Case, the Court was considering the issue of whether persons drawn from different sources and integrated into one class, be classified for purposes of promotion on the basis of their educational qualifications. 

    Thus, the CJI stressed that the purpose of the classification/ the legislative intent of the act needs to be given due importance while examining whether the classification is valid under Article 14. 

    "The legitimacy of the object, in a limited way, is a necessary element to be considered for assessing validity of any classification. The classification must be just and fair, which necessitates that the court scrutinizes the underlying purpose of the law. Many a case will ex-facie or demonstrably meet the equity compliance, some will be declared constitutional after in-depth judicial examination."

    (2) In Assessing For Violations Under Article 14, Focus Cannot Be Just Classification But The Larger Reason For Such Classification : Court Explores Relative And Absolute Arbitrariness

    The Court goes a step further to understand that unreasonableness of a challenged law or decision need not necessarily be seen in comparison by way of classification. The Court took the example of two cases where the previous benches determined unreasonableness in relative and absolute sense. 

    Taking the example of the decision in Ajay Hasia v. Khalid Mujib Sehravardi, the CJI highlighted how unreasonableness is usually tested in comparison to something else. In the said case, "this Court stipulated that a policy in question must satisfy two requirements under the reasonable classification test – (a) the classification must be reasonable; and (b) it must fulfil the twin conditions of intelligible differentia and rational nexus." 

    In the second case of A.L. Kalra v. Project and Equipment Corporation of India Ltd, the Court held that "one need not confine the denial of equality to a comparative evaluation between two persons to arrive at a conclusion of discriminatory treatment."

    Hence the above two decision were taken to illustrate that "a policy may perpetrate discrimination inherently, instead of inter se discrimination vis-à-vis others."

    The Court has thus concluded that there can be instances where arbitrariness can be in absolute terms, and need not be compared to something necessarily to demonstrate the violation of Article 14. 

    "An action/policy can per se be arbitrary, and such arbitrariness in itself constitutes a violation of the equal of protection under law."

    "It is arbitrariness that lies at the heart of the reasonable classification test. The principle of reasonableness – both legally and philosophically – is an essential element of equality or non-arbitrariness, pervading Article 14 like a “brooding omnipresence”."

    Substantive Equality : Travelling From Canadian Jurisprudence To Indian Courts

    To understand the principle of Substantive Equality, the Court turned to Canadian Jurisdiction where the rule seemed embedded under Section 15 of the Candian Charter. S.15 states : 

    "(1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

    (2) Subsection (1) does not preclude any law, program or activity that has as its object the amelioration of conditions of disadvantaged individuals or groups including those that are disadvantaged because of race, national or ethnic origin, colour, religion, sex or mental or physical disability."

    It was in 1989 that the Supreme Court of Canada, in Andrews v. Law Society of British Columbia interpreted Section 15(1) of the Canadian Charter to include both direct and indirect discrimination.

    Later the Canadian Supreme Court established a three-part test in Law v. Canada (Minister of Employment and Immigration). This test involved finding a group of people in similar situations for comparison and determining if the law's negative impact affected human dignity. 

    Subsequently, in R. v. Kapp, the Court changed this test. They decided that 'substantive' (or real) equality should be more important than just treating everyone the same on paper (as 'formal equality'). The Court also noted that the human dignity part of the earlier test did not achieve the purpose it had intended to. 

    The CJI analysed that the Canadian Jurisprudence looks at equality claims in a wider perspective where two questions are considered : (1) Is the differential treatment metted out by the law based on a protected characteristic? and (2) would allowing this differential treatment cause discrimination by encouraging unfair ideas/prejudice or stereotypes attached to the concerned person? 

    "(1) Does the law create a distinction based on an enumerated or analogous ground? and (2) Does the distinction create a disadvantage by perpetuating prejudice or stereotypes? The purpose of the distinction component is to demonstrate that the claimant has been treated differently from others—specifically, that they have been denied a benefit available to others or are burdened in a way that others are not, due to personal characteristics that qualify as enumerated or analogous grounds." the CJI observed. 

    The CJI also referred to the decision in Fraser v. Canada (Attorney General), which noted how facially neutral laws could also be discriminatory. In a way the CJI analysed how the growth of equality laws in Canada is similar to how constitutional jurisprudence has developed in India. 

    Comparing the Canadian understanding of Substantive Equality to the Indian Approach, the CJI examines that a similarity between tests under S.15 of Canadian Charter and Article 14 of the Indian Constitution can be found - the law in question must be backed by good reason for treating different groups differently, and this reason must also reflect in the purpose of the law. 

    " In this manner, the development of equality jurisprudence in Canada bears resemblances with the progressive development of constitutional jurisprudence in India. In the Indian context, the mere fact that a policy caters to a distinct, intelligible class, does not automatically imply that the rigours of Article 14 are satisfied. The second prong of the reasonable classification test mandates that the distinction created by the policy between the two classes must have a rational nexus with the object that policy seeks to achieve. Furthermore, the objective of the classification should not itself be illogical, unfair and unjust."

    Notably, the Supreme Court has applied the Substantive Equality test in several of its landmark decisions such as in NALSA v. Union of India (upholding rights of Transgender Persons); Navtej Singh Johar v. Union of India ( Decriminalizing Homosexuality) and Lt Col Nitisha and others v Union of India (Permanent Commission For Women Army officers). 

    True essence of Substantive Equality reflects in laws backed by the purpose of bolstering a particular social or economic good. The CJI also considers that respect for individual dignity is a key facet of substantive equality  "which encompasses three characteristics: (i) a sense of self-worth, (ii) protection of basic choices an individual makes, and (iii) protection of individuals against harmful stereotypes. Lastly, substantive equality is achieved when legislation or policies enhance participation and representation, countering both political and socio-economic exclusion." He adds. 

    The notion of equal opportunity to participate/respresent allows anti-subordination, as it focuses on the group which has suffered the disadvantage and examines whether the legislation or policy aims at neutrality or incorporates affirmative action to rectify the disadvantage or discrimination. Anti-subordination promotes structural change and aims to rectify disadvantages.

    Equality Principle In Land Allotment Policies 

    Applying the above principles to the present case of challenging the preferrential allotment of  the housing societies of MPs, MLAs, civil servants, Judges, defence personnel, journalists etc. within the Hyderabad Municipal Corporation limits on discounted rates, the Court observed that the policy decision of the State suffered from arbitrariness. 

    Here the Court observed that while the allotment at basic rates was done only to a select few as per Government Orders intending to provide benefit to only a certain class - that is MPs, MLAs, civil servants, Judges, Journalists etc; such a creation of seperatate class altogether had no rational basis. 

    It held :  "We are of the opinion that Judges of the Supreme Court and the High Court, MPs, MLAs, officers of the AIS, journalists etc. cannot be treated as a separate category for allotment of land at a discounted basic value in preference to others. The object of the policy perpetuates inequality. The policy differentiates and bestows largesse to an advantaged section/group by resorting to discrimination and denial. It bars the more deserving, as well as those similarly situated, from access to the land at the same price. It promotes social-economic exclusion, to favour a small and privileged section/group. The policy does not meet the equality and fairness standards prescribed by the Constitution." 

    In another recent decision by the bench comprising Justices Sudhanshu Dhulia and Ahsanuddin Amanullah, the Court set aside the allotment of land made by the Maharashtra Government in favor of the Medinova Regal Co-operative Housing Society (“MRCHS”) to provide housing facilities to the doctors working at Tata Memorial Hospital. 

    In doing so, bench made a reference to the Land Revenue (Disposal of Government Land) Rules, Maharashtra, 1971 (“Rules”) read with Government Regulations dated 09.07.1999 (“GR 1999”) which lays down a detailed procedure for allotment of land to any Proposed Co-­Operative Housing Society in Maharashtra. As per Clause 11 of the Rules, a reason is to be given by the State Government in writing as to why such allotment is made in favor of a particular society. Noting that no such procedure was followed in the instant case, the Court said that the entire land allotment exercise was conducted arbitrarily.

    "Clause 11 provides the mechanism by which the public can get to know that government land is available for allotment and can apply for the same. Also, if land is allotted under the discretionary powers of the government, then it is necessary to give reasons in writing as to why such allotment is made in favour of a particular society. Since there has to be transparency in matters of allotment of land by the government, adherence to the above rules and regulations becomes important in the cases of allotment, but unfortunately, all this is completely missing in the present case where allotment was made in favour of MRCHS in total violation of the prescribed procedure." 

    Thus, here again the Court's approach was focused on finding a reasonable intent behind the policy in question. Just like in the previous case, here too while a seperate class of land allottees (Tata's residential doctors) was created, the Court examined whether the classification was based any valid reason within the contours of Article 14. 

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