Telangana High Court Sets Aside Free Allotment of Government Land to International Arbitration & Mediation Centre Hyderabad

A Division Bench of Justice K. Lakshman and Justice K. Sujana observed,

“…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. 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.”

Thus, the Bench held,

“G.O. Ms. No. 126 dated 26.12.2021 is set aside and consequently, the allotment of land bearing Plot No. 27 admeasuring Ac. 3.70 in Sy. No. 83/1, Raidurg village, Sherilingampally mandal, Raga Reddy District in favour of Respondent No. 4 i.e., the IAMC is also set aside”

Facts:

The High Court was dealing with two Public Interest Litigation petitions challenging- (i) the allotment of land to IAMC vide G.O. Ms. No. 126, (ii) grant of financial aid of Rs. 3 crores to IAMC vide G.O. Ms. No. 76 and G.O. Ms. No. 365, and (iii) the direction of the State to all its departments and PSUs to refer its disputes above 3 crores to IAMC for arbitration vide G.O. Ms. No. 6.

Initially, a High Level Committee constituted by the Ministry of Law and Justice and chaired by Justice B.N. Srikrishna, suggested strengthening of institutional arbitration in India and establishment of institutions that provide arbitral services in line with the ICC Court, Singapore International Arbitration Centre, London Court of International Arbitration, Hong Kong International Arbitration Centre. It also emphasised on the importance of administrative and financial governmental assistance in the establishment of such institutions and in the promotion of institutional arbitration.

In light of these recommendations, a trust deed dated 20.08.2021, authored by the then CJI, was executed, creating and declaring the IAMC as a 'public charitable trust'. Consequently, the IAMC and Government of Telangana entered into an MoU whereby the land, in a “business friendly location”, along with financial and infrastructural assistance was promised by the Government.

Submissions:

It was the case of the petitioner that the Government, by issuing the above-mentioned GOs, had abused its powers. The allotment, coupled with the financial assistance, and referral of government disputes beyond Rs. 3 crore to IAMC, was suspected to involve favouritism and possible misuse of the land. Further, the petitioner opposed the land allotment to IAMC contending that its value ran into hundreds of crores and it could not have been allotted free of cost. They submitted that in the absence of a provision permitting the government to allot land free of cost, the said allotment to IAMC, which is a private body, was arbitrary.

Further, in relation to grant of financial aid and referral of disputes to IAMC, the petitioners argued that it would impose an undue financial burden on government exchequer, as IAMC charges exorbitant fees for conducting arbitration and mediation.

Defending the GOs, the Respondent State submitted that the land was allotted under Section 25 of the Telangana Land Revenue Act 1317 Fasli (the Act), which empowers government to allot land for any suitable public purpose, and the said allotment, along with the financial assistance, was made under the recommendations of the High-Level Committee constituted by the Central Government to promote institutional arbitration in India.

Court's Findings:

At the outset, the Court observed that while the government enjoys discretionary power in matters of land allotment and distribution of State largesse, the Court can intervene when a policy decision seems patently arbitrary, discriminatory and marred with favouritism.

Thereafter, the Court examined Section 25 of the Act which enacts the power of the government to assign lands for government or public purposes; and the Andhra Pradesh (Telangana Area) Alienation of State Lands and Land Revenue Rules, 1975, Rule 3(a) of which states that land can be alienated in favour of a private individual, institution or company only after collecting the applicable market value. The Court also referred to Rule 3(b) which provides that no alienation in favour of a private individual, company or institution shall be considered unless the same is registered under the Companies Act.

In light of these provisions, the Division Bench observed,

“The Rules, 1975 do not contemplate alienation of government land to a private body free of cost. Likewise, the Rules, 1975 provide that allotment in favour of a private body can only be made if such body is registered under the Companies Act. As is evident from the MoU dated 27.10.2021 and the impugned G.O. Ms. No. 126 dated 26.12.2021, the subject land was allotted in favour of the IAMC without assessing, charging and collecting the market value. Further, as on the date of allotment, the IAMC was not registered as a company. Therefore, the allotment of land in favour of the IAMC is vitiated on account of non-compliance of the applicable Rules.”

With respect to the government's decision to provide Rs.3 crores as financial assistance, the Court held that the intent of the Government– to support IAMC for promoting institutional arbitration in India, was a policy decision and was therefore justified, and similar financial assistance has been extended in the past to institutions such as the International Centre for Alternative Dispute Resolution (ICADR).

Similarly, the decision to refer all disputes exceeding Rs.3 crores to IAMC was also a matter of policy, not warranting the Court's interference.

However, the Court cautioned that despite continuous funding and free infrastructure, IAMC had not yet become self-sustaining. The Court directed the State to review IAMC's performance annually, and ensure that any funding beyond the five-year MoU period is subject to performance of IAMC.

In conclusion, the Court set aside the GO allotting land free of cost to IAMC; and upheld the GOs providing Rs. 3 crores as financial assistance and referring all government disputes above Rs. 3 crores to IAMC.

Case Details:

Case Number: W.P.(PIL) NOs.76 AND 79 OF 2023

Case Title: Koti Raghunatha Rao v. The State of Telangana

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