Supreme Court Strikes Down First Come First Serve Policy for Land Licenses in Haryana: Anant Raj Ltd. vs. State of Haryana (27 October 2021)

Introduction

Date of the Judgment: 27 October 2021

Citation: 2021 INSC 742

Judges: Justice Ajay Rastogi and Justice Abhay S. Oka

Is a ‘first-come, first-served’ approach a fair way to grant licenses for developing land? The Supreme Court of India recently tackled this question in a case concerning land development licenses in Haryana. The court examined whether the State’s practice of granting licenses based on who applied first was just and legally sound. This case delves into the principles of fairness and transparency in government processes, particularly when it comes to land development. The judgment was delivered by a two-judge bench comprising Justice Ajay Rastogi and Justice Abhay S. Oka, with Justice Rastogi authoring the opinion.

Case Background

The case revolves around the State of Haryana’s policy of granting licenses for developing group housing colonies. The state adopted a “First Come First Serve” (FCFS) basis for granting these licenses. This policy was challenged by original petitioners (Respondent nos. 7 to 9) who were denied licenses. The petitioners argued that the FCFS policy was unfair and lacked transparency. The High Court of Punjab and Haryana at Chandigarh agreed with the petitioners, canceling licenses granted to the appellants (Respondent nos. 4 to 7 in the High Court) and directing the State to frame a transparent policy. The appellants, whose licenses were canceled, and the original petitioners, who were denied licenses, both appealed to the Supreme Court.

Timeline

Legal Framework

The case is primarily governed by the following legal provisions:

• The Haryana Development and Regulation of Urban Areas Act, 1975 (referred to as the “1975 Act”): This Act regulates the development and regulation of urban areas in Haryana.
• The Haryana Development and Regulation of Urban Areas Rules, 1976 (referred to as the “1976 Rules”): These rules provide the procedure and guidelines for implementing the 1975 Act.
• Section 3 of the 1975 Act: This section deals with the application for a license to develop a colony.
• Section 9A of the 1975 Act: This section empowers the government to issue policy parameters for allotment of licenses.
• The Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963 (referred to as the “1963 Act”): This act was also referred to in the judgment in relation to the publication of the Final Development Plan.
• Section 5 of the 1963 Act: This section deals with the publication of development plans.

These provisions form the basis for regulating urban development and granting licenses for developing colonies in Haryana. The Supreme Court’s judgment interprets and applies these provisions to determine the validity of the FCFS policy.

Arguments

The appellants (M/s Anant Raj Ltd. and M/s Mahamaya Exports Pvt. Ltd.) argued that:

• Their applications were considered in accordance with the guidelines and instructions issued by the State Government.
• The FCFS policy was a long-standing practice followed by the authorities.
• The judgment in Centre for Public Interest Litigation & Ors. v. Union of India & Ors. (2012) 3 SCC 1, relied upon by the High Court, was not applicable as it pertained to the distribution of natural resources, whereas this case involves the development of private land.
• There was no prescribed policy before 5th July, 2012 regarding consideration of license applications on the basis of Draft/Final Plan.
• The licenses were granted much after the publication of the Final Development Plan.
• The High Court erred in cancelling their licenses.

The State of Haryana contended that:

• The process for granting licenses was initiated based on the principle of FCFS after the public notice dated 1st October, 2010.
• This practice had been followed for a long time.
• The application of Respondent nos. 7 to 9 was rejected for valid reasons.
• The government has introduced a new policy in 2017, and all pending applications would be considered under it.
• The allotment was made within the cap of 20% in Sector 63A for development of group housing society.

The original petitioners (Respondent nos. 7 to 9) argued that:

• The FCFS policy was arbitrary and against public interest.
• Their application for grant of license was arbitrarily rejected by the State authorities.
• Their application should be considered as a special case under the old policy of 2006.

Submissions

Issues Framed by the Supreme Court

The High Court framed the following issues:

1. How can a license for development of a colony be granted based on draft development plans published under the Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963?
2. Is the policy of granting licenses on a First Come First Serve basis fair and reasonable, in view of the Supreme Court’s judgment in Centre for Public Interest Litigation and others v. Union of India and others, 2012 (3) SCC page 1?

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities:

Judgment

The court’s view on the authorities:

• Centre for Public Interest Litigation & Ors. v. Union of India & Ors. (2012) 3 SCC 1: The court distinguished this case, stating that it dealt with the distribution of natural resources, whereas the present case was about land development. However, the court agreed with the High Court’s finding that the FCFS policy was arbitrary.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Lack of Transparency: The court emphasized that the FCFS policy was not transparent, as it was not codified or made public. This lack of transparency led to an “unholy race” amongst applicants.
• Arbitrariness: The court found the FCFS policy to be arbitrary, as it involved an element of pure chance and could be misused by those with access to power corridors.
• Violation of Article 14: The court held that the FCFS policy violated Article 14 of the Constitution, which guarantees equality before the law and non-arbitrariness in state action.
• Public Interest: The court stressed that every action of the State should be in the public interest, and the FCFS policy failed this test.
• No consistent practice: The court found no consistent practice of FCFS basis for allotment of licenses available under the entire Scheme placed on record.

Fact:Law Ratio

The court’s reasoning process for the issue of fairness of the FCFS policy is as follows:

Key Takeaways

• The Supreme Court has invalidated the First Come First Serve policy for granting land development licenses in Haryana.
• The court emphasized the need for transparency and non-arbitrariness in government actions.
• The court held that the policy was in violation of Article 14 of the Constitution of India.
• The State Government has been directed to consider all pending applications under the new policy of 2017.
• The court highlighted that the State has a solemn duty to ensure that a non-discriminatory method is adopted for allotment of licenses.
• The court stated that a public authority possesses powers only to use them for public good.

Directions

The Supreme Court directed that all pending applications, including those of the appellants, be considered under the State’s new policy of 2017.

Development of Law

The ratio decidendi of this case is that the First Come First Serve policy for granting land development licenses is not a valid method when there is a cap on the number of licenses to be granted. The court held that such a policy is arbitrary, lacks transparency, and violates Article 14 of the Constitution. This judgment clarifies that even when dealing with private land, the State must adopt a fair and transparent process for granting licenses. This case has changed the previous position of law followed by the State of Haryana.

Conclusion

In conclusion, the Supreme Court dismissed the appeals, upholding the High Court’s decision to strike down the First Come First Serve policy for granting land development licenses in Haryana. The court emphasized the importance of fairness, transparency, and non-arbitrariness in government actions, particularly when it comes to land development. The judgment mandates that all pending applications be considered under the State’s new policy of 2017, ensuring a more equitable and transparent process.