Examining the Arbitrariness in Public Resource Allocation: A Critical Analysis of the Una Plot Case

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In the state of Himachal Pradesh, a legal conundrum caught the judiciary’s attention. At its core, the case of Anil Spatia and Others vs. State of Himachal Pradesh CWP No. 7364 of 2012 revolved around the contentious allocation of a valuable industrial plot in Mehatpur, Una District. Initially designated for a noble public utility—an ESI Dispensary—this plot, number 145, unexpectedly became the center of a commercial lease to a private cement industry. This pivot from public service to private enterprise raised critical questions about fairness, transparency, and adherence to constitutional principles in the allocation of public resources. As the High Court of Himachal Pradesh delved into the intricacies of this case, it wasn’t just about a piece of land; it was a narrative about ensuring justice and equity in the face of potential administrative overreach. The courtroom drama that ensued was not only a legal battle but also a reflection of the enduring struggle to balance public good against private interests.

Facts of the Case

The controversy centered around Plot No. 145 in Mehatpur Industrial Area, originally designated for an ESI Dispensary but later allotted to a private entity for setting up a cement industry.

Key Dates

  1. 1973-1974: Mehatpur Industrial Area was established with 145 plots.
  2. 12.09.2011: Respondent No. 5 applied for a plot allotment.
  3. 17.03.2012: Provisional allotment of Plot No. 145 to Respondent No. 5.
  4. 03.09.2012: High Court’s initial directive for the submission of relevant records.
  5. 08.01.2013: High Court’s interim order highlighting the risk on construction by Respondent No. 5.
  6. 27.03.2018: Court seeks verification of petitioners’ plot allotment.
  7. 23.04.2018: Principal Secretary’s response denying preferential allotments to petitioners.
  8. 10.11.2023: Final judgment delivered.

Arguments Presented

  • Petitioners’ Arguments: The petitioners contended that the allotment of Plot No. 145 for industrial purposes, despite being earmarked for a public utility (ESI Dispensary), was arbitrary and violated the principle of equality enshrined in Article 14 of the Constitution. They argued that the plot, being of high commercial value, should have been auctioned, and the “first come first served” basis for allotment lacked transparency and favored the private interests of Respondent No. 5.
  • Respondents’ Defense: Respondents No. 1 to 4 (State authorities) justified the allotment based on the provisions of the Department of Industries Incentive Rules, 2004. They argued that since there was no formal proposal from the ESI Corporation to establish a dispensary, the plot’s allocation to Respondent No. 5 for industrial use was justified. They claimed that the allotment was done in the public interest to prevent financial loss due to the plot lying vacant.
  • Respondent No. 5’s Stance: Respondent No. 5 (private party) defended the allotment, stating that there was no violation of any rules or procedures in the allotment process. They also argued that the petitioners lacked locus standi, as they themselves benefited from similar allotments.

Legal Principles & Application

In the case the High Court of Himachal Pradesh at Shimla referred to several notable judgments to substantiate its decision. Below is the list of these cases along with the legal principles they establish and how they were applied in the current case:

  1. Centre for Public Interest Litigation v. Union of India:
    • Legal Principle: This case is commonly known as the “2G case.” It established that the policy of ‘first come, first served’ in matters of public resource allocation is fundamentally flawed, potentially arbitrary, and can lead to misuse.
    • Application: The High Court utilized this principle to critique the ‘first come, first served’ basis of plot allocation in Mehatpur, emphasizing the inherent risks and lack of transparency in this method.
  2. J.S. Luthra Academy v. State of J&K:
    • Legal Principle: This case highlighted the necessity for public auctions or tenders in the allocation of state resources to ensure fairness competitiveness, and to prevent arbitrariness.
    • Application: The Court applied this principle to argue that the plot in Mehatpur should have been disposed of through a public auction rather than a non-transparent, ‘first come, first served’ method.
  3. Bharti Airtel Ltd. v. Union of India:
    • Legal Principle: This judgment emphasized that the State is bound to act fairly and transparently, ensuring that no action is taken to the detriment of the public interest.
    • Application: The High Court used this principle to support its view that the allocation of Plot No. 145 lacked transparency and fairness and, therefore, was not in public interest.
  4. Goa Foundation v. Sesa Sterlite Ltd.:
    • Legal Principle: This case underscored the importance of adopting a rational method for the disposal of public property, ensuring that the allocation is non-discriminatory and serves the public interest.
    • Application: The Court referred to this principle to support its decision that the allocation process for Plot No. 145 was neither rational nor served the public interest.
  5. Natural Resources Allocation, In re, Special Reference No. 1 of 2012:
    • Legal Principle: This reference reasserted the necessity for transparency in allocating natural resources, emphasizing the public trust doctrine.
    • Application in Case: The reference was used to strengthen the argument against the arbitrary allocation of the plot, reinforcing the need for fairness and public interest in such allocations.
  6. Manohar Lal Sharma v. Union of India:
    • Legal Principle: It addressed the allocation of natural resources and the need for transparent methods in such processes.
    • Application in Case: This case underlined the requirement for a fair and transparent process in the allocation of Plot No. 145.

Court’s Reasoning and Findings

The Court found the “first come first served” policy to be inherently flawed, lacking transparency and fairness. Drawing from precedents, the Court emphasized the importance of public interest in the allocation of natural resources. It declared the allotment of Plot No. 145 as illegal and arbitrary, violating Article 14 of the Constitution.

The following points capture the essence of the Court’s assessment and reasoning:

  1. Violation of Article 14: The petitioners’ argument that the “first come, first served” basis for plot allocation violated the Constitution’s equality clause (Article 14) resonated strongly with the Court. The Court observed that this method lacked transparency and fairness, potentially leading to favoritism and arbitrariness.
  2. Public Utility vs. Commercial Use: The Court delved into the original purpose of Plot No. 145, which was earmarked for a public utility (ESI Dispensary). The Court found the change in land use from a public utility to commercial purposes without due process and public consultation troubling and indicative of an arbitrary decision-making process.
  3. Inadequacy of the ‘First Come, First Served’ Policy: The Court critically evaluated the ‘first come, first served’ basis of plot allocation under Rule 6.7(a) of the Department of Industries Incentive Rules, 2004. Drawing parallels from the Supreme Court’s judgment in the 2G Spectrum case (Centre for Public Interest Litigation v. Union of India), the Court highlighted the inherent flaws and potential for abuse in this policy. It emphasized that such an approach could lead to arbitrariness and lacked the necessary transparency for the fair distribution of public resources.
  4. Lack of Competitive Bidding: The judgment critically examined the absence of a competitive bidding or auction process. Drawing on precedents, the Court highlighted that the allocation of natural resources or public property should ideally be done through public auctions to ensure fairness and equal opportunity, thus serving the public interest.
  5. Inadequate Justification for Non-Auction: The respondents’ justification for not auctioning the plot, based on the contention that it was neither a resumed nor a surrendered plot, was found inadequate by the Court. The Court pointed out that the mere absence of such criteria does not preclude the need for a public auction, especially when there are multiple interested parties.
  6. Disparity in Financial Gains: The Court noted the significant disparity between the financial gains accruing to the private entity and the benefits to the state from the lease of the plot. This disparity was seen as contrary to the principle of ensuring adequate compensation for public resources.
  7. Question of Equity for Respondent No. 5: Addressing the construction activities undertaken by Respondent No. 5, the Court referred to its interim order, which clearly stated that any construction was at the respondent’s own risk. This effectively negated any claims of equity or damages that might be raised by Respondent No. 5 following the reversal of the plot allotment.
  8. Assessment of Petitioners’ Claims: While addressing the counter-allegations against the petitioners regarding preferential allotment, the Court found no evidence of irregularity in their allotments. Thus, their standing to file the petition was upheld.

Final Judgment The judgment declared Clause 6.7(a) of the Department of Industries Incentive Rules, 2004, as unconstitutional. The Court ordered the dismantling of any construction by Respondent No. 5 on Plot No. 145 and its restoration for its original public utility purpose.

“In matters of public resource allocation, the paramount consideration should always be the larger public good, not the expedient satisfaction of private interests.” –

“In the dispensation of public assets, the State must act not only as a guardian of fairness but also as an upholder of public trust.”

M.S. Ramachandra Rao,CWP No. 7364 of 2012 C.J.


In conclusion, the Court’s meticulous assessment paved the way for a judgment that rectified an instance of arbitrary resource allocation and reinforced the legal framework guiding such allocations in the future. The judgment is a testament to the judiciary’s role in upholding constitutional values and ensuring that public resources are managed transparently and equitably. The case underscored the judiciary’s role in safeguarding the public interest against arbitrary administrative actions in allocating natural resources. It reaffirmed the principles of fairness, transparency, and equality enshrined in the Indian Constitution.

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Deven Khanna,
Advocate,
Direct (M): + 91 – 7018469792  
Office: +91 – 0177 – 2674760

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Advocate Deven Khanna, an alumnus of the esteemed National Law School, is currently engaged in legal practice at the High Court of Himachal Pradesh and the Supreme Court of India. His practice primarily focuses on areas such as Civil liberties, Constitutional law, Writs, Labour and Service matters, Public Interest Litigations, and Bail matters. His academic contributions include articles in national journals, judging moot courts, and presentations at various legal conferences. He is committed to advancing legal education. For inquiries, he can be contacted at khannadeven@gmail.com or on mobile at 7018469792.

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