SUPREME COURT CLARIFIES CONDITIONAL ALLOTMENT UNDER STATUTORY SCHEME IS NOT A SALE

The Judgment in the Case of The State of Telangana & Ors. vs. Dr. Pasupuleti Nirmala Hanumantha Rao Charitable Trust, Civil Appeal No. 5321 of 2025 (Arising out of SLP (C) No. 25818 of 2023) was delivered by a Division Bench of the Supreme Court of India, comprising Hon’ble Justice Dipankar Datta and Justice Manmohan on 14^th May 2025. In this Case the Supreme Court dealt with whether the State could impose restrictions on land that had been sold at market value to a private Trust, and if such conditions violated Section 10[1] of the Transfer of Property Act, 1882.

Facts of the Case

Dr. Pasupuleti Nirmala Hanumantha Rao Charitable Trust (Respondent) was allotted 3.01 acres of land in Sy. No. 72/31 at Chinnathimmapur village, Medak District by the Government of Telangana through an Order dated 8 February 2001. The Trust paid the full market value for the land, which was alienated under G.O.Ms. No. 635 dated 2 July 1990. However, the allotment carried conditions restricting the use of the land and gave the Government the right to resume it without compensation in case of a breach. Later, the Government sought to interfere with the Trust’s enjoyment of the land, invoking the restrictive conditions. The Trust challenged this, and both the Single Judge and the Division Bench of the Telangana High Court held in their favour, declaring the Trust as the absolute owner, holding the restrictive clauses void under Section 10 of the Transfer of Property Act. The State Appealed  to the Supreme Court.

Issues

1. Whether the Government can impose post-sale restrictions on land sold at market value under a statutory scheme
2. Whether such restrictions on enjoyment or alienation of land are void under Section 10 of the Transfer of Property Act, 1882
3. Whether the land transaction constituted a sale conferring absolute ownership or a conditional grant subject to resumption

Contentions by the Appellants (State of Telangana)

The State argued that the land was allotted under statutory provisions (Telangana Land Revenue Act and Alienation of State Lands and Land Revenue Rules, 1975), which allow conditional alienation and resumption without compensation. They emphasized that the allotment was not an unconditional sale but a grant under a government scheme subject to specific terms. They also Cited G.O.Ms. No. 635 and B.S.O. 24 to argue that the Government retains rights to enforce conditions and resume land if breached.

Contentions by the Respondents (Charitable Trust)

The Trust argued that it had purchased the land for market value, which makes it a sale and not a conditional grant. They emphasized that once full market consideration was paid, the State could not restrict the enjoyment or impose resumption clauses. They also Cited Section 10 of the Transfer of Property Act to assert that such restrictive covenants are void when absolute ownership is transferred.

Supreme Court

The Apex Court held that the alienation of land to the Respondent Trust was not a sale but a conditional allotment under a statutory scheme governed by the Telangana Alienation of State Lands and Land Revenue Rules, 1975, G.O.Ms. No.635 (1990), and Board Standing Order 24. The Trust, aware of these conditions, violated them by developing and selling the land as a residential colony, which amounted to fraud on statute.

The Court found that the High Court erred in treating the transaction as a sale and clarified that statutory conditions imposed in such government allotments are not void under Section 10 of the Transfer of Property Act, 1882. Accordingly, the impugned judgments dated 24th June 2014 and 5th July 2022 were set aside, and the Appeal was allowed.

 

Parichaya Reddy

Associate

The Indian Lawyer & Allied Services

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[1] Section 10 in the Transfer of Property Act, 1882

Condition restraining alienation.

Where property is transferred subject to a condition or limitation absolutely restraining the transferee or any person claiming under him from parting with or disposing of his interest in the property, the condition or limitation is void, except in the case of a lease where the condition is for the benefit of the lessor or those claiming under him: provided that property may be transferred to or for the benefit of a women (not being a Hindu, Muhammadan or Buddhist), so that she shall not have power during her marriage to transfer or charge the same or her beneficial interest therein.