Discretionary allotments must be made within well-defined, reasonable, and transparent guidelines to avoid arbitrariness and ensure compliance with Article 14 of the Constitution.

S.S. Nijjar, J. - In December 1988, respondent No. 2 issued an advertisement inviting applications for allotment of residential plots measuring 400, 250, 150 and 100 Square Yards in Shri Guru Teg Bahadur Nagar Development Scheme (Water Works Road), at Khanna, District Ludhiana. The number of plots were not advertised. In the advertisement, it was stated that the allotment would be through law of lots. The allotment will be made strictly according to Punjab Town Improvement (Utilisation of Land and Allotment of Plots) Rules, 1983 as amended up-to-date (hereinafter referred to as "the Rules"). It was also provided that reservation in the categories of Schedule Castes, Backward Classes and other categories would be as per government instructions. Pursuant to the aforesaid advertisement, petitioners No. 1 to 4 applied for a 400 square yards plot and deposited Rs. 8000/- with the Improvement Trust Khanna (hereinafter referred to as "the Trust"). Petitioner No. 5 applied for a 250 square yards plot and deposited Rs. 5000/- with the trust. Although the number of vacant plots/sites were not mentioned in the advertisement, on enquiry it revealed to the petitioners that there were 17 plots of 400 square yards and 33 plots of 250 square yards. Even though all formalities were completed, the Trust did not hold draw of lots. Instead the plots were being allotted out of the discretionary quota and for extraneous considerations. The plots being situated in Khanna on the Grand Trunk Road are of substantial value. Reservations have been made under Rule 4 of the aforesaid Rules extending to 40 per cent of the total number of plots. In addition, 10 per cent of the plots are reserved for the discretionary quota of the plots. According to the petitioners, the Trust has allotted plots in excess to the percentage fixed and no plots have been left for allotment to the general public. They further complained that even if 50% of the plots are to be reserved under Rule 4, still 8 plots of 400 square yards and 16 plots of 200 square yards had to be allotted by draw of lots. In September 1995, it came to the notice of petitioner No. 4 that respondents were holding auction on 29.9.1995 of 10 sites for shop-cum-flats without holding the draw of lots. Petitioner No. 4 challenged the aforesaid action of the respondents in a Civil suit and sought permanent injunction against the Trust restraining it from holding the auction on 29.9.1995. Respondent No. 2 appeared in Court and stated that no auction was being conducted on 29.9.1995. The suit was got dismissed as withdrawn on the very same date. Thereafter, instead of holding the draw of lots, the Trust had refunded the earnest money to the petitioners after a period of more than 7-1/2 years. This refund was not accepted by the petitioners.

2. The petitioners have challenged the aforesaid action of the Trust on the ground that the respondents have not been able to hold draw of lots as the plots have been allotted to their favourites under the discretionary quota i.e. the persons who are politically connected and other persons for extraneous considerations. The action is also said to be illegal as it is against the statutory rules. Allotments have been made in violation of Rule 10(3) of the Rules which provides that if any person has already been allotted a plot in any Urban Estate of Punjab shall not be eligible for allotments of such residential plots. Further it is submitted that the percentage of reservation upto 50% of the total number of the plots is bad in law. Rule 4 of the Rules is likely to be struck down on the ground that there is no proper opportunity to the general public to take part in the selling of public property.

3. The State of Punjab, respondent No. 1 has justified its action and stated that reservations of plots to certain deserving categories of Society viz. Members of Legislative Assembly, Members of Parliament, Freedom Fighters, Political sufferers, Defence Personnel, War Widows,