By IndiaHub 
The whole situation with this leasehold plot which led to this ruling goes back to September 18, 1995, when the government put out an ad inviting bids for auction of plots in the Market Yard, Sumerpur, on a 99-year lease . The person who filed this case participated in that auction held on September 29, 1995 after depositing an earnest money of Rs 10,000, and being the highest bidder, was allotted a shop/plot.
The bid was approved by the Director, Agriculture Marketing, but it came with the condition that the allottees had to provide an undertaking to sign the lease deed according to the terms and conditions approved by the State Government and to get it registered. He complied, submitted the undertaking, was handed over the possession of the plot and started construction.
Later, via a communication dated June 21, 1998, he was told to execute the lease deed in the format approved by the state government, which incorporated a new requirement to pay an annual lease money equal to 5% of the market value of the plot at the time of allotment, plus a condition that this lease money would increase by 25% every 15 years.
Feeling burdened by this extra financial obligation, he filed a writ petition challenging this communication. On November 6, 2025, he won the case in Rajasthan High Court.
Summary of the judgement
Avnish Sharma, Partner at Khaitan & Co, said to ET Wealth Online: “The Rajasthan High Court held that the State Government cannot impose a new annual lease rent on buyers of auctioned plots after the auction and allotment are complete, when no such condition was disclosed in the original auction notice.”
According to Sharma, in this case, the Krishi Upaj Mandi Samiti auctioned 99-year leasehold plots in 1995. The auction terms required bidders to pay a one-time premium but did not mention any recurring annual lease rent. However, the allotment was made subject to the buyer undertaking to sign the lease deed in the form prescribed by the Krishi Upaj Mandi Samiti.
The possession was handed over basis such undertaking and the buyer(s) proceeded to undertake construction. Nearly three years after allotment, the State sought execution of the lease deed which introduced a new condition requiring annual lease rent of 5% of market value, with periodic increases. The Court struck down such imposition.
According to Shama, the buyer succeeded for three main legal reasons:
- The Court found that the 1995 auction notice had complete and exhaustive terms, which did not include any annual rent. Once a public authority auctions land on stated terms and bidders pay based on those terms, those conditions become contractual and final. The State cannot unilaterally introduce fresh financial obligations afterwards. Imposing new conditions years later is arbitrary and violates promissory estoppel
- Buyers had already paid the premium, taken possession, and built shops. They had changed their position in reliance on the auction terms. Under the doctrine of promissory estoppel, the State cannot go back on its representation and add new burdens after the buyer has acted on the original promise.
- Under the Transfer of Property Act, a lease can be granted for a one-time premium without recurring rent. The Court relied on Section 105 of the Transfer of Property Act, which recognises leases granted for a premium alone, without rent. Since the auction was clearly for premium-based leases, the State had no authority to subsequently levy annual rent.
Rajasthan High Court analysis of facts
Rajasthan High Court in its judgement ([2025:RJ-JD:47315-DB]) dated November 6, 2025, said that they observe that the central issue involved in these appeals pertains to the validity of the condition incorporated in the lease deed proforma approved by the State Government.
The conditions imposed after the auction was over, required the allottees to pay annual lease money equivalent to 5% of the market value of the plot, with a 25% enhancement every fifteen years.
The Rajasthan High Court said that the material on record makes it evident that the auction notice dated September 18, 1995, issued by the Krishi Upaj Mandi Samiti, Sumerpur, did not contain any clause stipulating payment of annual lease rent or any recurring charge.
Rajasthan High Court said: “The auction conditions were detailed and exhaustive, specifying the earnest money deposit, bid amount, and other incidental liabilities, but were silent on any further periodic payments.”
The Rajasthan High Court said that they find that after the completion of the auction, the bids were duly approved by the Director, Agriculture Marketing, and the possession of the allotted plots was handed over to the allottees, who also constructed shops and commenced business thereon.
The subsequent communication dated July 21, 1998, issued nearly three years later, requiring execution of lease deeds in the new proforma containing the impugned clause (annual rent with increment), clearly sought to impose an additional pecuniary burden beyond the contractual terms initially accepted.
Rajasthan High Court said: “Such unilateral alteration of the conditions after finalization of the auction is impermissible in law and contrary to the settled principles governing public contracts.”
The Rajasthan High Court said that they also find that the undertaking furnished by the allottees to execute lease deeds in accordance with the terms approved by the State Government cannot be construed as an unqualified consent to bear any subsequent financial burden not contemplated at the time of auction.
Rajasthan High Court said: “The said undertakings were given under circumstances leaving the allottees with no viable option but to comply, failing which they would have forfeited their plots. Therefore, no estoppel can be invoked against them to validate an otherwise arbitrary condition. This Court further observes that the reasoning of the learned Single Judge, based on Section 105 of the Transfer of Property Act, 1882, is sound and well-founded.”
The Rajasthan High Court said that the said provision (Section 105) makes it clear that payment of monthly or annual rent is not a necessary component of a valid lease, and leasehold rights can be transferred upon payment of a one-time premium.
Rajasthan High Court said: ”Once the auction was conducted and the full bid amount was realized, the transfer stood complete, and no further liability could be imposed retrospectively in the guise of rent.”
The Rajasthan High Court said that they are of the considered opinion that the learned Single Judge correctly applied the principle of promissory estoppel, holding that the respondents, having induced the petitioners to act upon the terms of the auction, could not thereafter alter the financial obligations to their detriment.
Rajasthan High Court said: “The introduction of the annual lease rent condition was not only contrary to the auction notice but also unreasonable, unfair, and arbitrary, and therefore rightly quashed.”
Rajasthan High Court judgement
The Rajasthan High Court said that in view of the foregoing discussion, they find no infirmity or illegality in the judgment dated October 8, 2009 passed by the Single Judge warranting interference in appellate jurisdiction.
Rajasthan High Court said:
●The findings are based on a correct appreciation of facts and settled legal principles, and the impugned order does not suffer from any perversity or error apparent on the face of the record.
●Accordingly, all the Special Appeals (Writ) filed by the State of Rajasthan and its functionaries are dismissed being devoid of merit.
●The judgment and order dated 08.10.2009 passed by the learned Single Judge in S.B. Civil Writ Petition No. 3801/1998 (Bhai Shankar Lal Jawan Mal v. State of Rajasthan & Ors.) and other connected matters are affirmed.