Full Judgment Text
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PETITIONER:
STAR ENTERPRISES ETC. ETC.
Vs.
RESPONDENT:
CITY AND INDUSTRIAL DEVELOPMENT CORPORATIONOF MAHARASHTRA LT
DATE OF JUDGMENT30/04/1990
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
KULDIP SINGH (J)
SAHAI, R.M. (J)
CITATION:
1990 SCR (2) 826 1990 SCC (3) 280
JT 1990 (2) 401 1990 SCALE (1)44
ACT:
Maharashtra Regional Town Planning Act, 1966: s. 113
(3A)New Town Planning Authority--Whether a ’State’ within
the meaning of Art. 12 of the Constitution--Whether entitled
to look for best deal in regard to its properties.
Constitution of India: Articles 298 & 14: Government
Company entering commercial.field--Refusing to accept high-
est offer in response to public tender--Action whether
arbitrary.
Indian Contract Act, 1872: Public authority making
contract-Invitation by public tender--Highest offer--When
rejected.
Administrative law--Administrative action--Public
authority rejecting highest tender--Duty to record reasons
to lend credibility to action--Need for public accountabili-
ty.
HEADNOTE:
The appellants had given the highest offers for certain
specified plots for lease in response to invitation by
public tender by the respondent Corporation a Government
Company, and complied with the requirements of deposit. The
respondent, however, rejected the said offers without as-
signing any reason.
The appellants challenged the action of the respondent
before the High Court as arbitrary, unconstitutional and
contrary to rule of law. The High Court, dismissed the writ
petitions in limine.
In these appeals by special leave, it was contended for
the appellants that the respondent Corporation was a ’State’
under Article 12 of the Constitution, that the power of
rejection of offers without assigning any reason was unregu-
lated and unfettered, contrary to the requirement of rule of
law, and that it was in the interest of the public authority
itself, the State and everyone in the society at large that
reasons for State action are placed on record and or even
communicated to the persons from whom the offers came.
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Dismissing the appeals, the Court,
HELD: 1. The respondent No. 1 was ’State’ within the
meaning of Article 12 of the Constitution and in its deal-
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ings with the citizens of India, it would be required to act
within the ambit of rule of law and would not be permitted
to conduct its activities arbitrarily. [829B-C]
R.D. Shetty v. International Airport Authority of India
JUDGMENT:
Sehravardi, [1981] 2 SCR 79, referred to.
2. The State is certainly entitled to look for the best
deal in regard to its properties. In the instant case, there
was no allegation of mala fides in the conduct of respondent
No. 1 in refusing to accept the highest offers. It could,
therefore, be presumed that in so doing the respondent had
been actuated by the consideration of looking for better
offers for the specific plots in its economic interest.
There was thus no arbitrariness in respondent trying to get
proper price for its plots. [829E-F, 828E-F]
3. When highest offers of commercial nature are rejected
reasons sufficient to indicate the stand of the public
authority should be made available and the same should be
communicated to the concerned parties unless there be any
specific justification not to do so. That would assure
credibility to the action, discipline public conduct and
improve the culture of accountability and provide an oppor-
tunity for an objective review in appropriate cases both by
the administrative superior and by the judicial process.
[830F-G, E-F]
State of U.P. v. Raj Narain & Ors., [1975] 4 SCC 428, re-
ferred to.
&
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2076-
2078 of 1990.
From the Judgment and Orders dated 25.8. 1989,
10.11.1989 & 5.9. 1989 of the Bombay High Court in W.A. Nos.
2198, 3377 and 2197 of 1989.
D.N. Dwivedi and Sarva Mitter for the Appellants.
Arun Jetley, Additional Solicitor General, Raian Karan-
jawala, H.S. Anand, Nandini Gore, Ravi Kumar, M. Karanjawa-
la, V,N. Patil and A.S. Bhasme for the Respondents.
The Judgment of the Court was delivered by
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RANGANATH MISRA, J. Special leave granted.
Three applications were filed under Article 226 of the
Constitution before the High Court of Bombay by the respec-
tive appellants before us challenging the rejection of their
highest offers in response to invitation by public tender
without assigning any reason for the same as arbitrary,
unconstitutional and contrary to rule of law.
The respondent a Government company within the meaning
of section 617 of the Companies Act has been constituted as
the New Town Development Authority under sub-s. (3A) of s.
113 of the Maharashtra Regional Town Planning Act, 1966. The
respondent is empowered to dispose of land vested in it and
the respondent has formulated with the approval of the State
Government under s. 159 of the said Act a code for regulat-
ing, inter alia disposal of land. Regulation 4 provides:
"The Corporation may dispose of plots of lands by putting to
auction or considering the individual applications as the
Corporation determines from time to time."
According to the appellants the normal practice adopted
by the Corporation is to invite tenders for the disposal of
specified plots which the Corporation chooses to assign
according to the terms and conditions for lease of plots for
mercantile use. The appellants maintained that they had
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given the highest offers by way of tender for certain speci-
fied plots by complying with the requirements of deposit and
claim that though the offers were the highest, yet the same
have not been accepted. Each of the appellants was before
the High Court challenging the action of respondent No. 1
but the writ petitions were dismissed in limine by saying
that there was no arbitrariness in the respondent No. 1
trying to get proper price for its plots.
It is not disputed that the scheme which is operating
provides that "respondent No. 1 reserves the fight to amend,
revoke or modify the scheme at its discretion as well as to
reject any or all offers for allotment without assigning any
reason." Obviously it is in exercise of this power that the
highest tenders have not been accepted.
It is the contention of Mr. Dwivedi appearing in support
of these appeals that the respondent is ’State’ under Arti-
cle 12 of the Constitution and conferment of naked and
unguided power as referred to above is arbitrary and con-
trary to the provisions of Article 14 of the Constitution;
and since there is no prescribed norm or guideline and he
power is unregulated and unfettered and the highest offer
after complying with the prescribed requirements is avail-
able to be rejected
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without assigning any reasons, citizens are likely to be
affected by exercise of such uncanalised power. Shortly put,
Mr. Dwivedi submits that the procedure is contrary to the
requirement of rule of law and therefore, cannot be sus-
tained. An affidavit in opposition has been filed on behalf
of respondent No. 1 wherein the circumstances under which
the highest offers have not been accepted has been indicated
and the position has been explained.
We do not find it difficult to agree with Mr. Dwivedi’s
submissions that respondent No. 1 is ’State’ within the
meaning of Art. 12 and in its dealings with the citizens of
India it would be required to act within the ambit of rule
of law and would not be permitted to conduct its activities
arbitrarily. It is too late in the day for an institution
like respondent No. 1 to adopt the posture that the activity
in question is commercial and as respondent No. 1 is engaged
in trading activity it would be open to it to act as it
considers appropriate for the purpose of protecting its
business interest. An instrumentality of the State as has
been laid down by this Court in a series of authoritative
decisions beginning with R.D. Shetty v. International Air-
port Authority of India & Ors., [1979] 1 SCR 1042 and in
Ajay Hasia v. Khalid Mujib Sehravardi, [1981] 2 SCR 79 and a
number of decisions thereafter has to act within the ambit
of rule of law and would not be allowed to conduct itself
arbitrarily and in its dealings with the public would be
liable to judicial review.
The State is certainly entitled to look for the best
deal in regard to its properties. This has been accepted by
several decisions of this Court with reference to State
action under the Excise Laws. There is no allegation of mala
fides in the conduct of respondent No. 1 in refusing to
accept the highest offer. We must, therefore, proceed on the
footing that respondent No. 1 acted bona fide and in refus-
ing to accept the highest offers of the appellants in regard
to specific plots has been actuated by the consideration of
looking for better offers for the specific plots in the
economic interest of respondent No. 1.
The question which still remains to be answered is as to
whether when the highest offer in response to an invitation
is rejected would not the public authority be required to
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provide reasons for such action? Mr. Dwivedi has not asked
us to look for a reasoned decision but has submitted that it
is in the interest of the public authority itself, the State
and every one in the society at large that reasons for State
action are placed on record and are even communicated to the
persons from whom the offers came so that the dealings
remain above board; the interest of the public authority is
adequately protected and a citizen knows where he stands
with reference to his offer. What this Court
830
said in State of U.P.v. Raj Narain & Ors., [1975] 4 SCC 428
may be usefully recalled here:
"In a government of responsibility like ours, where all the
agents of the public must be responsible for their conduct,
there can be but few secrets. The people of this country
have a right to know every public act, everything that is
done in a public way, by their public functionaries. They
are entitled to know the particulars of every public trans-
action in all its bearing. The right to know, which is
derived from the concept of freedom of speech, though not
absolute, is a factor which should make one wary, when
secrecy is claimed for transactions which can, at any rate,
have no repercussion on public security. To cover with veil
of secrecy, the common routine business, is not in the
interest of the public."
In recent times, judicial review of administrative
action has become expansive and is becoming wider day by
day. The traditional limitations have been vanishing and the
sphere of judicial scrutiny is being expanded. State activi-
ty too is becoming fast pervasive. As the State has descend-
ed into the commercial field and giant public sector under-
takings have grown up, the stake of the public exchequer is
also large justifying larger social audit, judicial control
and review by opening of the public gaze; these necessitate
recording of reasons for executive actions including cases
of rejection of highest offers. That very often involves
long stakes and availability of reasons for action on the
record assures credibility to the action; disciplines public
conduct and improves the culture of accountability. Looking
for reasons in support of such action provides an opportuni-
ty for an objective review in appropriate cases both by the
administrative superior and by the judicial process. The
submission of Mr. Dwivedi, therefore, commends itself to our
acceptance, namely, that when highest offers of the type in
question are rejected reasons sufficient to indicate the
stand of the appropriate authority should be made available
and ordinarily the same should be communicated to the con-
cerned parties unless there be any specific justification
not to do so.
We do not intend. to go into matters any further in as
much as we do not propose to apply this test to the present
appeals. These appeals fail but we make no order as to
costs.
P.S.S. Appeals dismissed.
831