Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos.73197320 OF 2019
(Arising out of S.L.P.(C) Nos. 172173 of 2019)
MUNICIPAL COUNCIL NEEMUCH .... APPELLANT(S)
VERSUS
MAHADEO REAL ESTATE AND ORS. .... RESPONDENT(S)
J U D G M E N T
B.R. GAVAI, J.
Leave granted.
2. The present appeals challenge the Judgment and Order
passed by the Division Bench of the Madhya Pradesh High
Court, Bench at Indore, dated 31.08.2017 thereby allowing the
writ petition filed by respondent No. 1 herein and the
Signature Not Verified
Digitally signed by
NARENDRA PRASAD
Date: 2019.09.17
16:58:17 IST
Reason:
subsequent Order dated 05.07.2018 thereby, rejecting the
Review Petition filed by the appellant.
2
3. The factual background, in brief, giving rise to the
present appeals is as under.
The appellant, which is a Municipal Council, duly
constituted under the Madhya Pradesh Municipality Act, 1961
(hereinafter referred to as the “said Act”) had invited tenders for
allotment of land on lease, for a period of 30 years. The land
was admeasuring 163176 sq. ft. situated in Scheme No.1A
(CommercialcumResidential Use), Neemuch. The Notice
Inviting Tenders (“NIT” for short) was published in the daily
newspapers, viz., Nai Duniya, Dainik Bhaskar, Free Press and
Dashpur Express. Respondent No.1, which is a registered
partnership firm along with other bidders had submitted the
tender thereby giving an offer of Rs.5,81,00,106/. It had also
deposited the earnest money amounting to Rs. 47,00,000/. The
bids of the participants were opened in presence of the
representatives of all the bidders. The bid of respondent No. 1
herein was found to be highest.
4. The appellant issued a letter dated 27.09.2008 thereby
informing respondent No. 1 that its bid was accepted.
Respondent No.1 was directed to deposit an amount of
Rs.1,45,25,050/, i.e., 25% of the bid amount within a period of
3
seven days. Respondent no.1 in accordance therewith deposited
the aforesaid amount on 01.10.2008.
5. It appears that an objection was raised by two members
of the Municipal Council under the provisions of Section 323 of
the said Act before the Collector with regard to the said tender
process. It further appears, that the Collector vide Order dated
18.07.2008 had stayed further proceedings of the tender
process. Vide Order dated 23.12.2008, the Collector disposed of
the proceeding observing therein, that the proposal be sent for
approval of the State Government in the Urban Administrative
and Development Department, respondent No. 2 herein, under
the provisions of Section 109 of the said Act.
6. Thereafter, it appears that, there was certain
correspondence between the Urban Administrative and
Development Department, on one hand, and the Divisional
Revenue Commissioner of Ujjain, respondent No.3 herein, on
the other hand. Finally, respondent No.3 passed an order dated
03.07.2010 observing therein that, the tenders invited in
connection with transfer of the said land were not competitive.
He further observed in the said Order, that the NIT was
published only in Indore edition of two Hindi Newspapers at
Indore and as such there was no wide circulation. As such, he
4
rejected the proposal of the Municipal Council and returned the
same with the direction to invite the tenders again by publishing
the NIT in at least one National level English newspaper and one
State level reputed Hindi newspaper. Being aggrieved thereby,
respondent No. 1 herein approached the Madhya Pradesh High
Court in Writ Petition No.12204 of 2010. The Division Bench
vide Order dated 31.08.2017 allowed the writ petition thereby
quashing and setting aside the Order dated 03.07.2010 passed
by respondent No.3 and further directing him to grant approval
on behalf of the State Government for allotment of the land on
lease in favour of respondent no.1. The appellant, thereafter,
preferred Review Petition No. 1072 of 2017. The same was
rejected. Hence, the present appeals challenging both the
Orders dated 31.08.2017 and 05.07.2018.
7. We have heard Mr. Harsh Parashar, learned counsel
appearing on behalf of the appellant and Mr. Kalyan Banerjee,
learned senior counsel appearing on behalf of the respondents.
8. For appreciating the rival controversy, it will be relevant
to refer to the provisions of Section 109 of the said Act. Section
109 reads as follows.
“109. Provisions governing the disposal of
Municipal property vesting in or under the
management of Council. No streets, land public
5
places, drains or irrigation channels shall be sold,
leased or otherwise alienated, save in accordance
with such rules as may be made in this behalf.
(2) Subject to the provisions of subsection (1)
(a) the Chief Municipal Officer may, in his
discretion, grant a lease of any immovable
property belonging to the Council, including
any right of fishing or of gathering and taking
fruits, flowers and then like, of which the
premium or rent, or both, as the case may be,
does not exceed two hundred and fifty rupees
for any period not exceeding twelve months at a
time:
Provided that every such lease granted by the
Chief Municipal Officer, other than the lease of
the class in respect of which the Presidentin
Council has by resolution exempted the Chief
Municipal Officer from compliance with the
requirements of this proviso, shall be reported
by him to the PresidentinCouncil within
fifteen days after the same has been granted.
(b) with the sanction of the PresidentinCouncil,
the Chief Municipal Officer may, by sale or
otherwise grant a lease of immovable property
including any such right as aforesaid for any
period not exceeding three years at a time of
which the premium, or rent, or both, as the
case may be, for any one year does not exceed
one thousand five hundred rupees;
(c) with the sanction of the Council, the Chief
Municipal Officer may lease, sell or otherwise
convey any immovable property belonging to
the Council.
(3) The sanction of the PresidentinCouncil or of
the Council under subsection (2) may be given
either generally for any class of cases or
specially in any particular case:
Provided that
(i) no property vesting in the Council in trust
shall be leased, sold or otherwise conveyed in a
6
manner that is likely to prejudicially effect the
purpose of the trust subject to which such
property is held;
(ii) no land exceeding fifty thousand rupees in
value shall be sold or otherwise conveyed
without the previous sanction of the State
Government and every sale or other conveyance
of property vesting in the Council shall be
deemed to be subject to the conditions and
limitations imposed by this Act or by any other
enactment for the time being in force.”
9. It could thus be seen that, the aforesaid provision
governs the disposal of municipal property vesting in or under
the management of the Municipal Council. Clause (ii) of sub
section (3) of Section 109 of the said Act would be the most
relevant provision. It provides that, no land exceeding fifty
thousand rupees in value shall be sold or otherwise conveyed
without the previous sanction of the State Government. It
further provides that, every sale or other conveyance of property
vesting in the Council shall be deemed to be subject to the
conditions and limitations imposed by the said Act or by any
other enactment for the time being in force.
10. It will also be relevant to refer to Rule 3 of the Municipal
Corporation (Transfer of Immovable Property) Rules, 1994
(hereinafter referred to as the “said Rules”), which reads thus:
7
“3. No immovable property which yields or is
capable of yielding an income shall be transferred by
sale, or otherwise conveyed except to the highest
bidder at a public auction or by inviting offers in a
sealed cover:
Provided that if the Corporation is of the opinion that
it is not desirable to hold a public auction or to invite
offers in sealed covers the Corporation may, with the
previous sanction of the State Government, effect
such transfer without public auction or inviting
offers in sealed covers:
Provided further that the Corporation may with the
previous sanction of the State Government and for
the reasons to be recorded in writing, transfer any
immovable property to a bidder other than the
highest bidder:
Provided also that for any such transfer by lease a
reasonable premium shall be payable at the time of
granting the lease and annual rent shall also be
payable in addition during the total period of the
lease.”
11. A perusal of the aforesaid Rule 3 of the said Rules would
reveal, that no immovable property which yields or is capable of
yielding an income shall be transferred by sale, or otherwise
conveyed, except to the highest bidder at a public auction or by
inviting offers in a sealed cover. The proviso thereof provides
that if the Corporation is of the opinion that it is not desirable to
hold a public auction or to invite offers in sealed covers, the
Corporation may, with the previous sanction of the State
Government, effect such transfers without public auction or
8
inviting offers in sealed covers. The second proviso also provides
that the Corporation may, with the previous sanction of the
State Government and for the reasons to be recorded in writing,
transfer any immovable property to a bidder other than the
highest bidder.
12. It is thus amply clear that, no land, exceeding fifty
thousand rupees in the value shall be sold or otherwise
conveyed without the previous sanction of the State
Government. The perusal of the aforesaid Rule further makes it
clear that the immovable property which yields or is capable of
yielding an income shall not be transferred by sale or otherwise
conveyed, except to the highest bidder at the public auction or
by inviting offers in a sealed cover. No doubt, with the previous
sanction of the State Government such a transfer could be
effected without public auction or inviting offers in a sealed
cover. The second proviso further provides that, the Corporation
may, with the previous sanction of the State Government and
for the reasons to be recorded in writing, transfer any
immovable property to a bidder other than the highest bidder.
13. It is thus amply clear that, whenever any land which is
having a value exceeding fifty thousand rupees is to be sold the
9
same cannot be done without the previous sanction of the State
Government.
14. In the present case, the learned Judges of the Division
Bench have arrived at a finding that such a sanction was, in
fact, granted. We will examine the correctness of the said
finding of fact at a subsequent stage. However, before doing
that, we propose to examine the scope of the powers of the High
Court of judicial review of an administrative action. Though,
there are a catena of judgments of this Court on the said issue,
the law laid down by this Court in the case of Tata Cellular Vs.
Union of India reported in (1994) 6 SCC 651 lays down the basic
principles which still hold the field. Paragraph 77 of the said
judgment reads thus:
“77. The duty of the court is to confine itself to
the question of legality. Its concern should be:
1. Whether a decisionmaking authority exceeded its
powers?
2. Committed an error of law,
3. committed a breach of the rules of natural justice,
4. reached a decision which no reasonable tribunal
would have reached or,
5. abused its powers.
Therefore, it is not for the court to determine whether
a particular policy or particular decision taken in the
fulfilment of that policy is fair. It is only concerned
with the manner in which those decisions have been
taken. The extent of the duty to act fairly will vary
from case to case. Shortly put, the grounds upon
10
which an administrative action is subject to control
by judicial review can be classified as under:
(i) Illegality : This means the decisionmaker must
understand correctly the law that regulates
his decisionmaking power and must give
effect to it.
(ii) Irrationality, namely, Wednesbury
unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not
rule out addition of further grounds in course of
time. As a matter of fact, in R. v. Secretary of State
for the Home Department, ex Brind, (1991) 1 AC
696, Lord Diplock refers specifically to one
development, namely, the possible recognition of the
principle of proportionality. In all these cases the test
to be adopted is that the court should, ‘consider
whether something has gone wrong of a nature and
degree which requires its intervention’”.
15. It could thus be seen that the scope of judicial review of
an administrative action is very limited. Unless the Court comes
to a conclusion, that the decision maker has not understood the
law correctly that regulates his decisionmaking power or when
it is found that the decision of the decision maker is vitiated by
irrationality and that too on the principle of “Wednesbury
Unreasonableness” or unless it is found that there has been a
procedural impropriety in the decisionmaking process, it would
not be permissible for the High Court to interfere in the decision
making process. It is also equally well settled, that it is not
permissible for the Court to examine the validity of the decision
11
but this Court can examine only the correctness of the decision
making process.
16. This Court recently in the case of West Bengal Central
School Service Commission vs. Abdul Halim reported in 2019
SCC OnLine SC 902 had again an occasion to consider the
scope of interference under Article 226 in an administrative
action.
“31. In exercise of its power of judicial review, the
Court is to see whether the decision impugned is
vitiated by an apparent error of law. The test to
determine whether a decision is vitiated by error
apparent on the face of the record is whether the error
is selfevident on the face of the record or whether the
error requires examination or argument to establish it.
If an error has to be established by a process of
reasoning, on points where there may reasonably be
two opinions, it cannot be said to be an error on the
face of the record, as held by this Court
in Satyanarayan v. Mallikarjuna reported in AIR 1960
SC 137. If the provision of a statutory rule is
reasonably capable of two or more constructions and
one construction has been adopted, the decision would
not be open to interference by the writ Court. It is only
an obvious misinterpretation of a relevant statutory
provision, or ignorance or disregard thereof, or a
decision founded on reasons which are clearly wrong in
law, which can be corrected by the writ Court by
issuance of writ of Certiorari.
32. The sweep of power under Article 226 may
be wide enough to quash unreasonable orders. If a
decision is so arbitrary and capricious that no
reasonable person could have ever arrived at it, the
same is liable to be struck down by a writ Court. If the
decision cannot rationally be supported by the
12
materials on record, the same may be regarded as
perverse.
33. However, the power of the Court to examine
the reasonableness of an order of the authorities does
not enable the Court to look into the sufficiency of the
grounds in support of a decision to examine the merits
of the decision, sitting as if in appeal over the decision.
The test is not what the Court considers reasonable or
unreasonable but a decision which the Court thinks
that no reasonable person could have taken, which has
led to manifest injustice. The writ Court does not
interfere, because a decision is not perfect.
17. It could thus be seen that an interference by the High
Court would be warranted only when the decision impugned is
vitiated by an apparent error of law, i.e., when the error is
apparent on the face of the record and is self evident. The High
Court would be empowered to exercise the powers when it finds
that the decision impugned is so arbitrary and capricious that
no reasonable person would have ever arrived at. It has been
reiterated that the test is not what the court considers
reasonable or unreasonable but a decision which the court
thinks that no reasonable person could have taken. Not only
this but such a decision must have led to manifest injustice.
18. In the light of the aforesaid principles, let us examine the
facts of the present case. Undisputedly, in the present case,
before inviting the bids, prior approval of the State Government
13
as is required under Section 109 of the said Act was not taken.
It appears, that only after the tender process was finalized and
the Municipal Council had taken a decision to accept the bid of
Respondent No.1, two municipal counsellors raised objection
under the provisions of Section 323 of the said Act, before the
Collector, Neemuch. The Collector, Neemuch on 18.07.2008 had
granted stay to the proceedings. Finally, the Collector, vide
Order dated 23.12.2008 held that for granting the said land on
lease for a period of 30 years, the approval of the State
Government is necessary. Pursuant to the said order by the
Collector, the matter was sent to respondent No. 2 State
Government. The Principal Secretary to the Government of
Madhya Pradesh addressed a communication to the
Commissioner, Ujjain Division, Ujjain (hereinafter referred to as
“the Commissioner”) thereby authorising him to transfer the
land in question. While doing so, the State Government also
directed the Commissioner to inspect that the utilisation of the
land was for the purposes as provided under Neemuch
Development Plan 2011.
19. However, the Commissioner addressed a communication
dated 03.03.2010 to the State Government thereby, pointing out
that the rights for transferring the property having a value more
14
than fifty thousand rupees is with the State Government. He
has, therefore, solicited guidance from the State Government
seeking clear orders in view of the provisions of Section 109 of
the said Act and Rule 7 of the said Rules. He also pointed out to
the State Government that the Municipal Council had published
the NIT only in two daily newspapers of Hindi language and as
such there was no sufficient competition. He also pointed out
that, as such tenders were filled up by only four bidders. He
specifically observed, that after noticing the rates offered, it
appears that there is cartel amongst the tenderers. He further
pointed out that, had the NIT been published in English and
Hindi newspapers at the National and State level, then there
would have been a wider competition and the higher rates could
have been offered. He, therefore, proposed that while rejecting
the proposal as submitted to the Council it will be appropriate
to direct the Municipal Council, Neemuch, to invite the tenders
again.
20. In response to the aforesaid communication dated
03.03.2010, respondent No. 2State Government addressed
another communication dated 18.05.2010 to the Commissioner.
The said communication states that after reexamination the
State Government has authorised the Commissioner for
15
transferring the land in question. The said communication
specifically states that if the proposal submitted by the
Municipal Council was not agreeable to the Commissioner then
while invalidating the proposal by the Municipal Council, he
may give order for initiation of proceedings afresh. In pursuance
of the aforesaid communication dated 18.05.2010, the order
impugned herein is passed by the Commissioner dated
03.07.2010.
21. The Commissioner in the Order dated 03.07.2010 has
found that the bids were not found to be competitive. He further
found that the NIT was published only in two Hindi newspapers
and as such there was no sufficient competition. He has,
therefore, rejected the proposal of the Municipal Council and
while doing so, returned back the same with the direction to
invite the tenders again and get the NIT published in at least
one National level English newspaper and one State level Hindi
newspaper.
22. The situation that emerges is thus. Initially the Municipal
Council, Neemuch, invited tenders for allotment of the said
land on lease for 30 years. This was done without taking prior
approval of the State Government as in required under Section
109 of the said Act. Two municipal counsellors raised objections
16
before the Collector under the provisions of Section 323 of the
said Act. The Collector, who initially granted stay on
18.07.2008, vide order dated 23.12.2008 directed the Municipal
Council to seek approval of the State Government to the said
proposal. Vide communication dated 21.12.2009, the State
Government directed respondent No. 3Revenue Commissioner
to hand over the possession of the land to respondent No. 1.
While doing so, the State Government directed the
Commissioner to inspect as to whether the land was being put
for use as per the development plan. On receipt of the
communication, the Divisional Commissioner addressed a
communication to the State Government on 03.03.2010
thereby, specifically pointing out that no proper publicity was
given to the NIT and that the rates were not competitive as per
the market value. It was specifically observed that there was a
cartel among the tenderers and, therefore, sought clear orders
of the State Government in view of Section 109 of the said Act.
He also proposed to reject the proposal with further direction to
invite fresh tenders by giving adequate publicity. In response to
the said communication, the State Government reexamined the
issue and by communication dated 18.05.2010 authorised the
Commissioner for transferring the land in question. It is further
17
clear from the said communication that, the State Government
authorised the Commissioner to take necessary decision with
regard to grant of sanction under the provisions of Section 109
of the said Act and Rule 7 of the said Rules. It specifically
observed that, if the Commissioner does not agree with the
proposal of the Municipal Council he may while invalidating the
proposal of the Municipal Council give orders for initiation of
proceedings afresh. It is in view of this authorisation that the
Divisional Commissioner has passed the orders which were
impugned before the Madhya Pradesh High Court.
23. We are at pains to say, that the Division Bench of the
High Court by only referring to the communication dated
21.12.2009 came to the conclusion that the sanction
contemplated under Section 109 of the said Act was granted by
the State Government. However, the Division Bench has totally
ignored the subsequent correspondence between the State
Government and the Commissioner. Perusal of the subsequent
communication reveals that the Commissioner had pointed out
the infirmities in the proposal of the Municipal Council and
advised the State Government to reject the said proposal with a
direction to the Municipal Council to invite fresh tenders. On
the objection of the Commissioner, the State Government re
18
examined and reconsidered the issue and authorised the
Commissioner to exercise powers under Section 109 of the said
Act to take appropriate decision, including rejecting the
proposal and directing the process of retendering.
24. It could thus be clearly seen that, the Commissioner,
instead of blindly accepting the directions contained in the
communication dated 21.12.2009, has acted in larger public
interest so that the Municipal Council earns a higher revenue.
Not only this, but the State Government, after the
Commissioner pointing out anomalies to its notice, has re
examined and reconsidered the issue and authorised the
Commissioner to pass appropriate orders including invalidating
the tender process and directing initiation of fresh tender
process. In the background of this factual situation, the finding
of the Division Bench of the High Court that the action of the
Commissioner is arbitrary and illegal, in our view, is neither
legally or factually correct. As discussed hereinabove, the High
Court, while exercising its powers of judicial review of
administrative action, could not have interfered with the
decision unless the decision suffers from the vice of illegality,
irrationality or procedural impropriety.
19
25. In the present case, we find that the Commissioner had
acted rightly as a custodian of the public property by pointing
out the anomalies in the proposal of the Municipal Council to
the State Government and the State Government has also
responded in the right perspective by authorising the
Commissioner to take an appropriate decision. We are of the
considered view that, both, the Commissioner as well as the
State Government, have acted in the larger public interest. We
are unable to appreciate as to how the High Court, in the
present matter, could have come to a conclusion that it was
empowered to exercise the power of judicial review to prevent
arbitrariness or favouritism on the part of the State authorities,
as has been observed by it in paragraph 13. We are also unable
to appreciate the finding of the High Court in para 17 wherein it
has observed that the impugned decision of the authorities are
found not to be in the public interest. We ask the question to
us, as to whether directing retendering by inviting fresh
tenders after giving wide publicity at the National level so as to
obtain the best price for the public property, would be in the
public interest or as to whether awarding contract to a bidder in
the tender process where it is found that there was no adequate
publicity and also a possibility of there being a cartel of bidders,
20
would be in the public interest. We are of the considered view
that the decision of the Commissioner which is set aside by the
High Court is undoubtedly in larger public interest, which
would ensure that the Municipal Council earns a higher
revenue by enlarging the scope of the competition. By no stretch
of imagination, the decision of the State Government or the
Commissioner could be termed as illegal, improper,
unreasonable or irrational, which parameters only could have
permitted the High Court to interfere. Interference by the High
Court when none of such parameters exist, in our view, was
totally improper. On the contrary, we find that it is the High
Court, which has failed to take into consideration relevant
material.
26. In the result, the impugned Orders are not sustainable in
law. The appeals are, accordingly, allowed and the impugned
orders dated 31.08.2017 and 05.07.2018 are quashed and set
aside. The petition of respondent No. 1 stands dismissed.
27. However, the Municipal Council is directed to refund the
amount deposited by respondent No. 1 herein along with
interest at the rate of 6% per annum forthwith.
21
28. In the facts and circumstances of the case, there shall be
no order as to costs.
.....................J.
[ARUN MISHRA]
.....................J.
[M. R. SHAH]
.....................J.
[B.R. GAVAI]
NEW DELHI;
SEPTEMBER 17, 2019.