2014 (4) TMI 1211 - SC - Indian Laws

Eligibility of auction - permissible for the Port Trust to terminate the tender - Held that - As already pointed out that can hardly be a ground to test the validity of a decision in administrative law. For the sake of argument, even if you presume that there a concluded contract, mere termination thereof cannot be dubbed as arbitrary. A concluded contract if terminated in a bonafide manner, that may amount to breach of contract and certain consequences may follow thereupon under the law of contract. However, on the touch stone of parameters laid down in the administrative law to adjudge a decision as are arbitrary or not, when such a decision is found to be bonafide and not actuated with arbitrariness, such a contention in administrative law is not admissible namely how and why a concluded contract is terminated. We, therefore, reject this contention of the appellant. Doctrine of promissory estoppel applicability - Held that - If there is a supervening public equity, the Government would be allowed to change its stand and has the power to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. Merely because the resolution was announced for a particular period, it did not mean that the Government could not amend and change the policy under any circumstances. If the party claiming application of doctrine acted on the basis of a notification, it should have known that such notification was liable to be amended or rescinded at any point of time, if the Government felt that it was necessary to do so in public interest. This contention of the appellant, therefore, is equally devoid of any merits. Concluded contract between the parties - Held that - When the LOI is itself hedged with the condition that the final allotment would be made later after obtaining CRZ and other clearances, it may depict an intention to enter into contract at a later stage. Thus, we find that on the facts of this case it appears that a letter with intention to enter into a contract which could take place after all other formalities are completed. However, when the completion of these formalities had taken undue long time and the prices of land, in the interregnum, shot up sharply, the respondent had a right to cancel the process which had not resulted in a concluded contract. We again emphasise that the issue of the argument of their being a concluded contract is raised in a petition filed under Article 226 of the Constitution and not by way of suit. The issue whether there was a concluded contract and breach thereof become secondary and is examined by us with that limited scope in mind. In such proceedings main aspect which has to be is as to whether impugned decision of the Port Trust was arbitrary or unreasonable. It is also important to remark that in a given case even if it is held that there was a concluded contract, whether specific performance can be ordered or not would be a moot question in writ proceedings. The appellant took the calculated risk in not going to the civil court and choosing to invoke extraordinary jurisdiction of the High Court, which is also discretionary in nature. Appeal dismissed.

Summary

Issues Involved:
1. Whether the decision contained in Resolution No. 108 dated 9.12.2010 is arbitrary and malafide.
2. Whether the doctrine of promissory estoppel applies.
3. Whether there was a concluded contract between the parties.

Issue-wise Detailed Analysis:

I. Whether the Decision Contained in Resolution No. 108 Dated 9.12.2010 is Arbitrary and Malafide:

The Supreme Court examined the facts leading to the impugned Resolution, noting that the tender process initiated in 2005 had seen a significant delay due to the non-receipt of Coastal Regulatory Zone (CRZ) clearance, which was finally obtained in 2010. By this time, the market value of the plots had increased substantially. The Port Trust, considering the larger public interest, sought legal opinion and decided to cancel the tender process to fetch a higher premium through a fresh tender. The Court held that the decision was based on valid considerations and was not arbitrary. It emphasized that in matters of administrative law, the focus is on the decision-making process rather than the merits of the decision itself. The Court cited precedents like *Meerut Development Authority v. Assn. of Management Studies* and *Tata Cellular v. Union of India* to underline the principles of judicial review in tender matters, highlighting that the State's decision to seek higher prices for public assets is legitimate and not arbitrary.

II. Whether the Doctrine of Promissory Estoppel Applies:

The Court clarified that the principle of promissory estoppel operates within the realm of administrative law and must be distinguished from contractual disputes. It noted that the appellant had only paid the earnest money deposit (EMD) and had not incurred further expenses or liabilities. The issuance of the Letter of Intent (LOI) was contingent upon obtaining CRZ clearance, and no formal allotment or lease documents were executed. The Court found that the appellant did not alter its position to its detriment based on the LOI, and thus, the doctrine of promissory estoppel did not apply. The Court cited *MP Mathur & Ors. v. OIC & Ors.* to support the view that public interest can override individual equity, allowing the government to change its stance if necessary for the public good.

III. Whether There Was a Concluded Contract Between the Parties:

The Court distinguished between public law remedies and contractual disputes, emphasizing that the latter falls outside the scope of judicial review under Article 226 of the Constitution. It referenced *Kisan Sahkari Chini Mills Ltd. & Ors.* to illustrate that contractual disputes should typically be resolved through civil courts unless there is a public law element involved. The Court found that the LOI issued to the appellant did not constitute a concluded contract, as it was contingent on obtaining CRZ clearance and other formalities. The Court noted that the Port Trust had reserved the right to accept or reject any bid, and the LOI did not confer any binding rights. The Court concluded that the decision to cancel the tender process was justified given the substantial delay and the significant increase in land prices, which warranted a fresh tender to achieve a fair market value.

Conclusion:

The Supreme Court dismissed the appeal, holding that the decision of the Port Trust was neither arbitrary nor malafide, the doctrine of promissory estoppel did not apply, and there was no concluded contract between the parties. The Court emphasized the importance of public interest and the State's right to seek higher prices for public assets through a transparent and fair process.