2014 (9) TMI 1164 - SC - Indian Laws

Cancellation of plot of land to M/s. Platinum Square for establishment of country club - Agreement of Lease was repudiated and rescinded - non-issuance of tender before making allotment - Section 23 of the Contract Act - whether the allotments of valuable land by CIDCO to one person in different capacity for the purposes mentioned, that too by entertaining private applications, are arbitrary, illegal and fraudulent and against the public policy as contemplated under Section 23 of the Indian Contract Act? Held that - Although allotment of plot for the purposes mentioned was either at a fixed price or by competitive bidding, but no procedure was adopted by the appellant for allotment of these plots either by tender or by competitive bidding. It has also come on record that as against these plots allotted to the respondents, no other application was either invited or received from interested persons. Obviously, when the tender was not advertised or any notice inviting applications were made then there was no occasion for any person to apply for allotment of these plots - no transparency has been maintained by the appellant-CIDCO in making these allotments of Government land. It is well settled that whenever the Government dealt with the public establishment in entering into a contract or issuance of licence, the Government could not act arbitrarily on its sweet will but must act in accordance with law and the action of the Government should not give the smack of arbitrariness. The High Court instead of looking into the matter, completely ignored the same on the ground that in the show cause notice none of the grounds were made basis of the order of cancellation of allotment. The High Court while exercising power of judicial review is supposed to have gone into the question as to how the three plots were allotted in favour of one group of persons. The High Court has lost sight of the admitted fact that by entertaining private applications of the same person three different valuable plots have been allotted in different names. The High Court fell in error in holding that the allotment of plots of land to the same person but in the names of trust is also justified. The action of cancellation of allotment of plots, as tried to be justified by CIDCO, would show that the High Court failed to appreciate such cogent reasons in deciding the matter while exercising the power of judicial review. It is more evident and clear that arbitrariness had a role to play in the matter while allotting the three plots in favour of one group of persons which certainly would come within the meaning of arbitrariness on the part of CIDCO and against the public policy. Such an action on the part of CIDCO, is nothing but a favouritism based on nepotism and was irrational and unreasonable and functioning in a discriminatory manner. The CIDCO was justified in cancelling all the allotments made in favour of the respondents - appeal allowed.

Issues Involved:
1. Cancellation of land allotments by CIDCO.
2. Legality of allotments made without public tender.
3. Application of Section 23 of the Indian Contract Act.
4. Role of public policy in governmental land allotments.
5. Judicial review of administrative decisions.

Detailed Analysis:

1. Cancellation of Land Allotments by CIDCO:
The appeals were directed against the High Court's judgment allowing writ petitions that challenged CIDCO's cancellation of land allotments to M/s. Popcorn Entertainment, M/s. Platinum Entertainment, and M/s. Platinum Square Trust. CIDCO had initially allotted plots for entertainment complexes and a country club, but later issued show cause notices and canceled the allotments citing irregularities and public policy concerns.

2. Legality of Allotments Made Without Public Tender:
The core issue was whether CIDCO's allotments, made without public tender, were arbitrary and illegal. CIDCO argued that the allotments were made without inviting tenders, which was against public policy and caused financial loss. The respondents contended that the allotments were made in accordance with CIDCO's Land Disposal Regulations, which allowed for disposal by considering individual applications.

3. Application of Section 23 of the Indian Contract Act:
CIDCO's cancellation notices referenced Section 23 of the Indian Contract Act, asserting that the allotments were void as they were opposed to public policy. The High Court initially dismissed the writ petitions, suggesting that the respondents had an alternative remedy. However, the Supreme Court remanded the matter back to the High Court, which then quashed CIDCO's cancellation orders.

4. Role of Public Policy in Governmental Land Allotments:
The Supreme Court emphasized that governmental actions must be transparent, non-arbitrary, and in public interest. It cited precedents establishing that state-owned property should not be dealt with at the absolute discretion of the executive and must follow a rational and non-discriminatory policy. The Court found that CIDCO's allotments lacked transparency and appeared to favor specific individuals, which was against public policy.

5. Judicial Review of Administrative Decisions:
The Supreme Court criticized the High Court for not adequately reviewing the merits of CIDCO's decision to cancel the allotments. It highlighted that judicial review should ensure that administrative actions are not arbitrary or influenced by favoritism. The Court concluded that CIDCO's actions were justified and the allotments were rightfully canceled due to the lack of a transparent and competitive process.

Conclusion:
The Supreme Court allowed the appeals, set aside the High Court's judgment, and upheld CIDCO's cancellation of the allotments. The Court stressed the need for transparency and adherence to public policy in governmental land allotments, ensuring that such decisions are made in a fair and equitable manner, free from favoritism or nepotism.

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