2021 (11) TMI 1214 - SC - Indian Laws

Eligibility to participate in the bidding process for allotment of 5 Star Hotel Plot - change of user for part of the plot and sub division of plot in breach of the terms and conditions represented in the Tender document and letter of allotment - transfer of part of the sub divided plot with change of user before execution of agreement to lease was consistent with Condition No.16 of the General Terms and Conditions of Tender and Condition No.21 of the letter of allotment or not - change of user and subdivision of plot has adversely affected the object of development of 5 Star Hotel in Navi Mumbai or not - legality of change of user and subdivision of plot and transfer of part of the plot. Whether M/s. Metropolis Hotels was eligible to participate in the bidding process for allotment of 5 Star Hotel Plot in accordance with Clause 4(c) of the invitation of offer? - HELD THAT - The perusal of the bid document clearly indicates that the Respondent - M/s. Metropolis Hotels at the time of applying for the bid had duly disclosed that the firm had already applied for registration and had also forwarded the Registration Form and Partnership Deed along with the tender documents. Subsequently on 16.01.2009 the Registrar of the firms issued the certificate of registration in favour of the Respondent - M/s. Metropolis Hotels - Having considered the communication and legal opinion tendered before accepting the highest bid CIDCO s law officers did their due diligence who opined that partnerships being creatures of contracts the requirement of Board resolutions and other technical objections raised were not an essential condition. Therefore at this stage it may not be equitable to review such issues in detail. Whether change of user for part of the plot admeasuring 23, 000 m2 and sub division of plot in breach of the terms and conditions represented in the Tender document and letter of allotment? - HELD THAT - The CIDCO has fairly conceded that the power of change of land of use does exist with CIDCO and has on multiple occasions been used to change the land use pattern. Most importantly in the present case after accepting the change of user fee the authorities cannot post-facto question the same. CIDCO has not been able to show as to how the its own order was illegal or arbitrary. Moreover they have not been able to identify whether the consideration taken by CIDCO at that time was deficient. The prevailing circumstances and changes in the factual conditions need to be appropriately considered. It may be noted that delay in construction of Navi-Mumbai airport economic slump and loss-making endeavors by similarly situated hotels are material considerations and the order has appropriately taken the same into account. The change of land use from five-star hotel to partly residential-cum-commercial purpose cannot be said to be illegal or arbitrary. Whether transfer of part of the sub divided plot of admeasuring 23, 000m2 with change of user in favour of M/s. Shishir Realty Pvt. Ltd. before execution of agreement to lease was consistent with Condition No.16 of the General Terms and Conditions of Tender and Condition No.21 of the letter of allotment? - Whether change of user and subdivision of plot has adversely affected the object of development of 5 Star Hotel in Navi Mumbai? - Whether change of user and subdivision of plot and transfer of part of the plot was legal just and proper? - HELD THAT - There is no substantial violation portrayed by the Appellants herein with respect to allotment of the scheduled land. Further the tender documents as analyzed above make it clear that the CIDCO had the power to change the land use sub-divide and transfer the plots and accordingly has been carried out in terms of the same. In this context we may only observe that good faith standards applicable in Government contracts serve an important purpose in reinforcing the reliance interest in contracts. Even the High Court while passing the impugned judgment has correctly held that Respondents-lessees have acted pursuant to the permission granted by CIDCO. Moreover after getting the commencement certificate and other necessary clearances the Respondents-lessees borrowed a substantial sum of money from other financial institutions for the development of the plot. However due to the ongoing dispute no development could take place for the past decade. By merely using grounds of public interest or loss to the treasury the successor public authority cannot undo the work undertaken by the previous authority. Such a claim must be proven using material facts evidence and figures. If it were otherwise then there will remain no sanctity in the words and undertaking of the Government. Businessmen will be hesitant to enter Government contract or make any investment in furtherance of the same. Such a practice is counter-productive to the economy and the business environment in general. Conclusion - There is an element of abuse of bureaucratic power behind subsequent change in the tender allotment. After conducting a tender process and receiving money the Government backtracked which led to this present prolonged litigation. The impugned order of CIDCO inter alia annulling the allotment on hyper-technical grounds cannot be sustained for being contrary to the doctrine of fairness. The reasons stated in the aforesaid order are perverse and per-se based on extraneous considerations. As analyzed above any substantive violation of law or tender conditions not identified which mandate annulling the allotment and subsequent arrangements thereby proving the conduct of the Appellant authority to be disproportionate. There are no merit in the appeal of the Appellants herein. Accordingly these civil appeals are dismissed with costs.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether M/s. Metropolis Hotels was eligible to participate in the bidding process for the allotment of a five-star hotel plot under Clause 4(c) of the invitation of offer.
• Whether the change of user for part of the plot and the subdivision of the plot breached the terms and conditions represented in the Tender document and letter of allotment.
• Whether the transfer of part of the subdivided plot to M/s. Shishir Realty Pvt. Ltd. was consistent with the terms of the tender and letter of allotment.
• Whether the change of user and subdivision of the plot adversely affected the object of developing a five-star hotel in Navi Mumbai.
• Whether the allotment of the plot, change of land use, and subdivision were arbitrary, illegal, and unjustified.

2. ISSUE-WISE DETAILED ANALYSIS

Eligibility of M/s. Metropolis Hotels:

• Legal Framework and Precedents: Clause 4(c) of the tender document required bidders to be a registered partnership firm. The Court referenced the Indian Partnership Act, 1932, which defines partnerships as contractual relations, not created by status.
• Court's Interpretation and Reasoning: The Court found that M/s. Metropolis Hotels had disclosed its pending registration and submitted necessary documentation with the bid. CIDCO's acceptance of the bid despite the pending registration was deemed equitable.
• Key Evidence and Findings: The firm was registered shortly after the bid submission, and CIDCO had accepted significant payments from the firm, indicating acceptance of the bid despite technicalities.
• Application of Law to Facts: The Court held that the partnership's pending registration did not invalidate the bid, as CIDCO had accepted it with full knowledge.
• Treatment of Competing Arguments: CIDCO's argument that the bid was void due to pending registration was rejected as inequitable, given their acceptance of the bid and subsequent payments.
• Conclusions: The Court concluded that M/s. Metropolis Hotels was eligible to participate in the bidding process.

Change of User and Subdivision of Plot:

• Legal Framework and Precedents: The General Development Control Regulations for Navi Mumbai allowed for modifications, including change of use, with CIDCO's discretion.
• Court's Interpretation and Reasoning: The Court found that CIDCO had the authority to permit changes in land use and that such changes were consistent with regulatory provisions.
• Key Evidence and Findings: CIDCO had previously allowed changes in land use and accepted fees for such changes, indicating a precedent for their actions.
• Application of Law to Facts: The Court held that the change of user and subdivision were permissible and consistent with CIDCO's regulatory framework and past practices.
• Treatment of Competing Arguments: CIDCO's argument that changes were illegal was countered by evidence of past similar actions and the lack of any statutory prohibition against such changes.
• Conclusions: The Court concluded that the change of user and subdivision were legal and justified.

Transfer of Subdivided Plot:

• Legal Framework and Precedents: The tender terms allowed for the transfer of rights with CIDCO's permission, provided certain conditions were met.
• Court's Interpretation and Reasoning: The Court found that the transfer was consistent with the terms, as CIDCO had accepted the transfer charges and executed the necessary agreements.
• Key Evidence and Findings: The transfer was completed with CIDCO's approval and after receipt of full payment, indicating compliance with tender conditions.
• Application of Law to Facts: The Court held that the transfer was valid, as all procedural requirements were satisfied.
• Treatment of Competing Arguments: CIDCO's challenge to the transfer was dismissed, as it was based on hyper-technical grounds without substantive legal basis.
• Conclusions: The Court concluded that the transfer of the subdivided plot was legal and proper.

3. SIGNIFICANT HOLDINGS

• The Court emphasized the importance of procedural fairness and natural justice, criticizing CIDCO's post-decisional hearing as inadequate.
• The judgment reinforced the principle that public authorities must act fairly and cannot arbitrarily change tender conditions or annul contracts without substantial legal justification.
• The Court held that the doctrine of promissory estoppel applied, as CIDCO had not demonstrated any overriding public interest that would justify reneging on its commitments.
• It was noted that mere potential for greater revenue does not justify breaching contractual obligations, especially in the absence of proven financial loss or public detriment.
• The judgment underscored the need for public authorities to uphold the sanctity of contracts and the reliance interests of parties, particularly in government contracts.

The Court dismissed the appeals, affirming the High Court's decision to quash CIDCO's cancellation of the allotment and subsequent actions, and highlighted the lack of merit in CIDCO's arguments. The decision emphasized the necessity for public authorities to adhere to principles of fairness, equity, and good governance in contractual dealings.