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TMI Blog2021 (11) TMI 1214X X X X Extracts X X X X X X X X Extracts X X X X ..... Pranati Bhatnagar, Adv., Mr. Saurabh Chaudhary, Adv., Ms. Anne Mathew, AOR JUDGMENT N.V. RAMANA, C.J.I. 1. These Civil Appeals arise out of the impugned judgment dated 06.12.2013 passed by the High Court of Judicature at Bombay in Writ Petition No. 702 of 2011, Writ Petition No. 5245 of 2011, and Public Interest Litigation No. 55 of 2011. 2. At the outset, a brief sketch of the facts is necessary for determining the issue. On 11.06.2008, the Appellants in Civil Appeal Nos. 3956-3957 of 2017 (City and Industrial Development Corporation of Maharashtra, for short "CIDCO") called for a tender for lease of land within its jurisdiction, for purposes of development of necessary infrastructure such as Hotels etc., around Navi Mumbai Airport. Respondent - M/s. Metropolis Hotels was one of the bidders. 3. Before approval of the tender, technical qualifications of the bidders were scrutinized and approved by the CIDCO's legal team on 25.07.2008 in the following manner: Metropolis Hotels is a Partnership firm consisting of M/s. Sun-n-Sand Hotel Pvt. Ltd. and Shishir Realty Pvt. Ltd. having their share 30% each. A short question arises for the determination is whether Board Resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hotels-Respondent No. 1, by way of a letter to CIDCO, applied for change of user of 34,000 sq. mtrs. of the said plot to commercial-cum-residential use. On 11.02.2010, this request for change/expansion of user of Plot No. 5 was considered and subsequently permitted only for 23,000 sq.mtrs. 7. On 11.03.2010, M/s. Metropolis Hotels requested for subdivision of the Plot No. 5 into two, i.e. 24,000 sq. mtrs. for the five-star hotel and 23,000 sq. mtrs. for the residential-cum-commercial plot. By way of a letter dated 29.03.2010, CIDCO demarcated the said plot as requested, forming Plot No. 5 (admeasuring 24,000 sq. mtrs.) and Plot No. 5A (admeasuring 22,999.08 sq. mtrs). M/s. Metropolis Hotels also requested assignment of their rights in respect of the plot on which the residential-cum-commercial user was permitted, i.e. Plot No. 5A. Assignment of this plot to M/s. Shishir Realty Private Ltd. was approved by CIDCO in its letter dated 30.03.2010, wherein it referred to the said assignee as one of the partners in the original allotment. 8. On 30.03.2010, the CIDCO executed two separate lease deeds in respect of the two plots, i.e. Plot No. 5 and Plot No. 5A. M/s. Shishir Realty Privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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? No 2. Whether change of user for part of the plot admeasuring 23,000 m2 and subdivision of plot in breach of the terms and conditions represented in the Tender document and letter of allotment? Yes 3. Whether transfer of part of the subdivided 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? No 4. Whether change of user and subdivision of plot has adversely affected the object of development of 5 Star Hotel in Navi Mumbai? Yes 5. Whether change of user and subdivision of plot and transfer of part of the plot was legal, just and proper? [No] 11. Pertaining to the first issue of the eligibility of M/s. Metropolis Hotels to participate in the bidding process, the order held that Clause 4(c) of the tender document obligated the bidders to have a registered partnership firm. It concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two lease deeds in favour of the Respondents-lessees were cancelled. 16. Aggrieved by the cancellation of the lease deeds, M/s. Metropolis Hotels and Shishir Realty Pvt. Ltd., challenged the aforesaid order of the Vice Chairman, CIDCO, through two writ petitions being Writ Petition No. 702 of 2011 and Writ Petition No. 5245 of 2011 before the High Court of Judicature at Bombay. Separately, a PIL was also filed challenging the allotment of the plot in question, change of land use, and sub-division of the said plot. 17. The High Court, vide impugned order dated 06.12.2013, while quashing the aforesaid cancellation order passed by CIDCO, held that the change of land use and sub-division of the plot had taken place with due authorization of the CIDCO. Further, it held that the CIDCO was not able to show any concrete violations which go to the root of the matter. Finally, the High Court held that, without producing any pressing need on record, the CIDCO is precluded and estopped on the doctrine of promissory estoppel from canceling the allotment. 18. Aggrieved by the impugned judgment, the CIDCO and PIL Petitioner-Appellant in C.A. Nos. 3959-3961 of 2017 have filed separate appeals b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he letter of allotment, which mandated that the allotted land shall be used only for the construction of a five star hotel. c) The change of land use was illegal and arbitrary. d) The sub-division of plots was also invalid. 22. Dr. Abhishek Manu Singhvi, learned Senior Counsel, appearing on behalf of Shishir Realty Pvt. Ltd., argues that: a) M/s. Metropolis Hotels was a partnership firm and had applied for registration. When bid was made, they had declared the same to CIDCO. The enforcing committee received the bid being fully aware that the application for registration of partnership firm was pending before the registrar and decided to go with their bid as it was Rs. 23 crore higher than the next bid. b) Additionally, the enquiry that was conducted against the said allocation was in complete abrogation of natural justice. No notice was issued to the Respondents during the pendency of the enquiry. Even while accepting the report of the Principal Secretary, no hearing was given to the Respondents. c) Not only is CIDCO bound by the principles of estoppel, but they have also failed to prove any losses attributable to the Respondent. d) CIDCO has only raised bald allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which are taken in gross abuse of law. English Courts have developed many legal standards for evaluating administrative decisions, one of them being enumerated in the case of Council of Civil Service Unions v. Minister for the Civil Service, [1985] AC 374, wherein Lord Diplock has summarized the grounds of challenging such decisions under the broad heads of illegality, irrationality, procedural impropriety and legitimate expectation. Beyond these grounds, a recent development in the form of proportionality has further increased the scope of judicial review. 26. Being governed under "rule of law" every action of the State or its instrumentality while exercising its executive powers must met the aforesaid requirements. While recognising the existing principle of freedom to enter or not to enter into contracts by the state and its instrumentalities, the manner, method and motive behind the aforesaid decision can be subjected to judicial review on the touchstone of equality, fairness, proportionality and natural justice. The decision of the executive must strike a balance with the alleged violation with that of the penalty imposed. 27. This Court, in many of its orders reviewing te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. (emphasis supplied) 30. These principles acquire importance as the efficacy of commercial activities in the public sector increases greatly. It appears that public interest litigation has opened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Ltd. has placed on record letter dated 23.12.2010 addressed to the Urban Development Department and CIDCO, stating that he was shocked to see a newspaper report stating that a committee appointed by the State Government has recommended the cancellation of the allotment done in their favour. The aggrieved Respondent challenged the aforesaid recommendation as it was passed without affording an opportunity of hearing them-the aggrieved party. 35. Subsequent to the aforesaid letter, on 28.12.2010, the Respondents-lessees received a show-cause notice dated back to 06.12.2010. The Respondents-lessees submitted their responses on 30.12.2010, 13.01.2011 and on 19.02.2011. Finally hearing was given to the Respondent on 03.03.2011. Thereafter, finally on 16.03.2011, the CIDCO cancelled/revoked the letter of allotment and the subsequent permissions. Vide the aforesaid order, the Manager (Town Services) was also directed to take over possession of the plots within 15 days. 36. The perusal of the materials produced on record shows that the initiation of the enquiry by the Principal Secretary, Urban Development Department was suo-motu, without any natural justice being provided for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative orders. Providing effective natural justice to affected parties, before a decision is taken, it is necessary to maintain Rule of law. Natural justice is the sworn enemy of intolerant authority. Any attempt by authority to circumvent the requirement of providing effective hearing before reaching a conclusion, cannot pass the muster. Coming to the facts herein, the post-decisional hearing given to the Respondent-lessee is reduced to a lip-service, which cannot be upheld in the eyes of law. 39. As a first step of judicial review, we need to note that when statutory functionaries such as CIDCO render an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of an affidavit or otherwise.Mohinder Singh Gill v. Chief Election Commissioner, New Delhi, (1978) 1 SCC 405. To this extent, we agree with the submission of Dr. Abhishek Manu Singhvi, that the scope of this Court is limited. Hence, we will only consider the impugned order of CIDCO dated 16.03.2011 and the reasoning supplied therein. 40. At this juncture, it is pertinent to consider certain allegations of violation raised by the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... els stand vitiated, and the concluded agreement is liable to be terminated. 45. In our considered opinion, the aforesaid paragraph does not indicate sufficient reasons. There is no reason provided as to what provision of law such bids violate. Further, there is no concrete allegation or adjudication on the suggested cartelization. There is no reasoning considered as to why such a practice was harmful to public interest. We may note that such considerations are important elements of party autonomy and commercial freedoms while framing the contract, which is not within the purview of judicial review. As there is no such law or contract provision which bars such conduct, the considerations undertaken by the order of CIDCO are extraneous and the same cannot be accepted. 46. The second aspect considered by the Appellant (CIDCO) was the change of land use. According to CIDCO, such change of land use was not permitted under the contract. Therefore, it was argued to be not valid. On the contrary, the Respondents have argued that not only CIDCO was authorized to change the usage but also the Clause 19 of the allotment letter provided that development of the plot was governed under the Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Although the argument made by the CIDCO is attractive at the outset, a deeper analysis makes it clear that such argument is devoid of merit. In this context, it may be necessary to note certain clauses contained in the Tender Document and Allotment Letter: 4. Who is eligible to offer to acquire plot (a) A person competent to contract under the Indian Contract Act is eligible to make offer to acquire plot. (b) A company incorporated under the Indian companies Act, 1956 is eligible to make offer to acquire plot. (c) A partnership firm registered under Indian Partnership Act, 1932 is eligible to offer to acquire plot. Offer shall be signed by all partners and enclosed with a true certified copies of Deed of Partnership and certificate of registration. (d) A public trust registered under Public Trust Act, 1950 and also registered under Society Registration Act, 1860 is eligible to offer to acquire plot. (e) A Co-operative society registered under the Maharashtra Co-operative Societies Act, 1960. The Offer form must be signed by the Chairman or the Hon. Secretary of the society without which it will be held invalid. The authorization of general body must be enclosed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is contradictory, this Court needs to interpret the same to harmonize and eliminate any absurdity. Ramana Dayaram Shetty v. International Airport Authority of India AIR 1979 SC 1628. If the interpretation supplied by CIDCO, by reading Clause 15(m) and (n) of allotment letter with Clause 15 of the tender document in isolation, is accepted, then the phrase 'If he so desires, may apply for the application of the modified Regulation of the General Development Control Regulation to CIDCO', as occurring under Clause 15 of the tender document, is rendered redundant. In this context, the aforesaid Clause needs to be interpreted to mean that, 'lessee cannot apply for change of land use as a matter of right, rather, CIDCO, on its discretion could grant such 'change in land use' on satisfaction based on material considerations'. 48. The contradictory contractual clauses, seen within various documents issued by CIDCO, have led to this seemingly unending dispute, which required more than a decade to be settled. This only emphasizes the importance of due diligence and careful drafting, which could have avoided such type of litigation in the first place. 49. In the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y CIDCO at that time was deficient. The prevailing circumstances and changes in the factual conditions need to be appropriately considered. In our considered opinion, 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. 51. The last submission on this aspect which the learned Senior Counsel for the CIDCO, Shri Rakesh Dwivedi, takes is that the relaxation of land use was made under the policy of 1997 which has been substituted by a new policy in 2004. However, such submission is patently wrong, considering the fact that the letter dated 11.02.2010 specifically alludes to the expanded policy of 2004 whereby additional categories of land use were added. It is mentioned in the letter that the policy of the CIDCO was not to impose any limit on the user of an area out of allotted area which can be converted. In light of the aforesaid discussion, the change of land use from five-star hotel to partly residential-cum-commercial purpose cannot be said to be illegal or arbitrary. 52. The third aspect which need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doctrine of promissory estoppel to argue that the CIDCO could not have walked out of the bargain, merely because of the possibility of larger profits. It is pertinent to note that, the CIDCO has failed to prove any losses suffered. 54. When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination. The larger public interest of upholding contracts and the fairness of public authorities is also in play. Courts need to have a broader understanding of public interest, while reviewing such contracts. 55. In Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, it was held as under: 22... The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tarted. 58. From the contradictory submissions asserted before this Court and the concessions given regarding practice of CIDCO to allow change in land use in other cases, clearly points to a 'regime revenge'. Such conclusion reached herein is further buttressed by the fact that no inquiry or disciplinary proceedings were initiated against the earlier Vice-Chairman, whose orders have been annulled. Such phenomenon is clearly detrimental to the constitutional values and Rule of law. 59. As the last leg of the submission, the Respondents-lessees have claimed that considering they have acted upon the directions of the Appellant authority and have duly paid the requisite amounts to the tune of Rs. 321.32 crores, CIDCO is bound by the doctrine of promissory estoppel. On the contrary, principles of estoppel do not apply if enforcing the promise would lead to the prejudice of public interest. 60. Before we delve into the aforesaid arguments, it is imperative for us to go to have a look at certain decisions of this Court. This Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, (1979) 2 SCC 409 laid down the necessity of the government being bou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts as have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. ....The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden. (emphasis supplied) In the aforesaid case, this Court held that it would not be enough for the Government to merely state that public interest requires that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record to claim such exemption. The aforesaid opinion was affirmed by this Court in the case of Vasantkumar Radhakisan Vora (Dead) by His LRs. v. Board of Trustees of the Port of Bombay, (1991) 1 SCC 761. The court held therein: 20. When it seeks to relieve itself from its application the government or the public authority are bound to place before the court the material, the circumstances or grounds on which it seeks to resile from the promise made or obligation undertaken by insistence of enforcing the promise, how the public interest would be jeopardised as against the private interest. It is well settled legal proposition that the private interest would always yield place to the public interest. (emphasis supplied) 62. The learned Senior Counsel, Mr. Rakesh Dwivedi, has sought to argue that promises made to the Respondents-lessees are contradicted by the representation given to the general public, that the land was being allotted for construction of a 5-star Hotel. He has sought to create an exception of public interest as a limit to promissory estoppel. 63. As we have noted earlier, there is no substantial violation portrayed by the Appellants herein with respect to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership firm, which was in the process of registration, to bid, needs to be viewed with some suspicion. In fact, the non-prosecution of the erring officials for the alleged mismanagement and irregularities is quite telling. 67. Before we state the conclusions, this Court would like to reiterate certain well-established tenets of law pertaining to Government contracts. When we speak of Government contracts, constitutional factors are also in play. Governmental bodies being public authorities are expected to uphold fairness, equality and Rule of law even while dealing with contractual matters. It is a settled principle that right to equality Under Article 14 abhors arbitrariness. Public authorities have to ensure that no bias, favouritism or arbitrariness are shown during the bidding process. A transparent bidding process is much favoured by this Court to ensure that constitutional requirements are satisfied. 68. Fairness and the good faith standard ingrained in the contracts entered into by public authorities mandates such public authorities to conduct themselves in a non-arbitrary manner during the performance of their contractual obligations. 69. The constitutional guarantee aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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