Supreme Court of India
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING DIRECTORversusPLATINUM ENTERTAINMENT AND OTHERS
- Citation
- 2014 INSC 690
- Decided
- 26 September 2014
- Disposal
- Appeal(s) allowed
- Bench
- M Y EQBAL
Holding
CIDCO was justified in cancelling the allotments as they were arbitrary, discriminatory and violative of Article 14 and public policy.
Summary
The Supreme Court examined the allotment of three plots of government land by the City and Industrial Development Corporation (CIDCO) to entities linked to the same proprietor. The respondents had obtained the plots through private applications without any public tender, prompting CIDCO to cancel the allotments on grounds of arbitrariness, nepotism and violation of public policy under Section 23 of the Indian Contract Act. The Court held that the State and its agencies cannot dispense largesse arbitrarily; allocations must follow a transparent, non‑discriminatory policy and be made by public auction or tender unless a compelling reason exists. It found CIDCO’s allotments to be favouritism and irrational, and therefore upheld the cancellation. Consequently, the appeals were allowed and the High Court’s order quashing the cancellation was set aside.
Issues considered
- The validity of CIDCO’s allotment of government land without public tender or auction.
- Whether the cancellation of the allotments under Section 23 of the Indian Contract Act is justified as a matter of public policy.
- Whether the State’s action violated Article 14 of the Constitution by being arbitrary, discriminatory or based on nepotism.
- The adequacy of the High Court’s reliance on alternative remedies and its dismissal of the writ petitions.
- The applicability of the Maharashtra Regional and Town Planning Act and related regulations to the disposal of public land.
Legislation cited
- Indian Contract Act, 1872s. 23
- Maharashtra Regional and Town Planning Act, 1966s. 118, s. 154, s. 159
- New Bombay Disposal of Lands Regulations, 1975s. Regulation 4
- New Bombay Road Disposal Rules, 1975s. Chapter 5
- Right to Information Act, 2005
Subjects
Town planningGovernment land allotmentArbitrarinessArticle 14FavoritismNepotismPublic policyIndian Contract ActCIDCOMaharashtra Regional and Town Planning ActRight to Information ActLand disposal regulationsCancellation of lease
Judgment
[2014] 10 S.C.R. 704
A CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING
DIRECTOR
v.
PLATINUM ENTERTAINMENT AND OTHERS
(Civil Appeal No. 9264 of 2014)
B
SEPTEMBER 26, 2014
[M.Y. EQBAL AND PINAKI CHANDRA GHOSE, JJ.]
Town Planning - Government action - Allotment of
C government land by the State or its agencies - Requirement
of fairness and equity - Three plots of Government land
allotted by appellant-CIDCO (City and Industrial Development
Corporation) - Cancellation of the allotment - Validity - Held:
Authorities of CIDCO showed undue favour and managed to
D allot the Government land in favour of one person knowing
fully well that the proprietor of the Company, in different
capacity and in dummy names, sought allotments of plots -
Arbitrariness had a role to play in the matter -Action on the
part of CIDCO was nothing but favouritism based on nepotism
E and was irrational and unreasonable and functioning in a
discriminatory manner - Order passed by the CIDCO
cancelling the allotments made in favour of the respondents
accordingly upheld - Maharashtra Regional and Town
Planning Act, 1966 - New Bombay Disposal of lands
F Regulations, 1975 - New Bombay Road Disp·osal Rules,
1975 - Constitution of India, 1950 - Art. 14.
Allowing the appeals, the Court
HELD:1. State and its agencies and instrumentalities
G cannot give largesse to any person at sweet will and
whims of the political entities or officers of the State.
However, decisions and action of the State must be
founded on a sound, transparent and well defined policy
which shall be made known to the public. The disposal
H 704
CllY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 705
DIRECTOR v. PLATINUM ENTERTAINMENT
of Government land by adopting a discriminatory and A
arbitrary method shall always be avoided and it should
be done in a fair and equitable manner as the allotment
on favoritism or nepotism influences the exercises of
discretion. Even assuming that if the Rule or Regulation
prescribes the mode of allotment by entertaining B
individual application or by tenders or competitive
bidding, the Rule of Law requires publicity to be given
before such allotment is made. CIDCO authorities should
not adopt pick and choose method while allotting the
Government land. [Para 49] [738-E-G] c
2. 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 D
the part of CIDCO is nothing but a favouritism based on
nepotism and was irrational and unreasonable and
functioning in a discriminatory manner. [Para 51] [739-D-
E]
E
3. The authorities of CIDCO showed undue favour to
the respondents and managed to allot the Government
land in favour of one person knowing fully well that the
aforesaid proprietor of the Company, in different capacity
and in dummy names, sought allotments of plots. CIDCO F
was thus justified in cancelling all the allotments made in
favour of the respondents. [Paras 54, 55] [740-F-G; 741-8]
Raman Dayaram Shelly vs. International Airport Authority
of India & Ors. (1979) 3 SCC 489: 1979 (3) SCR 1014; Akhil
Bhartiya Upbhokta Congress vs. State of Madhya Pradesh G
& ors. (2011) 5 SCC 29: 2011 (5) SCR 77; Kasturi Lal
Lakshmi Reddy & Ors. vs. State of Jammu and Kashmir &
Anr. (1980) 4 SCC 1: 1980 (3) SCR 1338; State of Haryana
vs. Jage Ram (1983) 4 SCC 556: 1983 (3) SCR 917;
Sachidanand Pandey & Anr. vs. State of West Bengal & Ors. H
706 SUPREME COURT REPORtS [2014) 10 S.C.R.
A (1987) 2 SCC 295: 1987 (2) SCR 223; Padma vs. Hiralal
Motilal Desarda (2002) 7 SCC 564 and Centre for Public
Interest Litigation vs. Union of India (2012) 3 SCC 1: 2012
(3) SCR 147 and Humanity and Anr. vs. State of West
Bengal and Ors. (2011) 6 SCC 125: 2011 (8) SCR 653 -
B relied on.
Popcorn Entertainment & Anr. vs. City Industrial
Development Corpn. & Anr. (2007) 9 SCC 593: 2007 (3)
SCR 17; Kasturi Lal Laxmi Reddy vs. State of Jammu &
C Kashmir 1980 (4) SCC 1: 1980 (3) SCR 1338; Chairman .
and MD, BPL Ltd. vs. S.P. Gururaja and others 2003 (8) SCC
567: 2003 (4) Suppl. SCR 587 and Sunil Pannalal Banthia
vs. City & Industrial Development Corpn. of Maharashtra Ltd.
(2007) 10 SCC 674: 2007 (3) SCR 798 - referred to.
D Case Law Reference:
2007 (3) SCR 17 referred to Para 13
1980 (3) SCR 1338 referred to Para 20
2003 (4) Suppl. SCR 587 referred to Para 21
E
2007 (3) SCR 798 referred to Para 23
1979 (3) SCR 1014 relied on Para 37
2011 (5) SCR 77 relied on Para 38
F
1980 (3) SCR 1338 retied on Para 39
1983 (3) SCR 917 relied on Para 40
1987 (2) SCR 223 relied on Para 41
G c2002) 1 sec 564 relied on Para 42
2012 (3) SCR 147 relied on Para 43
2011 (5) SCR 77 relied on Para 50
H 2011 (8) SCR 653 relied on Para 53
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 707
DIRECTOR v. PLATINUM ENTERTAINMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. A
9264 of 2014.
From the Judgment & Order dated 01.09.2009 of the High
Court of Judicature at Bombay in Writ Petition No. 9468 of
2005. B
WITH
C.A. Nos. 9265 & 9266 of 2014.
B.H. Marlapalli, A.S. Bhasme for the Appellant. c
Vikas Singh, J.P. Cama, Venkatesh, Deepika Kalia,
Kapish Seth, Dhruv Chopra, Anuj Agarwala, Lakshmi Raman
Singh, Shankar Chillarge, Aniruddha P. Mayee, Asha Gopalan
Nair for the Respondents.
D
The Judgment of the Court was delivered by
M.Y. EQBAL, J. 1. Leave granted.
2. These appeals are directed against the common E
judgment and final order dated 01.09.2009 passed by the High
Court of Judicature at Bombay whereby Division Bench of the
High Court has allowed three Writ Petitions being W.P.Nos.
9467, 9468 of 2005 and 3423 of 2006 preferred respectively
by M/s. Popcorn Entertainment Corporation (in short, 'M/s.
F
Popcorn'), M/s. Platinum Entertainment (in short, 'M/s.
Platinum') and M/s. Platinum Square Trust (in short, 'M/s.
Platinum Square'). By way of these writ petitions, the writ
petitioners had challenged orders of appellant- 'The City &
Industrial Development Corporation' (in short 'CIDCO') by G
which allotment of plot of lands to M/s. Popcorn and M/s.
Platinum Entertainment for erecting entertainment complex in
Navi Mumbai and the allotment of plot of land to Mis. Platinum
Square for establishment of country club were cancelled.
3. The facts giving rise to aforesaid writ petitions and H
708 SUPREME COURT REPORTS [2014] 10 S.C.R.
A consequently present appeals are almost similar. However, for
the sake of clarity factual matrix of each appeal has been
mentioned here separately.
4. The respondent- M/s. Popcorn Entertainment (SLP (C)
B No.1290 of 2010) in the appeal by special leave arising out of
Writ Petition No.9467 of 2005, by way of an application made
a request for allotment of plot in Airoli for setting up multiplex-
cum-audito ri um-cum-entertainment centre. On CIDCO's
instructions, respondent submitted detailed project report.
C CIDCO, by their letter of intent, requested the respondent herein
to pay an Earnest Money Deposit of Rs.20,77,000/- within 15
days from the receipt of the letter to enable the Board to
consider the allotment in favour of the respondent. The
respondent, accordingly made EMO on 29.6.2004. On
0 29.7.2004, CIDCO approved the allotment of a plot in favour
of thei appellant as the Board had not got any response for
similar plots in public tender. The total lease premium in respect
of the plot was Rs.2,07,70,000/- and the respondent was
directed to pay the balance amount of Rs.1,86,93,000/- by
E 14.9.2004. The allotment was allegedly made in terms of the
New Bombay Land Disposal Regulations, 1975 and also in
terms of the Land Pricing and Disposal Policy of CIDCO under
which the land could be allotted to any person by considering
individual application at the reserved price fixed by CIDCO.
F Thereafter, by making balance payment including additional
amount due to the marginal increase in the demarcation of the
plot, M/s. Popcorn Entertainment made a total payment of
Rs.2,98,22,420/- being the full and final payment in respect of
allotment in favour of the respondent as demanded by CIDCO.
G An agreement to lease was entered into with CIDCO in respect
of the plot allotted to the respondent.
5. However, on 1.8.2005, appellant CIDCO issued a show
cause notice to the respondent regarding the plot at Airoli
seeking cancellation of the agreement to lease executed in
H favour of the respondent. The respondent submitted reply to the
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 709
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y EQBAL, J.]
show cause notice and also sought information from CIDCO A
under the Right to Information Act regarding allotment to various
parties and the details thereon. The Agreement of Lease was
repudiated and rescinded, against which the respondent
approached the High Court by way of a writ petition.
B
6. The respondent- Mis. Platinum Entertainment in the
appeal by special leave (SLP(C)No.1117/2010) arising out of
Writ Petition No.9468 of 2005, by way of an application made
a request for allotment of plot for construction of a multiplex at
Kharghar Railway Station. Upon being asked by the appellant c
CIDCO, Mis. Platinum deposited EMO of Rs.20 lakh being 10%
of the tentative price of the plot in order to consider the
application of the respondent. Thereafter, CIDCO approved the
allotment in favour of the respondent considering the fact that
there was no multiplex in the area and the earlier effort of
0
CIDCO to advertise for such plots had met with no response.
CIDCO issued allotment letter in favour of the respondent
asking the petitioner to pay Rs. 1,80,00,000/- being the balance
price of the plot. The respondent made two separate payments
of Rs.90 lakh each towards the balance price of the plot on E
16.8.2004 and 19.8.2004. The respondent paid a sum of
Rs.20,00,600/- being the other charges demanded by the
appellant. The respondent was asked to pay a further sum of
Rs.65,096/-, which the respondent paid immediately. CIDCO
unilaterally decided to ask the respondent to pay a further sum
F
of Rs.20 lakh by enhancing the rate at which the plot was to be
allotted to the respondent from Rs.2500/- per square meter as
demanded in the allotment letter to Rs.2750 per square meter
because the plot of the respondent was on a 24 meter road.
The respondent herein on 17.11.2004 paid a further payment
of Rs.20 lakh along with Rs.2,96,078/- plus Rs.4957/- being the G
additional cost and the other charges. On 14.1.2005, the
respondent paid a further sum of Rs.19,828/- being the sum
demanded. The respondent on 17.1.2005 entered into an
agreement to lease with the appellant for the altotment of plot.
H
710 SUPREME COURT REPORTS [2014] 10 S.C.R.
A On 28.2.2005, CIDCO being the development authority of the
area issued commencement certificate to the respondent
permitting the respondent to start construction. However, on
14.7.2005, the respondent received a show cause notice
seeking cancellation of the allotment in favour of the responder.!
B on the ground that the allotment was void in view of Section 23
of the Contract Act as being opposed to public policy. The main
ground in the show cause notice was that the allotment was
without issuance of tender and was opposed to public policy.
The respondent submitted reply to the show cause notice. On
c 16.122005, CIDCO issued an ordef-l"ancelling the agreement
to lease and sought to resume the possession of the plot,
against which the respondent approached the High Court by
way of writ petition.
7. The respondent- M/s. Platinum Square Trust in the
0
appeal by special leave petition (SLP(C)No.1215/2010) arising
out of Writ Petition No.3423 of 2006, by way of an application
made a request for allotment of plot of land admeasuring 80,000
sq.mtr. at Kharghar hill for establishment of country club. CIDCO
E having a plot of land earmarked for similar purpose, considered
the request of the respondent and called upon the respondent
to pay Rs.39.52 lakh on or before 20th April, 2004 constituting
10% of the value of the plot as EMD so as to enable the CIDCO
to place the proposal of the respondent before the Board of
Directors. CIDCO further requested the respondent to submit
F registration certificate either under the Trust Act or the Society
Registration Act before allotment/ possession of the land so
that the case of the respondent could be considered for
allotment at subsidized rate in terms.of the policy; otherwise
commercial rates were to attract for such allotment. The
G respondent in terms of the letter of CIDCO deposited a sum of
Rs.39.52 lakh with them.The respondent got its trust deed
registered on 14th May, 2004; wherein six Trustees were
appointed. Amongst others, objectives of the Trust are to
establish and support, maintain and run sports club,
H
CllY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 711
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y EQBAL, J.]
gymnasium, health club, amusement park, yoga centre, water A
sports etc. and to carry out activities relating thereto.
8. The respondent herein was allotted 50,350 sq.mtr. land
by CIDCO for a total sale consideration of Rs. 3,43,70,800/-.
Out of the said amount of consideration, the respondent had 8
already deposited Rs.39.52 lakh as such the appellant was
directed to deposit Rs. 1,52,09,400/- in two installments i.e. on
30th July, 2004 and 29th August, 2004 being the balance lease
premium payable in respect of the subject plot. In the allotment
letter, it was specifically mentioned that payment of lease c
premium in a stipulated period is an essence of concluded
contract. It was further provided in the allotment letter that
extension of time could be granted which would be up to 3
months for payment of the first installment and up to 16 months
for the payment of the second installment. It was provided D
therein that up to 3 months the respondent would be charged
13% interest and beyond 3 months the respondent would be
charged 16% interest for the extended period of time. The
respondent on 15th September 2004, paid the first installment
of Rs.1,52,09,400/- within the extended time permitted under E
the allotment. The respondent on 3rd May, 2005, wrote letter
to the CIDCO for extension of time for making payment of
second installment up to December, 2005. Clearly in terms of
the allotment letter, the respondent could ask extension of
second installment up to 29th December, 2005. The respondent
F
Trust was registered under the Bombay Public Trust Act, 1950
on 19th April, 2005. The respondent submitted documents to
CIDCO on 25th May, 2005 evidencing registration of the Trust.
However, on 20th July, 2005 the respondent received show
cause notice seeking cancellation of the allotment made in G
favour of the respondent on the basis of Shankaran Report.
9. The respondent, on 3rd August, 2005, submitted its
detailed reply to the show cause notice challenging the
cancellation of allotment of plot, reiterating that the allotment
was in accordance with law as such it could not be cancelled. Il
712 SUPREME COURT REPORTS [2014] 10 S.C.R.
A The respondent, on 29th December, 2005, wrote letter to the
Marketing Manager of CIDCO requesting him to accept
payment of second installment being the last date up to which
the extension could be granted under the allotment. However,
CIDCO refused to accept the payment. The respondent on the
B same date wrote another letter recording the fact that CIDCO
has refused to accept the second installment and that the
respondent would not be liable to pay any further interest from
th~ said date and that the allotment could not be cancelled on
the ground that the payment has not been made by the
c respondent.
10. The respondent was served with the order dated 28th
April, 2005 cancelling allotment of plot made in favour of the
respondent. Being aggrieved by the aforesaid order of
D cancellation, the respondent herein approached the High Court
by way of writ petition filed under Article 226 of the Constitution
of India.
11. With the aforesaid factual matrix, it is also necessary
to note that State of Maharashtra, who is having ultimate
E authority and power to control and regulate the activities of
planning and development under the Maharashtra Regional and
Town Planning Act, 1966 (in short, 'MRTP Act'), in 1971
appointed appellant-CIDCO as new town planning authority for
the new town - Navi Mumbai. In exercise of powers conferred
F by sub-clause (a) of clause (1) of section 159 of the MRTP Act,
the CIDCO has with the previous approval of the State
Government published in July 1979 the New Bombay Disposal
of Lands Regulations, 1975 (in short, 'the Regulations'). The
aforesaid regulations, inter alia, provide for the demarcation of
G plots vested in the Government by CIDCO into disposable plots
having regard to their size and use. The said regulations also
make provision for conditions of lease, mode of disposal and
for grant of land for religious, educational, charitable and public
purposes. For the present purpose, relevant one is Regulation
H 4 of Chapter IV, according to which the Corporation may
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 713
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y. EQBAL, J.]
dispose of plots of land by public auction or tender or by A
considering individual applications as the Corporation may
determine from time to time.
12. It is the case of the appellant Cl DCO that the aforesaid
contesting respondents had been made allotment of lands by 8
the appellant pursuant to a direct application being made to the
office of the then Chief Minister and in other similar cases a
number of public interest litigation were filed in the High Court.
Accordingly, the Government, to ascertain whether the
allotments made were bonafide, directed the then Additional C
Chief Secretary to conduct an enquiry to find out whether the
Board of Directors of CIDCO disposed of lands in accordance
with law. Enquiry was conducted by the Additional Chief
Secretary and submitted the report (called Shankaran Report).
The enquiry inter alia revealed that subject allotment was illegal,
D
arbitrary and the appellant had suffered a financial loss in
crores. Therefore, the appellant issued notice to the contesting
respondents and ultimately cancelled the subject allotments,
which led to filing of the writ petition. The writ petitions were
dismissed by the High Court on the ground that alternative
E
, remedy was available to the writ petitioners by filing suits and
therefore writ jurisdiction cannot be invoked.
13. Aggrieved by the decision of the High Court,
respondents approached this Court by way of appeals by
special leave. Those Civil Appeals being Civil Appeal Nos. F
940-941 of 2007 were disposed of by this Court remitting the
matters back to the High Court for deciding the writ petitions
on merits. The said order is reported in Popcorn Entertainment
& Anr. vs. City Industrial Development Corpn. & Anr., (2007)
9 sec 593. In the order of remand this Court made some G
observations with regard to the merits of the case. For better
appreciation, para 41 and 47 are reproduced herein below:-
"41. At the time of hearing, it was suggested by the learned
Senior Counsel for the respondent that the allotment was H
- , - ....,-..-- - ... __ _
714 SUPREME COURT REPORTS [2014] 10 S.C.R.
A made without any justification and that there was a huge
demand for such plot, it is submitted by learned counsel
for the appellant that the appellant has sought information
from CIDCO under the Right to Information Act as to
whether there was no application pending with them for
B allotment of the said plot prior in time to the application of
the appellant. CIDCO in reply has clearly stated that there
was no application prior to the application of the appellant.
Even the allotment in favour of the appellant was a
reasoned allotment taking into consideration the lack of
c entertainment facilities in the area and the said issue was
also discussed in the board meeting before the allotment
and these facts are clear from the information provided to
the appellant under the Right to Information Act. Our
attention was also drawn to the noting in the file while
considering the case ofthe appellant and before making
D
the allotment that
(1) "There is no cinema/multiplex facility available _
today for the residents of CBD Belapur, Kharghar and
Kalamboli residents.
E
(i1) From accessibility and land use compatibility
point of view, Plot No. 1, Sector 2, Kharghar admeasuring
about 8000 sq m is an ideal location for multiplex.
(iii) This building will be visible from highway and will
F
add to the image of the city.
(iv) Adjoining Plot 1 of Sector 1 attached to railway
station admeasuring 5600· m~ (not demanded yet) is
earmarked for city mall."
G
47. We have given our careful consideration to the rival
submissions made by the respective counsel appearing
on either side. In our opinion, the High Court has
committed a grave mistake by relegating the appellant to
H the alternative remedy when clearly in terms of the law laid
Cl1Y INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 71 5
DIRECTOR v. PLATINUM ENTERTAINMENT [MY EQBAL, J.]
down by this Court, this was a fit case in which the High A
Court should have exercised its jurisdiction in order to
consider and grant relief to the respective parties. In our
opinion, in the instant case, 3 of the 4 grounds on which
writ petitions can be entertained in contractual matter were
made out and hence it was completely wrong of the High B
Court to dismiss the writ petitions. In the instant case, 3
grounds as referred to in Whirlpool Corpn. (1998) 8 SCC
1, have been made out and accordingly the writ petition
was clearly maintainable and the High Court has
committed an error in relegating the appellant to the civil C
court."
14. However, this Court took the view that the matter needs
to be remanded back to the High Court, so that the High Court
will consider all the submissions made by the parties and 0
dispose of the same afresh.
15. The High Court on receipt of the remand order
proceeded with the hearing of the writ petitions and after hearing
both the parties allowed the writ petitions by passing the
impugned order and quashed the orders passed by the E
appellant-CIDCO cancelling the allotment. The High court while
passing the impugned order has gone through the merits of the
case of both the parties but held that the observations made
by this Court in the remand order (41, 43, 47, 48 and 49)
relating to non-observations of rule and regulations causing F
substantial loss to the CIDCO operate as obiter and is binding
on the High Court and, therefore, the High Court has to fall in
line with the view expressed by this Court. Para 97 of the
impugned order is quoted hereinbelow.
G
"97. As already stated hereinabove, so far as categorical
and unequivocal observations made by the Apex Court
revolving around the issues relating to non-observation of
rule and regulations causing substantial loss to the CIDCO
since no tenders were invited and interpretation of Section H
716 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 23 of the contract Act are concerned, they operate as
obiter binding on us as such we have to fall in line with the
view expressed by the Apex Court."
16. We have heard learned counsel on either side at length.
8 Mr. B.H. Marlapalli, learned senior counsel appearing for the
appellant-CIDCO, contended that the High Court has
misconstrued and misinterpreted order passed by this Court
in the case of Popcorn Entertainment (supra) in the first round
of litigation whereunder the matter was remanded to the High
C Court for fresh consideration on merits keeping all contentions
open. However, the High Court chose to restrict itself to
consider only the ground for cancellation of the allotment taken
in the final show cause notice and recorded in the final order.
The High Court would have considered the matter on merits
D without being fettered or constrained by any observation of the
Apex Court. It has been further contended on behalf of the
appellant that this Court has declared the law that the disposal
of the State owned or public property by auction or tenders is
a rule and such disposal by private negotiation is an exception
E to be carved for cogent and compelling reasons to be recorded
in writing at the time of disposal. The law so declared is
mandatory in its application, warranting absolute and implicit
adherence thereto at the peril of any act or commission in
contravention thereof being illegal and non est.
F 17. Mr. B.H. Marlapalli, learned senior counsel further
submitted that in order to find out whether the Board of Directors
of CIDCO disposed off its lands in Navi Mumbai in accordance
with law, the State Government had directed the then Additional
Chief Secretary- Dr. D.K. Shankaran to hold a discreet enquiry
G in the affairs of CIDCO. The CIDCO cancelled the allotments
due to the arbitrary manner in which the plots were allotted and
the loss caused to CIDCO, and the basis for computing the loss
was the report of Dr. Shankaran, which has referred to several
allotments in the vicinity and the offer made to BARC and as
H such, in the writ jurisdiction, the High Court cannot decide the
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 717
DIRECTOR v. PLATINUM ENTERTAINMENT [MY EQBAL, J.]
price prevailing in the area at the time of allotment. It is further A
contended on behalf of the appellant that as per Shankaran
Report it was necessary to allot the plots by inviting tenders and
testing the market. Had it been done so, these plots would have
fetched at least five times greater value than the actual value
received. Further Mr. Nilesh Gala, who is the proprietor of M/s. B
Platinum Entertainment, has used the same modus operandi
for obtaining allotment of plots for country club at Kharghar and
another multiplex plot in Kharghar and the CIDCO was found
to have suffered a loss of Rs.10 crores in this case. Show
cause notice was issued mentioning three grounds, viz. C
favoritism, non-issuance of tender and loss caused to the
Corporation. It is further urged that the order of cancellation of
the allotment specifically states that the Board of Directors of
the Corporation found itself in substantial concurrence with the
findings recorded by Dr. Shankaran. o
18. Learned senior counsel sought to justify the action of
Cl DCO on the basis of Sections 154 and 118 of MRTP Act
contending that the purpose of constituting CIDCO·is to develop
a town by making allotment, and in case the allotments are
E
allowed to be made in arbitrary manner and if such allotments
are sustained, then it amounts deviation from the purpose of
the Act. It is further urged that Section 23 of the Contract Act
also envisages cancellation on account of the allotment/
agreement, if it is opposed to public policy and this Court may
F
sustain the cancellation being opposed to public policy. The
allotment made without inviting tenders leads to presumption
of nepotism etc. and it can only be justified by citing compelling
reasons. Whereas in the present case, no reasons were
mentioned and allotments were made surreptitiously to one G
person.
19. Rival submissions have been made by Mr. Vikas
Singh and Mr. J.P. Cama, learned senior counsel appearing
on behalf of contesting respondents, contending that the
allotment made in favour of these respondents was cancelled H
718 SUPREME COURT REPORTS [2014] 10 S.C.R.
A by the appellant by issuing show cause notices referring to
Shankaran report and alleging that CIDCO had suffered losses
and mentioning the ground that there was non-issuance of
tender before making allotment, the same being void under
Section 23 of the Contract Act was opposed to the public
B policy. According to them, the Apex Court, while remanding the
matter in the first round of litigation, in para 48 of the judgment
reported in (2007) 9 sec 593 (supra) set aside the order of
CIDCO seeking to resile from a concluded contract in favour
of the contesting respondents. It is submitted on behalf of the
c respondents that the New Bombay Land Disposal Rules are
the specific rules governing the disposal of land to be done by
CIDCO. Rule 4 of the said Rules clearly provided that CIDCO
has the authority to dispose plots of land by public auction or
tender or by considering individual application as the
o Corporation may determine from time to time. Mr. Vikas Singh,
learned senior counsel contended that once an allotment is
made in favour of a party, CIDCO has no right to cancel the
allotment on the ground that no tenders had been invited. A.
development authority while allotting land can allot plot of land
E without calling for tender or without inviting offers from the
general public if the statutory regulations regarding disposal of
land by public authority permit the authority to do so. It is further
urged that CIDCO has been relying upon the aforesaid rule to
justify, in various cases, the allotments made in favour of
F commercial complexes, societies as well as sports complexes
saying that such allotment made without issuance of tender were
justified as being within the power vested in CIDCO under Rule
4 of the aforesaid Rules.
20. In support of his contention, Mr. Vikas Singh cited the
G portion of a paragraph of the decision of this Court in Kasturi
Lal Laxmi Reddy vs. State of Jammu & Kashmir, 1980 (4)
sec 1, which is reproduced here:
"22 ........ We do not think the State is bound to advertise
H and tell the people that it wants a particular industry to be
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 719
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y. EQBAL, J.]
set up within the State and invite those interested to come A
up with proposals for the purpose. The State may choose
to do so, if it thinks fit and in a given situation, it may even
turn out to be advantageous for the State to do so, but if
any private party comes before the State and offer!:) to set
up an industry, the State would not be committing breach B
of any constitutional or legal obligation if it negotiates with
such party and agrees to provide resources and other
facilities for the purpose of setting up the industry. The
State is not obliged to tell such party: "Please wait I will
first advertise, see whether any other offers are forthcoming c
and then after considering all offers, decide whether I
should let you set up the industry."
21. Referring to the case of Chairman and MD, BPL Ltd.
vs. S.P. Gururaja and others, 2003 (8) SCC 567, Mr. Singh
contended that non-floating of tenders or not holding of public D
auction would not in all cases be deemed to be the result of
the exercise of the executive power in an arbitrary manner. The
power of cancellation under Section 23 of the Contract Act is
only available to the Court and on the concept of separation of E
power the said power is not exercisable by executive
unilaterally without referring to the Court. It has been further
contended that although through the impugned order the High
Court had quashed the cancellation order, only CIDCO has
preferred appeal whereas the State of Maharashtra accepted
the impugned order and has no grievance with the quashing F
of the order cancelling the contesting respondents' allotment.
22. It has further been contended that the rules provide for
three methods of disposal i.e. by tender, by public auction or
by considering individual applications and CIDCO vide various G
board resolutions have specifically provided the exact method
cif disposal for various types of plots. CIDCO has accordingly
framed the Land Pricing and Land Disposal Policy as approved
by various board resolutions wherein various categories of plots
are mentioned. In the case of commercial plots where FSI 1.5 H
720 SUPREME COURT REPORTS [2014] 10 S.C.R.
A is permitted the land price rate determined under the policy is
450% of the reserve price and the method of disposal is by
tender and in the alternative at fixed rate. Similarly for allotment
of multiplex, the rate specified under the policy is at reserve
price and the method of disposal is upon request at fixed rate
B or by competitive bidding. The two different methods of
disposal between a commercial allotment and the allotment for
multiplex is significant because in the case of commercial
allotment, by tender is the first method of disposal prescribed
and at fixed rate is the alternative method of disposal
C prescribed whereas in the case of allotment for multiplex/
auditorium on request at fixed rate is the first method and by
competitive bidding is the alternative method of allotment.
Furthermore, allotment in the case of M/s. Platinum Square
Trust the land price of open area/running track is specified to
o be 10% of the reserve price and of area used for construction
is to be at 50% of the reserve price and the method of disposal
is only upon request at fixed rate from the registered trust/
registered under the Public Trust Act. Learned senior counsel
contended that allotments in favour of the respondents were
E clearly in conformity with the rules and also in conformity with
the Land Pricing and Land Disposal Policy framed by CIDCO
for allotment of various types of land in the Navi Mumbai area.
23. It has been submitted that in a similar case where
F allotment had also been cancelled on the only ground that the
same had been made without inviting tenders, the Apex Court
in Sunil Pannalal Banthia vs. City & Industrial Development
Corpn. of Maharashtra Ltd., (2007) 10 SCC 674, has held that
once an allotment had been made in favour of a party, CIDCO
G has no right thereafter to cancel the allotment on the ground that
no tenders had been invited. CIDCO had power to make
allotment without calling for tender under Rule 4 and it could not
be said that the allotment in favour of Sunil Pannalal Banthia
was in any manner contrary to the rules for making such
allotment.
H
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 721
DIRECTOR v. PLATINUM ENTERTAINMENT [MY EQBAL, J.)
24. It has also been contended on behalf of the contesting A
respondents that according to the information provided to the
respondents under the Right to Information Act, a public utility
plot has never been put to tender by CIDCO during the period
when aforesaid allotments had been made in favour of the
respondents. According to the information provided, allotment B
to 56 allottees have been made without inviting tenders as per
Land Pricing and Land Disposal Policy and the price charged
is as per the policy as approved by Board resolutions. These
allotments were not scrutinized by Dr. Shankaran and not
formed part of the enquiry report. Furthermore, Shankaran C
report had been prepared ex-parte i.e. without issuing notice
to the respondents. Copy of said report was not furnished to
the respondents either along with show cause notice or before
cancellation order was passed although demanded by the
respondents in their reply, in which it was specifically mentioned D
that the final reply could be given only after the entire report was
given to them along with the methodology used by Shankaran
to arrive at the alleged losses. It is contended that the
cancellation order is vitiated being in violation of principles of
natural justice, for having been passed without giving a copy E
of the Shankaran report, which had been prepared behind the
back of the contesting respondents.
25. Upon perusal of notice it is clear that its contents are
similar in all these appeals. The appellant CIDCO referred the
F
Shankaran Report in which it was observed that the allotments
were made in favour of the respondents in an arbitrary manner
without calling upon to show cause as to why such allotment
should not be repudiated having become void on the thrust of
Section 23 of the Indian Contract Act, 1872. For better G
appreciation para 14 of the show cause notice is reproduced
hereinbelow:-
"The Board of Directors of the Corporation at its
meeting held on 6th June, 2005 considered the
recommendations of Dr. D.K. Shankaran, the then H
722 SUPREME COURT REPORTS [2014] 10 S.C.R.
A additional Chief Secretary and directions of the State
government and as directed me to call upon you to show
cause why the Corporation should not rescind or repudiate
such allotment having become void on the thrust of Section
23 of Contract Act 1872 which declares that an Agreement
s having its object or consideration to defeat provision of the
law or opposed to public policy as declared by the Hon'ble
Supreme Court as aforesaid is vitiated by illegality and is
liable to be declared void".
C 26. Section 23 of the Indian Contract Act, 1872 reads as
under:-
"What consideration and objects are lawful, and what
not.-The consideration or object of an agreement is
lawful, unless -
D
It is forbidden by law; or
\ is such of such a nature that, if permitted, it would
defeat the provisions of any law; or is fraudulent; or
E involves or implies, injury to the person or property
of another; or
the Court regards it as immoral, or opposed to
public policy.
F In each of these cases, the consideration or object
of an agreement is said to be unlawful. Every agreement
of which the object or consideration is unlawful is void."
27. Before dealing with the legality and validity of the notice
G aforesaid, we shall first wish to mention some of the relevant
facts:-
A. Indisputably applications were made by the respondents
to the then Chief Minister for allotment of plots of land in
question.
H
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 723
DIRECTOR v. PLATINUM ENTERTAINMENT [MY EQBAL, J.]
B. On the application submitted on behalf of M/s. Platinum A
Entertainment, through its proprietor Nilesh Gala, for the
allotment of plot for constructing multiplex at Kharghar
railway Station, the appellant was allotted the plot at
Kharghar Railway Station;
B
C. The said person Nilesh Gala as proprietor of M/s
Popcorn Entertainment Corporation made another
application for allotment of plot for the construction of
multiplex-cum-entertainment centre at Airoli. The appellant
CIDCO acceded to the request of Mr. Nilesh Gala and C
allotted the plot followed by lease agreement;
D. The same person Nilesh Gala formed a Trust called
Platinum Square Trust through one of its Trustees Damji
Kunwarji Gala and made a third application for allotment
of plot at Kharghar Hill for the construction of country club D
and paid part of the amount fixed for such allotment and
rest of the amount was to be paid in instalments. The
matter is pending and final lease deed has not been
executed.
E
28. Now the important question that needs consideration
is as to whether the allotments of valuable land by CIDCO to
one person in different capacity for the purposes mentioned
above, that too by entertaining private applications, are
arbitrary, illegal and fraudulent and against the public policy as
F
contemplated under Section 23 of the Indian Contract Act.
29. In the course of argument, Mr. Vikas Singh, learned
senior counsel appearing for the respondents in all the three
appeals filed a compilation of different documents including
Rules and Regulations. G
30. Regulation 4 lays down the mode and manner of
disposal of land by the Corporation. The said provision
empowers the Corporation to dispose of lands by public
auction or tender or considering individual applications as the H
724 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Corporation may determine from time to time. Regulation 4
reads as under:-
"Manner of disposal of land - The Corporation may
dispose plots of land by public auction or tender or by
B considering individual applications as the Corporation may
determine from time."
31. The land Pricing and Land Disposal Policy of CIDCO
would show that the commercial plots with FSI 1.5, that is plots
for offices, shop, restaurant, showrooms etc., is to be disposed
C of by tender/at fixed price. Similarly, plots for auditorium,
multiplex, theatre complex etc., shall be disposed of on request
at fixed rate/by competitive bidding. For better appreciation, the
relevant allotment policy of CIDCO is reproduced hereunder:-
D "Commercial Plots (with FSI 1.5)
Plots for offices, a. At 450% of RP in By tender/At
Shop + Res. and Developed Nodes fixed price
pure commercial b. At 400% of RP in
Show Rooms/Show Developing Nodes
E
Windows all types c. At 300% of RP
of Banks etc. in New Nodes
(FSl-1.5)
Plots for At Reserve Price On request at
F Auditorium/ fixed rate By
Multiplex theatre competitive
complex to bidding
be developed in
Private Sector
G
32. From the compilation, it reveals that Respondent M/s.
Popocorn Entertainment Corporation sought information under
the Right to Information Act, by mentioning some queries. One
of the questions asked by the respondent was as to what is
H
CITY INDUSTRIAL DEVELOPMENTTHR. ITS MANAGING 725
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y. EQBAL, J.]
the method of disposal of plot for multiplex as per Land Pricing A
and Disposal Policy during the said period. It was answered
that methodology as per the current land pricing policy approved
by the Board is on request at fixed rate/by competitive bidding.
In another query made by the proprietor of M/s. Platinum
Entertainment was as to whether any other application has been 8
made for allotment of the said plot for the same purpose and
the answer was that no other application prior to this allotment
for the same purpose was pending.
33. It further appears that an audit objection was raised by C
the office of the Accountant General, Mumbai to the effect that
there was lack of transparency in the allotment of plot to M/s.
Platinum Entertainment as no tenders were called for the sale
of the plot. In the clarification letter dated 21.4.2006 issued by
the Managing Director of the Appellant-CIDCO, it was admitted D
that no such tender was called for. In the explanation, it is stated
that global tender/tender was called for allotment of plot near
Vashi Station. It was not fruitful and, therefore, it was thought fit
for allotting plot at Airoli to a competent and resourceful party
on evaluation of the project report for multiplex and auditorium E
and entertainment centre. Similar explanation was given as
against the audit objection in respect of allotment of plot to M/
s. Popcorn Entertainment Corporation.
34. On perusal of the aforesaid documents, it is manifest
that although allotment of plot for the purposes mentioned above F
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 G
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.
H
726 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 35. As noticed above, the main person viz. Nilesh Gala as
proprietor of two different companies viz., Mis Platinum
Entertainment and M/s Popcorn Entertainment Corporation, by
making private applications to the then Chief Minister got
allotment of two valuable plots in two different areas for setting
B up multiplex-cum-auditorium-cum-entertainment centre and for
multiplex theatre. This is not the end of the matter. The same
proprietor formed a Trust consisting jof trustees in the name of
M/s Platium Square Trust and filed application for allotment of
another plot for the purpose of establishing country club. These
c three applications filed by the respondents were considered by
the appellant-CIDCO and the Board accorded sanction for
allotment of plots in these three places.
36. We, therefore, after having considered facts detailed
hereinabove, are prima facie of the view that no transparency
0
has been maintained by the appellant-CIDCO in making these
allotments of Government land.
37. It is well settled that whenever the Government dealt
with the public establishment in entering into a contract or
E 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.
In the case of Raman Dayaram Shetty vs. International Airport
Authority of India & Ors., (1979) 3 SCC 489, this Court
F observed as under:-
"11. Today the Government in a welfare State, is the
regulator and dispenser of special services and provider
of a large number of benefits, including jobs, contracts,
G licences, quotas, mineral rights, etc. The Government pours
forth wealth, money, benefits, services, contracts, quotas
and licences. The valuables dispensed by Government
take many forms, but they all share one characteristic. They
are steadily taking the place of traditional forms of wealth.
These valuables which derive from relationships to
H
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 727
DIRECTOR v. PLATINUM ENTERTAINMENT [MY EQBAL, J.]
Government are of many kinds. They comprise social A
security benefits, cash grants for political sufferers and the
whole scheme of State and local welfare. Then again,
thousands of people are employed in the State and the
Central Governments and local authorities. Licences are
required before one can engage in many kinds of B
businesses or work. The power of giving licences means
power to withhold them and this gives control to the
Government or to the agents of Government on the lives
of many people. Many individuals and many more
businesses enjoy largesse in the form of Government c
contracts. These contracts often resemble subsidies. It is
virtually impossible to lose money on them and many
enterprises are set up primarily to do business with
Government. Government owns and controls hundreds of
acres of public land valuable for mining and other 0
purposes. These resources are available for utilisation by
private corporations and individuals by way of lease or
licence. All these mean growth in the Government largesse
and with the increasing magnitude and range of
governmental functions as we move closer to a welfare
E
State, more and more of our wealth consists of these new
forms. Some of these forms of wealth may be in the nature
of legal rights but the large majority of them are in the nature
of privileges. But on that account, can it be said that they
do not enjoy any legal protection? Can they be regarded
as gratuity furnished by the State so that the State may F
withhold, grant or revoke it at its pleasure?"
"12 ............ It must, therefore, be taken to be the law that
where the Government is dealing with the public, whether
by way of giving jobs or entering into contracts or issuing G
quotas or licences or granting other forms of largesse, the
Government cannot act arbitrarily at its sweet will and, like
a private individual, deal with any person it pleases, but
its action must be in conformity with standard or norms
which is not arbitrary, irrational or irrelevant. The power or H
728 SUPREME COURT REPORTS [2014] 10 S.C.R.
A discretion of the Government in the matter of grant of
largesse including award of jobs, contracts, quotas,
licences, etc. must be confined and structured by rational,
relevant and non-discriminatory standard or norm and if the
Government departs from such standard or norm in any
B particular case or cases, the action of the Government
would be liable to be struck down, unless it can be shown
by the Government that the departure was not arbitrary, but
was based on some valid principle which in itself was not
irrational, unreasonable or discriminatory."
c 38. In the case of Akhil Bhartiya Upbhokta Congress vs.
State of Madhya Pradesh & ors., (2011) 5 SCC 29, this Court
while considering the question of legality of allotment of land
by the State or its agencies on the basis of applications made
D by individual, observed as follows:-
"65. What needs to be emphasised is that the State and/
or its agencies/instrumentalities cannot give largesse to
any person according to the sweet will and whims of the
political entities and/or officers of the State. Every action/
E decision of the State and/or its agencies/instrumentalities
to give largesse or confer benefit must be founded on a
sound, transparent, discernible and well-defined policy,
which shall be made known to the public by publication in
the Official Gazette and other recognised modes of
F publicity and such policy must be implemented/executed
by adopting a non-discriminatory and non-arbitrary method
irrespective of the class or category of persons proposed
to be benefited by the policy. The distribution of largesse
like allotment of land, grant of quota, permit licence, etc.
G by the State and its agencies/instrumentalities should
always be done in a fair and equitable manner and the
element of favouritism or nepotism shall not influence the
exercise of discretion, if any, conferred upon the particular
functionary or officer of the State.
H
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 729
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y. EQBAL, J.]
66. We may add that there cannot be any policy, much A
less, a rational policy of allotting land on the basis of
applications made by individuals, bodies, organisations or
institutions dehors an invitation or advertisement by the
State or its agency/instrumentality. By entertaining
applications made by individuals, organisations or B
institutions for allotment of land or for grant of any other
type of largesse the State cannot exclude other eligible
persons from lodging competing claim. Any allotment of
land or grant of other form of largesse by the State or its
agencies/instrumentalities by treating the exercise as a C
private venture is liable to be treated as arbitrary,
discriminatory and an act of favouritism and/or nepotism
violating the soul of the equality clause embodied in Article
.14 of the Constitution. ·
D
39. In the case of Kasturi Lal Lakshmi Reddy & Ors. vs.
State of Jammu and Kashmir & Anr., (1980) 4 SCC 1, this
Court observed as under:-
"14. Where any governmental action fails to satisfy
the test of reasonableness and public interest discussed E
above and is found to be wanting in the quality of
reasonableness or lacking in the element of public interest,
it would be liable to be struck down as invalid. It must follow
as a necessary corollary from this proposition that the
Government cannot act in a manner which would benefit F
a private party at the cost of the State; such an action
would be both unreasonable and contrary to public interest.
The Government, therefore, cannot, for example, give a
contract or sell or lease out its property for a consideration
less than the highest that can be obtained for it, unless of G
course there are other considerations which render it
reasonable and in public interest to do so. Such
considerations may be that some directive principle is
sought to be advanced or implemented or that the contract
or the property is given not with a view to earning revenue H
730 SUPREME COURT REPORTS [2014] 10 S.C.R.
A but for the purpose of carrying out a welfare scheme for
the benefit of a particular group or section of people
deserving it or that the person who has offered a higher
consideration is not otherwise fit to be given the contract
or the property. We have referred to these considerations
B only illustratively, for there may be an infinite variety of
considerations which may have to be taken into account
by the Government in formulating its policies and it is on
a total evaluation of various considerations which have
weighed with the Government in taking a particular action,
c that the court would have to decide whether the action of
the Government is reasonable and in public interest. But
one basic principle which must guide the court in arriving
at its determination on this question is that there is always
a presumption that the governmental action is reasonable
and in public interest and it is for the party challenging its
D
validity to show that it is wanting in reasonableness or is
not informed with public interest. This burden is a heavy
one and it has to be discharged to the satisfaction of the
court by proper and adequate material. The court cannot
lightly assume that the action taken by the Government is
E unreasonable or without public interest because, as we
said above, there are a large number of policy
considerations which must necessarily weigh with the
Government in taking action and therefore the court would
not strike down governmental action as invalid on this
F ground, unless it is clearly satisfied that the action is
unreasonable or not in public interest. But where it is so
satisfied, it would be the plainest duty of the court under
the Constitution to invalidate the governmental action. This
is one of the most important functions of the court and also
G one of the most essential for preservation of the rule of law.
It is imperative in a democracy governed by the rule of law
that governmental action must be kept within the limits of
the law and if there is any transgression, th~ court must
be ready to condemn it. It is a matter 9f historical
H experience that there is a tendency in every Government
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 731
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y EQBAL, J.]
to assume more and more powers and since it is not an A
uncommon phenomenon in some countries that the
legislative check is getting diluted, it is left to the court as
the only other reviewing authority under the Constitution to
be increasingly vigilant to ensure observance with the rule
of law and in this task, the court must not flinch or falter. It B
may be pointed out that this ground of invalidity, namely,
that the governmental action is unreasonable or lacking in
the quality of public interest, is different from that of mala
tides though it may, in a given case, furnish evidence of
mala tides. c
15. The second limitation on the discretion of the
Government in grant of largess is in regard to the persons
to whom such largess may be granted. It is now well
settled as a result of the decision of this Court in Ramana
D. Sheffy v. lntemational Airport Authority of India that the D
Government is not free, like an ordinary individual, in
selecting the recipients for its largess and it cannot choose
to deal with any person it pleases in its absolute and
unfettered discretion. The law is now well-established that
the Government need not deal with anyone, but if it does E
so, it must do so fairly without discrimination and without
unfair procedure. Where the Government is dealing with
the public whether by way of giving jobs or entering into
contracts or granting other forms of largess, the
Government cannot act arbitrarily at its sweet will and, like F
a private individual, deal with any person it pleases, but
its action must be in conformity with some standard or
norm which is not arbitrary, irrational or irrelevant. The
governmental action must not be arbitrary or capricious,
but must be based on some principle which meets the test G
of reason and relevance. This rule was enunciated by the
court as a rule of administrative law and it was also
validated by the court as an emanation flowing directly from
the doctrine of equality embodied in Article 14. The court
H
732 SUPREME COURT REPORTS [2014] 10 S.C.R.
A referred to the activist magnitude of Article 14 as evolved
in E.P. Royappa v. State of Tamil Nadu and Maneka
Gandhi case, (1978) 1 sec 248 and observed that it must
follow
B as a necessary corollary from the principle of
equality enshrined in Article 14 that though the State
is entitled to refuse to enter into relationship with
anyone, yet if it does so, it cannot arbitrarily choose
any person it likes for entering into such relationship
and discriminate between persons similarly
c circumstanced, but it must act in conformity with
some standard or principle which meets that test
of reasonableness and non-discrimination and any
departure from such standard or principle would be
invalid unless it can be supported or justified on
D some rational and non-discriminatory ground.
This decision has reaffitmed the principle of
reasonableness and non-arbitrariness in governmental
action which lies at the core of our entire constitutional
E scheme and structure."
40. In the case of State ofHaryana vs. Jage Ram, (1983)
4sec 556, the auction of liquor vends by excise department
was challenged. Deciding the question this Court in para 8
F held:-
"............. When a rule requires 'publicity' to be given to
an auction-sale, what is necessarily implied is that due
steps must be taken to give sufficiently advance intimation
of the intended sale and its material terms to the members
G of the public or, at least, to that section of the public which
normally engages in the kind of business which is the
subject-matter of the aution-sale. Even the five special
invitees would have found it difficult to come prepared to
take part in the resale which was held on May 23. They
H were not invited to a wedding feast. They were invited to
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 733
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y. EQBAL, J.]
attend the resale of a liquor vend and it is well known that A
a certain amount has to be paid by the successful bidder
on the fall of the hammer. We are also unable to appreciate
that the Excise Authorities of the Government of Haryana
should ha'!e picked and chosen some five particular
persons as recipients of the notice of reauction. How their B
names transpired and what is their particular status,
respectability and standing in the liquor trade, are matters
on which no light is thrown. There is no material before us
on which to doubt the integrity of the authorities who were
connected with the reauction. But their conduct must be C
above suspicion."
41. In the case of Sachidanand Pandey & Anr. vs. State
of West Bengal & Ors., (1987) 2 SCC 295, this Court after
considering various decisions on this point came to the
following conclusion:- D
"40. On a consideration of the relevant cases cited at the
Bar the following propositions may be taken as well
established: State-owned or public-owned property is not
to be dealt with at the absolute discretion of the executive. E
Certain precepts and principles have to be observed.
Public interest is the paramount consideration. One of the
methods of securing the public interest, when it is
considered necessary to dispose of a property, is to sell
the property by public auction or by inviting tenders. Though F
that is the ordinary rule, it is not an invariable rule. There
may be situations where there are compelling reasons
necessitating departure from the rule but then the reasons
for the departure must be rational and should not be
suggestive of discrimination. Appearance of public justice G
is as important as doing justice. Nothing should be done
which gives an appearance of bias, jobbery or nepotism."
42. In the case of Padma vs. Hirata/ Motilal Desarda,
(2002) 7 SCC 564, the process adopted by the City-Industrial
H
734 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Development Corporation for disposal of land by bulk sell
came for consideration before this Court, when it held as
under:-
"34. There is yet another angle of looking at the propriety
of the questioned bulk sale of land by CIDCO and the
B
manner in which it was done. The land acquired and
entrusted to CIDCO cannot just be permitted to be parted
with guided by the sole consideration of money-making.
CIDCO is not a commercial concern whose performance
is to be assessed by the amount it earns. Its performance
c would be better assessed by finding out the number of
needy persons who have been able to secure shelter
through CIDCO and by the beauty of the township and the
quality of life for the people achieved by CIDCO through
its planned development schemes. So long as such
D objectives are fulfilled CIDCO's operation on "no-profit-no
loss" basis cannot be found fault with. There should have
been no hurry on the part of CIDCO in disposing of the
balance land and that too guided by the sole consideration
of earning more money. Even that object CIDCO has not
E been able to achieve for at the end it has parted with land
at a price less than Rs 1500 per square metre - the
reserved price. Even if a sale of leftover land was a felt
necessity it should have satisfied at least two conditions:
(1) a well-considered decision at the highest level; and (it)
F a sale by public auction or by tenders after giving more
wide publicity than what was done so as to attract a larger
number of bidders."
43. In the case of Centre for Public Interest Litigation vs.
G Union of India, (2012) 3 sec
1, this Court observed as under:-
"75. The State is empowered to distribute natural
resources. However, as they constitute public property/
national asset, while distributing natural resources the
State is bound to act in consonance with the principles of
H equality and public trust and ensure that no action is taken
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 735
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y. EQBAL, J.]
which may be detrimental to public interest. Like any other A
State action, constitutionalism must be reflected at every
stage of the distribution of natural resources. In Article
39(b) of the Constitution it has been provided that the
ownership and control of the material resources of the
community should be so distributed so as to best subserve B
the common good, but no comprehensive legislation has
been enacted to generally define natural resources and a
framework for their protection. Of course, environment laws
enacted by Parliament and State Legislatures deal with
specific natural resources i.e. forest, air, water, coastal c
zones, etc.
xxxxxxx
80. In Jamshed Hormusji Wadia, (2004) 3 SCC 214 case,
this Court held that the State's actions and the actions of . 0 -
its agencies/instrumentalities must be for the public gooc(
achieving the objects for which they exist and should not
be arbitrary or capricious. In the field of contracts, the State
and its instrumentalities should design their activities in a
manner which would ensure competition and non- E
discrimination. They can augment their resources but the
object should be to serve the public cause and to do public
good by resorting to fair and reasonable methods."
44. The High Court in the impugned order took notice, in
F
paragraph 85, that the appellant-CIDCO tried to justify their
action of cancellation of allotment of plots on the following
reasons.
"1. Mr. Nilesh Gala, the proprietor of M/s. Platinum
entertainment has used same modus operandi for G
obtaining allotment of plots meant for country club and
another plot for multiplex in Kharghar.
2. An application was made by the petitioners to the
Hon'ble Chief Minister and the same was considered H
736 SUPREME COURT REPORTS (2014] 10 S.C.R.
A favourably by the Board of CIDCO.
3. The undue haste is shown in allotment of Plots resulting
in illegal and arbitrary allotment with malafide intention to
cause wrongful gain to the individual person. It is a case
B of favouritism supported by the Report of Dr. D.K.
Shankaran.
4. The agenda note and the resolutions demonstrate no
discussion about the individual merits of the allotters
except need for multiplexes sought to be justified during
c the case of discussion without indicating any reason for
choosing group of petitions for allotment of plots.
5. Absence of official members in the Board Meeting
wherein the decisions of allotment of plots to the
D petitioners were taken.
6. The allotment of plots of land are factually for
commercial purposes in the garb of construction of
multiplexes and country club with a view to inure profit to
the allottees.
E
7. The multiplex policy whereby certain tax benefits were
granted with effect from year 2002 were ignored while
making the allotment of plots to the petitioners overlooking
the demand for multiplexes due to concessions granted by
F the government.
8. No reasons are to be found to justify allotment of three
plots in favour of one group of persons.
9. Refusal on the part of comptroller of Auditor General to
G accept the reasons given by CIDCO justifying absence of
law suffered by CIDCO by virtue of the subject allotments
of plots to the petitioners.
10. Dr. D.K. Sankaran report is the basis for calculation
H of loss suffered by CIDCO.
CITY INDUSTRIAL DEVELOPMENTTHR. ITS MANAGING 737
DIRECTOR v. PLATINUM ENTERTAINMENT [MY EQBAL, J.]
11. Justification of the powers of the state government A
directing cancellation of allotment of plots on the basis of
sections 118 and 154 of the M.R.T.P. Act.
12. Surreptitious arbitrary allotment made without inviting
tenders leads to the presumption of nepotism and bias etc.
B
13. The petitioners M/s. Platinum Entertainment were not
registered as a charitable trust yet their application for
allotment was considered by CIDCO favourably.
14. Failure on the part of the petitioner to produce any c
valuation report to justify at which rate the allotment was
made by the CIDCO."
45. The High Court instead of looking into these aspects
of the matter, completely ignored the same on the ground that
in the show cause notice none of the grounds were made basis D
of the order of cancellation of allotment. In our considered
opinion, the High Court while exercising power of judicial review
is S\Jpposed 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 E
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.
F
46. Chapter 5 of New Bombay Road Disposal Rules, 1975
provides for allotment of land for religious, educational,
charitable etc. purposes and though the allotment of plots of
land for construction of multiplex are treated as allotment for
public utility purposes, in substance, the allotment qua these G
allottees was for commercial purpose. The allotments which are
made for the social, educational, charitable purposes do not
entail any profit to the allottees. However, multiplex is for
commercial exploitation, which ensures profit to the allottees
and the manner of disposal of lands enumerated in the said H
738 SUPREME COURT REPORTS [2014] 10 S.C.R.
A policy by and large suggests that most of the allotments have
to be made by inviting tenders or bids.
47. The document on record clearly demonstrates that
there was no discussion about individual merits of the allottees
and was only general consideration, which resulted in making
8
arbitrary allotment without going through the tender process.
The report of the Comptroller and Auditor General would show
that the reasons given by CIDCO are not acceptable and there
is loss caused to the Corporation by virtue of the said allotment
C made to the respondents.
48. The High Court ought to have seen the action of the
then Board of Directors of CIDCO demonstrating that in the first
meeting of the Board itself they cleared the special proposals
without considering the individual merits. In the meeting, hardly
D any official members were present when the allotments were
made to the respondents.
49. State and its agencies and instrumentalities cannot
give largesse to any person at sweet will and whims of the
E political entities or officers of the State. However, decisions and
action of the State must be founded on a sound, transparent
and well defined policy which shall be made known to the public.
The disposal of Government land by adopting a discriminatory
and arbitrary method shall always be avoided and it should be
F done in a fair and equitable manner as the allotment on
favoritism or nepotism influences the exercises of discretion.
Even assuming that if the Rule or Regulation prescribes the
mode of allotment by entertaining individual application or by
tenders or competitive bidding, the Rule of Law requires
G publicity to be given before such allotment is made. CIDCO
authorities should not adopt pick and choose method while
allotting the Government land.
50. Furthermore, this Court has already stated in Akhil
Bhartiya Upbhokta Congress vs. State of Madhya Pradesh
H
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 739
DIRECTOR v. PLATINUM ENTERTAINMENT [MY EQBAL, J.]
& Ors., (2011) 5 sec 29, that the State or its agencies or A
instrumentalities must give largesse founded on a sound,
transparent, discernible and well-defined policy, which should
be made known to the public at large and further held that a
rational policy of allotting land on the basis of individual
applications cannot de hors an invitation or advertisement by B
the State or its instrumentality, bringing it to the knowledge of
public at large so that the eligible persons should not be
excluded from lodging their competitive claims.
51. The action of cancellation of allotment of plots, as tried c
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 0
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, it appears to us, is nothing but a
favouritism based on nepotism and was irrational and
unreaso_nable and functioning in a discriminatory manner as E
voiced by this Court in the case of Raman Dayaram Sheffy
(supra).
52. Rule 4, to which our notice was drawn by the learned
counsel appearing on behalf of the respondents, although
provided an authority to dispose of plots of land by public F
auction or by tender or by considering individual applications
as the Corporation would determine from time to time, but such
action on the part of the Corporation should have been taken
rationally and after applying the methods which are more
rational and reflect non-arbitrariness and would not be smacked G
under the clout of favouritism and/or nepotism or being
influenced by political personalities. In our opinion, although
CIDCO had the power to allot the land in any one of the
manners stated in Rule 4 above, but the conduct of such
allotment should have been more clear and transparent and H
740 SUPREME COURT REPORTS [2014] 10 S.C.R.
A without presence of any element of favouritism and/or nepotism
and without being influenced by any such thing in exercising the
discretion conferred upon CIDCO.
53. In the case of Humanity and Anr. vs. State of West
B Bengal and Ors., (2011) 6 SCC 125, this Court observed that
in the matter of granting largesse, the Government has to act
fairly and without even any semblance of discrimination. It was
held as under:
"It is axiomatic that in order to achieve a bona fide end,
c the means must also justify the end. This Court is of the
opinion that bona fide ends cannot be achieved by
questionable means, specially when the State is involved.
This Court has not been able to get any answer from the
State why on a request by the allottee to the Hon'ble
D Minister for Urban Development, the Government granted
the allotment with remarkable speed and without
considering all aspects of the matter. This Court does not
find any legitimacy in the action of the Government, which
has to act within the discipline of the constitutional law,
E explained by this Court in a catena of cases. We are sorry
to hold that in making the impugned allotment in favour of
the allottee, in the facts and circumstances of the case, the
State has failed to discharge its constitutional role."
F 54. We take serious note and express our anguish, the way
the authorities of CIDCO showed undue favour to the
respondents and managed to allot the Government land in
favour of one person knowing fully well that the aforesaid
proprietor of the Company, in different capacity and in dummy
G names, sought allotments of plots. The way Cl DCO has been
dealing with the Government property, it is high time, we
observe, that notwithstanding Regulation 4, as contained in the
Regulations, the appellant CIDCO may take all endeavour to
make allotments of plots by open tender or competing bids and
H shall not take any decision for allotment of Government land at
CITY INDUSTRIAL DEVELOPMENT THR. ITS MANAGING 7 41
DIRECTOR v. PLATINUM ENTERTAINMENT [M.Y. EQBAL, J.)
the instance of the Ministers and High Dignitaries for any A
purposes whatsoever.
55. Taking into consideration the entire facts of the case
and the law discussed hereinabove, we have no hesitation in
holding that the CIDCO was justified in cancelling all the B
allotments made in favour of the respondents.
56. For the reasons aforesaid, these appeals are allowed
and the judgment and order passed by the High Court in the
writ petitions are set aside. Consequently, we uphold the order C
passed by the CIDCO cancelling the allotments made in favour
of the respondents.
Bibhuti Bhushan Bose Appeals allowed.
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