Holding

The Supreme Court held that the council's self‑financing project and the delegation of occupancy‑rights under Section 272(1) are within its statutory powers, do not constitute a prohibited lease under Section 92, and are not unreasonable, thus the appeal is dismissed.

Summary

The Jalgaon Municipal Council, having received a gift of land, sought to develop it by constructing an administrative building, a vegetable market and a commercial complex on a self‑financing basis, appointing a private developer (Respondent No. 6) to execute the project and to dispose of occupancy rights for a fee. Residents (appellants) challenged the council's resolutions and the agreement, alleging that the scheme amounted to an impermissible 50‑year lease prohibited by Section 92 of the Maharashtra Municipalities Act, involved an illegal delegation of power under Section 272, and was arbitrary and violative of Article 14. The Supreme Court examined whether the financing method and the delegation of occupancy‑rights fell within the council's statutory powers and whether the transaction was a lease or a permissible disposal of occupancy rights. It held that the scheme could be validly placed under Section 272(1), did not constitute a lease prohibited by Section 92, and was not unreasonable or arbitrary. Consequently, the Court dismissed the appeal, upholding the council's actions.

Issues considered

Whether a municipal council may adopt a self‑financing scheme with a private developer for a commercial complex under the Maharashtra Municipalities Act.
Whether the transaction amounts to a lease prohibited by Section 92 of the Maharashtra Municipalities Act.
Whether delegating the power to dispose of occupancy rights to the developer violates Section 272(1) as an impermissible delegation of statutory function.
Whether the council's resolutions are unreasonable or arbitrary, violating Article 14 of the Constitution.
Whether judicial review is available for such policy decisions of a municipal authority.

Legislation cited

Constitution of Indias. 14, s. 226, s. 298
Maharashtra Municipalities Act, 1965s. 272(1), s. 92

Subjects

municipal lawpublic procurementself‑financing projectleasedelegation of powerreasonablenessArticle 14judicial reviewadministrative law

Judgment

G.B. MAHAJAN AND ORS.
A
v.
JALGAON MUNICIPAL COUNCIL AND ORS.

SEPTEMBER 13, 1990

B [M.N. VENKATACHALIAH, N.D. OJHA AND J.S. VERMA, JJ .]

Constitution of India, I950: Articles 14 and 298-State Instru-
mentality-Municipal Council entering into contract with private
developer for construction of Commercial Complex on self financing
basis-Adoption of such an unconventional technique as a policy
option-Validity of.
c
Article 226-Resort to-Contractual transaction of Government
or its instrumentality-Presence public law elemem-Essential for invoking·
Judicial Review.

D Municipalities: Maharashtra Municipalities Act, 1965: Sections
92 & 272( 1)-Municipal Market-Disp 0sal of occupancy rights-
Construction o[ Commercial Complex-Private developer to undertake
on self financing basis-Giving adrninistrative building to Municipal
Council free of cost-Shops to be given to a/lottees-Liberty to dispose
of the remaining accommodation to cover financial outlays and project
E -Whether valid.

Administrative Law: Judicial Review-Policy decision-Govern-
ment or its instrumentality-Whether free to evo!Ve and adopt any
method for executing of a Project-Such decisions-Whether open to
Judicial Review.
F
Test of'Reasonableness'-To distinguish between proper use and
improper use of power-Applicability of. the test depends upon
context.

Delegation of power-Statutory function under Section 272 of the
G Maharashtra Municipalities Act, I965-0ccupancy rights-Powers to
substitute occupiers in its own place by developer~Whether permissible.

Interpretation of Statutes: Use of same word/phrase or concept in
different laws-Distinction in meaning and usage-Need for.

H Words & Phrases: 'Reasonableness'-' Reasonable man'-Mean- ~·
ing of.
20
MAHAJAN v. JALGAON MUNICIPAL COUNCIL 21
.,.
The respondent Municipal Council received by way of gill certain A
lands from one 'L' and the said lands were used by the Agricultural
Produce Market Committee as a cotton market and wholesale fruit and
vegetables market. The Respondent Council, in order to put the land to
a better and more profitable use, persuaded the Market Committee to
yield up possession. However, since the gill stipulated certain condi-
tions regarding the user, the Respondent Connell approached the heirs B
of the donor for amending the terms of the gill, and the heirs bargained
for and secured a benefit that five shops be given to them free of cost in
the proposed c<immercial complex. The entire project of constructing
the Administrative building, an adjacent structure for vegetable market
and a commercial complex wa8 to be executed by a developer at his own
expense. The estimated financial outlay was about Rs.11 crores. It was
contemplated that the developer was to hand over the Adlninistrative C
building free of cost to the Municipality and the vegetable market to the
allottees and the five shops to tht heirs of the donee of the land. There-
after the developer would be entitled to dispose of the occupancy rights
in respect of the rest of the accommodation in the commercial complex
and retain the promia received therefrom to cover the fmancial outlays D
and profit thereon. The occupie..S to whom allotments were made as
; .
also the occupiers inducted by the developer were to pay rents .to the
Respondent Connell for 50 years.

Tenders were issued for the project, and after scrutiny of the
tenders submitted by five developers, the tender of Respondent No. 6 E
was accepted by the Respondent-Connell, and a formal agreement was
entered into between the Council and Respondent No. 6.

The appellants, residents of the area petitioned to the Collector to
suspend the Resolutions of the Connell nnder:tal<ing the said project and
the agreement entered with Respondent No. 6, on the grounds that the F
_, proposed transaction amounted to a lease for 50 years which was pro-
hibited under Section 92 of the Maharashtra Municipalities Act, 1956;
that sanction of the Development Department was not ob_tained; that an
impermissible encumbrance would be created on the Council's pro-
perty in favour of the developer and that the intended user violated the
original terms of the gift. On the said petition, the Collector passed G
orders suspending the Resolutions. On revision, the Minister stayed the
operation of the Collector's order.

Meanwhile, a Writ Petition was flied before the High Court,
assailing the said Resolutions. Another Writ Petition was f'ded challeng-
ing the Minister's orders staying the order of the Collector. Both the H
22 SUPREME COURT REPORTS [ 1990] Supp. 3 S.C.R.
.- .

Writ Petitions were heard together. The main contention of the Writ
A
Petitioners was that the fmancial estimates of the project were made
grossly under-estimating the probable receipts by way of premia for the
grant of occupancy rights with the intention of giving an opportunity
for unjust enrichment to Respondent No. 6. The ffigh Court directed
that occupancy rights in regard to the shops at the disposal of the
B developer tenders be called from the public, so that the difference bet-
ween what was taken into account in the estimate and what was actually
secured might go to the benefit of the Municipality. Accordingly,
advertisement were issued, but it did not evoke any favourable response
from the public. The matter was listed again before the High Court. It ...
was held that tbe High Court's earlier order was self-executory, and the
Writ Petitions were dismissed. Review Petition was also dismissed.
c Another Writ Petition challenging the advertisement issued pursuant to
High Court's earlier order was also dismissed.

The Special Leave Petitions fded against the above-said orders of
the High Court, were dismissed by this Court with the observations that
D it was open to the petitioners to move the Minister for final disposal and
the Minister would expeditiously dispose of the matter taking into con-
sideration whether the scheme was in conformity with the statutory
provisions. The Minister disposed of the Revision Application recording
his findings against the appellants. Thereupon, the appellants fded a
fresh Writ Petition before the High Court challenging the Minister's
E orders. The High Court declined to interfere. Aggrieved by the High
Court's order, appellate preferred the present appeal by special leave.

It was contended on behalf of the appellants that the scheme of
financing the project was not, as a matter of policy, open and permissi-
hie to a Governmental authority; that the Municipal authority could
F have put up the construction itself departmentally or awarded the
execution of the whole project to a building contractor; that the method
of financing and the execution of the project are, beyond the powers of
the Municipal authority under the Act; that the terms of the agreement
with the developer that the latter be at liberty to dispose of the occu-
pancy rights in the commercial complex In such manner and on such
G terms as it may choose would amount to an impermissible delegation of
the statutory functions of the Municipal Council, under Section 272 of
the Maharashtra Municipalities Act; that the project, in effect
amounted to disposal of Municipal property by way of a long term lease
with rights of sub-letting in favour of the developer and hence violative
of Section 92 of the Act; and that the scheme was arbitrary, unreason-
..
H able and violative of Article 14 of the Constitution. It was further con-
MAHAJAN v. JALGAON MUNICIPAL COUNCIL 23

tended that the project was patently intended to provide for an unjust A
enrichment of.Respondent No. 6 at public expense.

On behalf of the Respondent it was contended that the- increasing
revenue expenditure and other rmancial commitments rendered it
impossible for the Municipal Council to set apart the rmancial inputs
B
required for the project; that in the management of the transaction
regarding disposal of occupancy rights and prompt mobilisation of
funds, the deficiencies and limitations of the bureaucratic machinery
should not" be i~ored in assessing the value and utiliti of the alterna-
tives; that all the said Resolutions in regard to the Project were passed
unanimously which lend credance to the propriety and wisdom of the
measure and its reasonableness; that the estimates and calculations on c
which the scheme was worked out by the Respondent Council would
show that the developer had no opportunity of making any run-away
profits or exploitative gains.

Dismissing the appeal, this Court,
D
HELD: 1. A project, otherwise legal, does not become any the less
permissible by reason alone that the local authority, instead of execut-
ing the project itself, had entered into an agreement with a developer
for its rmancing and execution. The question is not whether it is
on-conventional by the standard of the extant practices, but whether
E
there was something in the law rendering it impermissible. No doubt
there is a degree of public accountability in all governmental enter-
prises. But, the present question is one of the extent and scoiie of judi·
cial review over such matters. With the expansion of the State's pre-
sence in. the field of trade and commerce and of the range of economic
and commercial enterprises of government an,d its instrumentalities
F
there is an increasing dimension to governmental concern for stimulat-
ing efficiency, keeping costs down, improved management methods,
prevention of time and cost over-runs in projects, balancing of costs
against time-scales, quality-control, cost-benefit ratios. etc. In search of
these values it might become necessary to adopt appropriate techniques
of management of projects with concommitant economic expediencies.
G
There are essentially matters of economic policy with lack adjudicative
disposition, unless they violate constitutional or legal limits on power or
have demol)Strable pejorative .environmental implications, or if they
amount to clear abuse of power. This again is the judicial recognition of
administrator's right to trial and error, as long as both trial and error
are bona fide and within the limits ofauthority. (3SC-G] H
24 SUPREME COURT REPORTS [ 1990] Supp. 3 S.C.R.

A Forward Construction Co. & Ors. v. Prabhat Manda!, [1986] 1
SCC HNI; relied on.

Ramana Dayanand Shetty v. International Airport Authority,
[1979] 3 SCR 1014; Kasturi/al Laxmi Reddy v. State of J & K, [1980] 3
SCR 1338; explained.
B
New State Ice Company v. Ernest A. Liebmann, 285 US 261--Dis-
senting opinion of Brandeis J; Education Secretary v. Tameside B.C.,
[1977] AC 1014; referred to.
<.:._
"The Purpose and Scope of Judlclal Review" by Sir Gerard 'I
C Brennan is "Judicial Review of Admlnlstrative Action in the 1980s",
Oxford University Press; referred to.

2. In the ever increasing tempo of urban life and the emerging
stresses and strains of planning, wide range of policy options not incon-
sistent with the objectives of the statute should be held permissible. lo
D
the context of exp'!11ding exigencies of urban planning it will be difficult
for the court to say that a particular policy option was better than
another. The project is not ultra vires of the powers of the Municipal
Council, and hence there is no justification for quashing the Resolution
of the Municipal Council. [36G]
E
Policy making Paradigms in Administrative Law" by Colin
S. Diver in Harward Law Review, vol. 95 p. 393; referred to.

3. In the instant case, it is possible to fit the power exercised by
the Municipal authority Into Section 272(1) of the Maharashtra
Municipalities Act and hence there is no reason why the provision be
F
interpreted unduly restrictively to exclude such enterprise. [40E]

4. It has not been established that the essential elements of the
transaction are such that Section 92 of the Act is violated. It would,
indeed be unduly restrictive of the statutory powers of the local autho-
rity if a provision enabling the establishment of markets and disposal of
G
occupancy-rights therein are hedged in by restrictions not found in the
statute. The developer who was authorised to induct occupiers in
respect of the area earmarked for him merely exercised, with the con-
sent of the Municipal Council a power to substitute an bccupier in his
own place. This is not impermissible when it is with the express consent
of the Municipal Council. [40H; 41A-B] ,..
H
..
MAHAJAN v. JALGAON MUNICIPAL COUNCIL 25
...
5.1 Some phrases which pass from one branch of law to
A
another-as did the expression 'void' and 'voidable' from private law
areas to public law situations-carry over with them meanings that may
be inapposite in the chaoged context. Some such thing has happened to
the words "Reasonable", "Reasonableness" etc. Different contexts in
which the operation of "Reasonableness" as test of validity must be
kept distinguished. The administrative law test of 'reasonableness' as B
the touch-stone of validity of the Resolution in the instant case is diffe-
rent from the test of the 'reasonable man' familiar to the law of torts,
whom English Law figuratively identifies as the "man on the clapham
omnibus". In the latter case the standards of the 'reasonable-mao', to
the extent such a 'reasonable man' is court's creation, is a mere trans-
ferred epithet. Yet another area of reasonableness which must be distin-
guished is the constitutlonal standards of 'reasonableness' of the res- c
trictions on the fundamental rights of which the Court of Judicial Re-
view is the arbiter. [42F-G; 43A-B] ·

5.2. The 'reasonableness' in administrative law must distinguish
between proper and improper use of power. [44D] D

Davis Contractors v. Fareham U.D.C., (1956] 2 All ER 145; As-
sociated Provincial Picture Houses Ltd. v. Fednesbury Corporations,
[1948] 1 KB 223; Nottinghamshire County Council v. Secretary of State
for Environment; [1986] AC 240; Tiller v. Atlantic Coast Line Rail
Road Company, 318 US 54; Chief Constable v. Evans, [1982] 3 All ER E
141; referred to.

Administrative Law, by H.W.R. Wade, 6th Edn., pp. 407, 408;
Legal Control of Government, by Bernard Sehwartz aod H.W.R.
Wade, p. 253; referred to.
F
, 6. While it is true that principles of judicial review apply to the
exercise by a government body of its contractual powers, the inherent
limitations on the scope of the inquiry are themselves a part of
those principles. In a matter even as between the parties, there must
be shown a public law element to the contractual decision before
judicial review is invoked. In the present case the material placed G
before the Court fails far short of what the law requires to justify inter-
ference. [46F]

7. There is no merit in the contention that the Project Scheme was
-< tailored to suit Respondent No. 6 alone or that the project as put to
tender did not admit of tenders on fixed comparable parameters. No H
,
26 SUPREME COURT REPORTS [1990] Supp. 3 S.C.R.

other tenderer expressed any grievance. The tenders were such that the
A
tenderer could identify the terms which form the basis of comparative
evaluation. The charge of arbitrariness cannot be upheld. [46G-H; 47A]

8. To condemn the Municipal authority's decision, otherwise
valid, on the ground alone that the developer is likely to resort to trans-
B actions of unaccounted money would, as a judicial remedy, be plainly
unthinkable. [47E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6266
of 1990. "'

C From the Judgment and Order dated 18.9.1989 of the Bombay
High Court in W.P. No. 2404 of 1989.

R.K. Jain, Gopal Subramaniam, Mukul Mudgal, R.D. Bande
and Nitin Talk for the Appellants.

D K.K. Singhvi, Dr. Y.S. Chitale, B.N. Singhvi, A.K. Gupta, A.S.
Bhasme, R.N. Keshwani, N.N. Keshwani and Meraj Khayyam for the
Respondents.

The Judgment of.the Court was delivered by

E VENKATACHALIAHJ. Petitioners seek special leave to appeal
to this Court from the order dated 18.9.1989 made by the Bombay
High Court, Aurangabad Bench, dismissing appellants' Writ Petition
No. 2404 of 1989 in which they assailed certain contracts of the Munici-
pal Council of Jalgaon with a Developer of real estate for the execu-
tion of a project for 'Administrative Building' and a 'Commercial
.P Complex' on a plot of land belonging to the Municipality.

2. We have heard Sri R.K. Jain, learned Senior Advocate for
the Petitioners; Sri K.K. Singhvi, Sri A.S. Bhasme and Dr. Y.S.
Chitale, learned Senior Advocates for Respondents l, 4, 5, and 6
respectively.
G
Special leave granted. The main appeal is taken-up for final
hearing, heard and disposed of by this judgment.

3. The controversy relates to a project for the development of
real estate sponsored by the Town Municipal Council, Jalgaon, in the
H State of Maharashtra. In the year 1913 the Municipal Council, it would
27
,... MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J .l

appear, received by way of gift a piece of land of an extent of 5 acres
A
and 32 guntas from a certain Lila Dhar Bhatia. The land had been in
the use of the Agricultural Produce Market Committee, Jalgaon, as a
cotton-market_and whole-sale fruit and vegetable market. The Munici-
pal Council having entertained the idea of putting the land to a better
and more profitable use persuaded the Market Committee to yeild-up
possession. The terms of the original gift, it would appear, stipulated B
conditions that the land be put to use for only as a cotton and vegatable
market. In order to enable itself to put the land to other and more
beneficial uses and to exploit ihe commercial-potential which the
proper\y had with the passage of time acquired, the Municipal Council
appears to have approached the heirs of the original donor who appear
to have agreed to amend the terms of the gift accordingly. But the
permission was not without strings attached. The project as envisaged c
by the Municipal Council, contemplated, amongst other things, the
erection of a commercial complex. The heirs appear to have bargained
for and secured a benefit that they should be given five-shops free of
cost in the commercial complex.
D
4. The Municipal Council invited competitive proposals as to the
ways in which the potential of the land could be commercially exp-
loited and invited competitive plans and designs on the basis of which
the Architects could be selected from architects all over the country.
By its Resolution dated 17 .3. 1988 the Municipal Council selected M/s.
Kabra Chaudhary Associates as Architects for the project. E

The project envisaged a Central Administrative1 Building with
ground plus 17 floors intended to be utilised by the Municipal Council
for locating its own offices and an adjacent structure with a basement
plus five upper floors to be used as vegetable-market and a commercial
complex. The broad aspects as to the funding of the project were that F
the project was to be executed by a "Developer" who would be
required to take-up and execute the project at his own cost; that the
developer would be obliged to rehabilitate 486 small-time vegetable
vendors who were in occupation of the land in various units by provid-
ing them small stalls.at, what was described as, a concessional~prerriium
of Rs.3,000 per stall; that 83 more shops,-at fixed premia of Rs~40,000 G
each, be given to Adatias who were carryjng on their business on the
property and that, further, another 60 shops, at the same rate, be
allotted to some traders who are stated to have encroached upon the
land. This was in addition to the five shops, which had to be made
available to the heirs of the original donor free of cost. The nature of
the rights conferred on these beneficiaries is stated to be "occupancy H
28 [ 1990] Supp. 3 S.C.R.
SUPREME COURT REPORTS
...
rights" for a period of 50 years under section 272(1) of the
A
Maharashtra Municipalities Act, 1965 (Act for short) which regulated
the matter. The municipality would get rents from those occupants at
rates stipulated. The administrative block comprising of ground plus
17 floors was, however, intended to be handed over to the Municipal
Council free of cost for its own use and of its tenants.
B
5. The project-scheme contemplated a mode of financing which
contemplated that in. consideration of the "developer" putting-up the
entire construction at its own cost and making various allotments to
the shop-keepers to whom the Municipal Council had given assurances
of alternative accommodation at fixed rates of premia and providing
c Ground plus 17 floors of the Administrative building free of cost to the
Municipality, the developer would be entitled and at liberty to dispose
of the occupancy rights in respect of the rest of the accommodation in
"Commercial-Complex" and retain the premia paid by the disponees
so to reimburse itself the financial outlays on the project plus its profit.
The occupiers, including those who would have the benefit of the
D allotments at such fixed-rates as well as those to be inducted by the
developer, were expected to pay rents to the Municipal Council for the
period of 50 years at rates envisaged in the scheme, though, however,
certain incentives and concessions were afforded for the first two
periods of 3 years each. According to the financial estimates prepared
by the Municipal Council with the assistance of its architects as to the
E economics of the scheme the project was to involve a financial outlay
of about Rs. 11 crores. On certain estimates prepared by it the Munici-
pal Council was of the view that the project would benefit the local
community both from the immediate as well as long-term advantages if
this mode of financing and execution of the project was adopted. It
was the Council's view that while the project would help to rehabilitate
F all those businessmen and traders who were carrying on business on
the land and obviate protracted litigation for their eviction, the Muni-
cipal Council would, in addition, get a building consisting of a Ground
plus 17 floors in the Central Administrative Block which would be an
impressive structure 70 metres in height adding greatly to the value of
the municipal estate. It was also said that the rents from those occup-
G ants in the commercial complex would considerably augment the
municipal revenues.

6. After enunciating these criteria the project was put to tender.
Advertisements were taken out in the Newspapers and it is stated that
five Developers responded and submitted their tenders. After a pro-
H cess of scrutiny of the tenders and elimination of ineligible and non-
,.
MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHAL!AH, J .[ 29
,...
competitive ones, the tender of respondent No. 6 was accepted by the
Municipal Council by its unanimous Resolution dated 8. JO. 1988. On A
9.10.1988, a "Letter of Intent" was issued to the Respondent No. 6, !

which, in turn, on 15.10.1988 issued its own advertisement of the
project. On 18. 10. 1988, a formal agreement was entered into between
the Municipal Council and the Respondent No. 6 in this behalf.
B
7. Appellants who are residents of Jalgaon and who entertained
serious misgiving as to the legal permissibility, the economic sound-
ness and propriety of the policy of tpis venture petitioned to the Col-
lector of the District under the provisions of the 'Act' to suspend the
Resolutions of the Municipal Council undertaking the project and the
agreement with Respondent 6 for its execution. They urged that the
transaction really amounted to grant of a lease of 50 years prohibited c
under Section 92 of the "Act"; that under the Act a scheme of this
kind could not be embarked upon without the sanction of the Develop-
ment Department of the Government of the State of Maharashtra;
that the transaction resulted in the creation of an impermissible
encumbrance on the property of the Municipal Council in favour of the D
developer and lastly that the intended user violated the original terms
of the gift. The Collector suspended the impugned resolutions. But the
Minister, in a Revision-Petition preferred against the Collector's
order, stayed the operation of that order. Simultaneously, some
persons, including some of those who had moved the Collector, filed
Writ Petition No. 1765/)988 in the High Court assailing the said Reso- E
lutions. It is necessary to refer in any great detail to the several pro-
ceedings that ensued. Suffice it to say, in WP No. 1765/ 1988, in which
the Resolutions touching the clearance of the project·and the agree-
ment with respondent No. 6 had been assailed and the Writ-Petition
1825/1988 in which the Minister's order staying the Collector's order
was challenged came up together before a Division Bench of the High F
Court on 20. 12. 1988. The contention that was pressed appears to be
that the calculations forming the basis of the financial estimates of the
project were made grossly under-estimating the probable receipts by
way of premia for the grant of occupancy-rights with the intention of
giving an opportunity for unjust enrichment to Respondent 6 as,
according to the appellants, the occupancy-rights for the shops were G
capable of fetching far higher premia than those estimates rnade by the
Municipality. Learned Judges of the Division Bench who dealt with
the writ-petitions were of the opinion that any apprehension in that
behalf would be allayed if it was ensured that any such excess should
go to the benefit of the Municipality. Accordingly, the Division Bench
directed that in the. matter of disposal of the occupancy-rights in regard H
1
30 SUPREME COURT REPORTS [ 1990] Supp. 3 S.C.R.

A to the shops-other than those ear-marked for the preferential cate-
gory of existing businessmen and traders-tenders should be called
from the public so that the difference between what was taken into
account in the estimates of the project and what was actually secured
in response.to the advertisement, might go to the benefit of the Muni-
cipality. The order said:
B
"Shri Singhvi, appearing for the Jalgaon Municipal Coun-
cil, states that the Council will invite tenders for sale of 68
shops on the ground floor with basedient on the eastern
side facing Sane Guruji Road, stipulating Rs.3,50,000 per
shop as the floor price, and of 32 shops on the ground floor
without basement, on the rear of the above 68 shops, i.e.
c on the western side and facing Jaikisanwadi, stipulating
Rs.2,50,000 per shop as the floor price. The advertisement
will be given. within a week from today and it will be
repeated wit!lin a space of two days in between. The
advertisement will mention that Rs.25.000 have to be paid
D at the time of submitting the tender for the shop.

If the applications are received tendering more
amount than is stipulated in the notice, then the surplus
amount will be credited to the Municipal Council and only
the floor-price shall be paid to the contractor.
E
If applications for all the shops are not received, or, if
the applications received tender less amount than the floor-
price, then the Council is at liberty to go ahead with their
present scheme .... "

F [W.P. No. 1765/ 1988 dated 20.12.1988]

It would appear that the advertisement issued in that behalf did
not elicit any favourable response from the public. The matter was
listed again before the High Court on 21.1.1989. The Division Bench
held that its earlier order dated 10.12.1988 was self-executory and had
G put an end to the Writ-Petition finally and nothing really survived in
the Writ-Petition. That was how WP No. 1765/1988 came to an end.
Writ-Petition 1825/1988, directed against the stay order granted by the
Minister, was disposed of on 8.2. 1989. In Review-Petition 223 of 1989
appellants had sought a review of the order dated 20.12.1988 which
was also dismissed on 7.2.1989. The advertisement issued pursuant to
H the order dated 20.12.1988, was itself challenged in a separate Writ-
MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J .] 31
·~;
./<
Petition and that Writ-Petition was also dismissed on 8.2.1989.
A
8. All these orders were assailed before this Court in Special
Leave Petition No. 3292/1989, SLP No. 3222/1989, SLP No. 3268/1989
respectively. The SLP 3293/1989 which arose out of the Writ-Petition
challenging Minister's order was disposed of on 17.4.1989 by this
Court with the following observation: B

"Since the order made by the Hon'ble Minister is evidently
in the nature of ad-interim order, it is open to the petitioner
.> to move the Minister for final disposal. It is hoped that the
Minister, having regard. to the importance of the matter,
' will expeditiously dispose of the matter. The minister will
c
also consider whether the scheme in question is in confor-
mity with the statutory provisions. With these observations
the Special Leave Petition is dismissed."

Special Leave Petition (Civil) No. 3293 and 3268/1989 which arose out
of the orders in W.P. 1765 of 1988 and the Writ-Petition preferred D
against the Advertisement were also dismissed with the following
/
observation:

"In view of the above order in Special Leave petition
(Civil) No. 3222/1989 these Special Leave Petitions are
dismissed." E

9. Later, the Minister disposed of the Revision Application by
his order dated 3.8.1989. The Minister took into account the order
made by the High Court in Writ-Petition No. 1765/1988 and was
persuaded to the view that that decision could not be ignored by him.
That apart, he also went into the merits of the scheme and recorded F
findings against the appellants. Against this order of Minister, appel-
lants preferred a fresh Writ-Petition No. 2404/1989 before the High
Court. The present appeal before us arises out of the High Court's
order dismissing the said W.P. 2404/1989. The High Court was of the
view that the orders made by this Court in the earlier SLPs indicated
that this Court had really intended that all the controversies should G
conclude with the decision of the Minister. The High Court, however,
also went into the merits as well and held that there were no grounds to
interfere.

10. Sri R.K. Jain, strenuously contended before us that the High
Court misdirected itself as to the scope of the proceedings before it on H
32 SUPREME COURT REPORTS [1990] Supp. 3 S.C.R.

an obviously erroneous view that this Court, while disposing of the .... '
A earlier SLPs, had precluded any further enquiry into the merits after
the Minister's decision. Sri Jain submitted that this Court while dispos-
ing of the Special Leave Petitions had merely indicated its disinclina-
tion to interfere at that stage and had left the matter to be dealt with
under the statute by the Minister which obviously meant that at an
B appropriate stage when the correctness of the Minister's order came to
be assailed the matter would require to be examined on its own merits.
It was erroneous to think, contended Sri Jain, that the effect of the
orders of this Court was to impart a finality to the Minister's order
whatever its vitiating features.

There might be some force in what Sri Jain says if the observa-
c tions which Sri Jain takes exception to are alone taken into account.
The High Court was possibly wrong in its view as to the effect of this
Court's earlier orders. But what appears clear is that the High Court
also went into the merits of the matter. Therefore the grievance that
the High Court abdicated its jurisdiction on an erroneous interpreta-
D tion of this Court's earlier order may not be correct. However, in
order that there be no dissatisfaction on the question that the matter
did not receive adequate consideration in the High Court, we asked
the appellants to present their case on the merits also so that any need
for a remit of the matter to the High Court at this late stage was
obviated. Parties placed their case fully before us.
E
11. Sri Jain raised a number of contentions touching the power
of the Municipal Council to make such disposal of Municipal property
as was implicit in the scheme and on, what Sri Jain called, a manifest
susceptibility of the scheme for arbitrariness in the matter of the choice
of the developer. The main thrusts on Sri Jain's argument are, first,
F that the project, in substance, envisaged a disposal of the property-
rights of the Municipal Council in favour of Respondent No. 6 which,
in turn, became entitled to further deal with the properties squarely
attracting the prohibition under section 92 of the Act; and secondly,
that the scheme was a wholly non-conventional one unknown to set-
tled principles of public finance. Sri Jain strenuously urged that the
G non-conventional and unorthodox features of the scheme particularly
as to the mode of its finances, were tailored with Respondent 6 in mind
and were intended to, and did, confer on Respondent 6 a pre-mediated
largesse, in flagrant violation of financial disciplines and morality. It
was also urged that the project gave enormous pecuniary advantage to
Respondent 6 wholly disproportionate to its outlay of funds on the
H project.
'
I'
I
MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J .1 33

In the ultimate analysis, the contentions of Sri Jain admit of
A
) being formulated thus:

(a) That the scheme of financing of the project was not one that
was, as a matter of policy, open and permissible to a Govern-
mental authority. The Municipal authority could either have put-
up the construction itself departmentally or awarde.d the execu- B
ti on of the whole project to a building contractor. The method of
financing and execution of the project are, in short, ultra-vires of
the powers of the Municipal authority under the Act.

(b) That the terms of the agreement with the developer that the
latter be at liberty to dispose of the occupancy-rights in the com-
mercial complex in such manner and on such terms as it may c
choose woul amount to an impermissible delegation of the
statutory functions of the Municipal Council under Section 272
of the Act to the developer.

( c) That the project, in effect, amounted to and involved the D
disposal of Municipal property by way of a long term lease with
rights of sub-letting in favour of the developer violative of
section 92 of the 'Act'.

(d) That the scheme is arbitrary and unreasonable and is viola-
tive of Article 14 of the Constitution. The project is patently one E
intended to and does provide for an unjust enrichment ofrespon-
dent no. 6 at public expense.

We may now deal with these contentions.

12. Re: Contention (a) F

The mode of financing of the project is stated to be un-con-
ventional one and does not accord with any recognised or accepted
norms of functioning and financial discipline of Governmental bodies.
It is urged that the Municipal Council could have engaged a contractor
to execute the work against payment in accordance with well accepted G
--~ procedures for Government contracts or could have executed the
' works itself departmentally. It is said that the method now chosen for
the development involves a policy impermissible for a Government
body. This contention of the appellants, as a legal contention is some-
what vague and does not admit of clear-cut legal contours. As we
apprehend the contention, it pertains to the legality or propriety of a H
34 SUPREME COURT REPORTS [ 1990] Supp. 3 S.C.R.

policy-option. However, reliance was placed on certain observations
A of this Court in Ramana Dayanand Shetty v. International Airport
Authority, [1979] 3 SCR 1014 and Kasturilal Laxmi Reddy v. State of J
& K, [ 1980] 3 SCR 1338.

In those cases relied this Court pointed out that with the growth
B of a welfare state and with the Government assuming a pluralist role as
provider of social welfare services and with the corresponding increase
in the magnitude of the governmental functions and the consequent
evolution of new forms of wealth and new forms of property, the scope
for conferment of largessee by Government had increased and the
discretion of Government in the disposal of such properties, rights or
privileges should not be unlimited and arbitrary.
c
Sri Jain said that in the present case the project involved purely
commercial considerations and had had no social objectives and the
securing of terms to the best advantage of the Municipal Council
should have been the objective. It is urged that the Municipal Council
D disregarded this criterion and resorted to a method which gave uncon-
trolled discretion and authority to Respondent 6 to exploit the com-
mercial potential of the property for its own aggradisement. Sri Jain
said that the avowed reason why the Municipal Council did not itself,
with all its vast financial resources, undertake the execution of the
project was that the Municipal Council wanted to save itself from the
E difficulties involved in the process. Sri Jain said that if the developer
could finance the project by the income received from a disposal of the
occupancy-rights and make huge profits, there was no reason why the
Municipal Council itself could not have done the same.

13. Sri Singhvi, for the Municipal authority submitted that the
F execution of the project of this magnitude involved a degree of finan-
cial outlay and management expertise well beyond the immediate
sources of the Municipal Council and that though the Municipal
Council had a budget which indicated crores of rupees on the receipt
side, the increasing revenue expenditure and other financial commit-
ments rendered it well-neigh impossible to set-apart the financial
G inputs requisite for this project. Sri Singhvi said that in the matter of
management of the transactions relating to the disposal of occupancy-
rights and prompt mobilisation of funds, the deficiencies and limita-
tions of the bureaucratic machinery should not be put out of considera-
tion in assessing the value and utility of the alternatives. Sri Singhvi
pointed out that despite the heterogeneity of their political affiliations, •
H the members of the Municipal Council, passed all the resolutions in
MAHAJAN v. JALGAON MUNICIPAL COUNCIL (VENKATACHALIAH, J.l 35

regard to this project unanimously. Sri Singhvi said that although
popular support could not validate an ultra vires action, it might A
become relevant to the question whether a certain action was reason-
able or not and that the circumstance that all the resolutions had been
passed unanimously would lend credence to the propriety and wisdom
of the measure. Sri Singhvi claimed that the estimates and calculations
on which the scheme was worked-out by the Municipal Council would B
show that the developer would not have any opportunity of making
any run-away profits or exploitative gains.

14. On a consideration of the matter, it appears to us that the
. argument that a project envisaging a self-financing scheme, by reason
alone of the particular policy behind it, is beyond the powers of the
local authority is somewhat too broadly stated to be acceptable. A c
project, otherwise legal, <loes not become any the less permissible by
reason alone that the local authority, instead of executing the project
itself, had entered into an agreement with a developer for its financing
and execution. The criticism of the project being 'unconventional'
does not add to or advance the legal contention any further. The D
question is not whether it is un-conventional by the standard of the
extant practices, but whether there was something in the law rendering
it impermissible. There is, no doubt, a degree of public accountability
in all governmental enterprises. But, the present question is one of the
extent and scope of judicial review over such matters. With the expan-
sion of the State's presence in the field of trade and commerce and of E
the range of economic and commercial enterprises of government and
its instrumentalities there is an increasing dimension to governmental
concern for stimulating efficiency, keeping costs down, improved
management methods, prevention of time and cost over-runs in pro-
jects, balancing of costs against time-scales, quality-control, cost-
benefit ratios etc. In search of these values it might become necessary F
to adopt appropriate techniques of management of projects with
concommitant economic expediencies. These are essentially matters of
economic policy which Jack adjudicative disposition, unless they vio-
late constitutional or legal limits on power or have demonstrable
pejorative environmental implications or amount to clear abuse of
power. This again is the judicial recognition of administrator's right to G
trial and error, as long as both trial and error are bona fide and within
th~ limits of authority. We might recall the memorable words of what
Justice Brandeis said:

"The discoveries in physical science, the triumphs in inven-
tion, attest the value of the process of trial and error. In H
36 SUPREME COURT REPORTS [ 1990] Supp. 3 S.C.R.

large measure, these advances have been due to experi-
A mentation ..... "

" . . . . . . . . . . . . . . . . . . . . . . There must be power in the
States and the Nation to remould, through experimenta-
tion, our economic practices and institutions to meet
B changing social and economic needs ..... "

"To stay experimentation in things social and econo-
mic is a grave responsibility. Denial of the right to experi-
ment may be fraught with serious consequences to the
Nation. It is one of the happy incidents of the federal
system that a single courageous State may, if its citizens
c choose, serve as a laboratory; and try novel social and
economic experiments without risk to the rest of the
country. This Court has the power to prevent an experi-
ment ..... "

D " .... But in the exercise of this high power, we must be
ever on our guard, lest we erect our prejudices into legal
principles .... "

[See: New State lee Company v. Ernest A. Liebmann, 285
US 262 at 310- i 1- Dissenting opinion of Brandeis J.]
E
In regard to courts and policy we might recall the following
words of a learned author:

"The courts are kept out of the lush field of administrative
policy, except when policy is inconsistent with the express or
F implied provisions of a statute which creates the power to
which the policy relates or when a decision made in pur-
ported exercise of a power is such that a repository of the
power, acting reasonably and in good faith, could not have
made it. In the latter case, 'something overwhelming' must
appear before the Court will intervene. That is, and ought
G to be, difficult onus for an applicant to discharge. The
Courts are not very good at formulating or evaluating
policy. Sometimes when the Courts have intervened .on
policy grounds, the Court's view of the range of policies
open under the statute or of what is unreasonably policy ·
has not won public acceptance. On the contrary, Curial
H views of policy have been subjected to stringent criticism.
MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J.] 37

In the world of politics, the Court's opinions on policy are A
naturally Jess likely to reflect the popular view than the
policies of a democratically elected Government or of
expert administrators ....... "

"The considerations by reference to which the
reasonableness of a policy may be determined are rarely B
judicially manageable ..... "
(emphasis supplied}

,; . [See: "The Purpose and Scope of Judicial Review"-by Sir
Gerard Brennan in "Judicial Review of Administrative
Action in the 1980s" Oxford University Press.]
c
In Forward Construction Co. & Ors. v. Prabhat Manda/, [1986] 1
sec 100 a similar self-financing project was embarked upon by the
Municipal Corporation of Bombay. It is true, the present argument as
to the manner of execution of the project being ultra vires the powers
of the local authority was not in terms raised there. But some of the D
arguments have a familiar ring. This Court, noticing the financial
feature of the scheme observed:

"'The mere fact that the Corporation was to make a
gain of the non-refundable premium did not mean that that
was the only purpose which was in view. The purpose obvi- E
ously was the best utilisation of the available space. If in a
commercial zone the Corporation was able to make avail-
able accommodation for commercial purposes we do not
see why such a venture cannot be one either for the
purpose of promoting public safety, convenience or in the

- nature of facilities being made available as a part of the
improvement of the city. If commercial activities are to be
pin-pointed in a commercial zone and for that purpose the
Municipal Corporation takes a step to provide accommoda-
f

tion for commercial purposes it cannot be said that the
property of the Corporation was being acquired or held for
purposes other than purposes of the Act." G
(p. 115)

The concern of public law is to discipline the public power by
forging "legal techniques as part of the way in which public power is
-< made operational and part of the process through which it is attempted
to render such public power legitimate_ and to think of issues of legal H
38 SUPREME COURT REPORTS [ 1990] Supp. 3 S.C.R.

A regulation of public power in a way that goes deeper than particular
instances and elaborate issues of general principle". There is, how-
ever, as Professor Wade points out, ample room, within the legal
boundaries for radical differences of opinion in which neither side is
unreasonable. In Education Sec. v. Tameside B.C., [1977] A.C. 1014
case Lord Denning pointed out the error of confusing differences of
B
opinion, however strong, with unreasonableness on the part of one
side or the other. Lord Diplock said that the very concept of
administrative discretion involves a right to choose between more than
one possible course of action upon which there is room for reasonable
people to hold differing opinions as to which is to be preferred.

c In the ever increasing tempo of urban life and the emerging
stresses and strains of planning, wide range of policy options not
inconsistent with the objectives of the statute should be held permissi-
ble. Referring to the "Role of the Judge in Public Law Litigation" a
learned author says:
D
"Administrative law is, in essence, a search for a theory of
how public policy should be made. Two powerful traditions
mark the boundaries of that search. On the side, we leave
the choice among competing values to a largely unstruc-
tured process of pulling and hauling by individuals directly
accountable to the citizenry. On the other side, we demand
E a highly sturctured process of party-controlled proof and
argument before a neutral arbiter to resolve disputes over
the application of rules to specific facts. Between these
extremes is that vast land-scape we call policymaking-the
reconciliation and elaboration of lofty values into opera-

-
tional guidelines for the daily conduct of society's
F business."

[See: "Policy making Paradigms in Administrative Law"-
Colin S. Diver-Harward Law Review-vol. 95-3931]

It appears to us that in the context of expanding exigencies of urban
G planning it will be difficult for the court to say that a particular policy
option was better than another. The contention that the project is ultra
vires of the powers of the Municipal Council does not appeal to us.

15. We hold that Contention (a) does not justify quashing of the
H impugned Resolution of the Municipal Council. •
MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J.] 39

16. Re: Contentions (b) and (c) A

Sri Jain contended that the transaction essentially concerns the
disposal of Municipal property by way of a lease and violates Section
92 of the "Act". Section92 of the Act provides:
B
"(1) No Council shall transfer any of its immovable pro-
perty without the sanction of the State Government,

(2) ... Omitted as unnecessary

(3) Notwithstanding anything contained in sub-section (1),
a Council may lease its immovable property for a period C
not exceeding three years, and the lessee shall not be
allowed to make any permanent constructions on such
immovable property. Such lease may be renewed by the
Council beyo.nd the period of three years with the permis-
sion of the Director, so, however, that the total period of D
any lease shall not exceed seven years.

No such lease or any renewal thereof shall be granted
unless supported by a resolution passed at a meeting of the
Council."

The question is whether the present transaction amounts to E
lease. Sri Singhvi submitted that the transaction is limited to the dis-
posal of occupancy-rights covered by Section 271(1) of the Act and is
not one of transfer or lease of immovable property under Section 92.
Sri .Singhvi says that even otherwise the two areas of the statute are
mutually exclusive and provisions of 272( 1) were intended to and did
meet a special situation pertaining to municipal markets while 92 dealt F
with transfer or lease of other properties. It is unnecessary in the
present case to examine the larger question raised by Sri Singh vi
whether section 92 has no application at all to "municipal markets".
But the transaction would be out of section 92 if it is not a lease or a
transfer prohibited by that section. On this Sri Singhvi says that the
transaction relates to mere rights of user without transfer of an interest G
in the property.

In the present case it is possible to fit the power exercised by
Municipal Authority into Section 272( 1) of the Act. The relevant provi-
sions say:
H
40 SUPREME COURT REPORTS [ 1990] Supp. 3 S.C.R.

A 272. ( 1) The Council may

(a) J
l
(i) J
l Omitted as
B (ii) l unnecessary
J
(iii) l
l
J
(iv) J
c (b) put up to public auction or dispose of by private sale, the
privilege of occupying or using any stall, shop, stand, shed, pen
or space in a municipal market or municipal slaughter-house for
such period and on such conditions as it may think fit.

D (2) ]
J
(3) ] Omitted as unnecessary
J
(4) J

E If it is reasonable possible to fit in the basic conceptions of this
project into what can be held to be cor.1prised in the power under
s. 272(1), there is no reason why the provision be interpreted unduly
restrictively to exclude such enterprise.

As to the contention of an impermissible delegation of power to
F the developer Sri Singhvi would say that the occupancy rights in
respect of certain portions of the commercial complex were granted to
the developer in lieu of the monetary outlay that he would make on the
project and that the fact that the developer in respect of such accom-
modation was enabled to induct his nominees would not, in principle,
detract from the character of the transaction as long as the Municipal
G Council, in turn, recognised such nominees as grantees of the
occupancy.

On a consideration of the matter it appears to us that the appel-
lants have not been able to establish that the essential elements of the
transaction are s9ch that Section 92 of the Act is violated. It would,
H · indeed, be unduly restrictive of the statutory powers of the local
MAHAJANv. JALGAONMUNICJPALCOUNCIL (VENKATACHALIAH, J.] 41

authority if a provision enabling the establishment of markets and
disposal of occupancy-rights therein are hedged in by restrictions not A
found in the statute. The point to note is that the developer to the
extent he is authorised to induct occupiers in respect of the area
earmarked for hiin merely exercises, with the consent of the Municipal
Council, a power to substitute on occupier in his own place. This is not
impermissible when it is with the express consent of the Municipal B
Council.

Indeed, in the course of his submissions, Dr. Chitale for Respon-
dent ·6 stated that the project had turned out to be white-elephant for
respondent No. 6; that the shops and other commercial accommoda-
tion made available to him are not, indeed, good selling propositions
ancl that the project- had proved quite burdensome. Dr. Chitale, on c
behalf, of his client frankly stated that in view of the adverse and
embarrassing publicity the litigation had generated, Respondent 6 was
ready and willing to surrender the agreement and all his rights there-
under if the work ·done by him so far was valued and paid for in terms
of the specific clauses of the agreement in this behalf. Dr. Chi tale also D
submitted that·the·allegation that respondent no. 6 could make dispro-
portionately high returns is unfair and that while in respect of some of
the· shops the financial estimates of the Municipal Council were built
on the expectations of a return of Rs.3,40,000 per shop and in respect
of others at Rs.2,50,000, Respondent-No. 6 has not been able to get
even so much from the intending or prospective occ~pants. E
17. On a consideration of the matter we fin<!. no substance in
contentions (b) and (c) either.

18. Re: Contention (d)
F
The contention is that the resolutions of the Municipal Council
touching the approval of the project and authorised its execution by
Respondent 6 are vitiated by 'unreasonableness' and 'arbitrariness'.
The unreasonableness is said to consist in the choice of the manner of
the execution of the project and arbitrariness in the process enabling
the choice of Respondent 6. Both these sins, according to the conten- G
lion, were the result and in furtherance of the anxiety on the part of
the Municipal Council to favour Respondent 6.

Sri Jain urged that in the process of putting the project to tender
the criteria on which the competitive merits of the tenders could be
evaluated were not susceptible of such comparative assessment at all H
42 SUPREME COURT REPORTS (1990) Supp. 3 S.C.R.

A as, according to Sri Jain, there was no common denominator or ~
objective-standard with reference to which one specific officer could
be evaluated in comparative terms against the other.

19. It was urged that the basic concept of the manner of the
development of the real-estate and disposal of occupancy rights were
B vitiated by unreasonableness. It is a truism, doctrinally, that powen
must be exercised reasonably. But as Prof. Wade points out;

"The doctrine that powers must be exercised reafiOnable
has to be reconciled with the no less important doctrine
that the court must not usurp the discretil)n l)f the public
authority which Parliament appointed to take the deciskln.
c Within the bounds of legal reafiOnabless is the area in which
the deciding authority has genuinely free discretion. If it
passes those bounds, it acts u/tru vire$. The court mu1t
therefore resist the temptation to draw the bounds loo
tightly, merely according to its own opinion. It must strive
D to aprly an objective standard which leaves to the deciding
authority the full range of chl)ices which the legislature la
presumed to have intended. Oecitoion which are extrava·
gant Qf capricious cannl)t be lellitimate. But if the deci.lon
is within the confines of reasonableneas, ii is no part of the
court's function to look further into its meril6. 'Wilh the
E question whether 11 particular policy as wise or fooli~h the
court is not concerned; it can only interfere if to pursue it is
beyond the powers l)f the authl)rity ...... , , ."

[See: Administrative Law: H.W.R. Wade, 6th Elin. p. 4071

F In the arguments there is some general misnpprehension of the
scope of the "Reasonableness".test in administrative law. By whose
standards of reasonableness that a matter is to be decided? Some
phrases which pass from one branch l)f law to another "" as did the
expressions 'void' and 'voidable' from private law areali to public law
situations -- carrying over with them meanings lh11t may be inappoalte
G in the changed context. Some such thing has h11ppened to the word&
"Reasonable", "Reasonable11ess" etc. In Tiller v. At/11ntl~ Cl)(l.ft LIM
Rail Road Company, 318 US 54 at 68 Justice Franllfurther "'id:

"A phrase begins life as a literary expre1sion; its feli-
city leads to its lazy repetition; and repetition soon es!ab· ..
fishes it as a legal formula undiscriminalingly used to
MAHAJAN v. JALGAON MUNICIPALCOUNCIL{VENKATACHALiAH,J.j 43

express different and sometimes contradictory ideas."
A
Different contexts in which the operation of "Reasonableness·'
as test of validity operates must be kept distinguished. For .instance as
the arguments in the present case invoke, the administrative law tesl of
'reasonableness' as the touch-stone of validity of the impugned Reso-
lutions is different from the test of the 'reasonable man' familiar to the.
law of torts, whom English Law figuratively identifies as the "man on B
the c!apham omnibus". In the latter case the standards of the
'reasonable-man', to the extent such a 'reasonable man' is court's crea- ·
lion, is in a manner of saying, a mere transferred epithet. Lord Rildc-
,• liffe observed: ·
"By this time, it might seem that the parties themselves
have become so far disembodied ·spirits that their actual C
persons should be allowed to rest in peace. In their place
there rises the figure of the fair and reasonable man. And the
spokesman of the fair and reasonable man, who represents
after all no more than the anthropomorphic conception of
justice, is, and must be, the court itself .... " D
(emphasis su1>1>lied)
)
(See: Davis Contractors v. Fareham U.D.C., (1956] 2 ALL
ER 145 at 160]

Yet another area of reasonableness which must be disinguished E
is the constitutional standards of 'reasonableness' of the restrictions on
the fundamental rights of which the Court of judicial review is the
arbiter.
The administrative law test of reasonableness is not by the
standards of the "reasonable man" of the Torts law. Prof. Wade says:
F
"This is not therefore the standard of 'the man on the
Clapham omnibus'. It is the standard indicated by a true
construction of the Act which distinguishes between what
the statutory authority may or may not be authorised to do
so. It distinguishes between proper use and improper abuse
of power. It is often expressed by saying that the decision is 0
unlawful if it is one to which no reasonable authority
could have come. This is the essence of what is now com- .
monly called 'Wednesbury unreasonableness', after the
_,.. now famous case in which Lord Greene MR expounded
it."
(empahsis supplied) H
44 SUPREME COURT REPORTS [ 1990] Supp. 3 S.C.R.

[ See: Administrative Law-HWR Wade, 6th Edition-
A
407]

To the same effect are the observations in "Legal Control of
Government" (Bernard Schwartz and H.W.R. Wade] at page 253:

.B " ..... Confusion has perhaps arisen because the test of
reasonableness in this context is the law of tort and else-
where. In applymg the latter standard the judge merely
enforces what he thinks is reasonable. But in condemning
unreasonable administrative action he asks himself whe-
ther the decision is one which a reasonable body could have
reached. In other words he allows some latitude for the
c range of different opinions which may fall within the
bounds ofreasonableness .... "

The 'reasonableness' in administrative law must, therefore, dis-
tinguish between proper use and improper abuse of power. Nor is the
D test the Court's own standard of 'reasonableness' as it might conceive
it in a given situation. This is the essence of Lord Greene's dictum now
familiar as the 'Wednesbury unreasonableness', in [1948] 1KB223]. It
was observed:

"It is true that discretion must be exercised reason-
E ably. Now what does that mean? Lawyers familiar with the
phraseology used in relation to exercise of statutory discre-
tions often use the word 'unreasonable' in a rather
comprehensive sense. It was frequently been used and is
frequently used as a general description of the things that
must not be done. For instance, a person entrusted with a
p discretion must, so to speak, direct himself properly in law.
He must call his own attention to the matters which is
bound to consider. He must exclude from his consideration
matters which are irrelevant to what he has to consider. If
he does not obey those rules, he may truly be said, and
often is said, to be acting 'unreasonably'. Similarly, there
G may be something so absurd that no sensible person could
ever dream that it lay within the powers of the authority.
Warrington U in Shortv. Poole Corporation, [1926] Ch. 66
gave the example of the red-haired teacher, dismissed
because she had red hair. This is unreasonable in one
sense. In another it is taking into consideration extraneous
matters. It is so unreasonable that it might almost be
MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J.] 45

described as being done in bad faith; and, in fact, all these
things run into one another." A

Referring to the doctrine, Prof. Wade says:

"This has become the most frequently cited passage
(though most commonly cited only by its nickname) in B
administrative law. It explains how 'unreasonableness', in
its classic formulation, covers a multitude of sins. These
various errors commonly result from paying too much
attention to the mere words of the Act and too little to its
. general scheme and purpos~. and from the fallacy that
unresticted language naturally confers unfettered discretion.
c
Unreasonableness has thus become a generalised
rubric covering not only sheer absurdity or caprice, but
merging into illegitimate motives and purposes, a wide
category of errors commonly described as 'irrelevant con-
siderations', and mistakes and misunderstanding which can D
be classed as self-misdirection, or addressing oneself to the
wrong question .... "

[See: Administrative Law: H.W.R. Wade; Sixth Edn., p.
408]
'E.
The point to note is that a thing is not unreasonable in the legal sense
merely because the Court thinks it is unwise. Some observations of
Lord Scarman in Nottinghamshire Country Council v. Secretary of
State for Environment, [1986] AC 240 at 247 might usefully be
recalled:
F
" ..... But I cannot accept that it is constitutfonally
appropriate, save in very exceptional circumstarices, for
the courts to intervene on the ground of "unreasonable-
ness" to quash guidance framed by the Secretary of State
and by necessary implication approved by the House of
Commons, the guidance being concerned with the limits of G
public expenditure by local authorities and the incidence of
the tax burden as between taxpayers and ratepayers.
Unless and until a statute provides otherwise, or it is
established that the Secretary of State has abused his
power, these are matters of political judgme:>t for him and
forthe House of Commons. They are not for the judges ot H"
46 SUPREME COURT REPORTS [ 1990) Supp. 3 S.CR.

yow- Lordships' Hoase in its judicial capacity."

"For myself,. I refuse in this case l<i> examine the detail
of the guidance or its consequences. My reas005 are these .
Su.<:11 an' examination by a court would be justified only if a
ptinul facie case were to be sh<:>W:ll for holding that the
a Secretary of State had a1:ted in bad faith,. <:>r for an impro-
per motive, or that the comseqaences of his guidance were
so absurd that be must have taken leave of his M:llses
,,

l\lhen Lord Denning MR stated in the Courl of Appeal that
''Nol only ml!Sf lthe probationer-COllnselled be gi.ven a fair hearing,
c bal Clie deciskm itHlf must lJe fair and reasonable" {emphasis
supplied), the House of Lords thought that the statement of the
learned Master of the Rolls, if allowed to pass in!o law, would wrongly
.._fonn the remedy of judicial review, as the statemen1 ..-W imply
that rhe C€1Urf am ilself sit, as in appeal, in judgment of the reason--
D ablness of. the! demion instead of om lhe correctness of the" decision
makio& 1""'"3&". '"'1'!\e {lWl\)OSe oli Judidaf Review", ii was stated:
"" •••• is; to msme than !he individual receives fair treatment, and 1101
to - . e that the anlfuority, after accordimg fai• trealment, reaches on
a iunct wbidi it is ~e-d "" ellljOO!ed h" law to decide fm i"lself a
· CUlldmion wfri~b is; WFJe<:t in tire eyes Gf !lie COIJ.rt .. "[See: Chief
E Cti11.-.v. EY"'1<1,. ~I982D3' All ER 14t at ]44.

10.. WMe ir i& trne tbat prim:ipfes. oi j,udiciall review apply to Ille
eaaftle ll'.!!· al gmemnmit body· O·f ii& C<!IR1lractuali powers,, !he illb<m'lll
tiiri1a.- Oii tlle Kgpt: Elf tile inq1'Wy are Uiemsel'ves a pm mt'-e
fllila~ For im1ame, Uii a matter even a;s l:Jetween !he pa:rtie&, lbe-re
F ...,. be,.,._ a pblil:· law e-lc.- to ll'I" eontractw! deeiSion before
jlldiicial iniew: is; mV011.e<il!. In' tire presetVt case the mate:ial ~
before die Cem:f faDh far, sliorl of what Ifie lalw: require~ tcr j~
imleriin-.
2'~. hi ~ to' Iii" all'e'gatil)TJ. that the l'»ojecl Scli><:me wa&
Q taiiloRd &Ol sRl Rest>o~ fr a&l:ire· or that the proj1<ct as put 10 tend'¢r
did 9IJC adaM of t~ on• fued comparaf>fto [1>0l'ameters, we f!M oo
ineril. Sri K.X. Si:Jl'ghvi submi:tted that tire telllller papers we•e pre·
pand l!>J r&Jll!lfelll a.el>iteets and the pre<:ise points <m which· ~z..
.ne ~· were frwited' weFe speciJii<:aflo/ fun¢<>tpor.aledi it1' the
ie-.·J!!ll!Pel:&.. ne· poi!mi aga;im is. nll!at ml'>' ©the• tieiade rer expnessed\ ""'Y
ff P~"llllli£ec.. Tliit' temts. wen: sucllt· !bl. the t¢1ildli:i;n ~ ill:e1>1li:iy lire·
MAHAJANv.JALOAONMUNICIPALCOUNCIL!VENKATACHALIAH,J.] 47

terms which form the 'basis of comparative evaluation. The charge of A
arbitrariness cannot tie upheld. Tests to be applied in a given case may
be Influenced by the extent to whk:h a decision is supported by a
democratic unanimity which evidences the decision --• granted, of
course, the power.

.22. Sri R.K. Jain stated that the scheme .enables Respondent 6 B
tp resort to certain well-known financial malpractices for tax-evasion
now known to be rempant when propertres change hands. Sri Jain said
that the Court ought to take judicial notice of so rempant and perva-
sive an evil and interdict anything that tends to promote such
unhealthy economic trends. While it is true that large scale tax-evasion
and evils of unaccounted money bedevils the nation's economic disci- c
pline and that with the increasing erosion of morality in public life and
the serious personal degradations fur unjust gains one sees alround,
the situation is, indeed, serious. But we fail to see what the Court can
do in case like this. The ptesent argument proceeds on two assump-
tions. The first is that respondent no. 6 has, in fact, indulged in s\lch
pr11ctices in the matter of disposal of occupancy·rights. This is a mere D
allcption whk:h is emphatimlly repudiated by respondent no. 6. The
second is that the accommodation in this commercial complex is such
good competitive selling proposition that there is great demand and
limited supply enabling Respondent 6 to exploit the situation. This
again is 11 matter of mere allegation. To condemn the municipal
authority's ~jsion, otherwise valid, on the ground alone that the E
developer is likely to resort to transactions of unaccounted money
would, as a judicial remedy, be plainly unthinkable.

Contention (d) requires to be and is also held against appellants.

23. On a consideration of the matter, we think that the conclu- F
sion. reached by the High Court does not call for interference. These
appeals are accordingly dismissed. In the circumstances, we make no
orders as to the costs.

G.N. Appeals dismissed.