Holding

The agreement was illegal, arbitrary and contrary to statutory provisions and the public‑trust doctrine; consequently, the unauthorised underground construction must be demolished and the park restored.

Summary

The Lucknow Nagar Mahapalika entered into a one‑sided agreement with M.I. Builders to construct an underground shopping complex on Jhandewala Park, a historic public park, without inviting tenders or obtaining required statutory approvals. The High Court held the agreement illegal, arbitrary and violative of the U.P. Municipal Corporation Act, the Development Act, the Parks Act and the public‑trust doctrine, ordering demolition of the unauthorized structure and restoration of the park. On appeal, the Supreme Court affirmed that the Mahapalika had acted beyond its powers, breached Articles 14, 21 and 49 of the Constitution, and that the agreement was a fraud on power. It rejected the builder's claim of estoppel or rights under Sections 128/129, emphasizing that unauthorised construction cannot be compounded and must be removed. The Court directed demolition of three blocks, conversion of one block into a parking facility, and restoration of the park within twelve months, dismissing the appeal with costs.

Issues considered

The validity of the agreement between the Mahapalika and M.I. Builders under the U.P. Municipal Corporation Act and related statutes.
Whether the construction of the underground shopping complex violated statutory provisions, including the Development Act, Parks Act, and the public‑trust doctrine.
Whether the Mahapalika's actions were arbitrary, unreasonable, and violative of Articles 14, 21, 49 and 51A(g) of the Constitution.
Whether the High Court's order for demolition could be modified or relief moulded in view of the builder's investment.
Whether the builder could rely on estoppel or claim a disposal of property under Section 128/129 of the Municipal Corporation Act.

Legislation cited

Indian Easements Act, 1882s. 60(b), s. 62(t)
Indian Evidence Act, 1872s. 115
U.P. Urban Planning and Development Act, 1973s. 14, s. 3(e)

Subjects

public trust doctrinemunicipal corporationunauthorised constructionjudicial reviewarbitrarinessenvironmental lawland disposalSection 128Section 114Article 14Article 21U.P. Municipal Corporation ActU.P. Development Actdemolition order

Judgment

'
A M.I. BUILDERS PVT. LTD.
v.
RADHEY SHAY AM SAHU AND OTHERS

JULY 26, 1999

B [S.B. MAJMUDAR AND D.P. WADHWA, JJ.]

Constitution of India :

Articles 14,21,49,5/-A, 298, 299, 226 and 136-Park of historical
C importance-Maintained by Corporation-Corporation entering into an .
agreement with a builder for the construction of underground shopping
complex in the guise of decongesting the area without inviting tenders-
Terms of agreement totally one side in favour of builder and also contrary
to statutory provisions passed by State Legislature-Allegations of personal
gain against the authorities of Corporation-Corporation divested of its
D control over the park after the agreement-Held, such action of Corporation
is unreasonable, arbitrary, unfair and opposed to public policy, public interest
and public trust doctrine and is an example of bad governance-Therefore,
judicial revielf called for-Any illegal or unauthorised construction done by
the builder must be demolished irrespective ofamount ofexpenditure incurred ~
E by it-Municipalities-UP. Municipal Corporation Act, 1959-U.P.
Reglflation of Buildings Operations Act, 1958-U.P. Urban Planning and
Development Act, 1973-U.P. Parks, Playgrounds and Open Spaces
(Preservation and Regulation) Act, 1975.

Article 136-Relief-illegal and unauthorised construction-Court
F should order demolition of such construction irrespective of any amount
invested by the builder-Exercise ofjudicial discretion in moulding the relief
not called for in such cases of illegal and unauthorised construction as the
same would encourage and perpetuate the illegality-Direction issued to
hold an enquiry as to how unauthorised construction came about and to
G book the offenders-Public Accountability-Town Planning-Municipalities.
Articles-226, 32, I 36-Judicial review-Action of State or its
instrumentality-Illegal and in contravention of prescribed procedure apart
from being unreasonable, irrational or mala fides-He/d, such action is open
to judicial review-Further held, that bad governance sets bad example-
H Administrative Law.
1066
' M.I. BUILDERS PVT. LTD. v. R.S. SAHU 1067
U.P. Municipal Corporation Act, 1959: A
Section 114-0bligatory duty of the Corporation to maintain Parks-
Corporation allowing a builder to construct an underground shopping
. · complex over an existing park of historical importance-Held, section 114
violated-However, underground construction can be converted into a
parking place as it was also an obligatory duty of the Corporation-But, B
such parking place be constructed after taking into consideration all relevant
factors such as locality and its population etc.-Town Planning-UP. Parks,
Playground and Open Spaces (Preservation and Regulation)· Act, 1975.

Sections 91, 105 and 119-Meetings ofso called High Power Committee
of the Corporation-No authority to the Corporation to constitute such a C
Committee and to delegate its function to the Committee-Notice issued for
meeting of such Committee-Agenda included "other subjects, subject to the
permission of the Presiding Officer"- Under this topic of the agenda,
Corporation allowed a builder to construct an underground shopping complex
on an existing park of historical importance-Decision of this Committee D
was approved by Executive Committee and general body-Held, constitution
of High Power Committee and delegation offunction was wholly illegal and
. )
violative of mandatory provisions of Section 91 and 119 and was not mere
irregularity so as to be protected under Section 105-Further, such an
important project could not have been discussed under the topic "other
subjects" of the agenda-Municipalities-Town Planning. E
Section 136(2)-Requirement to obtain sanction of State Government
where any project approved by the Corporation exceeded Rs. ten lakhs-
Held, Section 136 (2) attracted not only where the cost of the project was
to be incurred by the Corporation but otherwise also.
F
Sections 131,132,133 and 136-Land of prime value was handed over
to a builder in violation of public trust doctrine and master plan of the city
for the construction of an underground shopping complex iover an existing
park by way of an agreement-Terms of agreement were such that a man of 1
ordinary prudence would not have such one sided terms in favour of the G
builder-Terms also contrary to various statutory provisions-Held, agreement
was illegal, unreasonable, atrocious, irrational and arbitrary-Constitution
of India, Article 14-Administrative Law-Judicial Review.

Section 128 and 129-Corporation granted licence to a builder to
construct an underground fhopping complex and to hold on the same for an H
1068 SUPREME COURT REPORTS [1999) 3 S.C.R.

A indefinite period-Under the terms of the agreement, builder authorised to
lease out the shops on behalf of the Corporation-Held, such terms would
attract the expression "otherwise dispose of any interest in the property" in
Section 128 and hence contravenes Sections 128 and 129.

U.P. Parks, Playground and Open Spaces (Preservation and Regulation)
B Act, 1975-Corporation allowing a builder to construct an underground
shopping complex on an existing park of historical importance-Under the
Act, it was the duty of the Corporation to maintain the park-Held, true
nature of the paFk destroyed and consequently the public trust doctrine as
expounded in Span Resorts case violated-Doctrine of Span resort case is
C a part of Indian Law and has developed from Article 2 I-Corporation was
a trustee for the proper maintenance of park-Public Trust doctrine-
Eco/ogy-Constitution of India-Article 2 I-Municipalities-Town
Planning-Park.

U.P. Urban Planning and Development Act, 1973--Sections 14 and
D 3(e)-Construction of underground shopping complex in a park-Sanction
of the building plan not obtained by the Development Authority constituted
under the Act-Held, construction illegal-Town Planning.

Easements Act, 1882--Sections 60(b) and 62(/)-Licene-Revocability
of-Licence granted by. the Corporation to a builder for the construction of
E an underground shopping complex in a park-Construction is a work of
permanent nature constructed after having been incurred expenses-Held,
Such licence would be irrevocable under Section 60(b)-But licence was
deemed to be revoked under Section 62(/) when as per agreement, licensee
would recover his full costs plus the agreed percentage of profit on the
F investment made by him.

Evidence Act, ·1872-,-Section 115-There is no estoppel against a
statute.

Practice and Procedure-Corporation being a continuing body will be
G estopped from changing its stand-But when the Corporation finds that its
action was contrary to statute, there could be no impediments in its way to
change its stand-Estoppel.

Interpretation of Statute-Subsidiary rules-Mandatory or directory-
Statute specifically provided that a body corporate has to act in a particular
H manner as specified in the statute and in no other way-Held, this provision
' M.l. BUILDERS PVT. LTD. v. R.S. SAHU 1069
is mandatory and has to be strictly complied with. A
Administrative Law-Authority created under the Act-Jurisdiction of-
Corporation allowed construction of an underground shopping complex on
an existing park contrary to various statutory provisions by way of an
agreement with a builder-Builder to act an agent-However, concept of
agency totally missing-Rather the agreement was from principal to B
principal-Terms ofthe agreement totally one sided in favour of the builder-
Terms of agreement defied logic, was outrageous and crossed all limits of
rationality-Held, the Corporation has acted in a fatuous manner in entering
into such an agreement.

An agreement to construct an underground-shopping complex in a C
park located in a commercial-cum-residential area of Lucknow, was entered
into between the appellant/builder and the Lucknow Mahapalika (Corporation)
on the pretext of decongesting the area. This agreement was entered into
without inviting any bid and without obtaining any project report. Not only
that, the procedure adopted by the Corporation was contrary to statutory D
provisions and the terms of the agreement was totally one sided in favour of
the builder. Decision to award the contract was also prejudicial to public
purpose in so far as the maintenance of park was of historical importance
from environmental point of view. Respondents challenged the award of the
contract to construct underground shopping complex in favour of appellant/
builder by way of a writ petition before the High Court and the same was E
allowed. In appeal, a Division Bench of the High Court confirmed the order
passed by the Single Judge. Hence this appeal.

It was contended by the builder/appellant that there was no disposal of
the property by Corporation in favour of the builder and therefore, provisions F
of Section 128 of the U.P. Municipal Corporation Adhiniyam, 1959 (the
· "Act"); that there was no arbitrariness or unreasonableness vitiating the
agreement between Corporation builder in view of the finding of the High
Court that there was no lack of bonafides and that it was not disputed that
the builder was not competent to execute; and that High Court exceeded its
jurisdiction as it did not apply correct parameters of its power of judicial G
review as laid down by Tata Cellular 's case.

It was contended by the respondent that in view of historical importance
and of environmental necessity, construction of shopping complex would be
•
in breach of Articles 21,49 and 51-A(g) of the Constitution; that the contract
was in violation of various statutory provisions contained in U.P. Regulation H
1070 SUPREME COURT REPORTS (1999] 3 S.C.R

A of Buildings Operations Act, U.P. Urban Planning and Development Ac~ U.P.
Parks, Playgrounds and Open Spaces (Preservation and Regulation) ~ct;
that no tender was invited by the Corporation; that the agreement sma~ked
of arbitrariness, was unfair and gave undue favour to the builder and this
was done with ma/a fide motives of personal gain by the authorities of the
B Corporation ; and that the action of the Corporation was against public
interest.

Dismissing the appeal, this Court

HELD. 1.1. There are two distinct areas of challenge in the present
case-(1) the agreement between Nagar Mahapalika and the appellant builder
C is a fraud on power and prime land has been given for a song by the
Mahapalika. The fact that the scheme was so lucrative could be seen from
the fact that all the shops less 5% wer.e booked within six days of the
advertisement appearing in December 1993. Public interest and the public
exchequer have been sacrificed. The Mahapalika is divested of its control
D over the project though notionally not forever but the builder, on the other
hand, has control_ over the project for all time to come and (2) construction
is in contravention of the provisions oflaw as contained in the U.P. Urban
Planning and Development Act. The project has been entrusted to the builder
in violation of the provisions of Act. The decision taken by the Mahapalika
was not on proper consideration and was not an informed objective decision.
E Judicial review is permissible if the impugned action is against law or in
violation of the prescribed procedure or is unreasonable, irrational or mala
fide. The High Court rightly exercised its power of judicial review in the
present case. It has examined the manner in which Mahapalika took the
decision. The second principle laid down in Tata Cellular case applies in all
F respect. The High Court held that the maintenance of the park because of
its Jtistorical importance and environmental necessity was in itself a public
purpose and, therefore, the construction of an underground market in the
garb of decongesting the area was wholly contrary and prejudicial to the
public purpose. By allowing the construction the Mahapalika has deprived
·its residents and also others of the quality of life to which they were entitled
G under the Constitution. The agreement smacks of arbitrariness unfairness
and favouritism. The agreement was opposed to public policy. It was not in
public interest. The whole process of law subverted to benefit the builder. The
Mahapalika and its officers forgot their duty towards the citizens and acted '
in a most brazen manner. [1140-F-H;~141-A-C]

H Tata Cellular v. Union of India, [1994] 6 SCC 651, followed.[1140-C]
M.I. BUILDERS PVT.LTD. v. R.S. SAHU 1071
1.2. The competence of the Appellant to undertake the proj. is not A
doubted when it is seen that proper construction has been made but before
taking the decision to award the contract to it nobody knew its credentials•
. Public interest has certainly been given a go-by. There was some
undercurrent flowing to award the contract to .the appellant. In these
circumstances, the dictum contained in Kasturi Lal Lakshmi Reddy becomes
inapplicable. No advantage can be drawn by the builder from the decision of B
G.B. Mahajan case as here the whole process of awarding contract to the
appellant has been gone through in an unabashed manner and in fragrant
violation of law with the sole purpose of conferring benefit on it.[1141-F-Hl

Kasturi Lal Lakshmi Reddy v. State ofJ & K, (1980)4 SCC 1 and G.B. C
Mahajan v. Jalgaon Municipal Council, [1991)3 SCC 91, distinguished.

1.3. No consideration should be shown to the builder or any other
person where construction is unauthorised. This dictum is now almost
bordering the rule of law. Stress was laid by the appellant and the prospective
allottees of the shops to exercise judicial discretion in moulding the relief. D
Such discretion cannot be exercised which encourages illegality or
perpetuates an illegality. Unauthorised construction, ifit is illegal and cannot
be compounded, has to be demolished. There is no way out. Judicial discretion
cannot be guided by expediency. Courts are not free from statutory fetters.
Justice is to be rendered in accordance with law. Judges are not entitled to E
exercise discretion wearing the robes of judicial discretion and pass orders
based solely on their personal predilections and peculiar dispositions. Judicial
discretion wherever it is required to be exercised has to be in accordance
with law and set legal principles. [1142-C-E)

2.1. In this case the builder got an interim order from this court and F
on the strength of that order got sanction of the plan from the Mahapalika
and no objection from LDA. It has no doubt invested considerable amount on
the construction which is 80% complete and by any standard is a first class
construction. Why should the builder take such a risk when the interim
order was specific that the builder will make construction at its own risk G
and will not claim any equity if the decision in the appeal goes against it?
The builder is not an innocent player in this murky deal when it was able
to get the resolutions of the Mahapalika in its favour and the impugned
agreement executed. Now construction of shops will bring in more congestion
and with that the area will get more polluted. Any commercial activity now
in this unauthorised construction will put additional burden on the locality. H
1072 SUPREME C.OURT REPORTS [1999] 3 S.C.R.

A The primaR' concern of the Court is to eliminate the negative impact the
underground shopping complex will have on the environmental conditions in
the area and the congestion that will aggravate on account of increased
-
traffic and people visiting the complex. There is no alternative to this dismantle
the whole structure and restore the park to its original condition leaving a
B portion constructed for parking as required under· clause (ix-a) of Section
114 of the U.P. Municipal Corporation Act, 1959. [1142-F-H; 1143-A-C)

2.2. While directing demolition of unauthorised construction, Court
should also direct an enquiry as to how the unauthorised construction came

C
about and to bring the offenders to book. It is not enough to direct demolition
of unauthorised construction, where there is clear defiance of law. In the
present case, but for the observation of the High Court, this Court would
certainly have directed an enquiry to be made as to how the project was
-
conceived and how the agreement came to be executed. [1144-D)

Ramana Dayaram Shetty v. International Airport Authority of India,
D (1979)3 SCC 489; Deputy Commissioner of Sales Tax v. Thomas Stephen &
Co. Ltd., (1988)2 SCC 264; MC. Mehta v. Kamal Nath, [1997)1 SCC 388;
Sachidanand Pandey v. State of West Bengal; [1987)2 SCC 295; Rashbihari
Panda v. State of Orissa [1969)1 SCC 414; State of Haryana v. Jage Ram,
[1983)4 SCC 556; Ram & Shyam Co. v. State of Hryana, [1985)3 SCC 267;
Chenchu Rami Reddy v. State of Andhra Pradesh, [1986)3 SCC 391; Seth
E Badri Prasad v. Seth Nagarmal, [1959) Supp. lSCR 769; K. Ramdas Shenov
v. The Chief Officers, Town Municipal Council, [1975)1 SCR 680 at 685;
Virendra Gaur v. State of Haryana, [1995)2 SCC 577; Pleasant Stay Hotel
v. Palani Hills Conservation Council, [1995)6 SCC 127; Cantonment Board,
Jabalpur v. S.N. Awasthi, [1995) Supp 4 SCC 595; Pratibha Cooperative
F Housing Society Ltd. v. Stqte of Maharashtra, [1991)3 SCC 341; Dr.
G.N.Khajuria v. Delhi Dzye/opment Authority, [1995)5 SCC 762; Manju
Bhatia v. New Delhi Municipal Council, JT (1997)5 SC 574 and Ram Avatar
Agarwal v. Corporation of Calcutta, (Civil Appeal No. 6416of1981 decided
by Supreme Court on August 20.1996), referred to.

G Short v. Poole Corporation, (1926) Ch 66, referred to.

3. By allowing underground construction the Mahapalika has deprived
itself of its obligatory duties to maintain the park as required under Section
114 of the U.P. Municipal Corporation Act. But then one of he obligatory
functions of the Mahapalika under Section 114 is also to construct and
H maintain ·parking lots. To that extent some area of the park could be used
M.I. BUILDERS PVT.LTD. v. R.S. SAHU 1073
, for the purpose of constructing an underground parking lots. But that can A
only be done after proper study has been made of the locality, including
density of the population living in the area, the floating population and other
certain relevant considerations. This study was never done. [1128-C-D]

4.1. The Mahapalika is the trustee for the proper management of the
park. When the true nature of the park, as it existed, is destroyed it would B
be violative of the doctrine of public trust as expounded by this Court in Span
Resort case. Public trust doctrine is part of Indian law. This public trust
doctrine in our country has grown from Article 21 of the Constitution.
[1128-D-E; 1129-D]

MC. Mehta v. Kamal Nath, (Span Resort case), [1997)1 SCC 388, C
followed

Illinois Central Railroad Co. v. Illinois, 146 US387 (1892), referred
to.

Environmental Law and Policy; Nature, Law and Society by Plater D
Abrams Goldfarb (American Casebook Series, 1992) under the Chapter on
Fundamental Environmental Rights, Section 1 (The Modern Rediscove1y of
the Public Trust Doctrine), referred to.

4.2. By allowing construction of underground shopping complex in the
park the Mahapalika has violated not only Section 114 of U.P. Municipal E
Corporation Act but also the public trust doctrine. (1129-D-E]
·-
5. There is no authority with the Mahapalika to constitute a High
Power Committee and to delegate its functions to that Committee. There was
no agenda at any time in any of the meetings of the Mahapalika for
consideration of the underground-shopping complex. Such an important F
matter, where the cost of the project was likely to.run into crores of rupees,
could not have been considered under the topic "Other Subjects, subject to
the Permission of the Presiding Officers." The Corporation had no time to
apply their minds. When the agenda did not include the subject of construction
of underground shopping complex nor was there any material to support the G
discussion on the subject of construction of underground shopping complex
it could not have been considered in the meetings of the Mahapalika and the
Executive Committee. There was no proposals, no documents no plan, no
study, no project report or feasibility report on the basis of which the
Mahapalika could have been given a green signal for construction of the
underground shopping complex. There was no discussion and no informed H
1074 SUPREME COURT REPORTS (1999] 3 S.C.R.

A decision. The Mahapalika completely abdicated its functions. In the present
case it is not mere irregularity or defect in the procedure so as to be
protected under Section 105 of the Act but the whole procedure is in Clear
breach of Sections 91 and 119 of the Act which are mandatory.
(1129-F-H; 1130-A-B]
B Myurdhwaj Cooperative Group Housing Society Ltd. v. Presiding
Officer, Delhi Cooperative Tribunal, [1998)6 SCC 39, distinguished.
6. The agreement dated 4.11.1993 was not executed as required by
Section 133 of the Act. Further, though the estimated cost of the project
approved by Mahapalika was more than Rs.10 lakhs, no sanction of the State
C Government as required under Section 136(2), was obtained. Thus the
submission that this provision would apply only if the project cost was to be
incurred by the Mahapalika cannot be accepted. It is the cost of the project
that matter and not who incurs the cost in the first instance. The agreement
dated 4-11-1993 is, therefore, not a valid contract and not binding on the
Mahapalika. In H.S. Rikhy's case in which it was held that where a statute
D makes a specific provision that a body corporate has to act in a particul!lr
manner and in no other, that provision of law being mandatory and not
directory has to be strictly followed. This principle will apply both as regards
holding of meeting of the Mahapalika and execution of contract on its behalf.·
Thus there is no estoppel against a statute. [1131-B-F-H]
E Dr. HS. Rikhy v. New Delhi Municipal Committee, AIR (1962) SC 554,
relied on.
7. Not only the clauses of the agreement are unreasonable for the
Mahapalika but they are atrocious. No person of ordinary prudence shall
ever into such an agreement. A trustee, which the Mahapalika is, has to be
F more cautious in dealing with its properties. Valuable land in the heart of
a commercial area has been handed on a platter to the builder for it to exploit
and to make runaway profits. The agreement is completely one-sided favouring
the builder. A land of immense value has been handed over to it to construct
an underground shopping complex and in violation of the public trust doctrine
G and the Master Plan for the city of Lucknow. The Master Plan of the city
of Lucknow could not have envisaged Jhandewalan Park as a site available
for commercial exploitation considering the density and congestion in the.
area. The Mahapalika has no right to step in even if there is any violation
by the builder of the terms of the agreement or otherwise. The Mahapalika,
though considered to be the owner of the land, is completely ousted and
H divested of the land for a period which is not definite and which depends
M.I. BUILDERS PVT.LTD. v. R.S. SAHU 1075
wholly on the discretion of the builder. It cannot be said that the construction A
of the underground shopping complex is by the builder as an agent of the/
Mahapalika. The concept of agency of totally missing in the present case.
Rather the deal is from principal to principal. The agreement dated 4-11-
1993 is not a valid one. The agreement defies logic. It is outrageous. It
crosses all limits of rationality. The Mahapalika has certainly acted in a . B
fatuous manner in entering into.such an agreement.
(1132-E-H; 1133-A; 1136-A-B; 1134-H; 1135-A)
Akadasi Pradhan v. State of Orissa, [1963) Supp. 2 SCR 691(at722),
relied on.

In Re W. (an infant), (1971) AC 682, referred to. c
Wade on Administrative Law, 7'h Edn., referred to.

8.1. Granting licence to the builder to construct underground shopping
complex of a permanent nature and to hold on to the same for a period which
is not definite and then under the impugned agreement authorizing the D
builder to lease out the shops on behalf of the Mahapalika, is a dubious
method adopted to subvert the provisions of Section 128 which apply as well
in the case of lease and thus the transaction will also be covered by the
expression "otherwise dispose of any interest in the property". It is, therefore,
difficult to accept the argument of the builder that the transaction is outside
Section 128 of the Act. [1139-F-G) E
8.2. Licence has been granted to the builder to enter upon the park
and to execute a work of permanent character and incur expenses in the
execution of the work, thus making the licence irrevocable under Section
60(b) of the Easements Act. However, the licence is deemed to be revoked
under Section 62(t) of the Easements Act after the happening of a certain F
event which in this case is when the builder has recovered the whole of his
investment plus 10% of the profit. When this purpose is achieved by the
licensee is anybody's game. Not only that, the licensee, i.e., the builder is
then authorised to lease out the shops so constructed on behalf of the
Mahapalika. The result would be that to the builder provisions of Section 129 G
of the Act cannot be thus made applicable. The provisions of Section-129 of
the Act have, therefore, been flouted. The impugned agreement dated 4-11-
1993 is bad having been executed also in contravention of the requirement
of Section 129 of the Act. [1139-G-H; 1140-A-B)

Chewalier I.I. Iyyappan v. The Dharmodayam Company, [1963)1 SCR H
1076 SUPREME COURT REPORTS [1999] 3 S.C.R.

A 85, relied on.
9. When the "development" is by the builder the provisions of Section
-
14 of the U.P. Urban Planning and Development Act ("Development Act")
would apply. There is no sanction of the building plan of the underground
shopping complex by Lucknow Development Authority. Construction is,
B therefore, per se illegal. Even after the interim order of this Court allowing
construction, plans were not got sanctioned from Lucknow Development
Authority, which would be the authority under the Development Act Sanction
of the building plan by the Mahapalika would, therefore, meaningless. Even
then, there were no sanctioned drawings. (1136-C-D]
c 10. Action of the Mahapalika in agreeing to the construction of
underground shopping complex in contravention of the provisions of the Act
and then entering into an agreement with the builder against settled norms
was wholly illegal and has been held to be so by the High Court. No doubt
the Mahapalika is a continuing body and it will be estoppel from changing
D its stand in the given case. But when the Mahapalika finds that its action
was contrary to provisions of law by which it was constituted there could
certainly be no impediments in its way to change its stand. There cannot be
any estoppel operating against the Mahapalika. II 137-H; 1138-A-B]

Union of India v. Indo-Afghan Agencies Ltd, (1968)2 SCR 366 and
E Ganges Manufacturing Co. v. Sourujmull, 1880 ILR Cal. 669, distinguished.

11.l. Every decision of the authority except the judicial decision is
amenable to judicial review and reviewability of such a decision cannot now
be questioned. However, a judicial review is permissible if the impugned
action is against law or in violation of the prescribed procedure or is
F unreasonable, irrational or mala-fide. Bad governance sets a bad example.
That is what exactly happened in the present case. (1135-B]

State of Bombay v. Laxmidas Ranchhoddas, Air (1952) Born 468,
approved.
G
11.2. In the present case a decision to construct underground shopping
_,-
complex by the appellant had already been taken and the whole process was
gone into to confer undue benefit on appellant and the bogie of congestion
was introduced to justify the action of the Mahapalika. It is wholly illegal and
smacks of arbitrariness, unreasonableness and irrationality. It is a case
H where the High Court rightly interfered in exercise of its powers of judicial
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1077
.,
... review keeping in view the principles laid down by this Court in Tata Cellular•
(1137-E; 1135-A]
A

Tata Cellular v. Union of India, (1994]6 SCC 651, relied on.
~

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 9323-
9325 of 1994.
B
From the Judgment and Order dated 23.8.94 of the Allahabad High Court
in W.P. Nos. 89, 92 and 94 of 1994.

M.L. Verma, Arun Jaitley, Dushyant Dave, G.L. Sanghi Raju
Ramachandran, Ms. ·Nisha Bagchi, Vikas Mehta, Ms. Indu Malhotra,
S.V.Deshpande, Ashok Srivastava, Pradeep Misra, R.C. Verma, C. Sidhartha, c
M.K. Srivastava, (A.K. Goel) Additional Advocate General for U.P. R.B. Misra,
Kamlendra Misra and Uday Umesh Lalit for the appearing parties.

The Judgment of the Court was delivered by

D.P. WADHW A, J. These appeals are directed against the judgment D
dated August 23, 1994 of a Division Bench of the High Court of Judicature
at Allahabad, (Lucknow Bench). By a common judgment in three writ petitions,
High Court speaking through Shobha Dixit, J. held that the decision of the
Lucknow Nagar Mahapalika ('Mahapalika' for short), also now called Nagar
Nigam or Corporation, permitting M.I. Builders Pvt. Ltd. (the appellant herein)
E
to construct underground shopping complex in the Jhandewala Park (also
known as Aminuddaula Park) situated at Aminabad Market, Lucknow, was
illegal, arbitrary and unconstitutional. High Court set aside and quashed the
relevant resolutions of the Mahapalika permitting such construction and also
the agreement dated November 4, 1993 entered into between the Mahapalika
and the appellant for the purpose. Writ of mandamus was issued to the F
Mahapalika to restore back the park in its original position within a period of
!hree months from the date of the judgment and till that was done, to take
adequate safety measures and to provide necessary safeguard and protection
to the public, users of the park. High Court had noticed that the fact that the
park was of historical importance was not denied by the Mahapalika and also
G
the fact that perseverance or maintenance of the park was necessary from the
91 environmental angle and that the only reason advanced by the Mahapalika
---- for construction of the underground commercial complex was to ease th_e
congestion in area. High Court, however, took judicial notice of the conditions
prevailing at the Aminabad market. It said it was so crowded that it was
bursting from all its seams. Construction of the underground shopping complex H
....
1078 SUPREME COURT REPORTS [1999] 3 S.C.R.

A in question would only complicate the situation and that the present scheme
would further congest the area. It said that the public purpose, which is
alleged to be served by construction of the underground commercial complex,
seemed totally illusory.

Aggrieved by the impugned judgment of the High Court, appellant has
-
B come to this Court. Mahapalika also felt aggrieved and filed appeals (Civil
Appeal Nos. 9326-28 of 1994) but these appeals by the Mahapalika were
subsequently allowed to be withdrawn by order dated February 6, 1997. There
is controversy as to how the Mahapalika which had earlier justified its action
later turned round and sought to withdraw the appeals. The order allowing
C withdrawal of the appeals by the Mahapalika is as under: - -.
"I.A. Nos. 10 TO 12

IN

CIVIL APPEAL NOS. 9326-28 OF 1994
D
·Nagar Mahapalika Appellants

v.

Radhey Shyam Sahu & others Respondents
E
ORDER

Taken on board.

The learned counsel for the appellant seeks leave to withdraw the
F appeals and states that Mr. S.V. Deshpande who appears for the other
side has no objection to the withdrawal. The appeals will, therefore,
stand disposed of as withdrawn with no order as to costs.

Sd
.................en
G
New Delhi, Sd
February 6, 1997 .................,]."

Mahapalika also cancelled the building plans. This action of the
Mahapalika was subject matter of criticism by the appellant as to how a duly
H sanctioned plan could be revoked without any notice to the appellant. We
M.l. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1079
may, at this stage, itself reproduce the relevant portion of the resolution dated A
August 6, 1996 of the Mahapalika for withdrawal of its appeals which is as
under:-
;

"The Lucknow Bench of Hon'ble High Court of Allahabad has
declared the agreement dated 4.1 l. l993 executed between the Nagar
Mahapalika, Lucknow and M.I. Builders, Karamat Market Lucknow in B
respect of construction of underground Palika Bazar and Multistoreyal ·
parking on Jhandewala Park Aminabad, Lucknow as invalid and not
in the public interest vide their judgment dated 23.8.1994.

The Hon'ble High Court rendered the above said Judgment by
accepting the writ petitions preferred by several elected sabhasad of C
the then Nagar Mahapalika and the citizens.

On the directions of the then Nagar Pramukh Shri Akhilesh Das,
who wanted to cause undue profit to M.I. Builders against the interest
of Nagar Mahapalika now Nagar Nigam Lucknow, the citizens of D
Lucknow, the Nagar Nigam Lucknow filed Special Leave Petition No.
17223-25 of 1994 in the Hon'ble Supreme Court against the Judgment
of the Hon'ble High Court.

It is proposed that in the interest of the citizen of Lucknow and
the Lucknow Nagar Nigam and pending Special Leave Petition No. E
17223-25 of 1994 in the Hon'ble Supreme Court be withdrawn and the
Nagar Nigam Lucknow be further directed to oppose the Special
Leave Petition filed by Mis. M.I. Builders in the Hon'ble Supreme
Court against the Judgment dated 23.8.1994 of Lucknow Bench of
Hon'ble High Court of Allahabad.
F
Unanimously decided that the aforesaid resolution be passed and
accordingly the action may be taken."

The letter revoking the sanctioned building plans is dated April 17, 1997
and is as under:- G
"To

Mis M.I. Builders (P) Ltd.
Karamat Market,
Nishatganj, Lucknow H
1080 SUPREME COURT REPORTS [1999) 3 S.C.R.

A Sir,
Vide this office letter No. 223/Sa.Sa.A./95 dtd. 23.1.1995 the building
plans for construction of underground shopping and parking complex
at Jhandewala Park, Ameenabad were sanctioned.

B After talcing legal advice by the Hon'ble Nagar Pramukh from the
standing counsel of the Nagar Nigam and Add. Advocate General the
earlier sanctioned building plans has been revoked vide order dated
17.4.97. As such these have no legal sanctity.

Please be informed.
c ·Yours faithfully,
Sd/-
S.K. Gupta
Mukhya Nagar Adhikari
17.4.97
D
Copy to: The Vice Chairman, Lucknow Development Authority, for
information.
Sd/-
S.K. Gupta
E Mukhya Nagar Adhikari"
There were three writ petitions before the High Court and during the
course of hearing of those petitions High Court had directed maintenance of
status quo. At that time, it would appear only digging in some part of the park
had been done and there was no construction. When the matter came before
F this Court, by order dated December 14, 1994 the Court passed the following
order:-

"Exemption from filing official translation is allowed.

Liberty to add the omitted parties in the cause title.

G Leave granted.

We have heard counsel on the question of grant of interim relief.

Printing dispensed with.
The operation of the impugned order of the High Court is stayed
H on the following conditions:
M.I. BUILDERS PVT. LTD. v.•R.S.
·1
SAHU [D.P. WADHWA, J.] 1081
Taking all the facts and circumstances into consideration and A
having regard to the fact that it may not be possible for this Court
to hear the appeal within a short time having regard to the pressure
of work and pendency of old cases, we direct that the appellant shall
be permitted to construct an under ground shopping complex by
~ising its own funds without collecting any additional funds from
individuals or concerns to whom the promise of allotment of shop is B
made. To clarify the matter, we say that the funds can be raised from
agencies other than those to whom the shops are ultimately allotted.
It will be made clear to the agencies from whom the funds are raised
that they will not be entitled to allotment of shops. The appellant will
maintain ~ccounts and file an undertaking to the above effect in this C
1 Court wi*in tw<t-weeks from today. In addition the undertaking will

contain a statement to the effect that in the event the appeals fail, the
appellant will not raise questions as to equity or the ground on its
having invested a huge amount and will be totally amenable to such
ditf.ctions and orders that this Court may make in regard to the
m~intenance or otherwise of the shopping complex. In other words, D
if the Court directs removal of the shopping complex in the event of
_(ailure of the appeals, the shopping complex.will have to be removed
•t the. appellant's cost without claiming anything in return. The
toristruction will be so carried out that the open space will remain
available for the public and the entire complex will be so constructed E
......... that it will be an underground one except for the ingress and egress
portions to the complex. The total area to be constructed on the
surface of the plot shall not exceed 10% of the plot.
SLP (C) Nos. 17223-25/94

Exemption from filing official translation is allowed. F
Leave granted.
.. Tag on with appeals arising from S.L.P. (C) Nos. 16907-09of1994
in which interim orders have already been made."

It is contended by the appellant that after the aforesaid interim order,
G
it got necessary building plans sanctioned by the Mahapalika and started
construction. Respondents, however, filed an application complaining that
construction was in violation of the building plans and was also against the
provisions of the U.P. Urban Planning and Development Act, 1973 (for short,
the 'Development Act'). To ascertain the nature of construction being carried H
1082 SUPREME COURT REPORTS [1999] 3 S.C.R.

A out at that time this Court appointed a Local Commissioner. These applicat~ons
were then disposed of by passing the following order:-

"I.A. Nos. 10-12

The Commissioner, Mr. Justice Loomba, a retired Judge of the High
B Court of Allahabad, has pursuant to this Court's order, submitted his
Report dated February 15, 1996. In paragraph 3 of the Report he
identifies the points on which the Report was required and then
proceeds to indicate the· actual physical condition in regard to the
construction of the market and states that the entire market is being
constructed underground and not above the ground and that the total
c area on the surface of the market for the ingress and egress (with
Chabutras) and light purposes etc. 4oes not exceed IO per cent of the
plot and is about 9.74 per cent of the area in which the market is being
constructed. He, however, notes that the level of the park at the
periphery appears to be higher than the estimated average level of the
original park by about 3.21 feet= 3 feet 2.5 inches as worked out on
D
the basis of available old signs and that the same does not appear to
be in any manner offensive and is of no consequence. He also points
out that the park made on the market area is and will be available for
the public in the form of park less the structures made on the surface,
which as pointed out above; does not exceed the permissible limit of
E IO per cent of the total plot area. He also states that the Chabutras
constructed on the back of the structures will also be available to the
pubiic and may serve as benches in the park. In view of this Report
which precisely indicates the actual physical condition existing on the
date of the Report and the plan appended thereto which shows
beyond any manner of doubt that the entire construction is
F
underground, the total surface area does not exceed the permissible
limit of IO per cent and the raising of the height on the periphery is
-
of no consequence because it does not. in any manner affect the
surface area. We, therefore, accept the Report of the learned Judge
and see no merit in these I.As."
-
G
The Court, however, did not go into other issues raised in the
applications. By a subsequent order dated May 7, 1997 the Court stopped
further construction.

Before we consider the details of the case we may note in brief the
H contentions of the parties.
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1083
Petitioners (now the respondents) in the writ petitions submitted that A
the park was not only of great historical significance but its maintenance was
necessary from the environmental point of view as mandated by law.
......
Admittedly, the park is the only open space in the Aminabad market, which
is an over-crowded commercial and residential area of the city. Possession of
the park was handed over to the appellant (M.1. Builders) in violation of the
B
provisions of law to construct an underground shopping co1tlplex and
_.... underground parking with the ostensible purpose of decongesting the area.
It is not that the encroachers would be removed from the area as the
underground shops were not allotted to any one of them. They would
nevertheless remain at the places occupied by them. Challenge to the action
of Mahapalika in allowing construction was on the grounds: - c
l. It was against the public purpose to construct an underground
market in the garb of the decongesting area of the encroachers
to destroy a park of historical importance and of environmental
necessity. It would be in breach of Articles 21, 49, 51-A(g) of the
Constitution as the existing park which is the only open space D
in the busiest commercial area in the heart of the city of Lucknow
can be destroyed and the citizens particularly the residents of
the area would be deprived of the quality of life to which they
are entitled under the law and to maintain ecology of the area.
2 . It is in violation of the statutory provisions as contained in the E
U.P. Nagar Mahapalika Adhiniyam, 1959 (now called Uttar Pradesh
Municipal Corporation Adhiniyam, 1959 -by Amending Act 12
of 1994) (for short the Act), U.P. Regulation of Buildings
Operations Act, 1958 (for short the 'Building Act'), Uttar Pradesh
Urban Planning and Development Act, 1973 (for short the
F
'Development Act') and also Uttar Pradesh Parks, Playgrounds
and Open Spaces (Preservation and Regulation) Act, 1975 (for

-
short the 'Parks Act').
3. No tenders were invited by the Mahapalika before entering into
the agreement wjth the builder. This was against the established
procedure and thus it acted arbitrarily in the matter of disposing
G
and dealing with its immovable property which was of immense
value. The agreement is wholly one sided and gives undue
advantage to the builder at the cost of the Mahapalika.
4. The agreement between Mahapalika and the builder smacks of
arbitrariness, is unfair and gives undue favour to the builder and H
1084 SUPREME COURT REPORTS [1999] 3 S.C.R~

A this was done with mala fide motives of personal gain by the
authorities of the Mahapalika particularly the Mukhya Nagar
Adfiikari (Chief Executive Officer) and the Adhy*sh
I
(the Mayor).
,

5. The resolution of the Mahapalika by which it has\greed to enter _,,
into the agreement with the builder was against me provisions
B of the Act which were mandatory.
6. The whole action of the Mahapalika was against public interest.
Lucknow Development Authority (for short LDA) which· was
constituted under the Development Act and was responsible for
development in the area which would mean construction of the
c underground shopping complex and underground parking lot
was side-lined and no sanction was obtained from the Vice
Chairman in accordance with the provisions of the Development
Act.
The builder as well as the Mahapalika filed their respective counter
D affidavits in the High Court opposing the writ petitions. No counter affidavit
was filed either by the State or by LDA though they were parties in the writ
petitions. Chief Executive Officer and the Mayor were imp leaded by name as
respondents in the writ petitions and allegations of mala fides and favourtism
made against them but none of them choose to file any counter affidavit
controverting those allegations. In the High Court a very strange scenario
E emerged and that was that though the stand of Mahapalika and .LDA as
spelled out from documents was at variation with each other, yet both were
represented by one counsel. Builder was represented by the Advocate General
of the State while State was represented by its standing counsel. Before us
though Mahapalika earlier supported the builder as noted above and also
F filed appeals against the impugned judgment but subsequently it reversed its
stand, withdrew its appeals and filed an affidavit supporting the judgment of
the High Court. The State Government and the LDA also filed their affidavits
supporting the judgment of the High Court with full vigom though as seen
earlier before the High Court they were just mute spectators. We may also
note that in reply to the applications IA Nos. 10 and I I in this Court the
G Mahapalika lent its support to the builder. This action of the Mahapalika
changing its stand midstream was subjected to severe critiCism by the appellant
and it was stated that there was estoppel by deed in the case and Mahapalika
could not go back on its earlier stand.

The impugned judgment has been challenged by the builder on the
H following grounds: -
l

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.) 1085
~ (a) There was no disposal of the property by Mahapalika in favour A
of the builder and therefore provisions of Section 128 of the Act
were inapplicable. Even assuming it was so, provisions of
Sections 129 and 132 of the Act stood complied.
(b) There was no arbitrariness or unreasonableness vitiating the
agreement between Mahapalika and the builder particularly in B
_. view of the express finding of the High Court that there was no
lack of bona fides and that it was not disputed that the builder
was competent to execute the job. This was having regard to
special features of the construction and further on account of
the fact that no party had come forward at any time to execute
the project. In such a situation omission to invite tenders would c
not vitiate the agreement particularly when the proposal for
construction of the project by the builder was widely known.

(c) In view of its stand before the High Court and in the Special
Leave Petition of the builder and its own appeals filed in this
Court it is not open to Mahapalika to advance any contention D
or take a stand contrary to what had been taken earlier.
(d) High Court exceeded its jurisdiction as it did not apply correct
parameters of its power of judicial review as laid by this Court
in Tata Cellular v. Union of India, [1994] 6 SCC 651 and other
cases and the High Court went wrong in going into the question . E
of expediency and wisdom of the proposed project.
(e) Mahapalika could not revoke the building plan without notice to
the builder and without hearing it in the matter.

- This last submission we need not go into the question if cancellation
of the sanctioned building plans by the Mahapalika was valid as that was not
the issue before the High Court.
F

Mahapalika is a body corporate constituted under the Act. The Act
provides for various functions of the Mahapalika and how these are to be
performed. Its various authorities are described in Section 5 which i's as G
under:-

"5. Corporation Authorities.- The Corporation authorities charged with
carrying out the provisions of this Act for each city shall be-
(a) the Corporation; H
1086. SUPREME COURT REPORTS [1999) 3 S.C.R.

A (aa) the Ward Committees;

(b) an Executive Committee of the Corporation;

(bb) the Nagar Pramukh;

B (c) a Development Committee of the Corporation;

(d) A Mukhya Nagar Adhikari 'and an Apar Mukhya Nagar
Adhikari' appointed for the Corporation under this Act; and

(e) in the eve!lt of the corporation establishing or acquiring electricity
C supply or public transport undertaking or other public utility
services, such other committee or committees of the Corporation
as the Corporation may with the P,.revious sanction of the State
Government establish with respect thereto."

Chapter II provides for constitution of various committees and Chapter
D III for proceedings of the Mahapalika, Executive Committee, Development
Committee and other Committees. In view of the applicability of the
Development Act, 1973, the Executive Committee of Mahapalika has ceased·
to be in operation to that extent. Under Section 91 falling in this Chapter, a ·;

E
list of the business to be transacted at every meeting except an adjourned
meeting, shall be sent to each member of the Mahapalika or of other Committees
-
at least ninety-six hours in the case of a meeting of the Corporation before
the date fixed for the meeting and seventy two hours in the case of a meeting <
of any such Committee and "no business, except as provided in sub- section
(2), shall be brought or transacted at any meeting other than a business of
which notice has been given". Sub-section (2) is as under: -
F
"(2) Any member of the Corporation or ofa Committee referred to in
sub- section (1), as the case may be, may send or deliver to the
Mukhya Nagar Adhikari notice of any resolution with a copy thereof
-
proposed to be moved by him at any meeting of which notice has
been sent under sub-section (l ). The notice shall be sent or delivered
G at least forty-eight hours in the case of a meeting of the Corporation
and twenty four hours in the case of a meeting of any committee
before the date fixed for the meeting and thereupon the Mukhya
Nagar Adhikari shall with all possible despatch cause to be circulated
such resolution to every member in such manner as he may think fit.
H Any resolution so circulated may, unless the meeting otherwise decides,
M.l. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, I.] 1087
I
I ,
be considered and disposeq of thereat." A
Under Section 95 of the Act, the Mahapalika may from time to time by

- special resolution constitute a special committee to enquire into and report
upon any matter connected with its powers, duties or functions. Every such
special committee shall conform to any instruction that may be given to it by
the Mahapalika. The report of the specta.l committee shall, as soon as may be B
practicable, be laid before the Mahapalika which may thereupon take such
action as it thinks fit or may refer backI
the matter to the special committee ~

for such further investigation and report as it may direct. Section 97 provides
for constitution of sub-committees by the Executive Committee or any
committee appointed under clause (e) of Section 5 and any such sub-committee C
shall possess such powers and perform such duties and functions as the
committee appointing it may from time to time delegate or confer. Section 105
of the Act provides that no act done or proceeding taken under this Act shall
be called in question in any court on the ground merely of any defect or
irregularity in procedure not affecting the substance. Under Section 119 of the
Act falling under Chapter V which prescribes duties and powers of the D
Mahapalika and its authorities, there is provision for delegation of functions
which we reproduce, in relevant part, as under: -

"119. Delegation offunctions,-(l) Subject to the other provisions of
this Act and the rules thereunder and subject to such conditions and
restrictions as may be specified by the Corporation - . E
(a) the Corporation may delegate to the Executive Committee or to
the Mukhya Nagar Adhikari any of its functions under this Act
other than those specified in Part A of Schedule I."
It is not necessary to refer to Part A of Schedule I mentioned in Section F
119 as none of the functions of Corporation on which there is prohibition has
been delegated. Under Section 119, reproduced above, delegation can only
be to the Executive Committee or to the Mukhya Nagar Adhikari and to no
other person or authority or Committee. Sections 421, 422 and 423 of the Act
were referred to contend that it is only for the Mahapalika itself to establish
private markets. These sections fall in Chapter XVI dealing with regulation of .G
markets, slaughter-houses, certain trades and acts, etc.

Chapter VI of the Act deals with property and contracts. Under Section
125 falling in this Chapter, Mahapalika has power to acquire, hold and dispose
of property or any interest therein whether within or without the limits of the
city. Under sub-section (3) of Section 125 any immovable property which may H
1088 SUPREME COURT REPORTS [1999] 3 S.C.R.

A be transferred to -the .Corporation by the Government shall be held by it,
subject to such conditions including resumption by the Government on the
occurrence of a specified contingency and shall apply to such purpose as the
Government may impose or specify while making the transfer. Section 128
deals with power of the Mahapalika to dispose of the property. As to what
B are the provisions governing disposal of property these are mentioned in
Section 129. Sections 128 and 129, in relevant part, are as under: -

" 128. Po~er to dispose of property. - ( 1) The Corporation shall, for the
purpose of this Act, and subject to the provisions thereof and rules
made thereunder, have power to sell, iet on hire, lease, exchange,
mortgage, grant or otherwise dispose of any property or any interest
c therein acquired by or vested in the Corporation under this Act.

Provided that no property transferred to the Corporation by the
Government shall be sold, let on hire, exchange or mortgaged or
otherwise conveyed in any manner contrary to the terms of the transfer
except with the prior sanction of the State Government.
D
129. Provision governing disposal of property. -With respect to the
disposal of property belonging to the Corporation the following
provisions shall have effect, namely:

(l) Every disposal of property belonging to the Corporation shall be
E made by the Mukhya Nagar Adhikari on behalf of the Corporation.

(2) xxx xxx xxx ..
~

(3) The Mukhya Nagar Adhikari may with the sanction of the
Executive Committee dispose of by sale, letting out on hire or
F otherwise any movable property belonging to the Corporation,
of which the value does not exceed five thousand rupees; and
may with the like sanction grant a lease of any immovable
property belonging to the Corporation, including any such right
as aforesaid, for any period exceeding one year or sell or grant
a lease in perpetuity of any immovable property belonging to the
G Corporation the value of premium whereof does not exceed fifty
thousand rupees or the annual rental whereof does not exceed
..,.
three thousand rupees.
(4) the Mukhya Nagar Adhikari may with the sanction of the
Corporation lease, sell, let out on hire or ot~erwise convey any
H property, movable or immovable, belonging to the Corporation.
M.l. BUILDERS PVT.LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1089

(5) xxx xxx xxx A
(6) the sanction of the Executive Committee or of the Corporation
under sub-section (3) or sub-section (4) may be .given either
generally or any in class of cases or specially in any particular
case.
(7) the aforesaid provisions of this section and the provisions of B
the rules shall apply to every disposal of property belonging to
the Corporation made under or for any purposes of this Act."

Sections 131, 13 2 (in relevant part) and 13 3 prescribe the manner of
execution of Contract and these are as under: -
c
"131. Powers of Corporation to the making of contracts.-Subject to
the provisions of this Act, the Corporation shaU have power to enter
into contracts which may be necessary or expedient under or for any
purposes of this Act.

"132. Certain provisions relating to the execution of the contracts.- D
(I) All contracts referred to in Section 131 including contracts relating
to the acquisition and disposal of immovable property or any interest
therein made in connection with the affairs of the Corporation under
this Act, shall. be expressed to be made, for and on behalf of the
Corporation, and all such contracts and all assurances of property E
made in exercise of that power shall be executed, for and on behalf
of the Corporation, by the Mukhya Nagar Adhikari Qr by such other
officer of the Corporation as may be authorised in writing by the
Mukhya Nagar Adhikari either generally or for any particular case or
class of cases.

(2) ........... .
F

(3) ........... .

(4) No contract involving an expenditure exceeding five lakh rupees
shall be made by Mukhya Nagar Adhikari unless it has been sanctioned
by the Corporation." G
"133. Manner of execution.-{!) Every contract entered into by the
Mukhya Nagar Adhikari on behalf of the Corporation shall be entered
into in such manner and form as would bind him if it were made on
his own behalf and may in like manner and form be varied or
discharged : H
1090 SUPREME COURT REPORTS [1999] 3 S.C.R.

A Provided that : -

(a) the common seal of the Corporation shall be affixed to every
contract which, if made between private persons, would require
to be under seal, and

(b) every contract for the execution of any work or the supply of
B any materials or goods which will involve an expenditure
exceeding two thousand and five hundred rupees shall be in
writing, shall be sealed with the seal of the Corporation and shall
specify-

(i) the work to be done or the materials or goods to be supplied as
c the case may be;

(ii) the price to be paid for such work, materi;ils or goods; and

(fu) the time or times within which the contract or specified portion
thereof shall be carried out.
D
(2) The common seal of the Corporation shall remain in the custody
of the Mukhya Nagar Adhikari and shall not be affixed to any contract
or other instrument except in the presence of a Sabhasad, who shall
attach his signature to the contract or instrument in token that the
same was sealed in his presence.
E
(3) The signature of the said Sabhasad shall be distinct from the
signature of any witness to the execution of such contract or
instrument.

(4) No contract executed otherwise than as provided in the section
F shall be binding on the Corporation."

Relevant part of Section 136 on which some arguments addressed, is
reproduced hereunder: -

"136. Estimates exceeding rupees fifty thousand-{l) Where a project
G is framed for the execution of any work or series of works the entire estimated
cost of which exceeds fifty thousand rupees-

(a) the Mukhya Nagar Adhikari shall cause a detailed report to be
prepared including such estimates and drawings as may be
requisite and forward the same to the Executive Committee who
H shall submit the same before the Mahapalika with its suggestions,
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1091
"
if any;
(b) the Mahapalika shall consider the report and the suggestions
and may reject the project or may approve it either in its entirety
or subject to modifications."
(By the amending Act 12of1994 w.e.f. 30.5.1994 the amounts in sub-
sections (1) and (2) of Section 136 are now respectively 5 lakhs and B
10 lakhs of rupees.)

Part IX of the Constitution was inserted by the Constitution (74th)
Amendment Act, 1992. Article 243W under this part prescribes the powers,
authorities and responsibilities of Municipalitic;s etc. It provides, in relevant C
part, that the legislature of a State may, by law, endow the Committee or the
Municipality such powers and authority with respect to performance of
functions and the implementation of schemes as may be entrusted to it
including those matters listed in the Twelfth Schedule. If we refer to the
Twelfth Schedule, Entries 8, 12 and 17 would be relevant and are as under:-
D
"8. Urban forestry, protection of the environment and promotion of
ecological aspects.
12. Provision of urban amenities and facilities such as parks, gardens,
play-grounds.
17. Public amenities including street lighting, parking lots, bus stops E
and public conveniences."

Keeping this aspect in view, the Act was amended and some of the
relevant duties of Mahapalika, which are obligatory as given in Section 114,
are as under:
F
"114. Obligatory duties of the Corporation.-lt shall be incumbent on
the Corporation to make reasonable and adequate provision, by any means
or measures which it is lawfully competent to it to use or to take, for each
of the following matters, namely: -

.. (viii) guarding from pollution water used for human consumption and G
preventing polluted water from being so used;

(ix) the lighting of public secrecy, Corporation markets and public
buildings and other public places vested in the Corporation;

.(ix-a) the construction and maintenance of parking lots, bus stops and H
1092 SUPREME COURT REPORTS [1999] 3 S.C.Rr

A public conveniences;

(xxx) planting and maintaining trees on road sides and other public
·-
places.

(xxxiii-a) promoting urban 'forestry and ecological aspects and
B protection of the environment;

(xli) providing urban amenities and facilities such as parks, gardens
and play-gi:ounds."

The Development Act is in force and it is not disputed that whole of
the city of Lucknow has been declared as development area within the
C meaning of Section 3 of this Act. "Development" is defined in clause (e) of
Section 2 of the Act and it is as under:-

"(e) "development", with its grammatical variations, means the carrying
out of building, engineering, mining or other operations in, on, over
or under land, or the making of any material change in any building
D
or land, and includes re-development."

Lucknow Development Authority (LDA) has been constituted under
Section 4 of the Development Act. Chapter III of the Development Act
provides for preparatit>n of Master Plan and zonal development plan for the
E development area. Section 13 provides for the procedure for amendment of
the Master Plan or zonal development plan. Section· I4 provides for development
of land in development area and this section is as under:-

"14. Development of land in the developed area.--{1) After the
declaration of any area as development area under Section 3, no
F development of land shall be undertaken or carried out or continued
in that area by any person or body (including a department of
Government) unless permission for such development has been
obtained in writing from the Vice-Chairman in accordance with the
provisions of this Act.

G (2) After the coming into operation of any of the plans in any
development area no development shall be undertaken or carried out
or continued in that area unless such development is also in accordance
with such plans.

(3) Notwithstanding anything contained in sub-sections (I) and (2),
H the following provisions shall apply in relation to developmer..t of land
't

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.) 1093
by any department of any State Government or the Central Government A ·
.
or any local authority
. -
(a) when any such department or local authority intends to carry
out any development of land it shall inform the Vice Chairman
in writing of its intention to do so, giving full particulars thereof,
including any plans and documents, at least 30 days before B
undertaking such development;
(b) in the case of a department of any State Government or the
Central Government, if the Vice-Chairman has no objection it
should inform such department of the same within three weeks
from the date ofreceipt by it under clause (b) of the department's C
intention, and ifthe Vice Chairman does not make any objection
within the said period the department shall be free to carry out
the proposed development;
(c) where the Vice Chairman raises any objection to the proposed
development on the ground that the development is not in D
conformity with any Master Plan or zonal development plan
prepared or intended to be prepared by it, or on any other
ground, such department or the local authority, as the case may
be, shall -
(i) either make necessary modifications in the proposal for E
development to meet the objections raised by the Vice- Chairman;
or

(ii) submit the proposals for development together with the objections
raised by the Vice- Chairman to the State Government for decision
under clause (d); F
(d) the State Government, on receipt of proposals for development
together with the objections of the Vice-Chairman, may either
approve the proposals with or without modifications or direct
the department or the local authority, as the case may be, to
make such modifications as proposed by the Government and G
the decision of the State Government shall be final;

(e) the development of any land begun by any such department or
subject to the provisions of Section 59 by any such local authority
before the declaration referred to in sub- section (I) may be
completed by that department or local authority with compliance H
1094 SUPREME COURT REPORTS [1999) 3 S.C.R.

A with the requirement of sub-sections (I) and (2)."

The Development Act also contains provision for penalties and power
of the LDA to demolish buildings and to stop development in case of
contravention of the provisions of this Act. When the Development Act is
in operation, then under Section 59 of this Act, certain functions of the U.P.
B Municipal Corporation Adhiniyam, 1959 become inoperative so far as these
are relevant for the purpose :

"59. Repeal etc., and Savings.-(l)(a) The operation of clause (c) of
Section 5, Sections 54, 55 and 56, clause (xxxiii) of Section 114, sub-
section (3) of Section 117, clause (c) of sub-section ( 1) of Section
c 119..."

The provisions of the U.P. Regulation of Buildings Operation Act, 1958
also become inoperative by virtue of Section 59 of the Development Act.

The Parks Act provides for preservation and regulation of parks, play-
D grounds and open spaces in the State of Uttar Pradesh. The Parks Act applies
to an area included in every Nagar Mahapalika under the Uttar Pradesh Nagar
Mahapalika Adhiniyam, 1959. It is not disputed that this Act is now in force
(w.e.f. February l, 1995). Park has been defined in clause (b) of Section 2 of
the Act to mean a piece of land on which there are no buildings or of which
E not more than one-twentieth part is covered with buildings, and the whole or
the remainder of which is laid out as a garden with trees, plants or flower-
beds or as a lawn or as a meadow and maintained as a place for the resort
of the public for recreation, air or light. The Act provides for maintenance of
parks and prohibits construction of building, except with the previous sanction
of the concerned authority, which is likely to affect the utility of the park.
F
As to how the impugned agreement dated November 4, 1993 came to
. be executed between the Mahapalika and the builder we now consider the
proceedings of the Mahapalika, the Executive Committee and its sub- committee
called the High Power Committee.
G I
On July 6, 1993 notice was issued for meeting of the Mahapalika for July
12, 1993 with following agenda: ..
"l. Discussions on the accepted proposals passed by the Executive
Committee on 27.5.1993, and 27.6.1993.
H 2 Discussions on the various proposals.
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1095
.,....,, 3. Other subjects, subject to the permission of Presiding Officer." A
There were no details regarding agenda item No. 3, which, it is said,
pertained to Palika Bazaar, i.e., the underground shopping complex. On that
day following resolution constituting the High Power Committee for disposal
of the properties of the Mahapalika was passed under aforesaid agenda item
N~~ B
"The full details, maps, conditions of allotment in respect of Shri
Rafi Ahmad Kidwai Nagar Yojna and Rajaji Puram Vistar Yojna may be
prepared at the earliest. And for this act a committee may be constituted
under the chairmanship of the Nagar Pramukh in which two Hon'ble
Sabhasad and three officers be appointed. For nominating the members, C
the Nagar Pramukh may be authorised. The powers of disposing of
the entire land, allotment and transfer in respect of both the schemes
shall be vested in the above committee.

It was also decided that the Committee constituted under the
Chairmanship of the Nagar Pramukh shall have the rights of disposing D
of all the properties, allotment, transfer etc. situated within the limits
of the Nagar Mahapalika and the above committee shall have the right
to give the final shape to the conditions of allotment and agreement

- etc. In this manner this sub Committee is authorised to exercise the
aforementioned rights of the Mahapalika conditions of allotment and
agreement etc. In this manner this Sub Committee is authorised to
E

exercise the aforementioned rights of the Mahapalika."

Meeting of the High Power Committee so constituted under the aforesaid
resolution of the Mahapalika, was held on October 13, 1993 and was adjourned
to October 19, 1993. In the meeting of the High Power Committee held on F
October 19, 1993, presided over by Mr. Akhilesh Das, Nagar Pramukh as
Chairman, there is discussion regarding construction of the underground air
conditioned Palika Bazar at Aminabad Jhandewala Park on the lines of Palika
Bazar in New Delhi. It was recorded that the Vice-Chairman, Lucknow
Development Authority by his letter No.279/Architect dated October 16, 1993
intimated that as per the Master Plan, the land use of the Aminabad, Jhandewala G
park is commercial. The draft of the contract to be entered into between the
Mahapalika and the MI Builders was approved. The minutes ended with the
recording as under:

"Amended and final draft of the contract was read by the Advocate
before the Committ~e on this, the opinion of the members was asked H
1096 SUPREME COURT REPORTS [1999) 3 S.C.R.

A for by the Chairman on which all the members were unanimous that
all the members after discussing over the suggestions and conditions
set out by the Mahapalika Advocate took this decision that the
prescribed project ma:y got executed by M.I. Builders Pvt. Ltd. And
the Mukhya Nagar Adhikari should be authorised for conducting all •.
the forthcoming actions and formalities.
B
The Hon'ble Chairman also directed that the entire proceedings
may be presented for information in the meeting of the Executive
Committee dated 20. I 0.93 and meeting of the Mahapalika house held
on 21.10.93.

c Sd B.K. Singh yadav Sd Sushil Dubey
Sabhased Member

Mukhya Nagar Adhikari
Member.

D Sd G.C. Goyal Architect Sd D.K. Doal,
Member Member, UP Nagar Adhikari.

Sd Akhilesh Dass Sd Laxmi Narain
Nagar Pramukh Sabhasad,

Chairman of the Committee Member."
E
In view of the directions of the High Power Committee the matter was
placed before the Executive Committee on October 20, 1993 which passed the
following resolution: -

"Resolution Np. (85) As per the decision taken in the meeting dated
F 12.7.1993 of the Mahapalika, Sub- Committee constituted under the
Chairmanship of the Hon'ble Nagar Pramukh was entrusted with the
powers of developing, leasing and to transfer the immovable property
of the Mahapalika. In exercise of these powers, the Sub- Committee,
keeping in view the grave problem of encroachment and parking in
Aminabad Submitted the proposal of the Hon'ble Members namely
G
Sh. Kalraj Mishra (President Bhartiya Janta Party U.P.) and Shri Ejaj
Rijvi, Ex. Minister for the construction of an Air Conditioned Palika
Bazar and parking place in the Jandewala park (Aminabad Park) on the
pattern of the Delhi Bazar, with a parking place for about 1000 vehicles
through Mis. M.I. Builders Pvt. Ltd. Presented before the Executive
H Committee for information which was welcomed by all and the proposal
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1097
was approved." A
Thereafter, the matter came to be placed before the Mahapalika in its
meeting dated October 21, 1993 and the following minutes were recorded: -

"In view of the decision taken by the General House of Mahapalika
dated 12.07 .93, a subcommittee under the Chairmanship of Mayor was B
entrusted to transfer, to develop and to give on lease of immovable
properties of Mahapalika. In exercise of these powers, the Sub-
committee, keeping in view the grave problem of encroachment and
parking in Aminabad submitted the proposal of Sh. Kalraj Misra
(President) Bhartiya Janta Party U.P. and Sh. Eagaz Risvi (Ex-Minister)
for construction of an air-conditioned Palika Ba~r and parking place C
in the Jhandewala Park (Aminuddaula Park) on the pattern of Delhi
(Air-conditioned) Palika Bazar and a parking in which there should be
a provision for parking of about 1000 vehicles through M.I. Builders
Pvt. Ltd. presented before the House for information which was
welcomed and a unanimous resolution was passed and the Nagar D
Pramukh was congratulated for this important work."

It will be advantageous to reproduce the impugned agreement dated
November 4, 1993, which is executed between the Mahapalika and the builder:-

"WHEREAS, the party No. I is an absolute owner of the plot of land E
\ '
· situated at Aminabad popularly known as Jhandewala Park measuring
about 2,45,000 sq.ft. and bounded as below :

NORTII Chhedilal Dharamshala Road

sourn Ganga Prasad Road
F
EAST Road locating Central Bank oflndia

WEST Road locating Hyder Husain building.

More specifically mentioned in the site- plan attached herewith.

WHEREAS, the party No. I is a body constituted under the UP G
Nagar Mahapalika Adhiniyam (Act II 1959), managing the parks, roads
street lights and other such maintenance of amenities in the city.

WHEREAS, owing to high increase in urban population (according
to 1991 Census, Lucknow Urban agglomeration has a population of
16,69,204) because of the migratory character of Rural Population to H
1098 SUPREME COURT REPORTS [1999] 3 S.C.R.

A Urban Areas which is too congested due to overflow of population, v •.
the city is also being faced overwhelmingly with day to day problem
of encroachment causing much of acrimony perpetrating high guilts
and discrete errors.

WHEREAS, the party No.1 remained ever conscious to kei;:p the
B city hygienically sound free from all adverse effects but the problem
of ercroachment is no less than a headache for the Lucknow Nagar
Mahapalika which has emerged like a growing nightmare and becoming
unmanageable by the Lucknow Nagar Mahapalika owing to its limited
\and scanty resources and flow of supplementary income. The eagerness
....
of Nagar Mahapalika to maintain proper road, construction of new
c roads with street lighting and the cleanliness derive during monsoon
for removing sand and silt from the nallahs is too often inadequately
met by the Local Bodies Department of the Government as the Schedule
of New Demands for providing requisite funds are not available timely
as well as sufficiently. This is one of the major hindrances in keeping
D the functioning of the Lucknow Nagar Mahapalika at low ebb.

. WHEREAS, considering the above points Mis. M.I. Builders Private
Limited had prepared a viable and constructive proposal keeping in
view the interest of Lucknow Nagar Mahapalika in all respects and,
the same was submitted to Lucknow. Nagar Mahapalika as it dealt
E exhaustively the benefits that will be oriented after its implementation
to the Lucknow Nagar Mahapalika as well as to the Lucknow Populace.
The proposal was found beneficial to the Nagar Mahapalika Lucknow
as well as to the general public. The proposal which will be known
as PALIKA BAZAR if given affect will be a source of control over
the traffic and will reduce the congestion in the vicinity.
F
WHEREAS, the aforesaid proposal was accepted by the Lucknow
Nagar Mahapalika in its Meeting thereby procuring a No Objection
Certificate from the Lucknow Development authority under Section 14
......
ofUrban Building Planning and Development Act, 1973 for constructing
the PALIKA BAZAR on the land mentioned above 279/vastuvid
G dated 16.10.1993.

NOW this agreement witnesseth as under :-

1. That party no.2 ·shall construct the said PALIKA BAZAR according
to the plan (attached herewith) with respect to which No Objection
H Certificate has been obtained by party no. I from the prescribed
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1099

·-· authority.

2. That the PALIKA BAZAR shall be constructed by party no.2 at his
A

own cost and party no.2 shall be entitled to realise the cost of
construction with reasonable profit which in any case shall not be
more than 10% with respect to each shop as may fixed by party no.2
in lieu of construction and when the project of Palika Bazar is completed B
and cost of construction has been realised the 'PALIKA BAZAR'
shall be handed over to the Lucknow Nagar Mahapalika as its owner.

3. That the party no.2 shall also provide air-conditioning facility in the
PALIKA BAZAR at his own cost as well as the installation of the
plant and construction of the infrastructure in this regard. c
4. That the party no.2 shall have the right to fix the amount of cost
of construction while the rent of the shops shall be at the rate of Rs.
2.50 p. only per sq. ft. and 50 p. will be charged as lease rent as 1/
5th of the rent of covered area and Rs.300 per shop for maintenance
subject to enhancement of the air Conditioning plant, maintenance of D
the complex as well as the electric charges.

5. That party no.2 shall be at liberty to lease out the shops as per its
own terms and conditions to the persons of their choice on behalf of
party no. I which shall be binding on party no. I but the conditions as
mentioned in para 4 as aforesaid in this agreement regarding rent shall E
remain in force.

6. That the party no.2 shall also have the right to sign the agreement
if necessary on behalf of party no. I as person authorised by party
no. I on the terms and conditions which the party no.2 may deem fit
and proper and the copy of the agreement shall be given to party no. I F
after its execution and the terms of the deed shall be binding upon
both the parties of this deed provided the party no.2 executes only
that much of agreement which number of shops are available in Palika
Bazar and in any case shall not exceed the same but the rent of the
shops shall remain the same as mentioned above.
G
7. That the construction of PALIKA BAZAR shall start within three
· months from the date of registration of this agreement and, shall be
completed within three years from the date of its start.

8. That party no.2 shall have the right to publicise the project and take
advances from the buyers and to give them proper allotment receipts. H
;~

1100 SUPREME COURT REPORTS [1999] 3 S.C.R.

A 9. That party no.I shall co-operate in all manners in the constructional
work activities of party no.2 and shall extend all its co-operation and
help as and when needed by party no.2 from time to time.

10. That the party no. l shall be responsible to help and assist party
no.2 in completing the project and party no. l shall also be exclusively
B responsible for getting the electric sewer and water connection from
concerned department for the above project at the cost of party no.2.

I I. That party no. J shall help. the party no.2 in getting the Project
completed and meeting all the needs and requirements in completing
the project.
c
I2. That in case there is in any obstruction from Mahapalika or legal
proceedings resulting in the non-completion or carrying out the
constructional work of the project resulting in the non-completion
stoppage of the work, the party no. l shall be responsible for all the
losses and damages that may accrue to party no.2.
D
13. That party no.2 shall not allot the 5% shops before completion of
parking and other services of the complex to e~sure the proper
compliance of the agreement and further ensure the quality of
construction.

E 14. That party no.2 shall give the bank guarantee ofRs.25,00,000 (Rs.
twenty five lacs) for its perf~rmance within 3'111.onths from the date of
registration of this agreement' Gut this clause is subject to all necessary
co-operation of party no. l.

15. That party no. I shall charge Rs.5,000 per shop for every second
F and subsequent transfer of the shops.

I6. That after the completion of the project the party no.2 shall hand
over the entire documents in original to the party no. I for keeping the
final records. -
G ·. 17. That in case of any disputes or differences arising out of the
project between the parties to the agreement, the same shall be referred
for arbitration to the mutually appointed arbitrator who shall in all
cases be the retired justice of Hon'ble High Court or its equivalent
and his award shall be binding upon both the parties.

H I8. That the agreement between the party no.2 and the shop keeper
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1101
shall be duly approved by the Nagar Mahapalika Lucknow and· the A
party no.2 has made that agreement available to the party no. I and
the party no. I has approved the said agreement.

19. That all the legal expenses in executing this agreement shall be
borne only by the party no.2.
B
IN WITNESS WHEREOF, the parties of this deed have signed the
deed on the day and the year mentioned herein below in presence of
the following witnesses and the terms of this agreement shall be
binding upon the legal heirs, successors, assignees and legal
representatives.
Sd/-
c
Lucknow : dated Party No.I
November4, I993. For M.I. Builders Pvt. Ltd.
Sd/-
WITNESSES
Managing Director Party No. 2 D
1. Sd/- Drafted by: Sd/-
2. Sd /- (Arvind Razdan) Advocate.
Civil Court, Lucknow"

Mr. Soli Sorabjee, learned counsel for the builder, submitted that the
agreement was not against public interest and could n9t have been revoked E
by the Mahapalika. He said the petitioners in the writ petitions did not bring
forward any contractor who could say that he was more competent than M.I.
Builders to execute the job and at a cost less than that to be incurred by M.I.
Builders. He said case of the builder was covered by a judgment of this Court
in Mis. Kasturi Lal Lakshmi Reddy and others v. State of Jammu and
Kashmir and another, [ 1980) 4 SCC I. In this case the State of J & K awarded F
a contract to the second respondent for tapping of IO to I2 lakhs blazes
annually for extraction of resin from the inaccessible chir forests in the State
'- for a period of I 0 years. This was in accordance with the policy of the State
Government and it was agreed upon that a part of resin so extracted would
be delivered to the State for running the State-owned industry and the rest G
would be retained by the second respondent for establishing and running its
own factory in the State. The petitioners in the writ petition assailed the order
of the State Government on the following main three grounds:-

"(A) That the order is arbitrary, mala fide and not in public interest,
inasmuch as a huge benefit has been conferred on the 2nd H
1102 SUPREME COURT REPORTS [1999] 3 S.C.R.

A respondents at the cost of the State.
(B) The order creates monopoly in favour of the 2nd respondents
who are a private party and constitutes unreasonable restriction
on the right of the petitioners to carry on tapping contract
business under Article 19(1 )(g) of the Constitution.
B (C) The State has acted arbitrarily in selecting the 2nd respondents
for awarding tapping contract, without affording any opportunity
to others to complete for obtaining such contract and this action
of the State is not based on any rational or relevant principle and
is, therefore, violative. of Article 14 of the Constitution as also
c of the rule of administrative law which inhibits arbitrary action
by the State."

This Court, after examining the whole facts of the case and applying the
parameters laid in Ramana Dayaram Shetty v. International Airport Authority
of India, [ 1979] 3 SCC 489 negatived all the pleas raised by the petitioners.
D Referring to its earlier decision in International Airport Authority of India
case this Court had observed that there are two limitations imposed by law
which structure and control the discretion of the Government in giving largess.
The first is in regard to the terms oh which largess may be granted and the
other in regard to the persons who may be recipients of such largess. Then
the Court said as under: - !<"
E
"So far as the first limitation is concerned, it flows directly from the
thesis that, unlike a private individual, the State cannot act as it
pleases in the matter of giving largess. Though ordinarily a private
individual would be guided by economic considerations of self-gain
in any action taken by him, it is always open to him under the law to
F act contrary to his self-interest or to oblige another in entering into
a contract or dealing with his property. But the government is not free
to act as it likes in granting largess such as awarding a contract or
selling or leasing out its property. Whatever be its activity, the
government is still the government and is, subject to restraints inherent
in its position in a democratic society. The constitutional power
G
confen:ed on the government cannot be exercised by it arbitrarily or
capriciously or in an unprincipled manner; it has to be exercised for
the public good. Every activity of the government has a public element
in it and it must therefore, be informed with reason and guided by
public interest. Every action taken by the government must be in
H public interest; the government cannot act arbitrarily and without
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1103
reason and if it does, its action would be liable to be invalidated. If A
the government awards a contract or leases out or otherwise deals
with its property or grants any other largess, it would be liable to be
tested for its validity on the touchstone of reasonableness and public
interest and if it fails to satisfy either test, it would be unconstitutional
and invalid."
B
The Court said that the State of J & K, in view of its policy of
industrialization, was interested in the setting up of the factory by the second
respondents, particularly since the second respondents had two factories for
manufacture of resin, turpentine oil and other derivatives and they possessed
large experience in the processing of resin and reprocessing of resin, turpentine C
oil and other derivatives. The Court considered the nature of the contract and
observed that it was obvious that, in view of the policy of the State
Government, no resin would be auctioned in the open market and in this
situation, it would be totally irrelevant to import the concept of market price
with reference to which the adequacy of the price charged by the State to the
second respondents could be judged. If the State were simply selling resin, D
there could be no doubt that the State must endeavour to obtain the highest
price subject, of course, to any other overriding considerations of public
interest and in that event, its action in giving resin to a private individual at
a lesser price would be arbitrary and contrary to public interest. But, where
the State has, as a matter of policy, stopped selling resin to outsiders and E
decided to allot it only to industries set up within the State for the purpose
of encouraging industrialization, there could be no scope for complaint that
the State was giving resin at a lesser price than that which could be obtained
in the open market. The yardstick of price in the open market would be wholly
inept because in view of the State policy, there would be no question of any
resin being sold in the open market. F

After examining this judgment it is difficult to appreciate the argument
of Mr. Sorabjee as to how the principles laid in this case can be applicable
to the present case.

To substantiate his argument that there was "estoppel by pleading"
G
against the Mahapalika Mr. Sorabjee referred to the stand of the Mahapalika
as reflected in the proceedings before the High Court as well as in this Court.
It was also pointed out that in the counter affidavit filed by the State
Government in the High Court it supported the builder. There was no 'disposal
of property' by the Mahapalika within the meaning of Section 128 of the Act. H
·1104 SUPREME COURT REPORTS [1999] 3 S.C.R.

A Resolution of Mahapalika to enter into the agreement with the builder was
validly passed. The project was the brainchild of M.I. Builders and the nature
of the transaction was such that it was unconventional and there is no
universal rule that tender be invited in every case. There was no secrecy.
Everything was done in open and discussed freely at various stages. In the
B affidavit dated January 8, 1994 of Mr. B.K. ~·:ngh, Chief Executive Officer of
the Mahapalika filed in the High Court he had explained why it was necessary
to have the project executed in order to avoid congestion in Aminabad
commercial area. In the affidavit dated October 19, 1995 of Mr. T.K. Doval,
Upnagar Adhikari which was filed i.n answer to IAs 10-12/95, complaining
breach of this Court's order dated Decemb.er 14, 1994, again the earlier stand
C of Mahapalika was re-affirmed. Mr. Sorabjee criticised the action of the
Mahapalika in withdrawing its appeals in this Court on February 6, 1997 on
mere mentioning in the Court. He said plan, which had been sanctioned by
order dated January 23, 1995, was revoked illegally on April 17, 1997 without
any notice to the builder. There is, however, resolution of the Mahapalika
dated August 6, 1996 filed by Mr. S.K. Gupta, Mukhya Nagar Adhikari of the
D Mahapalika opposing the present appeals by the builder. Mahapalika took a
summersault and gave a complete go- bye to its earlier stand. That there could
be estoppel by pleadings reference was made to a decision of this Court in
Union ofIndia v. Mis Indo-Afghan Agencies Ltd., [1968] 2 SCR 366, approving
the earlier decision of the Calcutta High Court in The Ganges Manufacturing
E Co. v. Sourujmull and others, (1880) ILR Calcutta 669 at 678). Mr. Sorabjee
said a party could not change its stand even if it was legally wrong in its
earlier stand as otherwise it could be a negation of everything.

In the Ganges Manufacturing Co. v. Sourujmull & Ors., (1880) 5 ILR
Cal 669, a Division Bench of the Calcutta High Court held that "a man may
F be estopped not only from giving particular evidence, but from doing any act
or relying upon any particular argument or contention, which the rules of
equity and good conscience prevent him from using as against his opponent".

In Union of India and others v. Mis. Indo-Afghan Agencies Ltd., [1968]
G 2 SCR 366, in a certain scheme called the Export Promotion Scheme incentives
were provided to the exporters for woolen goods. Mis. Indo- Afghan Agencies .-
Ltd. Exported woolen goods to Afghanistan of F.O.B. value of over Rs.5
crpres. The Deputy Director in the office of the Textile Commissioner, Bombay,
issued to them an Import Entitlement Certificate for about Rs.2 crores only.
When the representations made to the Government for grant of Import
H Entitlement Certificate for full F.O.B. value, it produced no response and writ
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1105
petition under Article 226 of the Constitution was filed in the High Court. A
High Court allowed the writ petition. In the appeal filed by Union of India to
this Court various contentions were raised. This Court said:-

"Under our jurisprudence the Government is not exempt from liability
to carry out the representation made by it as to its future conduct and
it cannot on some undefined and undisclosed ground of necessity or B
expediency fail to carry out the promise solemnly made by it, nor claim
to be the judge of its own obligation to the citizen on an ex parte
appraisement of the circumstances in which the obligation has arisen."

And further: -
c
"The defence of executive necessity was not relied upon in the present
case in the affidavit filed on behalf of the Union of India. It was also
not pleaded that the representation in the Scheme was subject to an
implied term that the Union of India will not be bound to grant the
import certificate for the full value of the goods t:xported if they deem
it inexpedient to grant the certificate. We are unable to accede to the D
contention that the executive necessity releases the Government from
honouring its solemn promises relying on which citizens have acted
to their detriment. Under our constitutional set-up no person may be
deprived of his right or liberty except in due course <>f and by authority
of law: if a member of the executive seeks to deprive a citizen of his E
right or liberty otherwise than in exercise of power derived from the
law - common or statute - the Courts will be competent to and
indeed would be bound to, protect the rights of the aggrieved citizen."
It was also held: -

"We hold that the claim of the respondents is appropriately founded F
upo~ the equity which arises in their favour as a result of the
representation made on behalf of the Union of India in the Export
Promotion Scheme, and the action taken by the respondents acting
upon that representation under the belief that the Government would
carry out the representation made by it.' On the facts proved in this G

- case, no ground has been suggested before the Court for exempting
the Government from the equity arising out of the acts done by the
exporters to their prejudice relying upon the representation."

Mr. Sorabjee then referred to Section 128 of the A.;t and to the expression
"disposal" and also to Sections 129(4), 131and132 of the Act. According to H
1106 SUPREME COURT REPORTS [1999] 3 S.C.R. I,
I

A him there was no disposal of any property and no interest in the land had
been transferred by the Mahapalika to the builder. In this connection reference
was made to the agreement dated November 4, 1993. Reference was also made
to the counter affidavit filed earlier by Mr. B.K. Singh, Mukhya Nagar Adhikari,
wherein he had stated that the property vested in Mahapalika and that there
B was no disposal or transfer of any interest in the property to the builder. As
to what is meant by the expression "disposed of' reference was made to
another decision of this Court in Deputy Commissioner of Sales Tax (Law),
Board of Revenue (Taxes), Ernakulam v. Mis. Thomas S~ephen and Co. Ltd,
[ 1988] 2 SCC 264 at 266. This judgment was of course in context of sale of
goods. Reference was also made to a decision of House of Lords (1959 (1)
C WLR 465 at 472) to contend that "disposal" means disposal absolutely.

If it was necessary to call tender reference was made to a decision of
this Court in G.B. Mahajan and others v. Ja/gaon Municipal Council and
others, [ 1991] 3 sec 91, where tender was invited to construct the building
but authority was given to the developer to grant occupancy rights. In this
D case, this Court considered the scope of judicial review in the case of
contractual transaction of Government, its policy decision and right of the
Government on its instrumentality to evolve any method for execution of the
project. In this case respondent Jalagaon Municipal Council entered into a
contract with a private developer/builder for construction of a commercial
E complex. The project contemplated its execution by the developer on self-
financing basis subject to handing over the administrative building of the
complex to the Municipal Council free of cost and allotting some shops at a
fixed rate/free of cost to certain specified persons while having right to
dispose of the remaining accommodation at its own discretion and to retain
the premia received by way of reimbursement of its financial outlays plus
F profits. The execution of the project was challenged on the ground that it was
unconventional and thus untenable. This Court said that the Government or
its instrumentality policy option to adopt any method or technique for
management of the project provided the same is within the constitutional and
legal· limits. This Court held that the project was not ultra vires the powers
G of Municipal Council and such a case was not open to judicial review. The
following main contentions were raised apprising the project: -

"(a) That the scheme of financing of the project was unconventional
and was not one that was, as a matter of policy, open and.
permissible to a governmental authority. The municipal authority
H could either have put up the construction itself departmentally
M.I. BUILDERS PVT.LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1107
or awarded the execution of the whole project to a builditjg A
contractor. The method of financing and execution of the project
are ultra vires 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 B
commercial complex in such manner and on such terms as it may
choose would 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 disposal C
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 violative
of Article 14 of the Constitution. The project is patently one D
intended to and does provide for an unjust enrichment of
respondent 6 at public expense."

This Court negatived all these contentions. It said that the project,
otherwise. legal, does not become any the less permissible by reason alone
that the local authority, instead of executing the project itself, had entered into E
an agreement with a developer for its financing and execution. This Court did
not find any violation of any provisions of the Maharashtra Municipalities
Act, 1965 governing the Municipal Council. On the question of reasonableness
this Court said that a thing is not unreasonable in the legal sense merely
because the court thinks it is unwise. Then this Court said: -
F
"The contention regarding impermissible delegation is not tenable.
The developer to the extent he is authorised to induct occupiers in
respect of the area earmarked for him merely exercises, with the consent
of the Municipal Council, a power to substitute an occupier in his own
place. This is not impermissible when it is with the express consent G
of the Municipal Council. It would be unduly restrictive of the statutory
powers of the local authority if a provision enabling the establishment
of markets and disposal of occupancy rights therein are hedged in by
restrictions not found in the statute."

Reference was then made to a decision of this Court in Tata Cellular H
ll08 SUPREME COURT REPORTS [1999} 3 Sf.~,R.

A v. Union of India, [1994] 6 SCC 651, where this Court considered the ~cope
'
of judicial review and adduced the following principles: -

"( l) The modem trend points to judicial restraint in administrative
action.

B (2) The court does not sit as a court of appeal but merely reviews the -
manner in which the decision was made.

(3) The court does not have the expertise to correct the administrative
decision. If a review of the administrative decision is permitted it will
be substituting its own deeision, without the necessary expertise
C which itself may be- fallible.

(4) The terms of the invitation to tender cannot be open to judicial
scrutiny because the invitation to tender is in the realm of contract.
Normally speaking, the decision to accept the tender or award the
contract is reached by process of negotiations through several tiers.
D More often than not, such decisions are made qualitatively by experts.

(5) The Government must have freedom of contract. In other words,
a fair play in the joints is a necessary concomitant for an administrative
body functioning in an administrative sphere or quasi-admi:Jtistrative
sphere. However, the decision must not only be tested by the
E application of Wednesbury principle of reasonableness (inc.luding its
other facts pointed out above) but must be free from arbitrariness not
affected by bias or actuated by mala fides.

(6) Quashing decisions may impose heavy administrative burden on ·
the administration and lead to increased and unbudgeted expenditure."
F
Lastly, Mr. Sorabjee said that after this Court allowed builder to construct,
in upholding the judgment of the High Court, equities would have to be
balanced. Of course, it would be different matter if the appeals were to be
allowed, he said.

G Fifty prospective allottees of the shops, who had made payment to M.1.
Builders for allotment of shops before High Court granted order of stay, filed
an application in this Court seeking permission to intervene in these appeals.
We heard Mr. Salve, learned senior counsel, who appeared for them. We
record his submissions as under: -

H l. It is not in public interest to dismantle the shops if the court
' M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1109
ultimately upholds the judgment of the High Court. !A
2 Advertisement was made by .the builder on December 24, 199j
offering to allot the shops and required each of the prospective
allottee to pay Rs.25,000 with application for allotment. 500 such
applications were received out of which 380 applications were
accompanied with cheque of Rs.25,000 each. Remaining 120 B
prospective allottees deposited the amount of Rs.25,000 each
... by mean of cash. When, however, possession of the area was
handed over to the builder it was found that it was less than that
agreed earlier and that the total number of shops to be
constructed would be now in 263 in number. Shops were of two
sizes of IO x 15 ft. and IO x 20 ft. c
3. Question raised now is: if by putting in possession any interest
in land was created in favour of the builder? Could it be said that
there was charge created in favour of the builder on the property
including the land and the structure built upon it till the builder
got whole of the amount invested by it plus 10% of the profit D
over and above that? No interest in the land was created in
favour of the builder. The agreement was something like a lien
on a property of an unpaid creditor as understood in law. Builder
in that situation would have right to possession till it was paid
its dues. As per the tenns of the contract builder would retain E
the property by way of security till it was paid but it could not
claim to have any interest in the property. It is like an unpaid
creditor. When the tenn "disposed of' is used it means that full
title had passed but when we say any interest in the property
is passed then we mean a slice of thaf title has passed.
F
4. Agreement though is silent as to what is the legal right of the
builder on the land, it grants merely a right to the builder to enter

.. 5.
upon the land and to build upon as per its tenns. Provisions of
Section 128 of the Act are not attracted .

It is a moot point if in a Public Interest Litigation the petitioner
can tell the court to consider a document whether it is favourable
G
or not. Court cannot use a magnified glass to see whether any
interest had been created and then to strike down the agreement
being violative of Section 128 of the Act. Ultimately it boils
down to the intention of the parties otherwise it will be straining
the point too far which is not pennissible. H
1110 SUPREME COURT REPORTS (1999] 3 S.C.R.
'
A 6. If this Court decides to uphold the judgment of the High Court
the applicants would request that the relief be moulded. In
Public Law relief can be moulded even where the court found ~
irregularity or illegality to deny relief. That can be done under
Article 142 of the Constitution. After all what the High Court has
found was that the resolution was not properly considered before
B passing the same; that requirements of the provisions of Sections
128 and 129 of the Act were not adhered to; and that tenders
were not invited in order to favour the builder.
-
7. It is not the case of the writ petitioners that any extraordinary
c advantage was conferred on the builder or that funds of the
taxpayers have been drained out. If it was a hospital or an
industry or a dangerous building it would be imperative that the
building be pulled down but here construction is underground
made to remove congestion and the only complaint of the
petitioners was that it would create more congestion. Therefore,
D a mere irregularity or even illegality would not result in destroying
the construction, particularly, when there is no clear finding of
any mala fide by the High Court. It is not that any other builder
has been aggrieved by the action of the Mahapalika and had
come forward to complain. In fact one of the persons who
E himself is a party to the resolution was one of the petitioners.
In the Administrative Law there is an authority that relief could
be moulded. There is no affidavit of the Lucknow Development
Authority that buildtng was in any way dangerous. Shopping
complex and the parking lot, which has been built upon, is for
public good and an order of demolition would not be iri general
F public interest. Discretion should be used not to invalidate the
whole process even if provision of Sections 128 and 129 were
violated. Some mechanism could be evolved so that fair price for
the shops and use of parking lot is fixed and the case of every
prospective allottee could be examined and so also perhaps the
G terms of the agreement between the builder and the Mahapalika.
.It would be an extraordinary order if demolition is ordered.
Reference was made to Wade on Administrative Law, 7th Edition, page
720 and to De Smith on Judicial Review of Administrative Action, 5th Edition,
page 271 to support the contention that relief could be moulded in law. In
H Wade's treatise the following part is relevant: -
' M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1111

-- -~ "The freedom with which the court cari use its discretion to mould its
remedies to suit special situations is shown by two decisions already
encountered. One was the case where the House of Lords refused
A

mandamus to a police probationer wrongly induced to resign, although
he made out a good case for that remedy, in order not to usurp the
powers of the chief constable, and instead granted him an unusual
form of declaration to the effect that he was entitled to the remedies B
of unlawful removal from office except for reinstatement. The other
was the case of the Take-over Panel, where in fact no relief was
granted but the Court of Appeal explained the novel way in which
remedies should be employed in future cases, with the emphasis on
declaration rather than certiorari and on 'historic rather than c
contemporaneous' relief. The same freedom to mould remedies exists
in European Community law, where the European Court of Justice may
declare non-retroactivity when holding some act or regulation to be
void."

In De Smith it is as under: - D
"The principle that failure to observe fom1al or procedural rules in the
administrative process may be venial if no substantial prejudice has
been caused to those immediately affected now appears in a number
of statutory contexts, but it is too early to say that it has established
itself as a general principle of law in contexts where the enabling Act E
(
is silent on the point, though somi;: of the cases on the effect of
disregarding statutory time limits point vaguely in this direction.

Administrative inconvenience

-- Is administrative inconvenience a proper rea:;on for rebutting the
presumption that a decision which violates a statutory provision is
unlawful (and therefore that the provision is, in the circumstances not
F

"')" .'.'mandatory")? Administrative inconvenience is an accepte<;l criterion

•... in relation to remedies provided by the courts in judicial review. For
example, where a series of commercial transactions have been
G

--
undertaken in reliance upon th~ impugned decision the court may, in
its discretion, fail to quash that decision in view of the administrative
chaos that would result from such a remedy. Judicial discretion is
employed here to balance fairness to the individual against the general
public interest. The task, however, of deciding the force'of a statutory
provision does not involve judicial discretion. It involves the faithful H
1112 SUPREME COURT REPORTS [1999] 3 S.C.R
'
A construction of the objects and purposes of an act of Parliani.ent ~
the context of the particular decision. Although aspects of public
policy may play a part in this exercise, it would be wrong of the courts
to impute any general implication that Parliament may intend
administrative inconvenience to excuse in advance the violation of its
statutes. Such an implication invites careless administration and
.B assumes that the legislature would too easily excuse a breach of its
statutes. It is suggested, therefore, that administrative inconvenience
is not normally a proper criterion to guide the question of whether a
statutory provision is "mandatory"."

C Mr. Sorabjee and Mr. Salve were opposed by a formidable cohort of
lawyers. Mr. N.M. Ghatate appeared for the corporators who filed writ petition
in the High Court and were present themselves in the meetings of the
Mahapalika on July 12, 1993 and October21, 1993; Mr. G.L. Sanghi appeared
for the Mahapalika; Mr. Adarsh Goel for the State of U.P.; Mr. Arun Jaitley
for the LDA; and Mr. Dushyant Dave for Amrit Puri, who had separately filed
D the writ petition. Their submissions can be summarised as under: -

1. There was no proper convening of the meetings of the Executive
Committee and the Mahapalika, which granted approval to the
construction of underground shopping complex. There was also
" no such agenda in the meeting of the Mahapalika. Constitution
E ';ofthe High Power Committee by the Mahapalika was itself not
le'gat-.Regulations had been framed under the Act for conduct
of the' meetings. Under Section 91 of the Act the requirement is
four days notice· for the general body meeting of the Mahapalika
and three days notice for the meeting of the Executive Committee.

-
Regulation 7 prescribes as to how the business of the meeting
F
is to,~,~ c9p4p~~~q; f}~· t~)wfuc~~item is to be taken up first and
rest in .seri.ati.m.., ~~g~l,a!~<.>pJZ~fJ>:;[c~quires that resolution of the
E?Ce,cutiv~: So!11m~!t~~ r.~h,<;>!-!19 1 R~ ,;~~P.,¥,,ately circulated to the
. meqib~r.~ ~nq, 1Jh,~ :..?Hsj~eJ~,,f;:~p~~~~grrtJiat should not be
tr~n~a~t~~ .~1?- the~~~~~~i;i.~ 1~'.anY, ?th~~,b~s~FJ.~ ...,with permission
G of th,~ chair:;.; 9!1~~r.l_l~g1t~~tio~ ;~.9.}~ i~ _R..e_,~~J~~1 f2L~ resolution
to be ..valid ,!l],a,t .~er~...s~~~ld .b,~op!'~.<?£ ~~ 1 ~ 1 ~~1~onder.
2 .. Thi impugned' agreenierltwas n:ot'ex;ecuted:-as:per thereqliifement
."of Section 133 •ofthe 1Act and on :that •accounf:ii :is· n:o'tloiftding
·oil' the' Mailapaiika:;!Reliance1 wi!S piacedfonia:rdedsi6if1:of this
H "Court·ijf Dr.· fH.SPRikhJ :& !fOrs? v! 1'The''New'<belhi <Mun\fcipal
,
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WAO-HWA, J.] 1113

Committee, AIR (1962) SC 554. In this case the question for A
consideration before this Court was whether the provisions of
Section 8 of the Delhi and Ajmer Rent Control Act, 1952 (the 1
Rent Act) applied to the transactions between the appellants
and the New Delhi Municipal Committee (the Committee)
constituted under the Punjab Municipal Act, 1911. The Committee B
had constructed a market and allotted the shops and flats by
inviting tenders in pursuance to an advertisement. On an
application filed under Section 8 of the Rent Act by an allottee,
an objection was raised by the Committee that there was no
relationship of landlord and tenant between the parties. High
Court held that there was no relationship of landlord and tenant C
between the parties inasmuch as there was no 'letting', there
being no properly executed lease. In coming to the conclusion
that there was no valid lease between the parties, High Court
relied upon the provisions of Section 47 of the Punjab Municipal
Act. High Court negatived the contention that the Committee
was estopped from questioning.the status of the applicants as D
tenants, having all along admittedly accepted rent from them. On
an appeal against the judgment of the High Court to this Court,
it was held that use of the term 'rent' cannot preclude the
( landlord from pleading that there was no relationship of landlord
and tenant. The question must, therefore, depend upon whether E
or not there was a relationship of landlord and tenant in the
sense that there was a transfer of interest by the landlord in
favour of the tenant. This Court said that in its opinion the Rent
Act applied only that species of 'letting' by which the
rel~tionsh~p of landlord and tenant is created, that is to say, by

- which an mterest in the property, however, limited in duration is F
created. This Court referred to the provisions of Section 47 of
the Punjab Municipal Act which is as under :

"47. _0_) E~ery contract made by or on behalfofthe Committee of any
mumc1pahty of the first class whereof the value or amount exceeds
one hun~r~d ~pees, and made by or on behalf of the Committee of G
any mumc1pal1ty of the second and third class whereof the value or
:mount exceeds fifty rupees shall be in writing, and must be signed
y two members, ~f whom the president or a vice-president shall be
one, and countersigned by the secretary : .

Provided that, when the power of entering into any contract on H
1114 SUPREME COURT REPORTS
/
(1999] 3 S.C.R.
'
A behalf of the committee has been delegated under the last foregoing
section, the signature or signatures of the member or members to
whom the power has been delegated shall be sufficient.
-
.,__

(2) Every transfer of immovable property belonging to any committee
must be made by an instrument in writing, executed by the president
B or vice-president and by at least two other members of committee,
whose execution thereof shall be attested by the secretary.

(3) No contract or transfer of the de.scription mentioned in this section
executed otherwise than in conformity with the provisions of this
section shall be binding on the committee."
c This Court said that in order that the transfer of the property in question
should be binding on the Committee, it was essential that it should have been
made by an instrument in writing, executed by the President or the Vice-
President and at least two other members of the Committee, and the execution
by them should have been attested by the Secretary and If these conditions
D are not fulfilled, the contract of transfer shall not be binding on the Committee.
It was observed that provisions of Section 47(3) are mandatory and not
merely directory. Finally considering the argument that the Committee is
e~topped by its conduct from challenging the enforceability of the contract
this Court said :
E "The answer to the argument is that where a statute makes a specific
provision that a body corporate has to act in a particular manner, and
in no other, that provision of law being mandatory and not directory,
has to be strictly followed."

3. It was the appellant, the builder, who was building the
F underground shopping complex. It was not undertaking the
construction as an agent of the Mahapalika. In this connection
reference was made to a decisions of this Court in Akadasi
Padhan v. State o/Orissa, (1963] 2 Supp. SCR 691at722. It was,
therefore, mandatory that the building plan be approved by the
G LOA.

In Akadast Padhan v. State of Orissa, [1963] Supp. 2 SCR 691, the State
of Orissa acquired a monopoly in the trade of Kendu leaves. Prior to this the
petitioner used to carry on ~xtensive trade in the sale of ~e~du leav~s .. He
filed a petition under Article 32 of the Constitution c6mpla1mng restnct1?ns
H put on his fundamental rights. In the course of discussion this Court said:-
M.I. BUILDERS PVT.LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1115
"When the State carries on any trade, business or industry it must\ A
inevitably carry it on either departmentally or through its officers ·
appointed for that purpose. In the very nature of things, the State
cannot function without the help of its servants· or employees and
that inevitably introduces the concept of agency in a narrow and
limited sense. There are some trades or businesses in which it may be B
inexpedient to undertake the work of trade or business departmentally
or with the assistance of State servants. In such cases, it is open to
the State to employ the services of agents, provided the agents work
on behalf of the State and not for themselves."

The Court then said: -
c
"It is true that an agent is entitled to commission in commercial
transactions, and so, the fact that a person earns commission in
transactions carried on by him on behalf of another would not destroy
his character as that other person's agent. Cases of Declarers agents
are not unknown to commercial law. But we must not forget that we D
are dealing with agency which is permissible under Art. 19(6) (ii), and
as we have already observed, agency which can be legitimately allowed
under Art. 19(6)(ii) is agency in the strict and narrow sense of the
term; it includes only agents who can be said to carry on the monopoly
at· every stage on behalf of the State for its benefit and not for their
own benefit at all. All that such agents would be entitled to would be E
remuneration for their work as agents. That being so, the extended
meaning of the word 'agent' in a commercial sense on which the
learned Attorney-General relies is wholly inapplicable in the context
of Art. 19(6Xii)."

4. Mahapalika had disposed of the land in favour of the builder in
F
contravention of the provisions relating to disposal of property

..... under Sections 128 and 129 of the Act. If the substance of the
impugned agreement is looked into it is the transfer of interest
in land by the Mahapalika to the builder.
5. Even Section 128 of the Act was not applicable as the land was
G
'' a park which could not be disposed by the Mahapalika. As a
matter of fact Mahapalika was the trustee of the park and the
doctrine of public trust, which was applicable in India as held
by this Court in MC. Mehta v. Kamal Nath and others, (known
as Span case) [1997] l sec 388, was applicable to the park in H
lt16 SUPREME COURT REPORTS [1999) 3 S.C.R.

A question. Mahapalika, therefore, could only manage the park
and could not alienate it or convert it something different from
the park. Park was held by the Mahapalika on trust for the
citizens of Lucknow.

In MC. Mehta v. Kamal Nath and others, (1997] 1 SCC 388,
B the case, which is also known as that of 'Span Resorts case',
owned by Span Motels Pvt. Ltd., this Court observed, that
public trust doctrine, as discussed in the judgment, is a part of
the law ofland. The Court gave various directions even cancelling
the lease granted in favour of the Motel and directing the Motel
to pay compensation by way of cost for restitution of the
c environment and ecology of the area. The judgment was cited
to reaffirm the argument for preservation of ecology, which is an
important factor in preserving the Jhandewala Park.

6. Section 114 of the Act provides for obligatory duties of the
Mahapalika and one such obligatory functions is to maintain
D
public places, parks and to plant trees. This cannot now be done
as the park has been dug and construction made under.ground.
By allowing underground construction Mahapalika has deprived ·
itself to its obligatory duties which cannot be permitted.
Irreversible changes have been made. Qualitatively it may still be
E a park but it is a park of different nature inasmuch as trees
cannot be planted. Now it is like a terrace park. Though the Park
Act came into operation w.e.f. February l, 1995 and the
construction of the underground shopping complex had started
in January, 1995 after the interim order of this Court but since
the construction was made subject to the final order of this
,F
Court the provisions of the Park Act will have to be considered
while deciding the matter.

7. Contract of such a magnitude could not have been awarded to
the builder without calling for tenders. There was no ground to
depart from the settled norms. Decision of this Court in
G
Sachidanand Pandey & Anr. v. State of West Bengal and others,
[1987] 2 sec 295, is no authority for the proposition that it was
not necessary to invite tenders. That was a case relating to
development of tourism industry in the State of West Bengal.
The case did not lay any rule but was an exception thereto. In
H that case a lease was granted by the State Government to Taj
' M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1117

Group of Hotels for construction of a Five Star Hotel. This was A
challenged on various grounds in a writ petition filed under the
banner of PIL. The writ petition was dismissed by the learned
single judge of the High Court. On appeal, the Division Bench
confinned the judgment of the learned single Ji:idge. The matter
then came to this Court under Article 136 of the Constitution . B
and leave was granted. One of the questions raised was that
lease which was granted by the State Government without inviting
tenders or holding a public auction. This Court posed the question
if in pursuing the socio-economic objective, the State is bound
to invite tenders or hold a public auction. The Court referred to
various judgments of this Court in Rashbihari Panda v. State C
ofOrissa, [1969] 1 SCC 414; R.D. Shetty v. International Airport
Authority ofIndia & Ors. [1979] 3 SCC 489; Kasturi Lal Lakshmi
Reddy v. State of J & K. [1980] 4 SCC 1; State of Haryana v.
Jage Ram, [1983] 4 SCC 556; Ram and Shyam Co. v. State of
Haryana & Ors. [1985] 3 SCC 267 and Chenchu Rami Reddy &
Anr. v. Government ofA.P. & Ors., [1986] 3 SCC 391. Then this D
Court observed as under :
"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. Certain precepts and principles have to be observed. E
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 that is the ordinary rule, it is not an invariable rule.
There may be situations where there are compelling reasons p
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 is as important as doing
justice. Nothing should be done which gives an appearance of bias,
jobbery or nepotism.
G
Applying these tests, we find it is impossible to hold that the
Government of West Bengal did not act with probity in not inviting
tenders or in not holding a public auction but negotiating straightway
at ann's length with the Taj Group of Hotels."

This Court also found that on the commercial and financial aspect of H
1118 SUPREME COURT REPORTS [1999] 3 S.C.R.

A the lease even on a prima facie view, there appears to be nothing wrong or
objectionable in the 'net sales' method. The 'net sales' method is a fairly well
--
known method adopted in similar situations. It is a profit-oriented and appears
to be in the best interest of the Government of West Bengal.

8. There was collusion among certain members of the Mahapalika,
B its officers and the builder. Even the conduct of the lawyer of
the Mahapalika was commented upon adversely. It was not (

necessary for the Mahapalika to file a separate appeal against·
the impugned judgment of the High Court. These members of
the Mahapalika equated themselves with the builder. The lawyer
of the Mahapalika drafted the agreement dated November 4,
c 1993 between the Mahapalika and the builder. He also filed
special leave petitions on behalf of the Mahapalika which had
since been withdrawn. All the fees of the lawyer of the Mahapalika
for attending the meetings of the Mahapalika, drafting the
agreement, preparing special leave petitions, etc. were paid by
D the builder though that was shown to be done at the instance
of the Mahapalika. There is on the record of the Mahapalika a
letter of the builder that there was a collusion among the
Mahapalika, builder, the lawyers and the officers of the
Mahapalika, the architect of the Mahapalika, who approved the
Jay out plan, was also the architect of the LDA. After the lay out
E plan was submitted to the LDA the architect of the Mahapalika
himself okays the lay out plan as architect of the LDA, which
is then approved by the Vice-Chairman of the LDA.

9. A body corporate cannot be made to remain bound by its earlier
decision if that decision is found to be contrary to law. There
F could not be any estoppel against the statute particularly when
-
..
the whole project is against public interest. The State Government
was right in changing its stand. State Government considered
the whole matter and on the representations re~eived from the
public decided to accept the judgment of the High Court.
G
10. The agreement is a fraud on the power of the Mahapalika. Prime
land has been given to the builder for a song. The fact that the
scheme was so lucrative could be seen that all shops to be
constructed less 5% were booked within six days of the
advertisement appearing in December, 1993. Public interest and
H public exchequer have been sacrificed. Mahapalika divested itself
M.I. BUILDERS PVT . LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1119

- of its control over the project. The agreement is wholly one
sided favouring the builder. It is unjust, unreasonable and
irrational.
A

11. Builder had already collected Rs.25,000 from each of the
prospective allottees at the time of registration when it was
originally planned to constru£t 500 shops. There were no building B
plan in existence. Collecting of this amount by the builder is of
no consequence in deciding the present appeals. It is now
stated that 263 shops had been constructed though the builder
collected earnest money for 500 shops. In spite of the judgm~nt
of the High Court the builder did not care to refund the earnest
money so collected. Its conduct does not entitle it to any
c
consideration. No proper study was undertaken before the
Mahapalika granted its approval for construction of the
underground shopping complex. There were no building plans
when the agreement was entered into.
D
12. Narrow consideration that a few crores of rupees have been
spent on the construction cannot come into consideration when
the construction is in clear violation of the Act, the Development
Act and Article 21 of the Constitution. That crores ·of rupees
have been spent is an argument which is advanced in every
other case of unauthorised construction. E
... 13. There is no alternative to the construction which is unauthorised
and illegal to be dismantled. The whole structure built is in
contravention of the provisions of law as contained in the
Development Act. The decision to award contract and the
agreement itself was unreasonable. The construction of the F
underground shopping complex, if allowed to stand, would
perpetuate an illegality. Mahapalika could not be allowed to
benefit from the illegality. A decision of this Court in Seth Badri
Prasad and others v. Seth Nagarmal and others, [1959] I Supp.
SCR 769 at 774 was referred to, to contend that the court could
G
-.._ not exclude from its consideration a public statute and since the
... construction of the underground shopping complex was wholly
illegal it had to be dismantled. No question of moulding a relief
can arise as the builder made construction on the basis of the
interim order of this Court and at its own risk. Various decisions
of this Court in support of these contentions where demolition H
1120 SUPREME COURT REPORTS [1999) 3 S.C.R.

A of unauthorised construction was ordered, were referred to, these
being (1) K. Ramdas Shenoy v. The Chief Officers, Town
Municipal Council, Udipi and others, [1975] 1 SCR 680 at 685,
(2) Virender Gaur and others v. State_ of Haryana and others, ~

'
[1995] 2 SCC 577 at 582, (3) Pleasant Stay Hotel and another
v. Palani Hills Conservation Council and others, [1995] 6 SCC
B 127 at 139, (4) Cantonment Board, Jabalpur and others v. S.N.
Awasthi and others, [1995] Supp. 4 SCC 595 at 596, (5) Pratibha
Cooperative Housing Society Ltd. And another v. State of
Maharashtra and others, [1991] 3 SCC 341, (6) Dr. G.N Khajuria
and others v. Delhi Development Authority and others, [1995]
c 5 SCC 762, (7) Mrs. Manju Bhatia and another v. New Delhi
Municipal Council and another, JT (1997) 5 SC 574 and (8) an
unreported decision of this Court in Ram Awatar Agarwal v.
Corporation of Calcutta, (Civil Appeal 6416of1981) decided on
August 20, 1996.

D In K Ramadas Shenoy v. The Chief Officers, Town Municipal
Council, Udipi and others, [1975] 1 SCR 680, respondent was
granted by resofotion of the Municipal Committee to construct
a cinema theatre at a place where earlier respondent was granted
licence for the construction ofKalyan Mantap-cum-Lecture Hall.
In a petition under Article 226 of the Constitution the High Court
E held that the cinema theatre could not be constructed in a place
other than specified localities without proper sanction but since
the third respondent had spent a large sum of money it did not •
quash the impeached resolution of the Municipal Committee.
The appellant contended before this Court that the Town Planning
F Scheme forbade in cinema building at the place asked for and,
therefore, the resolution of the Municipal Committee was invalid.
This Court observed as under: -
"An illegal construction of a cinema building materially affects the
right to or enjoyment of the property by persons residing in the
residential area. The Municipal Authorities owe a duty and obligation
G
under the statute to see that the residential area is not spoilt by
unauthorised construction. The scheme is for the benefit of the
residents of the locality. The Municipality acts in aid of the scheme.
The rights of the residents in the area are invaded by an illegal
-
'"'

construction of a cinema building. It has to be remembered that a
H scheme in a residential area means planned orderliness in accordance
M.l. BUILDERS PVT. LTD. v; R.S. SAHU [D.P. WADHWA, J.] 1121
with the requirements of the residents. If the scheme is nullified by A
a_rbitrary acts in excess and derogation of the powers of the
Municipality the courts will quash orders passed by Municipalities in
such cases.

The Court enforces the performance of statutory duty by public
bodies as obligation to rate payers who have a legal right to demand B
compliance by a local authority with its duty to observe statutory
rights alone. The scheme here is for the benefit of the public. There
is special interest in the performance of the duty. All the residents in
the area have their personal interest in the performance of the duty.
The special and substantial interest of the residents in the area is C
injured by the illegal construction."

In Virender Gaur and others v. State of Haryana and others, [1995] 2
SCC 577, the Municipal Committee, Thanesar, District Kurukshetra in the State
of Haryana framed Town Planning Scheme, which was sanctioned by the
Government. In the Scheme certain land vested in the municipality. State D
Government sanctioned allotment of that land to Punjab Samaj Sabha on:
payment qf a price at the rates specified therein. When the Punjab Samaj
Sabha after getting sanction started construction the appellants filed writ
\
petition in the Punjab and Haryana High Court, which was, however, dismissed.
It was submitted before this Court that the purpose of the Scheme was to E

.. reserve the land in question for open spaces for the better sanitation,
environment and the recreational purposes of the residents in the locality and
that the Government had no power to lease out the land to Punjab Samaj
Sabha. Reversi~g the judgment of the High Court this Court said that after
the writ petition was filed by the appellants Punjab Samaj Sabha instead of
awaiting the decision on merits proceeded with the construction in post-haste F
and expended the money on the construction. Therefore, the Court said, "we
do not think that it would be a case to validate the actions deliberately
chosen, as a premium, in not granting the necessary relief. It was open to the
Punjab Samaj Sabha to await the decision and then proceed with the
construction. Since the writ petition was pending, it was not open to them G
to proceed with the construction and then to plead equity in their favour.
Under these circumstances, we will not be justified in upholding the action
of the State Government or the Municipality in allotting the land to Punjab
Samaj Sabha to the detriment of the people in the locality and in gross
violation of requirements of the Scheme. Any construction made by Punjab
Samaj Sabha should be pulled down and it must be brought back to the H
1122 SUPREME COURT REPORTS [1999] 3 S.C.R.

A condition in which it existed prior to allotment. The Municipality is directed
to pull down the construction within four weeks from today. They should
place the report on the file of the Registry of the action taken in the matter.,"

In Pleasant Stay Hotel and another etc. etc. v. Palani Hills
Conservation Council and others, [1995] 6 SCC 127, the question was whether
B the impugned Government Orders were lawfully and validly made and, if so,
whether they could regularise the unauthorized construction. High Court
quashed the impugned Government orders and issued certain directions. This
Court observed as under and then referred the matter to the High Court for
certain clarifications:-
c "In our considered opinion the most eloquent and patent fact that
must tilt the scale in this dispute in favour of the, Council is that the
Hotel has admittedly made a residential construCtion of seven floors
even though their sanctioned plan was only for two floors. That
necessarily means that five floors of the building have been constructed
D illegally and unauthorisedly. It is not surprising therefore that the
entire endeavour of the Hotel now is to protect the two floors
constructed above the road level and to yield to any workable formula.
It is in that context that the Hotel, without prejudice to its rights and
contentions, had suggested that the entire structure of seven floors
might be allowed to remain and, for that purpose it was prepared to
E give an undertaking that they would not use the five floors below the
road level for any residential purpose but utilise it only for keeping
air-conditioning plant and other attendant purposes for running the
Hotel on the two floors above the road level. The Council, however,
vehemently opposed the above suggestion on the ground that
acceptance thereof would mean giving judicial imprimatur to utter and
F
flagrant breach of statutory provisions to which the Hotel resorted to
in spite of repeated opportunities given and reminders issued to
retrace their steps and any sympathy shown to the Hotel would be
wholly misplaced. We need not, However, dilate on this aspect of the
matter as it appears to us that there is some confusion as to the nature
G of the above-quoted direction, given by the High Court and it requires
to be clarified."

In Cantonment Board, Jaba/pur and others v. S.N. Avasthi and others,
[1995] Supp. 4 SCC 595, this Court observed that construction made in
contravention of law would not be a premium to extend equity so as to
H facilitate violation of the mandatory requirements oflaw. Here the Cantonment
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1123
,,
Board had granted permission for construction of a building which was later A
on cancelled as the resolution of the Board granting permission was suspended
by the GOC-in-Chief.

In Pratibha Cooperative Housing Society Ltd And another v: State of
Maharashtra and others, [ 1991] 3 SCC 341, this Court came down heavily on
the housing society which made construction in violation of Floor Space B
Index. This Court said that such unlawful construction was made by the
Housing Board in clear and flagrant violation and disregard ofFSI and upheld
the order of demolition of eight floors as ordered by the Bombay Municipal
Corporation. While dismissing the special leave petition this Court observed
as under: - c
"Before parting with the case we would like to observe that this case
should be a pointer to all the builders that making of unauthorised
constructions never pays and is against the interest of the society at
large. The rules, regulations and by-laws are made by the Corporations
or development authorities taking in view the larger public interest of D
the society and it is the bounden duty of the citizens to obey and
follow such rules which are made for their own benefits."
In Dr. G.N. Khajuria and others v. Delhi Dellelopment Authority and
others, (1995] 5 SCC 762, appellants were some of the residents of Sarita Vihar
colony, developed by the Delhi Development Authority (ODA). It was E
contended that the DDA permitted a nursery school to be opened in a certain
park in complete violation of the provisions of the Delhi Development Act,
1957. After considering the provisions of the Delhi Development Act Master
and Zonal Development Plans this Court said that the site at which the school
was allowed to be opened was a park. It further held that it was not open to
the ODA to carve out any space meant for park for a nursery school. This F
Court said that the allotment for opening the nursery school was misuse of
power and it cancelled the allotment. This Court observed that the construction
put up by the allottee, even though permanent, was of no relevance as the
same has been done on a plot of !and allotted to it in contravention of law.
As to the submission that dislocation from the present site would cause G
difficulty to the tiny. tots, this Court said that the same has been advanced
only to get sympathy from the court inasmuch as children, for whom the
nursery school is meant, would travel to any other nearby place where such
a school would be set up by the allottee or by any other person. Six months
time was granted to the allottee to make alternative arrangements as it thinks
fit to shift the school so that the children are not put to any disadvantageous H
1124 SUPREME COURT REPORTS [1999) 3 S.C.R.

A position. Then, this Court observed as under:-
"Before parting, we have an observation to make. The same is that a
feeling is gathering ground that where unauthorised constructions are
demolished on the force of the order of courts, the illegality is not
taken care of fully inasmuch as the officer of the statutory body who
B had allowed the unauthorised construction to be made or make illegal
allotments go scot free. This should not, however, have happened for
two reasons. First, it is the illegal action/order of the officer which lies
at the root of the unlawful act of the citizen concerned, because of
which the officer is more to be blamed than the recipient of the illegal
benefit. It is thus imperative, according to us, that while undoing the
c mischief which would require the demolition of the unauthorised
construction, the delinquent officer has also to be punished in
accordance with law. This, however, seldom happens. Secondly, to
take care of the injustice completely, the officer who had misused his
power has also to be properly punished. Otherwise, what happens is
D that the officer, who made the hay when the sun shined, retains the
hay, which tempts others to do the same. This really gives fillip to the
commission of tainted acts, whereas the aim should be opposite."

In Mrs. Manju Bhatia and another v. New Delhi Municipal Committee
and another, JT (1997) 5 SC 574, the builder, after obtaining requisite sanction
E to build 8 floors, constructed more floors, sold the flats and gave possession
to the respective buyers. Subsequently it was found that the builder
constructed the building in violation of the building regulations and
consequently flats on the top four floors were ordered to be demolished. The
demolition was challenged in the High Court by way of a writ petition, which -
F was dismissed. Special leave to appeal to this Court was also dismissed. The
question before this Court was whether the appellants, who had purchased
the flats without the builder informing them of the illegal construction, should
be compensated for the loss suffered by them. High Court in the impugned
judgment directed the return of the amount plus the escalation charges. All
this was on a suit brought by the appellants. This Court noticed that the
G escalated price as on the date was around Rs.1.5 crores per flat. Taking into
consideration the totality of the circumstances this Court directed the builder
to pay Rs.60 lacs including the amount paid by the allottees. -
In an unreported decision of this Court in Ram Awatar Agarwal & ors.
v. The Corporation of Calcutta & ors., [C.A. No. 6416 of 1981] decided on
H August 20, 1996, an unauthorised construction in the city of <;alcutta was
' M.l. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] ¥J25
allowed to be demolished by the Corporation of Calcutta. It was a multistory · A
building. The Court observed as under:-

"We share the feeling of the Deputy City Architect when he states
in paragraph 18 of his affidavit that this is a case in which an
unscrupulous builder took advantage of the court's order upto a point
of time and after he failed in the legal process upto this court the B
'tenants were set up to delay the inevitable and thus in this matter the
unauthorised structure hazardous and unsafe has stood all these
years. We have, therefore, no manner of doubt that this is a case in
which exemplary costs should be awarded."

At the conclusion of the arguments and in order to decide the matter
c
fully and finally but without prejudice to the respective contentions of the
parties, we wanted to know the nature of construction so far as carried out;
the cost thereof; the area meant for shopping and parking separately; and if
the plans were in accordance with the Development Act and Rules. This was
particularly so when by an interim order of this Court construction was D
allowed though with certain clear stipulations.

Prof. T.S. Narayanaswami, Ex-Head of Department of Building Engineering
and Management, School of Planning and Management, New Delhi was
appointed as Local Commissioner for the purpose. He was asked to report on E
the following aspects of the construction :
a:
"l. What is the extent of construction put up by the appellant under
ground the aforesaid part?
2. What is the nature of said Construction?
F
3. What cost can be said to have been incurred by the appellant
in the construction uptil now?
4. What further costs, if any, are required to be incurred for
completion of the project with parking provisions?
5. What will be the extent of the cost required to be incurred if the · G
__, structures existing on spot are required to be demolished and
~
the land is to be restored to its original position?
6. Whether the present structures are put up by the appellant in
accordance with the building plans sanctioned by the Nagar
Nigam? H
1126 SUPREME COURT REPORTS [1999] 3 S.C.R.

A 7. Whether the present structures comply with the bui'lding
requirements as per the provisions governing the Lucknow
Development Authority?
8. Whether the structures existing on spot are safe and sound and
not likely to create any health hazard, if they are allowed to be
B retained on spot?
9. Whether the existing structures with suitable alterations can be
used for parking of vehicles and/-0r for putting up other amenities
--
like public convenience etc?
IQ. If the land earmarked for parking in the building plans submitted
c to the Nagar Nigam by the appellant, and which land is dug up
at present, if restored to its original position, is it feasible to use
the existing structures for parking of vehicles and for putting up
other amenities?
11. What are ·the existing general conditions of the locality and the
D area around the park?"

It is not necessary to examine the report of the Local Commissioner in
detail except to note that :

I. extent of work carried out is approximately 80% of the civil and
E structural work, about 30% of the finishing work and 20% of the
services support work;
2 it is a 'First Class' permanent construction;

3. cost of construction of the work so far executed is approximately
Rs. 3.52 crore and the cost of work still to be done is approximately
F 2.97 crore;

4. dismantling of the construction so far made and restoration of
the park would cost Rs. 98,10,181 less Rs. 22,19,550 salvage
value;

G 5. though there is a letter of approval of confirmation having been
given, there are no sanctioned drawings (Chief Architect of the
Mahapalika said that sanctioned drawings were "missing" from
his files).
-
6. Lucknow Development Authority (LOA) did not play any role
H in sanctioning the project except the Layout Plan. (Layout Plan
' M.l. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1127
was forwarded to the LOA by the Chief Architect of the A
Mahapalika who was also officiating as Chief Architect of LOA
at that time. In other words, the approval of the Layout at the
LOA level was recommended by the same person who forwarded
it from the Mahapalika);
7. Master Plan could not have envisaged the park as a site available B
for commercial exploitation, given the density and congestion of
the surrounding area;
8. structure as designed is safe from the structural engineering
view point;
9. air pollution levels of the park and the surrounding areas would c
go up by substantial amount as a result of underground shopping
complex-cum-parking; and
10. there is a lot of crowding during day hours (9.00 a.m to 6.00 p.m.)
leading to generally slow movement of traffic and occasional
traffic hold ups. A high decibel level thanks to vehicles and D
moving people and vendors. A lot of solid waste collection at
the end of the day and generally high level of pollution as a
result.

By and large the Report of Prof. Narayanaswamy has found acceptance
by all the parties. E
Mr. M.L. Verma, learned senior advocate, who appeared for M.I. Builders
after the report of Prof. Narayanaswamy, submitted that the Report of the
Local Commissioner insofar as it gives cost incurred on the constructions is
not correct and so also the cost required to be incurred for completion of the F
project. His argument was that cost so far incurred was in fact more than what
the Local Commissioner said and that cost required for completion of the
project was less than that arrived at by the Local Commissioner. We, however,
.. do not find merit in his submission as we find that the Local Commissioner
has applied the same principles while arriving at the cost so far incurred and
the cost to be incurred for completion of the project. We, therefore, accept G
the Report of the Local Commissioner in its entirety. But to what effect we
shall presently see.

Jhandewala Park, the park in question, has been in existence for a great
number of years. It is situated in the heart of Aminabad, a bustling commercial-
cum-residential locality in the city of Lucknow. The park is of historical H
1128 ·SUPREME COURT REPORTS [1999] 3 S.C.R.

A importance. Because of the construction of underground shopping complex
and parking it may still have the appearance of a park with grass grown and
path laid but it has lost the ingredients of a park inasmuch as no plantati"on
now can be grown. Trees cannot be planted and rather while making
underground construction many trees have been cut. Now it is more like a
B terrace park. Qualitatively it may still be a park but it is certainly a park of
different nature. By construction ofunderground shopping complex irreversible
changes have been made. It was submitted that the park was acquired by the
State Government in the year 1913 and was given to the Mahapalika for its
management. This has not been ccmtroverted. Under Section 114 of the Act
it is the obligatory duty of the Mahapalika to maintain public places, parks
C and plant trees. By allowing undergrouncl construction Mahapalika has
deprived itself of its obligatory duties to maintain the park which cannot be
permitted. But then one of the obligatory functions of the Mahapalika under
Section 114 is also to construct and maintain parking lots. To that extent some
area of the park could be used for the purpose of constructing underground
parking lot. But that can only be done after proper study has been made of
D the locality, including density of the population living in the area, the floating
population and other certain relevant considerations. This study was never
done. Mahapalika is the trustee for the proper management of the park. When
true nature of the park, as it existed, is destroyed it would be violative of the
doctrine of public trust as expounded by this Court in Span Resort Case,
E (1997] I SCC 388. Public Trust doctrine is part oflndian law. In that case the
respondent who had constructed a motel located at the bank of river Beas
interfered with the natural flow of the river. This Court said that the issue
presented in that case illustrated "the classic struggle between those members
of the public who would preserve our rivers, forests, parks and open lands
in their pristine purity and those charged with administrative responsibilities
F who, under the pressures of the changing needs of an increasingly complex
society, find it necessary to encroach to some extent upon open· lands
heretofore considered inviolate to change".
)
•
In the treatise "Environmental Law and Policy : Nature, Law, and Society"
G by Plater Abrams Goldfarb (American Casebook series - 1992) under the
Chapter on Fundamental Environmental Rights, in Section 1 (The Modem -j
Rediscovery of the Public Trust Doctrine) it has been noticed that "long ago
•there developed in the law of the Roman Empire a legal theory known as the
"D9ctrine of the public trust." In America Public Trust doctrine was applied
to public properties, s~ch as shore-lands and parks. As to how doctrine
H works it was stated: "The scattered evidence, taken together, suggests that
' M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1129
the idea of a public trusteeship rests upon three related principles. First, that A
certain interests 'like the air and the sea' have such importance to the
citizenry as a wh,ole that it would be unwise to make them the subject of
private ownership. Second, that they partake so much of the bounty of
nature, rather than of individual enterprise, that they should be made freely
available to the entire citizenry without regard to economic status. And,
finally, that it is a principle purpose of government to promote the interests B
of the general public rather than to redistribute public goods from broad
public uses to restricted private benefit...o With reference to a decision in
Illinois Central Railroad Company v. Illinois, (146 U.S. 387 (1892]), it was
stated that 'the court articulated in that case the principle that has become
the central substantive thought in public trust litigation. When a state holds C
a resource which is available for the free use of the general public, a court
will look with considerable skepticism upon any governmental conduct which
is calculated either to reallocate the resource to more restricted uses or to
subject public uses to the self-interest of private parties'. This public trust
doctrine in our country, it would appear, has grown from Article 21 of the
Constitution. D
Thus by allowing construction of underground shopping complex in the
park Mahapalika has violated not only Section 114 of the Act but also the
public trust doctrine.
E

- If we now refer to the pr()visions of law relating to notice of meetings
and business of the Mahapalika and its committees it is apparent that these
provisions were not adhered to. There is no authority with the Mahapalika
to constitute High Power Committee and to delegate its functions to that High
Power Committee. There was no agenda at any time in any of the meetings
of the Mahapalika for consideration of the underground shopping complex. F
There were no proposals, no documents, no plan, no study, no project report
or feasibility report on the basis of which Mahapalika could have given a
green signal for construction of the underground shopping complex. There
was no discussion and no infonned decision. Mahapalika completely abdicated
its functions. Mahapalika delegated its functions to the High Power Committee G
in contravention of the Act. Constitution of the High Power Committee itself
''
was wholly illegal. High Power Committee took decision to hand over the park
to the builder for construction of the underground shopping complex and also
approved the terms of the agreement dated November 4, 1993. Decision of the
High Power Committee was put before the Executive Committee and the
general body of the Mahapalika for the purpose of "infonnation" and both H
1130 SUPREME COURT REPORTS [1999] 3 S.C.R.

A these bodies stamped their approval. As noted above there was no agenda
for consideration of these resolutions of the Executive Committee of the
Mahapalika. Corporators had no time to apply their minds. Such an important
matter, where the cost of the project was likely to run in crores of rupees,
could not have been considered under the topic "other subjects, subject to
B the permission of the Presiding Officer". Section I 05 of the Act protects any
act done or proceeding taken on account of any defect or irregularity in
procedure not affecting the substance. In the present case it is not mere
irregularity or defect in the procedure but the whole procedure is in clear
breach of Sections 91 and 119 of the Act which are mandatory.

C The law mandates that not only the notice of the date and the time of
the meeting but the notice of the business to be transacted at such meeting
should be given at least 4 clear days before the date of the meeting for the
Mahapalika and 3 days for the Executive Committee. When the agen~a did
not include the subject of construction of underground shopping complex nor
was there any material to support the discussion the subject of construction
D of underground shopping complex it could not have been considered in the
meetings of the Mahapalika and the Executive Committee.

In Myurdhwaj Cooperative Group Housing Society Ltd. v. Presiding
Officer, Delhi Cooperative Tribunal and Ors., [1998] 6 SCC 39, the appellant
E was a Housing Co-operative Society registered under the Delhi Co- operative
Societies Act, 1972 and Delhi Co-operative Societies Rules, I ~73. In the
meeting of the general body of the society, it was decided that only those
who have deposited minimum amount specified by the general meeting would
be allotted flats and others would be accommodated on the flats to be
constructed on the additional land in Phase-II construction. Respondent No.3
F w\10 was one of the original members of the society challenged the decision
of the general meeting. One of the contention raised was that decision of the
general body which relegated her and other such members to Phase-II was
not on the agenda. This Court said a general body can always with the ,1
approval of the house in the meeting of its members take up any other matter
G not covered by the agenda on that account, no illegality could be held. This
Court also observed that Section 28 of the Delhi Co-operative Societies Act,
1972 vests final authority in the general body of a cooperative society. It has
wide powers including residuary power except those not delegated to any
other authority under the Act, the rules and its bye-laws. In other words, its
power, if any, is only restricted by the Act, the rules, the bye-laws and any
H order having force of law. This decision is of no help to the appellant as in
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1131
the present casee.ve are considering the statutory provisions for holding of A
the meetings of the Mahapalika and the Executive Committee which have
been violated.

Agreement dateci November 4, 1993 has not been executed as required
under Section 133 of the Act. Resolution of the High Power Committee, which
was placed before the Mahapalika and the Executive Committee for information, B
required that 'the prescribed project may be got executed by M.1. Builders
Pvt. Ltd. and the Mukhya Nagar Adhikari should be authorised for conducting
all the forthcoming actions and formalities". Now, Mahapalika has power to
enter into contracts (Sec. 131). Under sub-section (1) of Section 132 contract
shall be expressed to be made, for and on behalf of Mahapalika and shall be C
so executed for and on behalf of the Mahapalika. Under sub-section (4), no
contract involving an expenditure exceeding five lakh rupees shall be made
by Mukhya Nagar Adhikari (Chief Executive Officer) unless it has been
sanctioned by the Mahapalika. Proviso (a) to Section 133(1) requires common
seal of the Mahapalika to be affixed on ever; contract. The common seal shall
be affixed only in the presence of a corporator (Sabhasad) who shall attach D
his signatures to the contract in token that the same was sealed in his
presence. The signature of the corporator shall be distinct from the signature
of any witness to the execution of such contract (sub-sections 2 and 3 of
Section 133). Under sub-section 4 of Section 133 no contract executed otherwise
than as provided in the section shall be binding on the Mahapalika. The E
impugned agreement is thus not executed in accordance with the requirements
--"" of law. Further, under sub- section (2) of Section 136 where the Mahapalika
approves the project and the entire estimated cost exceeds rupees ten lakhs,
the project report shall be submitted to the State Government and it is for the
State Government to reject or sanction the project with or without modifications.
Till that is done no work shall be commenced. No such sanction of the State F
Government was obtained in the present case. It was submitted that this
provision would apply only ir'the project cost was to be incurred by the
Mahapalika. We do not think it is so. It is the cost of the project that matters
and not who incurs the cost in the first instance. Agreement dated November
4, 1993 is, therefore, not a valid contract and not binding on the Mahapalika. G
As held in HS. Rikhy 's case, AIR (1962) SC 554 where a statute makes a
specific provision that a body corporate has to act in a particular manner and
in no other, that provision of law being mandatory and not directory has to
be strictly followed. This principle will apply both as regards holding of
meeting of the Mahapalika and execution of contract on its behalf. This
judgment is also authority for the preposition that there is no estoppel against H
1132 SUPREME COURT REPORTS (1999] 3 S.C.R.

A a statute.
We may now examine some of the terms of the agreement dated
November 4, 1993. There are six recitals to the agreements which cannot be
co-related to any discussion in any of the meetings of the Mahapalika, the
Executive Committee or the High Power Committee. Under clause (2) of the
B agreement it is for the builder to make construction at its own cost and then
to realise the cost with profit not exceeding more than 10% of the investment
in respect of each shop. Nobody knows how much cost the builder is likely
to incur and how long it will continue to be in possession of the shopping
complex. Full freedom has been given to the builder to lease out the shops
C as per its own terms and conditions to persons of its choice on behalf of the
Mahapalika and Mahapalika shall be bound by these terms and conditions.
Builder ha.; also been given the right to sign the agreement on behalf of the
Mahapalika on the terms and conditions which the builder may deem fit and
proper. Builder is only required to give a copy of the agreement to the
Mahapalika after its execution and both the Mahapalika and the builder shall
D remain bound by the terms of that agreement. Since there is no project report
nobody knows how many shops the builder would construct and of what
sizes. Mahapalika is allowed to charge Rs.5,000 per shop for every second
and subsequent transfer of shops by the builder but what amount is to be
charged for the first transfer or subsequent transfers is left to the sole
E discretion of the builder. A bare glance at the terms of agreement shows that
not only that the clauses of the agreement are unreasonable for the Mahapalika
but they are atrocious. No person of ordinary prudence shall ever enter into
such an agreement. A trustee, which the Mahapalika is, has to be more
cautious in dealing with its properties. Valuable land in the heart of commercial
area has been handed on a platter to the builder for it to exploit and to make
F run away profits. As a matter offac~ 6n examining the terms of the agreement
we find that Mahapalika has been completely ousted from the underground
shopping complex for an indefinite period. It has completely abdicated its
functions.
..
...
G To repeat, the agreement is c\lmpletely one sided favouring the builder.
The land of immense value has been handed over to it to construct
underground shopping complex in violation of the public trust doctrine and
the Master Plan for the city of Lucknow. Mahapalika has no right to step in
even if there is any violation by the builder of the terms of the agreement or
otherwise. Mahapalika, though considered to be the owner of the land, is
H completely ousted and divested of the land for a period which is not definite
M.l. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA,J.] 1133
and which depends wholly on the discretion of the builder. On the question A
·- ofreasonableness reference may be made to Wade on Administrative Law, 7th
Edition, page 399. The learned author observed that '.'The court must strive
to apply an objective standard which leaves to the deciding authority the full
range of choices which the legislature is presumed to have intended. Decisions
which are extravagant or capricious cannot be legitimate". Quoting Lord B
Hailsham LC in Re W. (an infant) (1971) AC 682, where he said, "two reasonable
persons can perfectly reasonably come to opposite conclusions on the same
set of facts without forfeiting their title to be regarded as reasonable". The
following passage from the treatise would be relevant:-

"This is not therefore the standard of 'the man on the Clapham C
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. It distinguishes between proper use and
improper abuse of power. It is often expressed by saying that the
decision is unlawful if it is one to which no reasonable authority could
have come. This is the essence of what is now commonly called D
"Wednesbury unreasonableness", after the now famous case in which
Lord Greene MR expounded it as follows.

It is true that discretion must be exercised reasonably. Now what
does that mean? Lawyers familiar with the phraseology used in E
relation to exercise of statutory discretions often use the word
'unreasonable' in a rather comprehensive sense. It has 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 discretion must, so to speak, direct himself properly in
law. He must call his own attention to the matters which he is F
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
I acting 'unreasonably'. Similarly, there may be som.ething so
absurd that no sensible person could ever dream that it lay
within the powers of the authority. Warrington LJ in Short v. G
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 described as being done in bad faith; and, in H
1134 SUPREME COURT REPORTS [l 999] 3 S.C.R.

A fact, all these things run into one another.

This has become the most frequently cited passage (though
most commonly cited only by its nickname) in administrative law. It
explains how 'unreasonableness', in its classic formulation, covers a
multitude of sins. These various errors commonly result from paying
B too much attention to the mere words of the Act and too little to its
general scheme and purpose, and from the fallacy that unrestricted
language naturally confers unfettered discretion.

Unreasonableness has thus become a generalised rubric covering
not only sheer absurdity or caprice, but merging into illegitimate
c motives and purposes, a wide category or errors commonly described
as 'irrelevant considerations', and mistakes and misunderstandings
which can be classed as self-misdirection, or addressing oneself to
the wrong question. But the language used in the cases shows that,
while the abuse of discretion has this variety of differing legal facets,
D in practice the courts often treat them as distinct. When several of
them will fit the case, the court is often inclined to invoke them all.
The one principle that unites them is that powers must be confined
within the true scope and policy of the Act.

Taken by itself, the standard of unreasonableness is nominally
E pitched very high: 'so absurd that no sensible ·person could ever
dream that it lay within the powers of the authority' (Lord Greene
MR); 'so wrong that no reasonable person could sensibly take that
view" (Lord Denning MR); 'so outrageous in its defiance of logic or
of accepted moral standards that no sensible person who had applied
his mind to the question to be decided could have arrived at it' (Lord
F Diplock). It might seem from such language that the deliberate
decisions of ministers and other responsible public authorities could
almost never be found wanti11g. But, as may be seen in the following
pages, there are abundant instances of legally unreasonable decisions
and actions at all levels. This is not because ministers and public
G authorities take leave of their senses, but because the courts in
deciding cases tend to lower the threshold of unreasonableness to fit
their more exacting ideas of administrative good behaviour."

When we keep in view the principles laid by this Court in its various
judgments and which we have noticed above, it has to be held that the
H agreement dated November 4, 1993 is not a valid one. The agreement defies
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1135
logic. It is outrageous. It crosses all limits of rationality. Mah::.ipalika has A
certainly acted in fatuous manner in entering into such an agreement. It is a
case where the High Court rightly interfered in exercise of its powers of
judicial review keeping in view the principles laid by this Court in Tata
Cellular v. Union ofIndia, [ 1994] 6 SCC 651. Every decision of the authority
except the judicial decision is amenable to judicial review and reviewability of B
such a decision cannot now be questioned. However, a judicial review is
permissible if the impugned action is against law or in violation of the
prescribed procedure or is unreasonable, irrational or malajide. On the principle
of good governance reference was made to a decision of Division Bench of
Bombay High Court in State of Bombay v. Laxmidas Ranchhoddas and
another, AIR (1952) Bombay 468 at 475) (Para 12). It was submitted that bad C
governance sets a bad example. That is what exactly happened in the present
case.

In State ofBombay v. Laxmidas Ranchhoddas & Anr., [1952] AIR Born.
468, a Division bench of the High Court was considering the argument that
tpe writ of mandamus being discretionary, the Court should consider whether D
it should not put a limitation upon its own powers and jurisdiction. It was
submitted that it was impossible for any State to function if there was a
constant interference by the High Court in the eXef!ltive acts performed by
the officers of the State. Chagla, CJ, speaking for the Court, said :
E
"It may be that interference by the High Court may result in
inconvenience or difficulty in administration. But what we have to
guard against is a much greater evil. When we find in the modem
1 State wide powers entrusted to Government, powers which affect the
property and person of the citizen, it is the duty of the Courts to see
that those wide powers are exercised in conformity with what the F
Legislature has prescribed. We are not oblivious of the fact that in
order that the modem State should function the Government must be
armed with very large powers. But the High Court does not interfere
with the exercise of those powers. The High Court only interferes
when it finds that those powers are not exercised in accordance with G
the mandate of the Legislature. Therefore, far from interfering with the
good governance of the State, the Court helps the good governance
by constantly reminding Government and its officers that they should
act within the four comers of the statute and not contravene any of
the conditions laid down as a limitation upon their undoubtedly wide
powers. Therefore, even from a practical point of view, even from the H
1136 SUPREME COURT REPORTS [1999] 3 S.C.R.

A point of view of the good governance of the State, we think that the
High Court should not be reluctant to issue its prerogative writ whenever
it finds that the sovereign Legislature has not been obeyed and
powers have been assumed which the Legislature never conferred
upon the executive."

B It cannot be said that the construction of the underground shopping
complex is by the builder as an agent of the Mahapalika. Concept of agency
is totally missing in the present case. Rather the deal is from principal to
principal. Reference may be made to the decision of this Court in Akadasi
Padhan's case, [1963] Supp.2 SCR 691, quoted above. When the
C "development" is by the builder provisions of Section 14 of the Development
Act would apply. There is no sanction of the building plan of the underground
shopping complex by the LDA. Construction is, therefore, per se illegal. Even
after the interim order of this Court allowing construction, plans were not got
sanctioned from the LOA, which would be authority under the Development
Act Sanction of the building plan by the Mahapalika would, therefore, be
D meaningless. Even then, there were no sanctioned drawings. It has been
pointed out that process of sanction appeared to be ad hoc and skeletal.
When construction started LDA issued a show cause notice to the Mahapalika
but then in view of the interim order made by this Court show cause notice
was subsequently withdrawn. It was stated that against the order withdrawing
E the show cause a revision was filed by Mr. Amrit Puri, a writ petitioner to the
State Government, which was stated to be still pending.

It is not disputed that there is a Master Plan applicable to city of
Lucknow. This Master Plan is prepared under the Development Act. It was
submitted by the builder that the park could be exploited for commercial
F purposes as Aminabad has been shown to be a commercial area. No doubt
Aminabad is a commercial area but that does not mean that the park can be
utilised for commercial purposes. Rather using the park for commercial purposes
would be against the Master Plan. However, in letter dated October 16, 1993
by Vice-Chairman, LOA to the Mahapalika did say:

G "I am to inform you in this regard that the land use of the Jhandewala
park situated in Aminabad is commercial one as per the Master Plan.
This department has no objection on the layout plan submitted
accordingly."

How this letter came to be written one may notice the sequence. High
H Power Committee meets on October 13, 1993 and is adjourned to October 19,
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1137
1993. Mr. G.C. Goyal is the Architect of Mahapalika and ·he forwarded the A
layout plan to LOA. Mr. Goyal is also officiating as Architect of LOA.
Approval of the layout plan by LOA is dated October 16, 1993, which is 3
days before the next meet of the High Power Committee. This approval of the
layout at LOA was recommended by the same person who forwarded it from
the Mahapalika and in a great hurry. In the Master Plan for the city of
Lucknow, it is Aminabad area which is commercial and that would not mean B
that Park can be put to commercial use. By letter dated November 23, 1993,
LOA objected to the construction being undertaken in the Park without
obtaining permission/No objection from it and required the construction to
stop. Mahapalika in tum by its letter sent on the following day to the builder
informed it of the objection raised by LOA and that before starting any C
construction the permission/No objection of LOA as required under Sections
14 and 15 of the Development Act was necessary. It does appear to us that
the Master Plan of the city of Lucknow could not have envisaged the
Jhandewala Park as a site available for commercial exploitation considering the
density and congestion in the area.
D
The reason for· the construction of underground shopping complex
given was that it would remove the congestion in the area. We have report
of the Local Commissioner, which says that it would rather lead to more
congestion. We think Mr. Dave is right in his submission that a decision to
construct underground shopping complex by M.I. Builders had already been E
taken and that the whole process was gone into to confer undue benefit to
M.I. Builders and the bogie of congestion was introduced to justify the action
of the Mahapalika. It is wholly illegal and smacks of arbitrariness,
unreasonableness and irrationality.

We may also note the argument of Mr. Adarsh Goel who said that F
Jhandewala Park was acquired by the State in the year 1913 and was given
to Mahapalika for its management. He said under Section 41 of the Development
Act read with Section 5 of the U.P. Regulation of Building Operations Act a
Government order was issued on August 18, 1986 by the State Government
whereby the use of park for any other use was prohibited. This direction of G
the State Government was incorporated in the Master Plan for the city of
Lucknow and of course violated by allowing construction of underground
shopping complex.

Action of the Mahapalika in agreeing to the construction of underground
shopping complex in contravention of the provisions of the Act and then H
1138 SUPREME COURT REPORTS [1999] 3 S.C.R.

A entering into an agreement with the builder against settled norms was wholly
illegal and has been held to be so by the High Court. No doubt Mahapalika
is a· continuing body and it will be estopped from changing its stand in the
given case. But when Mahapalika finds that its action was contrary to the
provisions of law by which it was constituted there could certainly be no
impediment in its way to change its stand. There cannot be any estoppel
B operating against the Mahapalika. Principles laid in Union of India v. Mis.
Indo-Afgan Agencies Ltd., [1968] 2 SCR 366, and of Calcutta High Court in
The Ganges Manufacturing Co. v. Sourujmull and others, (1880) ILR Calcutta
669, cannot apply to the facts of the present case.

C Section 128 of the Act confers powers on the Mahapalika to sell, let of,
hire, lease, exchange, mortgage, grant otherwise dispose of any property or
-
any interest therein acquired by or vested in the Mahapalika. Appellant and
the intervenors said that there was no disposal of any property and no
interest in the land had been transferred by the Mahapalika to the builder.
Respondent, as noted above, contended to the contrary. Under Section 54 of
D the Transfer of Property Act, 1882 agreement to sell does not create any
interest in land. We are not concerned with this provision. Reference may,
however, be made to Sections 60(b) and 62(t) of the Easement Act, 1882.
Though the licence under Section 60(b) is irrevocable but it can be revoked
after the happening of certain event which is when the builder has recovered
E whole of his investment plus 10% of the profit. Reference may be made to
a decisions of this Court in Chawalier I.I. Jyappan and another v. The
Dharmodayam Company, [1963] l SCR 85. In this case an argument was
raised by the appellant that he had been granted a licence and acting upon
the licence he had executed a work of permanent character and incurred
expenses in the execution thereof and, thereafter, under Section 60(b) of the
F Easement Act, 1882 the licence was irrevocable. This Court said:-

"In our opinion no case of licence really arises but if it does what is
the licence which the appellant obtained and what is the licence,
which he is seeking to plead as a bar. The licence, if jt was a licence,
was to construct the building and hand it over to the respondent
-
G
company as trust property. There was no licence to· create another
kind of trust which the appellant has sought to create. It cannot be
said therefore that there was an irrevocable license which falls under
-
'

s. 60(b) of the Act. Even such a licence is deemed to be revoked under
s. 62(t) of that Act where the licence is granted for a specific purpose
H and the purpose is attained or abandoned or becomes impracticable.
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1139
In the present case the purpose for which the license was granted has A
either been ab~ndoned or has become impracticable because of the
action of the appellant."

[The Indian Easement Act, 1882: Sections 52, 53, 60(b) and 62(f) :-

52. Where one person grants to another, or to a definite number of B
other persons, a right to do, or continue to do, in or upon the
immovable property of the grantor, something which would, in the
absence of such right, be unlawful, and such right does not amount

- to an easement or an interest in the property, the right is called a
licence.

53. A licence may be granted by any one in the circumstances and
to the extent in and to which he may transfer his interests in the
c
property affected by the licence.

60. A licence may be revoked by the grantor, unless:-

(a)
D
(b) the licensee, acting upon the licence, has executed a work of a
permanent character and incurred expenses in the execution.

62. A licence is deemed to be revoked -
E
(a) to (e) .......... .

(f) where the licence is granted for a specified purpose and the
purpose is attained, or abandoned, or becomes impracticable;]
We find force in the submissions of respondents that by granting
licence to the builder to construct underground shopping complex of pennanent F
nature and to hold on to the same for a period which is not definite and then
under the impugned agreement builder having been authorised to lease out
the shops on behalf of the Mahapalika, it is a dubious method adopted to
subvert the provision of Section 128 which apply as well in the case of lease
and thus the transaction will also be covered by the expression "otherwise G
· dispose of any interest in the property". It is, therefore, difficult to accept the
argument of the builder that transaction is outside Section 128 of the Act.
Now, first licence has been granted to the builder to enter upon the park and
to execute a work of permanent character and incur expenses in the execution
ofthe work, thus making the licence irrevocable. However, the licence is
deemed to be revoked after the licensee has recovered his full cost on the H
1140 SUPREME COURT REPORTS [1999) 3 S.C.R.

A construction plus I 0% of the profit on the investment made by him. When
this purpose is achieved by the licensee is anybody~s guess. Not only that
licensee, i.e., the builder is then authorised to lease out the shops so
constructed, on behalf of the Mahapalika. The result would be that to the
builder provisions of Section 129 of the Act, cannot be thus made applicable.
In such a situation for the builder to contend that the transaction is not
B covered by Section 128 and, therefore, Section 129 willnot apply is certainly
incredulous. Provision of Section 129 of the Act has, therefore, been flouted.
Impugned agreement dated November 4, 1993 is bad having been executed
also in contravention of the requirement of Section 129 of the Act.

C The facts and circumstances when examined point to only one conclusion
that the purpose of constructing the underground shopping· complex was a
mere pretext and the dominant purpose was to favour the M.l. Builders to earn
huge profits. In depriving the citizens of Lucknow of their amenity of an old
historical park in the congested area on the spacious plea of decongesting
the area Mahapalika and its officers forgot their duty towards the citizens and
D acted in a most brazen manner.

Proposition of construction of underground shopping complex was so
lucrative and the land so valuable that Mahapalika itself could have done it
by collecting earnest money from the prospective allottees. But then nobody
cared to examine this aspect and a plea was also advanced that Mahapalika
E had no finance to undertake the project. If one refers to the agreement the
builder itself devised a self-financing scheme and it had not to spend anything
from its own pocket. On mere booking of the shops builder could collect
rupees one crore twenty five lakhs and would have collected more money
with the progress of the construction at various stages. A public body would
F not sequester away its property by devising new methods.

Thus there are two distinct areas of challenge in the present case - (I)
the agreement is fraud on power, prime land has been given for a song by
the Mahapalika. The fact that the scheme is so lucrative could be seen from
the fact that all shops less 5% were booked within six days of the advertisement
G appearing in December, 1993. Public interest and public exchequer have been
sacrificed. Mahapalika is divested of its control over the project though
notionally not for ever but the builder, on the other hand, has control over
the project for all times to come and (2) construction is in contr~vention of
the provisions of law as contained in Development Act. The project has been
entrusted to the builder in violation of the provisions of the Act. The decision
H taken by the Mahapalika was not on proper consideration and was not an
-~

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA,J.] 1141
informed objective decision. Judicial review is permissible if the impugned A
action is against law or in violation of the prescribed· procedure or is
unreasonable, irrational or mala fide. As said earlier High Court rightly exercised
its power of judicial review in the present case. It has examined the manner
in which the decision was made by the Mahapalika. Second principle laid in
Tata Cellular's case, [1994] 6 SCC 651, applies in all respects. High Court held B
that the maintenance of the park because of its historical importance and
environmental necessity was in itself a public purpose and, therefore, the
construction of an underground market in the garb of decongesting the area
was wholly contrary and prejudicial to the public purpose. By ~llowing the
construction Mahapalika had deprived its residents as also others of the
quality of life to which they were entitled to under the Constitution and the C
Act. The agreement smacks of arbitrariness, unfairness and favourtism. The
agreement was opposed to public policy. It was not in public interest. Whole
process of law was subverted to benefit the builder. We agree ·with the
findings and conclusions of the High Court.

High Court in it~ impugned judgment has not doubted the capacity of D
M.I. Builders to undertake the project but then that is not the issue. The
question is why it was not necessary to invite tenders for the project of such
a high cost. Why it was thought that it was only the M.I. Builders in the
country who could undertake the job? Why project report was not obtained
to know the cost of the project? Why could it not be thought that there could E
be any other person who could undertake the job at a lesser cost and in
equally competent manner? Public interest has certainly been given a go bye.
There was some undercurrent flowing to award the contract to M.I. Builders.
High Court said "lest we are taken amiss we wish to make it clear that we do
not doubt either the bona tides of the authorities or the competence of the
respondents Mis. M.I. Builders to enter into the impugned agreement but we F
are of the view ... " The competence of M/s. M.I. Builders to undertake the
project is not doubted when now it is seen that proper construction has been
..
J made but before taking decision to award the contract to it nobody knew its
credentials. No attempt made whatsoever to consider if there was any other
person more competent for the job or if of equal competence could offer better G
terms. In these circumstances, dictum contained in the case of Kasturi Lal
Lakshmi Reddy v. State ofJ & K., [ 1980] 4 SCC I, becomes inapplicable. No
advantage can be drawn by the builder from the decision of this Court in G.B.
Mahajan 's case [ 1991] 3 SCC 91, as here the whole process of awarding
contract to M.I. Builders has been gone through in an unabashed manner and
in flagrant violation of law with the sole purpose of conferring benefit on it. H
1142 SUPREME COURT REPORTS [1999] 3 S.C.R.

A All said and done we fail to understand the certificate given by the High
Court about the bona tides of the authorities in awarding the contract to
Mis. M.I. Builders. The officers of the Mahapalika, who were impleaded as
respondents by name, did not file any replies to contradict the allegations
made against them. Rather it appears that it was a fit case where High Court
B should have directed an inquiry to be made as to how the project came to
be awarded to M.I. Builders including the conduct of the lawyers.

High Court has directed dismantling of the whole project and for
restoration of the park to its original condition. This Court in numerous
decisions has held that no consideration should be shown to the builder or
C any other person where construction is unauthorised. This dicta is now
...,
I

almost bordering rule of law. Stress was laid by the appellant and the
prospective allottees of the shops to exercise judicial discretion in moulding
the relief. Such discretion cannot be exercised which encourages illegality or
perpetuates an· illegality. Unauthorised construction, if it is illegal and cannot
be compounded, has to be demolished. There is no way out. Judicial discretion
D cannot be guided by expediency. Courts are not free from statutory fetters.
Justice is to be rendered in accordance with law. Judges are not entitled to
exercise discretion wearing robes of judicial discretion and pass orders based
solely on their personal predilections and peculiar dispositions. Judicial
discretion wherever it is required to be exercised has to be in accordance with
E law and set legal principles. As will be seen in moulding the relief in the
present case and allowing one of the blocks meant for parking to stand we
have been guided by the obligatory duties of the Mahapalika to construct
and maintain parking lots.

In the present case we find that the builder got an interim order from
F this Court and on the strength of that order got sanction of the plan from the
Mahapalika and no objection from the LDA. It has no doubt invested
considerable amount on the construction which is 80% complete and by any
standard is a first class construction. Why should the builder take such a risk
when the interim order was specific that the builder will make construction at
G its own risk and will not claim any equity if the decision in the appeal goes
against it? When the interim order was made by this Court Mahapalika and
the State Government were favouring the builder. As a matter of fact
Mahapalika itself filed appeals against the impugned judgment of the High
Court. Perhaps that gave hope to the bu~lder to go ahead with the construction
and to take the risk of getting the construction demolished and restoring the
H park to its original condition at its own cost. The builder did not foresee the
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.) 1143
change in stand not only of the Mahapalika but also of the State Government. A
It also, as it would appear, over-rated its capacity to manage with the State
Government to change the land use of the park. Builder is not an innocent
player in this murky deal when it was able to get the resolutions of the
Mahapalika in its favour and the impugned agreement executed. Now,
construction of shops will bring in more congestion and with that the area
will get more polluted. Any commercial activity now in this unauthorised B
construction will put additional burden on the locality. Primary concern of the
Court is to eliminate the negative impact the underground shopping complex
will have on environment conditions in the area and the congestion that will
aggravate on account of increased traffic and people visiting the complex.
There is no alternative to this except to dismantle the whole structure and C
restore the park to its original condition leaving a portion constructed for
parking. We are aware that it may not be possible to restore the park fully
to its original condition as many trees have been chopped off and it will take
years for the trees now to be planted to grow. But beginning has to be made.

There are four blocks under construction. Services like air-conditioning, D
fire-fighting, water supply, sanitary installation, necessary pumps for drainage
and sewerage, etc. are yet to be installed and completed.

In block No. I there are shops at the level minus 9'6". These shops are
divided by partition walls. There is a big hall with pillars below these shops
at level of minus 19'6". E
In block 2 there are shops on tlie upper basement level 9'6". There is
no lower basement Jevel.

Third block is currently designed to have shops at the upper basement
level and parking at the lower basement level. The upper basement level can F
be converted to have parking at that level too since the structural configuration
will permit the same. Flooring on the lower basement is yet to be laid. There
can thus be parking both on the upper basement and the lower basement.
This parking place for vehicles would lead to decongestion of the roads
surrounding the park which are otherwise choked with the parked vehicles in G
its entire periphery.

Fourth block is only partially developed with just a separate ramp going
down to the first basement level and a few columns with their foundations
standing from the lower basement level. This fourth block, is currently dug
up. However, to facilitate the movement of the vehicles to the two levels of H
,.

1144 SUPREME COURT REPORTS [1999] 3 S.C.R.

1.. A parking in the third block a new ramp shall be constructed adjacent tci and
contiguous to the third block.

We have noted above that under clause (ix-a) of Section 114 of the Act,
\
it is incumbent on the Mahapalika to make reasonable and adequate provision
by_ any ~ans or measures which it is lawfully competent to it to use or to
B take for the construction and maintenance of parking lots, bus stops and
public convenience.

Number of cases coming to this Court pointing to unauthorised
constructions taking place at many places in the country by builders in
C connivance with the Corporation/Municipal officials. In the series of cases,
this Court has directed demolition of unauthorised constructions. This does
not appear to have any salutary effect in cases of unauthorised construction
coming to this Court. While directing demolition of unauthorised construction,
court should also direct inquiry as to how the unauthorised construction
came about and to bring the offenders to book. It is not enough to direct
D demolition of unauthorised construction, where there is clear defiance of law.
In the present case, but for the obsefvation of the High Court, we would
certainly have directed an inquiry to be made as to how the project was
conceived and how the agreement dated November 4, 1993 came to be executed.

We direct as under :
E
1. Block 1, 2 and 4 of the underground shopping complex shall be
dismantled and demolished and on these places park shall be
restored to its original shape.

2. In Block 3 partition walls and if necessary columns in the upper
F basement shall be removed and this upper basement shall be
converted into parking lot. Flooring should be laid at the lower
basement level built to be used as parking lot. Ramp shall be
constructed adjacent to Block 3 to go to upper and fower
basement levels for the purpose of parking of vehicles. Further
G to make block 3 functional as a separate unit walls shall be
constructed between block 2 and block 3 and also block 3 and
block 4.

3. Dismantling and demolishing of these structures in Blocks l, 2
and 4 and putting Block 3 into operation for parking shall be
H done by the Mahapalika at its own cost. Necessary services like
M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1145

.-'--• sanitation, electricity etc. in Block 3 shall be provided by the A
Mahapalika.

4. Mahapalika shall be responsible for maintaining the park and the
~
I Block 3 for parking purposes in proper and efficient manner.

5. M.I. Builders Pvt. Ltd., the appellant, is divested of any right,
title or interest in the structure built by it under or over the park. B
It shall have no claim whatsoever against Mahapalika or against
any other person or authority

6.
--
Block 3 shall vest in Mahapalika free from all encumbrances.
Licence of M.I. Builders to enter into the park and the structure
built therein is cancelled of which possession is restored to the c
Mahapalika with immediate effect. No obstruction or hindrance
shall be caused to the Mahapalika by any one in discharge of
its functions as directed by this order.
7. Restoration of the park and operation of Block 3 for parking
purposes shall be completed by Mahapalika within a period of D
12 months from today and report filed in the registry of this
Court.

,. With the directions aforesaid, the appeals are dismissed with costs.

RK.S. Appeals dismissed.