MALIK BROTHERSversusNARENDRA DADHICH AND ORS.

A                            MALIK BROTHERS                                            __,-- .
                                    v.
                        NARENDRA DADHICH AND ORS.

                                 AUGUST 25, 1999

B             [S. SAGHIR AHMAD AND G.B. PATTANAIK, JJ.]


           Constitution of India, Article 226-Public Interest Litigation-Public
    Auction-Highest bid accepted-Dispute between parties referred to
     arbitration-Award of arbitrator challenged by third party under writ
C   jurisdiction in. PIL-Award not challenged under provisions of Arbitration
    Act-Whether PIL maintainable-Held, under the facts and circumstances,
     interest ofpublic is not {II all involved and PIL not maintainable-Provisions
     of the Arbitration Act cannot be frustrated by recourse to writ jurisdiction-
    Arbitration Act, 1940.
D
          Arbitration Act, 1940,-Section 2 I-Scope of-Parties referring dispute
    to an arbitrator-Reference to arbitrator challenged in PIL by third party-
    Extraneous consideration alleged-Allegations not supported by material
    evidence-Held, Section 2 I of Arbitration Act does not debar parties to refer
    dispute between them for arbitration.
E
          Appellant was the highest bidder in a public auction held by the Indore
    Development Authority. The bid of appellant was accepted but when the
    appellant failed to deposit the balance amount within the stipulated period,
    the Development Authority forfeited the initial premium deposited !:>y the
F   appellant which was challenged by the appellant and the dispute was referred
    to an arbitrator. The arbitrator passed an award in favour of the appellant.

          Respondent No.I, a tax payer of the Indore Municipality, filed a public
    interest litigation petition under Article 226 of the Constitution of India
    challenging the reference of the dispute to the arbitrator by the Authority
G   and the award of the arbitrator on the ground that valuable piece of Government
    land was being sold for a small price which would be grossly prejudicial to
    public interest. High Court allowed the PIL petition and quashed the auction,
    the reference of dispute to arbitrator and the award of the arbitrator on the
    ground that there was violation of Section 21 of the Arbitration Act in
H   referring the dispute to the arbitrator, and that appellant was being benefitted
                                         732
                    MALIK BROTHERS v. N. DADHICH                           733
at the cost of public revenue by sale of land at a low price. Aggrieved by the     A
order of the High Court, appellant has filed the present appeal.

      Allowing the appeal, the Court

       HELD: 1.1. It is necessary to bear in mind that a public interest
litigation is usually entertained by a court for the purpose of redressing B
public injury, enforcing public duty, protecting social rights and vindicating
public interest. The real purpose of entertaining such application is the
vindication of the rule of law, effective access to justice to the economically
weaker class and meaningful realisation of the fundamental rights. The
directions and commands issued by the courts of law in a public interest
litigation are for the betterment of the society at large and not for benefitting C
any individual. But if the court finds that in the garb of a public interest
litigation actually an individual's interest is sought to be carried out or
protected, it would be the bounding duty of the court not to entertain such
petition as otherwise the very purpose of innovation of public interest litigation
would be frustrated. It is in fact a litigation in which a person is not D
aggrieved personally but bring an action on behalf of down-trodden mass for
the redressal of their grievance. (734-G-H; 7'35-A-B)

      1.2. The respondent in the name of a tax payer of the municipality has
protracted a public interest litigation in which in fact really, interest of the
public is not at all involved and the High Court has entertained the petition      E
and has not only set aside a public auction held at large but also quashed
an award of a competent arbitrator thereby frustrating the provisions of the
Arbitration Act fully. The very act of entertaining the application as a public
interest litigation at the behest of respondent No.I, who had absolutely no
interest in the transaction was improper. (736-A, B, C; 738-C, DJ
                                                                                   F
      Sachidanand Pandey and Anr. v. State of West Bengal and Ors., (1987)
2 SCC 295 and Ramshwaran Autyanuprasi and Anr. v. Union of India and
Ors., (1989) Suppl. 1 SCC 251, relied on.

     2. There is not an iota of material to indicate that the decision of the      G
Improvement Trust in referring the dispute to the arbitrator was either for
extraneous consideration or had not been taken bona fide. (738-AI

     3. No material was produced by respondent No.I to indicate thatI there
was any infirmity in the auction and that the highest bid obtained was not
genuine and the price obtained thereon is grossly low. [738-A, B]                  H
    734                    SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.

A         4. There is no bar for parties to a dispute to refer the dispute for
    arbitration instead of litigating in common law courts. Section 21 of the
    Arbitration Act does not debar the parties to refer a dispute between them
    to an arbitrator, particularly when the litigation in normal course has become
    not only expensive but also continues for years together. If any informal
    forum is chosen by the parties for expeditious decision of their disputes, it
B   would not be safe for a court of law to come to a conclusion that such decision
    has been taken for any extraneous consideration without any supporting
    materials in that regard. [738-F, G)



c
          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4739of1999.

         From the Judgment and Order dated 1l.10.96 of the Madhya Pradesh
                                                                                           ---
    High Court in M.P.No.113of1991.                                                    ,   __
          S. Muralidhar for the Appellant.

D        Shrish Kumar Misra, (S.K. Gambhir) for Vivek Gambhir (Ms. Madhur
    Dadlani) for S.K. Agnihotri for the Respondents.

          The Judgment of the Court was delivered by

          PATT ANAIK, J. Leave granted.
E
            This appeal by grant of special leave is directed against the Judgment
    of the Division Bench of Madhya Pradesh High Court, Indore Bench. On a
    petition being filed under Article 226 of the Constitution of India by a tax
    payer of the Indore Municipality, the High Court entertained the same as a
    public interest litigation and by the impugned order, quashed an auction held
F    by the Indore Development Authority as well as the highest bid of the
    appellant in the said auction which had been accepted by the Indore
    Development Authority and also an award of a cqmpetent arbitrator in respect
    of the dispute between the Indore Development Authority and the appellant.
    Before embarking upon an inquiry into the legality of the impugned judgment
G   of the High Court, it is necessary to bear in mind that a public interest
    litigation is usually entertained by a court for the purpose ofredressing public
    injury, enforcing public duty, protecting social rights and vindicating public
    interest. The real purpose of entertaining such application is the vindication
    of the rule of law, effective access to justice to the economically weaker class
    and meaningful realisation of the fundamental rights. The directions and
H   commands issued by the courts of law in a public interest litigation are for
          MALIK BROTHERS v. N. DADHICH [PATTANAIK, J.]                     735

the betterment of the society at large and not for benefitting any individual. A
But if the Court finds that in the garb of a public interest litigation actually
an individuals interest is sought to be carried out or protected, it would be
the bounding duty of the court not to entertain such petition as otherwise
the very purpose of innovation of public interest litigation will be frustrated.
It is in fact a litigation in which a person is not aggrieved personally but B
brings an action on behalf of downtrodden mass for the redressal of their
grievance. In the case of Sachidanand Pandey and Anr. v. State of West
Bengal and Ors., [1987] 2 SCC 295, when the State of West Bengal had
allowed the construction of a five star hotel in the vicinity of a zoological
garden and a part of the land belonging to the zoo had been leased out to
the said company, a petition had been filed in the Calcutta High Court and C
the High Court having dismissed the same, the matter had been carried to this
Court and this c,ourt also had upheld the decision of the High Court, after
coming to the conclusion that 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 arms length with the
 Taj Group of Hotels. In the said judgment Justice Khalid has added a few D
 paragraphs indicating as to how a public interest litigation pose a threat to
 courts and public alike. The learned Judge had sounded a word of caution
 that if courts do not restrict the free flow of case in the name of public interest
 litigation, "the traditional litigation will suffer and the courts of law, instead
 of dispensing justice will ha.ve to take upon themselves administrative and E
 executive functions." It was also stated by the learned Judge- "it is only when
 the Courts are apprised of gross violation of fundamental rights by a group
 or a class action or when basic human rights are invlided or when there are
 complaints of such acts as shock the judicial conscience that the courts,
 especially this Court, should leave aside procedural shackles and hear such
 petitions and ~tend its jurisdiction under all available provisions for remedying F
 the hardships and miseries of the needy, the underdog and the neglected."
 In the case of Ramsharan Autyanuprasi and Anr. v. Union of India and Ors.,
 [I 989] Suppl. 1 SCC 251 , a writ petition had been filed in this Court under
 Article 32 alleging mismanagement of a public trust and this court ultimately
 held that the petition does not seek to advance any public right and innovation G
 of the jurisdiction of this court as a public interest litigation, in the back-
 ground of the allegations made in the petition and in the context of the case
 was wholly unjustified. This Court has further indicated that the public
 interest litigation does not mean settling disputes between individual parties
 and when there is no breach of fundamental rights and the matter is amenable
 to proceedings under Sections 37 and 38 of the Rajasthan Public Trust Act H
    736                     SUPREME COURT REPORTS [1999] SUPP. l S.C.R.

A to entertain a petition styling into which a public interest litigation is the              J'
    abuse of the process of court. The object of noting the aforesaid caution
    indicated in two judgments of this court is to emphasise how in the case in
    hand this has proved to be true and how the respondent in the name of a
    tax payer of the municipality has protracted a public interest litigation which         c
    ultimately has resulted gross injustice to the Indore Development Authority
B   and also the appellant and in fact really, interest of public is not at all involved
    and it is further to be noticed that the High Court has been swayed away to
    entertain a petition and not only has set aside a public auction held at large
    but also quashed an award of a competent arbitrator in respect of the dispute
    referred to him between the parties and application concerning the said award
C   is pending before a competent civil court, thereby frustrating the provisions
    of the Arbitration Act fully.
                                                                                                )

          The brief facts leading to the Judgment under appeal are that the Indore
                                                                                           /
                                                                                             ..l
   Development Authority issued a notice of holding of a public auction in
   respect of a plot of land in Indira Complex at Naulakha Road, Indore. The
D auction was scheduled to be held on 15.4.81. The appellant was the highest
   bidder in the auction and the bid amount was Rs. 25, 10,000. The said bid was
   accepted and the appropriate authority called upon the appellant to deposit
   the amount and to produce a relevant stamp paper for execution of the lease
   deed. The appellant however defaulted in making the deposit within the
E period stipulated in the notice. On account of such default the initial premium
 • which had been deposited to the extent of Rs. 6,27 ,500 was forfeited. The
   appellant however challenged the order of forfeiture and requested the Indore
   Development Authority, to whom Indira Complex scheme has been transferred .
   in the meantime by the State ·Government, for making a reference to the
   arbitrator. Initially this request had been rejected but by letter dated 8.6.90,
F Shri K.S. Bhatnagar, a retired I.A.S. Officer was appointed as arbitrator. The
   arbitrator ultimately passed an award. The Respondent No. I herein, considering
   the award to be a serious public injury, approached the High Court by way
   of a public interest litigation and by an interim order, the High Court restrained
   the Development Authority from delivering the possession of the land to the
   appellant but prior to the aforesaid interim order, the possession had been
G delivered on 8.1.91. It was contended in the aforesaid public interest litigation
   petition that the value of the land would be much more than for which the
   same is going to be handed over pursuant to the award of the arbitrator and
   parting with a valuable piece of land for the small price would be grossly
   prejudicial to the public interest. The present appellant as well as the
H Development Authority filed their counter affidavits before the High Court,
                                                                                           1,
                   MALIK BROTHERS v. N. DADHICH [PATTANAIK, J.]                       737

......   indicating therein that there has been no illegality in referring the dispute to     A
         the arbitrator and the said arbitrator considered the matter in several sittings
         and passed the award which is the subject matter of an application filed under
         Section I 4 of the Arbitration Act. It was also indicated by the Indore
         Development Authority that the board considered the dispute between the
         appellant and the board in several meetings and finally thought it appropriate       B
         to refer the matter to the arbitrator and such reference is a bona fide decision
         of the board on the facts and circumstances of the case and it cannot be said
         that such reference has caused public injury. The High Court by the impugned
         judgment after considering the provisions of Section 21 of the Arbitration Act
         and the law on the subject, came to the conclusion that there has been a
         gross violation of the aforesaid provision of the Arbitration Act and it is not      C
         known why respondent No. I (Indore Development Authority) elected to
         appoint the arbitrator. The High Court also came to the further conclusion that
         the land would not have been disposed of even on lease basis through
         arbitration and the Indore Development Authority committed an error of law
         and consequent public injury by revival of a close issue by appointment of
         an arbitrator and by its attempt benefitted the present appellant at the cost        D
          of public revenue. With the aforesaid conclusion, the High Court quashed the
         resolution of the Indore Development Authority, referring the dispute to the
         arbitrator as well as the award of the arbitrator and passed certain consequential
         directions. The question that arises for consideration therefore, is whether in
          the facts and circumstances of the case, the High Court was justified in            E
          entertaining a writ petition in the garb of a public interest litigation arid was
         justified even in setting aside the award of a competent arbitrator which was
          not assailed under the provisions of the Arbitration Act but by filing a
          petition under Article 226 on the ground that the very decision of the
          Improvement Trust, referring the matter to the arbitrator was illegal and has
          caused public injury.                                                               F

                At the outset it may be stated that the land in question was admittedly
         put to public auction and the appellant was the highest bidder and this fact
         has not been disputed at any stage. The further admitted position is that the
         appellant had deposited some amount but could not deposit the balance                G
         amount even though the bid of the appellant was accepted by the competent
         authority and for non-deposit of the balance amount, the earlier amount
         deposited stood forfeited which however was challenged by the appellant. Jt
         is at that stage the Indore Development Authority took into consideration all
         the relevant factors and thought it appropriate to refer all disputes pertaining
         to the land, which was subject matter of the auction for arbitration. Not an         H
    738                     SUPREME COURT REPORTS [1999] SUPP. I S.C.R.

A iota of material has been placed before us to indicate that the said decision           ,, '•
    of the Improvement Trust was either for extraneous consideration or had not
    been taken bona fide. In course of hearing of this appeal, not an iota of
    material was produced before us by respondent No. 1 at whose instance the
    High Court had entertained the public interest litigation petition to indicate
    that there was any infirmity in the auction that was held on 15.4.81 and that
B   the highest bid obtained was not genuine and the price obtained thereon is
    grossly low. Though a bald assertion had been made by respondent No. 1
    that the normal price of the land would be much higher than the highest



c
    auction price which the appellant had offered but no substantive material had
    been proctuced in the High Court and nothing has been brought to the notice
    of this Court also. In this view of the matter we fail to understand as to how
    the High Court could come to the C(mclusion that there has been gross public
                                                                                          -   r


     injury by referring the matter to the arbitrator and the Improvement Trust has
    acted beyond its jurisdiction by referring the dispute pertaining to the land
     in question to the arbitrator. In our considered opinion the very act of
    entertaining the application as a public interest litigation at the behest of
D   respondent No. I, who has absolutely no interest in the transaction was
     improper and the High Court had in fact not adverted to the parameters for
    entertaining a petition as a public interest litigation. It may not be out of place
    to mention at this stage that two other auctions, similarly held were not
    assailed but it is the auction where the appellant was the highest bidder was
E   only assailed for the reasons known to respondent No. I. When the appellant
    had chailenged the legality of the action of the competent authority in the
    matter of forfeiture of the deposit made, the competent authority thought it
    appropriate to refer the entire dispute pertaining to the land in question for
    arbitration and we see no infirmity with that decision nor that decision can
    be said to have been taken on some extraneous consideration. We also fail
F   to appreciate the conclusion of the High Court on Section 21 of the Arbitration
    Act inasmuch as there is no bar for parties to a dispute to refer the dispute
    for arbitration instead of litigating in common law courts. In our view, Section         11
    21 of the Arbitration Act does not debar the parties to_ refer a dispute between
    them to an arbitrator, particularly when the litigation in normal course has
    become not only expensive but also continues for years together. If any
G
    informal forum is ·chosen by the parties for expeditious decision of their
                                                                                             ~
    disputes, it would not be safe for a co~rt of law to come to a conclusion that
    such decision has been taken for any extraneous consideration without any
    supporting materials in that regard. In the case in hand, the High Cotlrt of            ,.,.t
    Madhya Pradesh committed serious error of law by invoking its discretionary              ~
H   jurisdiction under Article 226 of the Constitution of India at the behest of a
                                                                                             >-
                                                                                             ~
             MALIK BROTHERS v. N. DADHICH [PATTANAIK, J.]                 739

    person who has no interest in the litigation in question and in quashing the A
    decision of the Indore Development Authority of referring the dispute to the
    arbitrator as well as the award of the competent arbitrator, by entering into
    an arena of conjecture and by assuming that the price of land must have gone
    up without having before them any materials in that respect. We have no
    hesitation, therefore to set aside the impugned judgment of the High Court
    and we accordingly do so. Necessarily, therefore, the award of the competent B
    arbitrator remains operative and the rights of the parties flowing therefrom
    have to be worked out in accordance with law. The present appeal is allowed.
    The impugned judgment of the Madhya Pradesh High Court in Indore Bench
    dated 11.10.96 passed in Miscellaneous Petition No. 113of1991 is set aside
    and the said miscellaneous petition stands dismissed. The respondent No. 1 C
    shall bear the costs of this appeal and the hearing fee is assessed as Rs.
    20,000.

    A.K.T.                                                   Appeal allowed.




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