PATHAN MOHAMMED SULEMAN REHMATKHANversusSTATE OF GUJARAT & ORS.

                       [2013] 12 S.C.R. 446

A       PATHAN MOHAMMED SULEMAN REHMATKHAN
                                 v.
                  STATE OF GUJARAT & ORS.
         (Special Leave Petition (C) No.32507 of 2013)
                      NOVEMBER 22, 2013
B
         [K.S. RADHAKRISHNAN AND A.K. SIKRI, JJ.]

        Administrative Law:
c       Policy decision - Setting up of International Financial
  Services Centre - Joint venture company with 50:50 public
  private participation - Approval by Central Government -
  Allotment of land to Company - Challenged on the basis of
  report of CAG that State Government did not adopt a uniform
0 policy in alienation and allotment of land -· Held: A decision
  taken In good faith, with good intentions, without any
  extraneous considerations, cannot be belittled, even if that
  decision was ultimately proved to be wrong - Non-floating
  of tenders or absence of public auction or invitation alone is
  not a sufficient reason to characterize the action of a public
E authority as either arbitrary or unreasonab/,9 or amounting to
  ma/a fide or improper exercise of power - Keeping in view
  the various orders passed by State Government and
  resolutions allotting lands to fourth respondent and also the
  notification issued under Special Economic Zones Act, 2005,
F High Court has rightly held that it cannot be said that State
  Government has acted against public interest - Government
  has noticed development and employment opportunities that
  the project would bring into the State - Decision taken by
  Government was also transparent - Further. these are purely
G policy decisions taken by State Government and, while so, it
  has examined the benefits the project would bring into the
  State and to its people - It is open to tl1e State and the
  authorities to take economic and management decision

H                              446
 PATHAN MOHAMMED SULEMAN REHMATKHAN v. 447
            STATE OF GUJARAT
depending upon the exigencies of a situation guided by            A
appropriate financial policy notified in public interest - That
is what has been done in the instant case - Public Interest
Litigation.

    Comptroller and Auditor General of India:
                                                                  B
    Power of CAG - Explained.

      Arun Kumar Agrawal v. Union of India & others (2013)
7 SCC 1; Centre for Public Interest Litigation & Ors. v. Union
of India & Ors. 2012 (3) SCR 147 =AIR 2012 SC 3725 -              c
referred to.

                     Case Law Reference:
     (2013) 7 sec 1           referred to           para 6
     2012 (3) SCR 147         referred to           para 10       D

      CIVIL APPELLATE JURISDICTION : Special Leave
Petition (Civil) No. 32507 of 2013.

    From the Judgment & Order dated 04.10.2013 of the High        E
Court of Gujarat at Ahmedabad in WPPIL NO. 97 of 2013.

   Y.N. Oza, D.N. Ray, Srushti Thula, Lokesh K. Choudhary,
Sumita Ray for the Appellant.

     Kabir H., Jesal (for Hemantika Wahi), for the Respondents.   F

     The following Order of the Court was delivered

                           ORDER
    K.S. RADHAKRISHNAN, J. 1. The State of Gujarat, it is         G
seen, in the year 2005 thought of developing an International
Financial Services City at Ahmedabad at par with the globally
benchmarked financial centres such as Sinjuku-Tokyo, Lujiazui-
Shanghai, La Defense Paris, London Dockyard, having
                                                                  H
    448      SUPREME COURT REPORTS                (2013] 12 S.C.R.


A offshore banking facilities. The State conducted detailed study
  through its wholly owned company called Gujarat State
  Financial Services Limited (GSFSL). Th,e study report was
  prepared in February 2006 which strongly recommended for
  execution of the project after undertaking a feasibility study.
8 Since the project was first of its kind in the country and involved
  commercial risk, the State Government thought of undertaking
  the project of a public-private partnership so that the
  responsibility and the risk, if any, could be! shared.

       2. The State organized the "Vibrant Gujarat Urban Summit"
C in the year 2007. The third respondent, Infrastructure Leasing
  & Financial Services Ltd. (ILFS) showed its commitment for
  development of the national financial services centre and a
  Memorandum of Understanding was signed with the State
  Government on 16.2.2007. On 15.5.2007, a joint venture
D agreement was executed between the State represented by the
  Gujarat Urban Development Company Limited (GUDC) and the
  third respondent for forming a 50:50 joint venture company in
  the name of Gujarat International Financial Tech City Limited
  i.e. GIFT Company Ltd. on 22.3.2011 and 7.6.2011 the State
E Government issued and allotted 412 acres of land to the fourth
  respondent i.e. GIFT Company Ltd. and 250 acres of land to
  its wholly owned subsidiary i.e. GIFT SEZ Limited with a right
  to mortgage while retaining ownership thereof with the State
  Government.
F       3. On 18.8.2011, the fifth respondent, Government of India,
  issued a notification under Special Economic Zones Act, 2005,
  for the area of 261 acres of land for development, operation
  and maintenance of the project. The Government of India on
  27.12.2011, accorded approval to the GIFT SEZ Limited for
G setting up of an International Financial Services Centre. Facts
  reveal, by April 2013, out of the estimated investment of
  Rs.9,700 crore for the entire proposed project, an amount of
  Rs.450 cro~e has already been spent by fourth respondent
  towards development expenses in creating infrastructure.
H
PATHAN MOHAMMED SULEMAN REHMATKHAN v. 449
 STATE OF GUJARAT [K.S. RADHAKRISHNAN, J.)
Fourth respondent has already constructed around 12.8 kms. A
of roads in the township. The fourth respondent has also
constructed a water treatment plant and sewerage treatment
plant having respective capacity of 3 MLD and 2.2 MLD and
distict cooling system, including power sub-station for 66 K>J,
utility tunnel of around 2.2 kms. and automated waste collection B
system for load of around 5 TPD. The fourth respondent has
also constructed an artificial water body known as "Samriddhi
Sarovar" having circumference of 1.5 kms, and a water
pumping station at Nabhoi and a pipeline of almost 12 kms.
has been laid to provide water from Narmada canal to the c
township. Various other activities are also going-on on a war-
footing.
     4. The project picked up momentum and nobody
challenged the joint venture agreement or the decisions taken
by the State Government to allot lands to the fourth respondent        D
for creating infrastructure for development and operation of the
project. The Comptroller and Auditor General of India (CAG),
however, had made certain remarks in his report no.2 of 2013
for the year' ending on 31st March, 2011, stating that the
performance audit revealed a number of system and                      E
compliance deficiencies and the State Government did not
adopt a uniform policy in alienation and allotment of land.
Further, it was also stated that the delay in finalization has
resulted in blocking up of revenue of the Government and there
was no mechanism for review and correction of incorrect orders         F
 issued by the subordinate officers to safeguard Government
revenue and that no proper monitoring system existed in the
Department to ascertain and vacate encroachment cases.
Relevant portion of the CAG report reads as follows :-
                                                                       G
     "3.5.13 Inconsistent decision to allot land at token amount
     Gujarat Urban Development Company Limited (GUDC), a
     Government Company was authorised by Government In
     May 2007 to undertake the Gujarat International Finance
     City project (GIFT city) in a joint venture with Infrastructure   H
    450       SUPREME COURT REPORTS                 [2013] 12 S.C.R.

A         Leasing & Financial Services Ltd. (IL&FS) for setting up
          an International Finance City. Subsequently, a Company
          called GIFT Company Ltd, (the Company) was formed by
          IL&FS and GUDC as a joint venture.
          As per the direction of the Government in Revenue
B
          Department, Collector, Gandhinagar handed over advance
          possession of Government land admeasuring 26,77,814
          sq.mt. valued by the DLVC/SLVC during September 2007
          to December 2008 at Rs.500 crore situated at fourteen
          survey numbers of four Talukas of Gandhinagar district to
c         GUDC for setting up the GIFT city. The GUDC proposed
          (June 2007) to Government for relaxation in payment of
          occupancy price for the land. Chief Secretary, Principal
          Secretaries of Revenue Department, Finance Department
          and UDUHD opined that the land shall be allotted at market
D         value as per the extant policy on valuation of Government
          land. However, moratorium period of two years shall be
          allowed for payment of 50 per cent of the value of land and
          remaining 50 per cent payable as a soft Joan. Meanwhile,
          Ministry of Commerce and Industry, Govt. of India accorded
E         a formal approval in January 2008 to GIFT Company Ltd.,
          for the proposed Multrservices SEZ covering an area of
          10, 11,750 sq.mt. (250 acres).

          As per GR dated 22.11.2004, if the allotment could not be
F         made within completion of two years from the date of
          DLVC's valuation, it was to be refixed afresh. The land was
          allotted in April/June 2011 by Government to the Company
          after expiry of two years from the date of valuation of
          DLVC, though fresh valuation was not done. Scrutiny of
          Cabinet note indicated that Collec~tor, Gandhinagar had
G
          stated that the value of the allotted iand was approximately
          Rs.2,760 Crore. However, Cabinet allotted 10, 11,744
          sq.mt. of land to GIFT SEZ Ltd., and 16,66,070 sq.mt. to
          GIFT Company Ltd., for a nominal price of rupee one with
          the condition that during the first phase of the project, the
H
PATHAN MOHAMMED SULEMAN REHMATKHAN v. 451
 STATE OF GUJARAT [K.S. RADHAKRISHNAN, J.)
  surplus amount received by the developers shall be              A
  divided between Government and the two Companies in
  50:50 ratio. During the execution of subsequent phases,
  the surplus amount, which may be received over and
  above the base cost of the project shall be divided
  between Government and the GIFT Company Ltd., in 80:20          8
  ratio.

  We noticed that land was allotted without ascertaining its
  value as on the date of allotment. Advance possession of
  land was given to an organisation other than Boards/
  Corporations/ SEZ in contravention of the Government            C
  policy. Land was allotted negating the views of Finance
  Department, Revenue Department and UDUHD without
  collecting occupancy price to a minimum extent of Rs.500
  crore as on the dates of advance possession of land.
                                                                  D
  After this was pointed out, the Government stated (July
  2012) that it was a Public Private Partnership (PPP)
  project and development rights were only given and
  ownership rights vested with the Government. The reply is
  not acceptable as the Government land is allotted at new        E
  and restricted tenure wherein the allottee is not entitled to
  sell, transfer or mortgage the land without the permission
  of the Collector. However, in this case, the Government
  authorised the allottee to mortgage/lease the land without
  seeking permission from the Collector/Government.
                                                                  F
  Further, the State Government has produced no records
  to indicate that allotment for the GIFT city was on the basis
  of PPP. The State Government despite repeated requests
  did not produce to audit the Joint Venture Agreement
  signed between Government/GUDC and IL&FS. Non
  production of the records to audit has the consequential        G
  effect of limiting the scope of audit.

   3.5.14 Conclusion

   The performance audit revealed a number of system and          H
    452            SUPREME COURT REPORTS              [2013] 12 S.C.R.


A         compliance deficiencies. Government did not adopt a
          uniform policy in alienation and allotment of land. Delay in
          finalisation of valuation also resulted in blocking up of
          revenue of the Government. There was no mechanism for
          review and revision of incorrect orders issued by the
B         subordinate officers to safeguard Gc1vernment revenue. No
          proper monitoring system exists in the Department to
          ascertain and vacate encroachment cases."

       5. The petitioner herein filed a Public Interest Petition
  before the Gujarat High Court primarily based on the report of
C CAG seeking a declaration that thEl action of the State
  Government for allotting land in favour of the. respondent
  company was illegal and void and sought for an investigation
  by the Central Bureau of Investigation and also for other
  consequential reliefs. The Gujarat High Court after hearing all
D the parties at length and, after elaborately considering the
  materials on record, framed the following questions :

           "(i)     Whether the report of the CAG by itself can legally
                    be made the basis for the reliefs claimed in the
E                   petition?

           (ii)     Whether the decision of the State Government to
                    develop an international finance service city on the
                    basis of a public private partnership model with a
                    social objective could be termed as arbitrary,
F                   discriminatory and an act of favouritism and/or
                    nepotism violating the sole object of equality clause
                    embodied in Article 14 of the Constitution of India?

           (iii)    Whether the petition deserves to be dismissed on
G                   the ground of delay and laches?
          6. The Gujarat High Court felt, though the Writ Petition
    could have been dismissed on the ground of delay, the Court
    still examined all the contentions raised by the parties and
    recorded a ciear finding on all the issues. The High Court
H
 PATHAN MOHAMMED SULEMAN REHMATKHAN v. 453
  STATE OF GUJARAT [K.S. RADHAKRISHNAN, J.)
placed reliance on the judgment of this Court in Arun Kumar            A
Agrawal v. Union of India & others (2013) 7 SCC 1 and held
that having regard to the powers conferred on the CAG, CAG
is not entitled to question the merits ofthe policy objectives of
the State Government. The Court also held that it cannot be said
that the State Government had given largesse to an individual          B
according to its sweet will and whims and took the view that
the Government took a conscious commercial decision after
 perusing the pros and cons of the entire matter and that the
 action of the respondent was not based on extraneous
 considerations or vitiated by malafide exercise of powers.            c
 Holding so, the writ petition was dismissed by the impugned
 order, against which this special leave petition has been
 preferred.

        7. We heard Shri Y.N. Oza, learned· counsel for the
  petitioner and perused the records, as well as counter affidavit     D
  and reply affidavit filed by the parties before the Gujarat High
  Court. The entire case of the petitioner is based on the CAG
  report. The applicability and the binding characteristics of such
. report were considered by the High Court. In Arun Agrawaf's
  case (supra), this Court held as follows:-                           E

       "We may, however, pointed out that since the report is from
       a constitutional functionary, it commands respect and
       cannot be brushed aside as such, but it is equally
       important to examine the comments what respective               F
       Ministries have to offer on the CAG's Report. The Ministry
       can always point out, if there is any mistake in the CA G's
     · report or the CAG has inappropriately appreciated the
       various issues."                                        ·

       8. CAG is a key figure in the system of parliamentary           G
  control of finance and is empowered to delve into the economy,
  efficiency and effectiveness with which the departmental
  authorities or other bodies had used their resources in
  discharging their functions. CAG is also the final audit authority
  and is a part of the machinery through which the legislature         H
    454      SUPREME COURT REPORTS                   [2013] 12 S.C.R.


A enforces the regulatory and economy in the administration of
  public finance, as has been rightly pointed out by the High
  Court. But we cannot lose sight of the fact that it is the
  Government which administers and runs the State, which is
  accountable to the people. State's welfare, progress,
B requirements and needs of the people are better answered by
  the State, also as to how the resources are to be utilized for
  achieving various objectives. If every decision taken by the
  State is tested by a microscopic and a suspicious eye, the
  administration will come to stand still and the decisions-makers
c will lose all their initiative and enthusiasm. At hindsight, it is easy
  to comment upon or criticize the action of the decision maker.
  Sometimes, decisions taken by the State or its administrative
  authorities may go wrong and sometimes it may achieve the
  desired results. Criticisms are always welcome in a
  Parliamentary democracy, but a decision taken in good faith,
0
  with good intentions, without any extraneous considerations,
  cannot belittled, even if that decision was ultimately proved to
  be wrong.

      9. We have extensively referred to these principles in Arun
E Agrawal's case (supra), where we have held as follows:-

        ''This Court sitting in the jurisdiction cannot sit in judgment
        over the commercial or business decision taken by parties
        to the agreement, after evaluating and assessing its
F       monetary and financial implications, unless the decision is
        in clear violation of any statutory provisions or perverse or
        taken for extraneous considerations or improper motives.
        States and its instrumentalities can enter into various
        contracts which may involve coMplex economic factors.
        State or the State undertaking being a party to a contract,
G
        have to make various decisions which they deem just and
        proper. There is always an element of risk in such
        decisions, ultimately it may turn out to be correct decision
        or a wrong one. But if the decision is taken bona fide and.
        in public interest, the mere fact that decision has ultimately
H
PATHAN MOHAMMED SULEMAN REHMATKHAN v. 455
 STATE OF GUJARAT [K.S. RADHAKRISHNAN, J.]

    proved to be wrong, that itself is not a ground to hold that       A
    the decision was mala fide or taken with ulterior motives."

     10. Reference in this regard may also be made to the
judgment of this Court in Centre for Public Interest Litigation
& Ors. v. Union of India & Ors. AIR 2012 SC 3725, wherein it           B
was held that when the GAG report is subject to scrutiny by the
 Public Accounts Committee and the Joint Parliamentary
 Committee, it would not be proper to refer the findings and
 conclusions contained therein. The Court even went on to say
 that it is not necessary to advert to the reasoning and               C
 suggestions made, as well.

      11. We have gone through the salient features of the
Project referred to in the various orders passed by the State
Government and the resolutions dated 22.3.2011 and 7.6.2011
allotting lands to fourth respondent and also the notification D
dated 18.8.2011 issued under the Special Economic Zones
Act, 2005, and we are in agreement with the High Court that it
cannot be said that the State has acted against public interest.
The Government has noticed the development and the
employment opportunities that the project would bring into the E
State. The decision taken by the Government was also
transparent and that the Government has also got substantial
stake in the Public-Private Partnership and has also taken care
of its interests while entering into the various agreements.
Learned senior counsel fairly submitted that he is not attributing F
any motives or stating that the decision was taken for
extraneous reasons, but contended that the Government had,
without any application of mind, parted with a large tracks of
 land worth crores of rupees to the private party, which is not in
the interest of the State.
                                                                   G
      12. We are of the view that these are purely policy
 decisions taken by the State Government and, while so, it has
 examined the benefits the project would bring into the State and
 to the people of the State. It is well settled that non-floating of
 tenders or absence of public auction or invitation alone is not           H
    456      SUPREME COURT REPORTS              [2013] 12 S.C.R.


A a sufficient reason to characterize the action of a public
  authority as either arbitrary or unreasonable or amounted to
  ma/a fide or improper exercise of power. The Courts have
  always held that it is open to the State and the authorities to
  take economic and management decision depending upon the
B exigencies of a situation guided by appropriate financial policy
  notified in public interest. We are of the view that is what has
  been done in the instant case and the High Court has rightly
  held so. We, therefore, find no reason to entertain this Special
  Leave Petition and the same is dismissEid.
C RP                                             SLP dismissed.