STAR ENTERPRISES ETC. ETC.versusCITY AND INDUSTRIAL DEVELOPMENT CORPORATLON OF MAHARASHTRA LTD. & ORS.

                     STAR EN1ERPRISES ETC. ETC.
A                                      v.
    CITY AND INDUSTRIAL DEVELOPMENT CORPORATlON
             OF MAHARASHTRA LTD. & ORS.

                               APRIL 30, 1990
B
             [RANGANATH MISRA, KULDIP SINGH AND
                       R.M. SAHA!, JJ.]

          Maharashtra Regional Town Planning Act, 1966: s. 113 (3A)-
    New Town Planning Authority-Whether a 'State' within the meaning

c
    of Art. 12 of the Constitution-Whether entitled to look for best deal in
    regard to its properties.
                                                                                   r   '   -
          Constitution of India: Articles 298 & 14: Government Company
    entering commercial field-Refusing to accept highest offer in response
    to public tender-Action whether arbitrary.
D
          Indian Contract Act, 1872: Public authority making contract-
    Invitation by public tender-Highest offer-When rejected.

          Administrative /aw-Administrative action-Public authority
    rejecting highest tender-Duty to record reasons to lend credibility to
                                                                                  ·~
E   action-Need.for public accountability.                                         \

          The appellants had given the highest offers for certain specified
    plots for lease In response to invitation by public tender by the respon-
    dent Corporation a Government Company, and complied with the
    requirements of deposit. The respondent, however, rejected the said
    offers without assigning any reason.
F
         The appellants challenged the action of the respondent before the
    High Court as arbitrary, unconstitutional and contrary to rule of law.
                                                                                   +
    The High Court, dismissed the writ petitions in limine.

           In these appeals by special leave, it was contended for the appel-
G   lants that the resoondent Corooration was a •State' under Article 12 of
    the Constitution, that the power of rejection of offers without assigning
    any reason was unregulated and unfettered, contrary to the require-
    ment of rule oflaw, and that it was in the interest of the public authority
    itself, the State and everyone in the society at large that reasons for
    State action are placed on record and or even communicated to the
H   persons from whom the offers came.
                                       826
                      STAR ENTERPRISES v. C.I.D.C. MAHARASHTRA                    827

               Dismissing the appeals, the Court,
     1                                                                                   A
_~       ___    HELD: 1. The respondent No. 1 was 'State' within the meaning of
          Article 12 of the Constitution and in its dealings with the citizens of
          India, it would he required to act within the ambit of rule of law and
          would not be permitted to conduct its activities arbitrarily. [829B-C)
                                                                                         B
               R. D. Shetty v. International Airport Authority of India & Ors.,
         [1979] 1SCR1042 and Ajay Basia v. Khalid Mujib Sehravardi, [1981] 2
         SCR 79, referred to.

                2. The State is certainly entitled to look for the best deal in regard
         to its properties. In the instant case, there was no allegation of mala
         fides in the conduct of respondent No. 1 in refusing to accept the highest      c
         offers. It could, therefore, be presumed that in so doing the respondent
         had been actuated by the consideration of looking for better offers for
         the specific plots in its economic interest. There was thus no arbitrari-
         ness in respond~nt trying to get proper price for its plots. [829E-F, 828E-F]
                                                                                         D
                3. When highest offers of commercial nature are rejected reasons
         sufficient to inljicate the stand of the public authority should be made
         available and the same should be communicated to the concerned
         parties unless there be any specific justification not to do so. That would
         assure credibility to the action, discipline public conduct and improve
         the culture of accountability and provide an opportunity for an objec-          E
         tive review in appropriate cases both by the administrative superior and
         by the judicial process. [830F-G, E-F J

               State of U.P. v. Raj Narain & Ors., [1975] 4SCC 428, referred tii.

              CIVIL APPELLATE JURISDICTION: Civil Appeal                        Nos.     F
         2076-2078 of 1990.

               From the Judgment and Orders dated 25.8.1989, 10.11.1989 &
         5.9.1989 of the Bombay High Court in W.A. Nos. 2198, 3377 and 219/
         of 1989.
               D .N. Dwivedi and Sarva Mitter for the Appellants.                        G

              Arnn Jetley, Additional Solicitor General, Raian Karanjawala,
         H.S. Anand, Nandini Gore, Ravi Kumar, M. Karanjawala, Y:N. Patil
         and A.S. Bhasme for the Respondents.

               The Judgment of the Court was delivered by
    828                  SUPREME COURT REPORTS            [1990] 2 S.C.R.

          RANGANATH MISRA, J. Special leave granted.
A
                                                                                \
         Three applications were filed under Article 226 of the Constitu-
    tion before the High Court of Bombay by the respective appellants
    before us challenging the rejection of their highe~J offers in response
    to invitation by public tender without assigning any reason for the
B   same as arbitrary, unconstitutional and contrary to rule of law.
                                                                            -
        The respondent a Government CQmpany within the meaning of
  section 617 of the Companies Act has been constituted as the New
  Town Development Authority under sub-s. (3A) of s. h3 of the
  Maharashtra Regional Town Planning Act, 1966. The respondent is
  empowered to dispose of land vested in it and the respondent has
C formulated with the approval of the State Government under s. 159 of
                                                                                    .....
                                                                                    y
  the said Act a code for regulating, inter alia disposal of land. Regula-
  tion 4 provides:
                "The Corporation may dispose of plots of lands by putting
                to auction or considering the individual applications as the
D               Corporation determines from time to time."
        According to the appellants the normal practice adopted by the
  Corporation is to invite tenders for the disposal of specified plots
  which the Corporation chooses to assign according to the terms and
  conditions for lease of plots for mercantile use. The appellants
E maintained that they had given the highest offers by way of tender for
  certain specified plots by complying with the requirements of deposit
  and claim that though the offers were the highest, yet the same have
                                                                                ""  \



  not been accepted. Each of the appellants was before the High Court
  challenging the action of respondent No. 1 but the writ petitions were
  dismissed m limine by saying that there was no arbitrariness in the
F respondent No. 1 trying to get proper price for its plots.
           It is not disputed that the scheme which is operating provides
     that "respondent No. 1 reserves the right to amend, revoke or modify
     the scheme at its discretion as well as to reject any or all offers for
     allotment without assigning any reason." Obviously it is in exercise of
     this power that the highest tenders have not been accepted.
G         It is the contention of Mr. Dwivedi appearing in support of these
     appeals that the respondent is 'State' under Article 12 of the Constitu-
     tion and conferment of naked and unguided power as referred to
     above is arbitrary and contrary to the provisions of Article 14 of the
     Constitution; and since there is no prescribed norm or guideline and
H    the power is unregulated and unfetu.:red and the highest offer after
     complying with the prescribed requirements is available to be rejected
                        STAR ENTERPRISES v. C.LD.C. MAHARASHTRA                     829

           without assigning any reasons, citizens are likely to be affected by
      I                                                                                    A
           exercise of such uncanalised power. Shortly put, Mr. Dwivedi submits
-~         that the procedure is contrary to the requirement of rule of law and
           therefore, cannot be sustained. An affidavit in opposition has been
           filed on behalf of respondent No. 1 wherein the circumstances under
           which the highest offers have not been accepted has been indicated
           and the position has been explained.                                            B
                  We do not find it difficult to agree with Mr. Dwivedi's submis-
           sions that respondent No. 1 is 'State' within the meaning of Art. 12 and
           in its dealings with the citizens of India it would be required to act
           within the ambit of rule of law and would not be permitted to con-

-          duct its activities arbitrarily. It is too late in the day tor an institution
           like respondent No. 1 to adopt the posture that the aclivity in question
           is commercial and as respondent No. 1 is engaged in trading activity it
                                                                                           c

    .'".   would be open to it to act as it considers appropriate for the purpose .of
           protecting its business interest. An instrumentality of the State as has
           been laid down by this Court in a series of authoritative decisions
           beginning with R.D. Shetty v. International Airport Authority of India
                                                                                           D
           & Ors., [1979] 1 SCR 1042 and in Ajay Rasia v. Khalid Mujib
           Sehravardi, [1981] 2 SCR 79 and a number of decisions thereafter has
           to act within the ambit of rule of law and would not be allowed to
           conduct itself arbitrarily and in its dealings with the public would be
           liable to judicial review.
                  The State is certainly entitled to look for the best deal in regard      E
           to its properties. This has been accepted by several decisions of this
           Court with reference to State action under the Excise Laws. There is
           no allegation of ma/a /ides in the conduct of respondent No. 1 in
           refusing to accept the highest offer. We must, therefore, proceed on
           the footing that respondent No. 1 acted bona fide and in refusing to
           accept the highest offers of the appellants in regard to specific plots has     F
           been actuated by the consideration of looking for better offers for the
           specific plots in the economic interest of respondent No. 1.
                 The question which still remains to be answered is as to whether
           when the highest offer in response to ap invitation is rejected would
           not the public authority be required to provide reasons for such
                                                                                           G
           action? Mr. Dwivedi has not asked us to look for a reasoned decision
           but has submitted that it is in the interest of the public authority itself,
           the State and every one in the society at large that reasons for State
           action are placed on record and are even communicated to the persons
           from whom the offers came so that the dealings remain above board;
           the interest of the public authority is adequately protected and a citi-        H
           zen knows w.here he stands with reference to his offer. What this Court
    830                    SUPREME COURT REPORTS             [1990] 2 S.C.R

    said in State of U. P. v. Raj Narain & Ors., [1975] 4 SCC 428 may be
A
    usefully recalled here:

                "In a government of responsibility like ours, where all the
                agents of the public must be responsible for their conduct,
                there can be but few secrets. The people of this country
B               have a right to know every public act, everything that is
                done in a public way, by their public functionaries. They
                are entitled to know the particulars of every public transac-
                tion in all its bearing. The right to know, which is derived
                from the concept of freedom of speech, though not abso-
                lute, is a factor which should make one wary, when secrecy
c               is claimed for transactions which can, at any rate, have no
                repercussion on public security. To cover with veil of
                                                                                    -r -
                secrecy, the common routine business, is not in the interest
                of the public."

           In recent times, judicial review of administrative action has
D   become expansive and is becoming wider day by day. The traditional
    limitations have been vanishing and the sphere of judicial scrutiny is
    being expanded. State activity too is becoming fast pervasive. As the
    State has descended into the commercial field and giant public sector
    undertakings have grown up, the stake of the publi~ exchequer is also
    large justifying larger social audit, judicial control and review by open-
E   ing of the public gaze; these necessitate recording of reasons for execu-
    tive actions including cases of rejection of highest offers. That very
    often involves long stakes and availability of reasons for action on the
    record assures credibility to the action; disciplines public conduct and
    improves the culture of accountability. Looking for reasons in support
    of such action provides an opportunity for an objective review in
F   appropriate cases both by the administrative superior and by the judi-         ·~
    cial process. The submission of Mr. Dwivedi, therefore, commends
    itself to our acceptance, namely, that when highest offers of the type in      +
    question are rejected reasons sufficient to indicate the stand of the
    appropriate authority should be made available and ordinarily the
    same should be communicated to the concerned parties unless there be
G   any specific justification not to do so.

          We do not intend to go into matters any further in as much as we
    do not propose to apply this test to the present appeals. These appeals      · -"'
    fail but we make no order as to costs.

    P.S.S.                                                Appeals dismissed.