Holding

The termination of the donor‑seat arrangement is valid as it violates Articles 14 and 15, the Unnikrishnan decision applies, no res judicata or natural‑justice requirement bars the State, and the agreement is not enforceable to the extent it contravenes constitutional principles.

Summary

In 1954, Shri M.P. Shah donated Rs.15 lakh to the Government of Saurashtra for establishing a medical college, with the condition that he or his nominee could nominate 10% of the seats for admission. The Government of Gujarat later decided to discontinue the donor's 12-seat quota, invoking the Supreme Court's decision in J.P. Unnikrishnan v. State of Andhra Pradesh, which prohibited any reservation of seats for donors in professional colleges. The Meghji Pethraj Shah Charitable Trust challenged this termination, arguing that the original agreement was a binding contract, that the earlier Gujarat High Court decision in Asha Nanavati (1974) operated as res judicata, and that natural justice required a hearing before termination. The Supreme Court held that the Unnikrishnan judgment was fully applicable, that the donor‑seat arrangement violated Articles 14 and 15 of the Constitution, that the Nanavati decision was a judgment in personam and not res judicata, and that termination of the agreement did not require observance of natural justice. Consequently, the Court allowed the State's appeal, set aside the Gujarat High Court judgments, and upheld the discontinuation of the donor seats.

Issues considered

The validity of the donor‑seat reservation under Articles 14 and 15 of the Constitution
Whether the Supreme Court's decision in J.P. Unnikrishnan v. State of Andhra Pradesh applies to a government medical college
Whether the 1974 Gujarat High Court decision in Asha Nanavati v. State of Gujarat operates as res judicata between the Trust and the State
Whether the termination of the agreement requires compliance with principles of natural justice
Whether the 1954 agreement constitutes a enforceable contract under Article 299 of the Constitution

Legislation cited

Code of Civil Procedure, 1908s. Section 11
Constitution of Indias. Article 14, s. Article 15, s. Article 19(1)(g), s. Article 299

Subjects

donationmedical collegeadmission quotaArticle 14Article 15res judicatanatural justicecontractgovernment collegeUnnikrishnan casemerit‑based admission

Judgment

\

STATE OF GUJARAT A
v.
MEGHJJ PETHRAJ SHAH CHARITABLE TRUST

MARCH 29, 1994

IS.C. AGRAWAL AND B.P. JEEVAN REDDY, JJ.] B

Constitution of India-Articles I4 and 15--Admission to government
medical college-Quota of seats to be filled by donor or his nominee under
agreenient with govenunent-Government te1minating agreement-field, ter-
minating the agreement following Unnikrishnan vali~Selection on basis of C
n1e1it which applfes to private professional colleges applies equally to govern-
ment colleges----No quota can be reserved for person, family or trnst which
may have assisted monetarily in establishing college.

Civil Procedure Code 1908, Section 11.
D
Res judicata-Waiver--Estoppef-Quota of 12 seats to be filled by
donor or his nominee-Case by student in 1974, in her individual capacity,
seeking adniission-Appellant-State and respondent-Trust supporting the ar-
rangenient as co-re,\pondents in that case-Held, does not attract the mle of
res judicat~Judg1nent in earlier case was in personam, not in rem- E
Government's position in earlier case does not constitute, estoppel-There can
be no estoppel, acquiescence or waiver preventing the State from discharging
its obligations under Pait Ill of the Constitutioit-Constitution of India,
Article 14.

Adn1inistrative I~aiv : F
•
Natural Justice-Agree111cnt for conditional donation entitling donor or
his noniinee to reconunend candidates for adn1ission-Tennination of agree-
nient by State-field, tcnninution not quasi-judicial act-Not an executive or
adntinistrative act either, to attract the duty to act fairly, but a matter govented G
by contract/agreen1cnt-Obse1vancc of principles of natural justice not neces-
sa1y.

M "donated" a sum of Rs.15 lakhs in 1954 of establish a medical
college. The government of Saurashtra established the Meghji Pethraj
Shah Medical College at Jamnagar in 1955 and a government hospital was H
163
j

164 SUPREME COURT REPORTS [1994] 3 S.C.R.

A attached to it with the required bed-strength and facilities. In an arrange- -~
men! between M and the government, one of the conditions was that M or
his successor or his nominees would be entitled to recommend admission
to the extent of 10% of the seats, and that the arrangement was to continue
throughout the existence of the college.

B In 1955, the capacity of the college was 60. In 1964, the expanded
capacity was 175. Jn 1965, the government informed the r~spondent
nominee-Trust that it would not be possible to reserve more than 12 se~ts
for the nominees of the donor; the respondent- Trust ac<1uiesced in this
decision. In 1993, this court delivered the decision in J.P. Un11ikris/111a11 v,
C State of A.P., [1993) 3 SCC 645, pertaining to admission to private profes-
sional colleges, essentially to eliminate the system of capitation fees. The
scheme framed by the court in that decision inter alia directed that no seats
shall be reserved for any community, group or family which may have
established the college.

D Thereafter, in July 1993, the government of Gujarat resolved to
discountinue the 12 donor seats in the Meghji Pethraj Shah Medical
College, Jamnagar. The Rules for admission to the MBBS course in
government medical college, for 1993-94, was accordingly revised and
published.
E A writ petition filed by the respondent-Trust in the High Court was
allowed by a Single Judge and a Letters Patent Appeal, preferred by the
State of Gujarat was dismissed.

The Respondent contended_ that the Judgment in Unnikrishnan has
F no relevance lo this case and that the agreement between the parties was
sacrosanct. It was argued that the decision of the Gujarat High Court in '
Asha Na11avati v. State of Gujarat, Specail Civil Application No. 1232 of J-

1974 dated 20 September, 1974, .where to the government and the Trust
were co~respondents, and wherein the government affirmed the agreement,
operates as Res-Judicata. It was contended by the respondent-Trust that,
G even if the agree1nent was to be termin.attd, the principle of natural justice
had to be followed. It was also submitted that the High Court had struck
down the notification which applied to the medical college as well as lo a
pharmacy college, whereas the government has chosen to appeal only in
the case of medical college. It was argued that this was discriminatory and
H arbitrary, and would result in two inconsistent orders, if allowed. If the
STATE OF GUJARAT v. CHARITABLE TRUST 165
agreement was to be terminated, it was urged, the amount should be A
refunded, \\-'hich would now be the equivalent of Rs. 7lt2 crores.

Allo\\-ing ~he appeal, this court

HELD : .1.1. The government or Gujarat was right in follo,.ing
Unnikrishnan and terminating the arrangement by which the respondent- B
Trust would no.minate 12 students for admission to the medical college.
Reliance upon the judgment or this court was a perrectly relevant,
legitimate and valid for terminating-the said arrangement. It was _bound
to do so in law and it has done so. [178-A·B; 180-A·B]

J.P. Unnikrishnan v. State of A.P., [1993] 3 sec 645, followed. C
1.2. Unnikrishnan expressly directed that all students admitted to a
private proressional college shall be selected exclusively on the basis or
merit, both in the category of merit (free) seats as well as payment seats.
An exception was made to the extent or 5% or the seats for accommodating D
the N.R.ls/foreign students in view or the orders and policy or the govern-
ment or India to encourage such students; It has also been directed
expressly that "there shall be no quota reserved for the management or for
• any ra.;,ily, caste or community, which may have established such college".
Where this is the position in the case of proressional colleges established
and administered by private bodies, it is ~nconceivable" that iri the case or .. E
a college established and run by the government, any admissions can be ·
made. otherwise than on merit or any quota can be reserved ror any person,
family or Trust, which may have assisted monetarily in establishing the·
college. [179-.D-F]

J.P. Unnikrisnnan v.SttzteoJA.f'., [1993] 3 sec 645, applied. F

2.1. The judgment in Nanavati is not a judgment in rem. It is a
judgment in personam. It was in a writ l'etition filed by a student, in her
indhidual capacity, seekin& a dirtdfon to the college to admit her in
J\IBBS 1st )'ear course. There was 110 is~ue in controversy between the G
Trust and the government nor \\'as there any adjudication by the court on·
such an issue. [180-D-E]

2.2. For attracting the rule or res judicata between co-derendants it
is necessary that there should have been some issue directly and substan-
tially in controversy between them which has been heard and finally H ~·
166 SUPREME COURT REPORTS (1994] 3 S.C.R.

A decided by the court. Same would be the position where a plea of res
judicata is sought to be raised between co-respondents in a writ petition,
on the general principles of res judicata. Since the said basic requirement
is not satisfied, the judgment in Nanavati cannot be treated as res judicata
between the Trust and the government. At the most, it can be used as an
instance where the government had afTirmed the binding nature of the said
B arrangement but no more. (180-E-G]

Asha Nanavati v. State of Gujarat, Special Civil Application No. 1232
of 1974 dated 20 September, 1974, distinguished.

C 23. The State cannot be prevented from discharging its obligations
under Part III of the Constitution by rules like estoppel, acquiescence or
waiver. Merely because the government had contended in 1974 that the
said arrange1nent is a valid one and binding upon it, it is not precluded
from resiling from the said position even when it has realised that such
an arrangement is contrary to Article 14. [pp. 180-G-H; 181-A-B]
D
Federation of Directly appointed officers of Indian Railways v. Union
of India, (1993] 3 SCC 364, State of U.P. v. Nawab Hussain, (1977] 3 SCR
428 and Somwanti v. State of Punjab, (1963] 2 SCR 774, distinguished.

Ambika Prasad Mishra v. State of U.P., (1980] 3 SCR 1159, referred
E
to.

3.1. The power of nomination was unregulated and absolute and lay
within the sole discretion of the "donor" and his nominee. The '1donation 11
was one with strings sattached i.e., subject to cerain conditions, one of
F which was of an enduring benelit to him. [176-G-H; 177-B]
I
31. The medical college was established by the Government of
Saurashtra. At all times, it has been maintained and run by the govern-
ment out of their 0"11 funds. The present strength of the college is practi-
cally three times its original stren~th. This court can take judicial notice
G of the fact that over the last severul decades, a seat in MBBS course is a
highly prized achievement. The very power of nomination in respect of 12
1ncdical seats every year meant an exceptional power and clout-and
patronage-which even the government, which has established and has
been maintaining and running the college at huge expense, did not possess.
H It is true that Rs. 15 lakhs was a substantial amount in 1954, but it is
STATE OF GUJARAT v. CHARITABLETRUST[.IEEVAN REDDY,J.] 167

.... e<1ually evident that the said payment has yielded substantial benefit over A
the last forty years. (175-F-H; 177-C-G]

4. Termination of agreement is not a quasi-judicaial act; hence it is
not necessary to observe the principles of natural justice. It is not also an
executive or administrative act to attract the duty to act fairly. It was a
matter governed by a contract/agreemant between the parties, and a public B
law remedy is not, as such, available. [182-D-F]

Assistant Excise Commissioner v. Isaac Petc1; (1994) 2 JT 140, referred
to.

5. Since the medical college and the pharmacy college are different C
and they had filed two different petitions, non-filing of appeal in one case
does not disable the government from filing the appeal in the other case,
merely because the judgment is a common one. It must be deemed in such
a case that it is a judgment in each case separately. [183-A·B]
D
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2134 &
2135 of 1994.

From the Judgment and Order dated 9.12.93 of the Gujarat High
Court in L.P.A. No. 359/93 & 363/93 in S.C.A. Nos. 6532 & 7692 of 1993.
E
Altaf Ahmad, Additional Solicitor General, N.H. Bhatt, C.B. Babu,
Himanshu Misra, Buddi Sggar, Anip Sachthey, Ms, Meenakshi Arora,
Aseem Mehrotra and A.P. Medh for the Appellants.

G. Ramas\vamy, P. Chidambaram, R.F. Nariman, SJ. Navavati, V.K.
Bhatt, Premal Nanavati, B.S. Jain H.D. Pathak, Mrs. V.D. Khanna, F
Yashank Adhyaru, Ms. B. Tiwari and Ms. Hemantika Wahi for the
Respondents.

The Judgment of the Court was delivered by

ll.P. JEEVAN REDDY, J. Leave granted. G

Meghji Pcthraj Shah Medical College was established by the then
Government of Saurashtra at Jamnagar in the year 1955. For establishing
·-'. the college, Sri M.P. Shah "donated" a sum of Rupees fifteen lakhs subject
to certain conditions. The govern1nent hospital then known as Irwin Hospi- H
!

168 SUPREME COURT REPORTS [1994] 3 S.C.R.

A ta\ was attached to the said college to meet the requirement of a hospital
with necessary bed-strength. In the year 1993, the Government of Gujarat
repudiated one of the conditions attached to the donation, which led the
M.P. Shah Charitable Trust to approach the Gujarat High Court for
issuance of a writ commanding the State of Gujarat to continue to abide
B by the said condition. The writ petition was allowed by a learned Single
Judge and a Letters Patent Appeal preferred by the State of Gujarat has
been dismissed by a Division Bench-the correctness whereof is under
challenge herein.

Having regard to the questions arising herein, it is necessary to notice
C the facts concerning the establishment of the college. On October 8, 1954,
Sri M.P. Shah wrote a letter to the then Chief Minister of Saurashtra
confirming the arrangement arrived at by him with Sri Manubhai Shah, who
was evidently acting on behalf of the Chief Minister. It is necessary to quote
the letter in full :
D
"Respected Shri Debharbhai,

Today morning, I returned from Jamnagar and in good health.
Hope, you will also be enjoying good health. On Monday the 4th
October, I had satisfactory discussions with Shri Manubhai Shah
E at the residence of Shri Premchandbhai in Jamnagar for Medical
College and hospital. He has shown good interest in the matter
· and let us pray that, by the grace of god this mission may be
successful.

Following decisions have been taken in the discussion with him.
F
(1) Existing Irwin hospital will be properly extended and the
number of beds and other amenities will be provided as per the ~
requirement of the medical college. Hospital shall be named after
Mahatma Gandhi or any other great Indian leader instead of
G present name.

(2) The Medical College attached this with hospital shall be known
as Shri Meghji Pethraj Shah Medical College. The building for the
hostel for the students of this college also shall be constructed.

H (3) The Constitution of the Colleges shall also provide that I or my
\

STATE OF GUJARAT v. CHARJTABLETRUST[JEEVANREDDY,J.] 169

successor or 1ny no1ninees shall be entitled to recommend·adntission A
to the extent of 10% of the total number of students to be admitted
and this an·angement shall be continued so long as the college
continues. I have explained to Shri Manubhai about the necessity
of provision and has accepted the same.

(emphasis added) B

(4) The steps shall be taken to start tile college from next June
and till the new building for the college is ready, the college shall
be conducted in the new building constructed for Jamnagar court.

After having confirmation to the above effect from the Govern-
c
ment, we shall complete the necessary procedure for donation and
send our confirmation for the same for government record.

Yours
Sd/- For Meghji Pethraj Shah." D
On 22nd/23rd November, 1954, the Chief Minister wrote to Shri M.P.
Shah confirming the arrangement. The letter reads :

"Dear Shri Meghjibhai,
E
I was glad to receive your letter dated 28th Oct. All the steps are
being taken to start medical college from June, 1955. Arrange-
ments will be made to start the college in the new building of the
court till the new building for the college is constructed. Medical
college will be known as the name suggested by you and the
arrangements have been made for the same. Constitution of the F
college shall provide for the admission to 10% of the satdents
admitted eve1y year as recommended by you or your successor or
noniinee and this a1rangen1ent shall be pennanent.

(Emphasis added) G
As regards hospiLal, it is being considered to name as Smt.
Kasturba Gandhi Hospital, Final decision shall be taken in few
days.

I think that on this basis, till all the points are confirmed and H
I
I

170 SUPREME COURT REPORTS [1994] 3 S.C.R.

A the procedure is completed, stone foundation cere1nony of the new
building shall be done by the Hon'ble President or other great
leader. I a:n arranging for the same and shall inform the date, when
finalised.

Hope this will find you in good health.
B
Yours well wisher,
sd/- U.N. Dhebar."

The medical college was accordingly established and started
C functioning from June, 1955 with a strength of sixty students. As per the
arrangement contained in the aforesaid letters, Sri M.P. Shah was per-
mitted to nominate students for admission to the extent of 10% of the total
strength obtaining at a given time. This arrangement continued even after
the formation of the State of Gujarat. In course of time, the college and
D the hospital grew in strength and size. As against sixty seats in 1955, the
annual intake of the college rose to 175 - three times the original number.
In the year 1964, the Government of Gujarat took a decision that it would
not be possible for it to r,eserve more than twelve seats for the nominees
of the donor. Though a copy of the said proceedings is not placed before
us, it is found referred to in the letter dated April 19, 1965 written by the
E Under Secretary to the Governmen~ of Gujarat to the trustee of Meghji
Pethraj Charitable Trust. (It is stated that meanwhile the original donor,
M.P. Shah had designated the respondent-trust as his nominee.) The letter
reads :

F "! am directed to refer to your letter dated 4th March, 1965 on the
subject noted above and to state that for the reasons given in
Government letter No. MOG-1062/4257/Q dated 11th August,
1964, it will be not possible for Government to reserve more than
12 seats for the nominees of the donor at M.P. Shah Medical
College, Jamnagar 11 •
G
The respondent-trust acquiesced in this decision. It is not brought to
our notice that the trust lodged any'protest to the said reduction much less
take any legal proceedings to compel the government to abide by the
arrangement. From the year 1964-65, therelo'rg, only twelve students were
H being nominated by the trust.
STATE OF GUJARAT v. CHARITABLE TRUST[JEEVAN REDDY.J.] 171

~· In February, 1993 this court delivered the judgment in J.P. Unnikrish- A
nan v. State of Andhra Pradesh, f1993J 3 S.C.C. 645. The decision pertains
to private professional colleges. With a view to eliminate the evil of
capitation fee and the other undesirable practices prevalent in private
medicol colleges, this court framed a scheme which the affiliating university
and the concerned governme1nt were under an obligation to impose as
terms and conditions of affiliation/recognition. The scheme inter alia
B
directed that no seats shall be reserved for any community, group or family
which may have established the college. The idea evidently was that while
donations are welcome, investments are not - for the reason, expressly
affirmed in the judgment, that imparting of education is not and cannot be
)-
allowed to become a business. This feature of the scheme naturally set the c
Government of Gujarat a-thinking - whether in the light of the above
pronouncement, it is permissible to reserve seats for the 11 donor" in the said
government college when such a course is not permissible even in a private
medical college. Accordingly, it resolved vide the Government of Gujarat
resolution dated 12th July, 1993 "to discontinue the twelve donor seats in
D
M.P. Shah Medical College, Jamnagar". The resolution, a copy of which
was communicated to the respondent- trust and the college reads as
follows:
' ''ANNEXURE : 'E'
E
Rules for Admission to first MBBS/BDS/
Physic Therapy in Medical Colleges in
Gujarat State 1993-94.

Government of Gujarat,
Health & Family Welfare Department, F
r
Resolution No. MCG-1093-2323-J,
Sachivalaya, Gandhinagar,
Dated the 12th July, 1993.

Read :- (1) Govt. Resolution Health and Family
G
Welfare Department No. MCG-1093-1373-.1
dt. 20.5.1993.

(2) Govt. Resolution Health and Family
·~

Welfare Department No. MCG-1093-1373-J
dt. 26.6.1993. H
172 SUPREME COURT REPORTS [1994] 3 S.C.R.

A (3) Govt. Resolution Health and Family
Welfare Department No. MCG-1093-1373-J
dt. 3.7.1993.

RESOLUTION:

B Government has in keeping with the judgment of the Supreme
Court in Writ Petition No. 607/.92 between Unnik1is/man J.P. and
others v. State of Andhra Pradesh, decided to discontinue the 12
donor seats in M.P. Shah Medical College, Jamnagar and 10 donor
and seats in Pramuch Swami Medical College, Karamsad. The
c decision of the Govt. has been communicated the concerned trus-
tees vide this department letter of even No. dt. 22.6.93 requesting
them not to admit any student against the donor seats.

Therefore in modification of Rules for admission to first
MBBS/BDS/Physiotheraphy course at Govt. Medical College and
D P.S. Medical College, Karamsad/Govt. Dental College/School of
Physiotherapy in Gujarat State for the year 1993-94 approved vide
Govt. Resolution No. MCG-1093-1373-J dated 20.5.93 Govt. is
pleased to delete the words "and 3" appearing in 7th line of Rule
i and (ii) to delate the words "'Provided that .............. total available
E seats" appearing in 6th and 7th lines of the Rule 2 and (iii) to
delete Rule 3.1, 3.2, 3.3, 3.4, and note thereunder.

By order and in the name of the Government of Gujarat.

(M.L. JADA V)
F Section Officer, Health and Family
Welfare Department."

Accordingly the Rules for admission to M.B.B.S. course in govern-
ment medical collegr.;, for the yca1: 1993-94, published by the Government
G of Gujarat contained no provision for nomination of students by the
respondent-trust for the said academic year. It is then that the respondent-
trust approached the Gujarat High Court challenging the aforesaid
Government resoluation.

Before we refer to the contentions of the parties, it is necessary to
H notice an earlier judgment of the Gujarat High Court dated 20th Septem-
I

STATE OF GUJARAT"- CHARITABLETRUST[JEEVAN REDDY,J.] 173

ber, 1994 in Special Civil Application No. 1232 of 1974 (Miss Asha A
Nanavaci v. State of Gujarat & Ors.). The writ petiton was filed by a student
seeking admission to the said college. Her case was that but for the said
provision for nomination, she would have obtained a seat in the college.
She questioned the validity of the rules for admission issued by the Govern-
ment of Gujarat insofar as they provided for nomination of twelve students
by the respondent-trust. She submitted that when the college was started
B
in the year 1955, its strength was sixty and according to the original
arrangement only six seats were available for nomination by the trust; that
the strength of the college has been increased from time to time by the
government by investing its own funds with the result that by the year 1974,
the strength of the college had risen to 175; in such a situation, the c
provision permitting the donor to nominate as many as twelve students was
arbitrary, unreasonable and violative of Article 14 of the Constitution of
India. She submitted that there was no formal contract or agreement
between the Government of Saurashtra and the donor and that the arran-
gement, if any, between the then Government of Saurashtra and Sri M.P. D
Shah was not binding upon the Government of Gujarat. She characterised
the said arrangement as contrary to public policy and prejudicial to public
interest. Both the Trust and the Government of Gujarat, who were imw
pleaded as respondents, opposed the writ petition and justified the arran-
gement. The High Court dismissed the writ petition holding that the said
arrangement was not violative of Article 14 of the Constitution. The court E
observed that in 1954-55, there was no medical college in Saurashtra and
that a college could be established only with the help of the said donation
from Sri M.P. Shah. The provision for nomination by the said donor in
consideration of the said donation, the court held, is reasonable. No appeal
was preferred by any one against the said decision. F

Sri Altaf Ahmed, Additional Solicitor General appearing for the
appellant (State of Gujarat) assailed the judgment of the Gujarat High
Court on the following grounds :

(1) The government was justified in discontinuing the provis10n G
reserving twelve seats for being nominated by the respondent- trust inas-
much as the reservation of the kind is opposed to Articles 14 and 15 of the
Constitution. According to the judgment in Unnikrishnan, no sealli can be
reserved for the family, group or community which may have established a
private professional college; it is inconceivable that such a reservation can H
I
I

174 SUPREME COURT REPORTS [1994] 3 S.C.R.

A be provided in a government college.

(2) Even if it is assumed for the sake of argument that such a
provision was valid when it was made in 1954, it is not valid or reasonable
after lapse of about forty years.

B (3) There was no contract between M.P. Shah and the Government
of Saurashtra as provided by Article 299 of the Constitution. The arrange-
ment between the Government of Saurashtra and Sri M.P. Shah is not
legally enforceable in a court of law.

(4) The High Court has not correctly understood the ratio of the
C judgment in Unnikrishnan. the judgment made it clear that any such
reservation even in a private college is impermissible. The Government of
Gujarat was bound by the said judgment. It, therefore, acted to put an end
to the said provision for reservation in a government college.

D (5) The High Court was in error in holding that the judgment of the
Gujarat High Court in Nanavati v. State of Gujarat operated as res judicata
between the government and the respondent-trust. Since the government
and the Trust were co-respondents and there was no conflict of interest
between them in that writ petition, the decision rendered cannot operate
as res judicata between them.
E
(6) Having regard to the nature of function, it was not neccesary for
the government to observe the principles of natural justice while terminat-
ing the arrangement.

Sri G. Ramaswamy, learned counsel apprearing for the respondent-
F trust urged the following reasons in support of the judgment of the High
Court:
I

(1) There is a binding contract between the government and the
Trust entered into in 1954. In any event, the finding of the Gujarat High
G Court in Nanavati's case that there was a binding contract between the
parties operates res judicata.

(2) The contract entered into between the parties is not violative of
Article 14. It is also not open to the State to raise the question of violation
of Article 14 since this question was concluded by the judgment of the High
H Court in Nanavati as far as back in 1974.
STATE OF GUJARAT v. CHARITABLETRUST[JEEVANREDDY,J.] 175

(3) The judgment in Unnik1ishnan is applicable only to private col- A
leges. It did not pertain to or deal with the government colleges. The said
judgment was, therefore, not relevant and did not warrant the impugned
termination of arrangement by the Government of Gujarat. Once that
judgment is held to be irrelevant in the case of government colleges, the
only ground of termination gets knocked off.
B
(4) In the facts and the circumstances of the case, the contract
between the parties could not have been terminated unilaterally without
observing the principles of natural justice.

(5) If the government is of the opinion that the contract entered into C
in 1954 was void and unconstitutional, even then it cannot unilaterally
terminate the contract without refunding the amount donated by Sri M.P.
Shah. The amount of Rupees fifteen lakhs in 1954 is equivalent to Rupees
seven and a half crores today.

(6) The government's order pertains to M.P. Shah Medical College D
as well as pharmacy college. By a common judgment, the learned Single
Judge of the Gujarat High Court struck down. the government resolution
with respect to both colleges. The government, however, chose to file
appeal only in the case of M.P. Shah Medical College but not with respect
to the pharmacy college. This is not only discriminatory and arbitrary but E
must also induce this court not to interfere in this appeal since upsetting
the judgment of the Gujarat High Court would result in two inconsistant
orders.

Before we deal with the contentions urged by the learned counsel
before us, it, would be appropriate to notice a few facts. F

M.P. Shah Medical .College was established by the Government of
·• Saurashtra. Al all times, it has been maintained and run by the Government
of Saurashtra/ Gujarat - from out of their own funds. Every medical college
must necessarily have a hospital attached lo it with requisite bed-strength
and facilities; there cannot be a medical college without such an attached G
hospital. For this reason, an existing government hospital was re-named as
"Kasturba Gandhi Hospital" and attached to the college. Apart from the
sum of Rupees fifteen lakhs "donated" in the year 1954, no further sum has
been donated nor any other expenditure incurred by Sri M.P. Shah or the
respndent-trust over the last forty years. There is also no evidence to show H
I

)

176 SUPREME COURT REPORTS (1994] 3 S.C.R.

A that the college was established exclusively with the amoJnt 'donated" by
Sri M.P. Shah and that no fonds or property of the Government was
utilised for the purpose. The material placed before us does not also show
that the Government of Saurashtra was in no position to spare a sum of
Rupees fifteen lakhs in 1954 for establishing the college or that for that
B reason it approached or requested Sri M.P. Shah to donate the said
amount. It is not clear from whom did the proposal emanate. The judgment
of G\Jiarat High Court in Nanavati refers to and accepts the statement of
a trustee of the respondent-Trust that "the State of Saurashtra was a newly
formed State at that time and was a very small State and the State had
many other public duties like development of other educational institutions
c of higher education in what was known as educationally backward region
of the country"', and the further averment that "this object (setting up a
medical college) could be achieved only if a sizeable donation like Rupees
fifteen lakhs (considering the value of rupee in those days) was received
by the Government of Saurashtra, when he government itself was unable
D without some initial donation to embark upon setting up a medical college
11
from its own funds 'fhe observations, in the judgment in 1Vanavati show
•

that while the said 11 donation' 1was essential for starting the college, it did
not meet the entire expense. Nor do we know what the entire expense. The
significant words are "the govenment by itself was unable without so1ne
E initial donation .to embark upon setting up a medical college from its own
funds"'. Not that we are suggesting that had the college been set up
exclusively out of the said donation\ it would n1a~e any difference. We are
11

only setting out the precise factual position.

F The arrangement between the Government of Saurashtra and Sri
M.P. Shah does not prescribe the manner or method according to which
the original donor or the Trust should select the students to be nominated
against the quota reserved for them. It was and is open to the donor(frust
to nominate such candidates as they chose. The Government had no right
to question the nominations made. While the Trust says that they have been
G nominating students on a fair basis with a view to help genuine students
and physically handicapped students, the govermnent says that the nomina-
tion did not follow any particular method or criteria and that the
nominated students came from all over the country. The fact remains that
the power of nomination was unregulated and absolute and Jay within the
H sole discretion of the 11donor'1 and his nominee.
STATE OF GUJARAT v. CHARITABLETRUST[JEEVAN REDDY,J.) 177

Secondly, and more significantly, it is misleading to call the amount A
of Rupees fifteen lakhs paid by Sri M.P. Shah to the government in the
year 1954 as a 11 donation 11 •

The said amount was not given by Sri M.P. Shah without any strings
attached, but subject to certain conditions, one of which was of an enduring
B
benefit to him. Not only the college (to be established and maintained by
the government) was to be named after Sri M.P. Shah, he bargained for
and obtained a quota of ten percent seats to which he could nominate
anyone. At the time the college was established the strength of the college
was sixty. It has expanded enormously and its present strength is practically
three times its original strength. As against sixty seats in 1955, the number c
of seats today is 175. Sri M.P. Shah or the respondent-trust have not been
spending a single pie on the education of students nominated by them over
the last about forty years. For the first twenty years, they enjoyed the right
of nominating one-tenth of the students and for the last about twenty years,
twelve students. The cost of medical education has been steadily rising over D
the years. In 1974, - as it appears from the judgment in Nanavati - the cost
of educating one student was Rupees one lakh. Today it is anywhere in the
region of five to seven lakhs. We can take judicial notice of the fact that
over the last several decades, a seat in M.B.B.S. course is a highly prized
achievement. The private medical colleges have been charging several lakhs
of rupees for granting admission in their colleges. We are not suggesting E
that the respondent-trust was collecting money for nominating students. It
may not have been necessary for it but the very power of nomination in
respect of twelve medical seats every year did mean an exceptional power
and clout -and patrongage - which even the government, which has estab-
lished and has been maintaining and running the college at a huge expense, F
• did not and does not possess. Indisputably,. admission to government
medical colleges is being done exclusively on the basis of the merit and
even the government does not possess the power to nominate a student for
admission in its discretion. Only the respondent-trust po~sessed such a
power - and all because forty years back a sum of Rupees fifteen lakhs was
11
donated 11 by its predecessor-in-interest. It is true that the sum of Rupees G
fifteen lakhs in 1954 was a substantial amount, as has been repeatedly
emphasised by Sri Ramaswamy. But it is equally evdent that the said
payment has yielded substantial benefit over the last forty years.

Having noticed the relevant factual aspects, we may now trun to the H
178 SUPREME COURT REPORTS [1994] 3 S.C.R.

A position in law. Sri G.Ramaswamy, learned counsel for the respondent-
trust is not right in saying that the decision in Vnnik1ishnan was not relevant
to the decision of the Government of Gujarat to terminate the aforesaid
arrangement. In our opinion, it was perfectly relevant and the Government
of Gujarat was right in terminating the arrangement following the said
decision. It has been held in Vnnikrishnan that while .a person may have a
B right to establish an educational institution, it can certainly not be treated
or operated as a trade or business. The following extract from the judgment
brings out the essence of the holding on this aspect :

"While we do not wish to express any opinion on the question
c whether the right to establish an educational institution can be said
to be carrying on any 11 occupation11 within the meaning of Article
19(1)(g), - perhaps, it is - we are certainly of the opinion that such
activity can neither be a trade or business nor can it be a profession
within the meaning of Article 19(1)(g). Trade or business normally
connotes an activity carried on with a profit motive. Education has
D
never been commerce in this country. Making it one is opposed to
the ethos, tradition and sensibilities of this nation. The argument
to the contrary has an unholy ring to it. Imparting of education has
never been treated as a trade or business in this country since time
immemorial. It has been treated as a religious duty. It has been
E treated as a charitable activity. But never as trade or business. We
agree \Vith Gajendragadkar, J. that !1education in its true aspect is
more a mission and a vocation rather than a profession or trade
or business, however wide may be the denotation of the two latter
words ........ " (See University of Delhi.) The Parliament too has
manifested its intention repeatedly (by enacting the U.G.C. Act,
F
l.M.C. Act and A.l.C.T.E. Act) that commercialisation of educa-
tion is not permissible and that no person shall be allowed to steal
a march over a more meritorious candidate because of his
economic power. The very same intent.ion is exprcs~ion by the
legislatures of Andhra Pradesh, Karnataka, Maharashtra and
G Tamil Nadu in the Preamble to their respective enactments
prohibiting charging of capitation fee.

We are, therefore, of the opinion, adopting the line of reasoning
in State of Bombay v. R.M.D. Chamarbaugwala, [1957[ S.C.R. 874
H that imparting education cannot be treated as a trade or business.
STATE OF GUJARAT v. CHARITABLE TRUST[JEEVANREDDYJ.] 179

Education cannot be allowed to be converted into commerce nor A
can the petitioners seek to obtain the said result by relying upon
the wider meaning of 11 occupation 11 • The content of the expression
"occupation" has to be ascertained keeping in mind the fact that
clause (g) employs all the four expressions viz., profession, occupa-
tion, trade and business. Their fields may overlap, but each of them
does certainly have a content of its own, distinct from the others.
B
He that as it may, one thing is clear - imparting of education is not
and cannot be allowed to become commerce. A law, existing or
future, ensuring against it would be a valid measure within the
meaning of clause (6) of Article 19. We cannot, therefore, agree
with the contrary proposition enunciated in Sakharkherda Educa- c
" tion Society v. State of Maharashtra, Andhra Kesari Education
Society v. Govt: of A.P. and Bapuji Educational Assn. v. State.

In the scheme evolved in the said judgment, it is expressly directed
that all students admitted to a private professional college shall be selected D
exclusively on the basis of merit, both in the category of merii (free) seats
as well as payment seats. In the case of such private professional colleges,
an exception was made to the extent of 5% of the seats for accommodating
the N.R.ls/foreign students in view of the orders and policy of the Govern-
ment of India to encourage such students. It has. also been directed
expressly that "there shall be no quota reserved for the management or for E
any family, caste or community, which may have established such college".
If this is the position in the case of professional colleges established and
administered by private bo<lies, it is inconceivable that iri the case of a
college established anJ run by I he government, any admissions can be
made other,visc than on merit or any quota can be reserved for any person, F
. family or Trust, \Vhich 1nay have assisted monetarily in establishing the
college. The government is not precluJed from accepting donations from
charitable-minded individuals or organisations but it cannot certainly enter
into an arrangement or a venture of the kind concerned herein. In this case,
the payment was more in the nature of a deal whereunder Sri M.P. Shah
obtained in return an enduring benefit till the college lasts. It was not even G
a .case, \vhere the govenmcnt unilaterally offered something out of gran-
titude for such "donation" - not that we are saying that such a thing would
be legal. Now, where an individual or an organisation which establishes and
runs a medical college (recognised by State or affiliated to a university) is
not entitled, according to Unnik1ishnan, to admit students on its own, or in H
(

I

180 SUPREME COURT REPORTS [1994] 3 S.C.R.

A its discretion, it is inconceivable that a person or a body which has assisted
in setting up of a government medical college would be permitted to have
a quota of its own to which it can nominate students of its own choice.
There is no room for such an arrangement in law. We are, therefore, (Jf
the opinion that the reason given by the Government of Gujarat in its
communication dated June 22, 1993 for terminating the said arrangement
B is a perfectly relevant, legitimate and valid reason. It was bound to do so
in law and it has done so. No exception can be taken to the said action.

In this view of the matter, it is not necessary to deal with the other
contentions urged by the learned Additional Solicitor General. We must,
c however, deal with other contentions urged by Sri Ramaswamy. He con-
tended that the decision of the Gujarat High Court in Nanavati operates
as res judicata between the repondent-trust and the Government of Gujarat
and, therefore, it is not open to the government to say that the said
arrangement is not valid and/or binding upon it. It is not possible to agree.
D The judgment in Nanavati is not a judgment in rem. It is a judgment in
personam. It was in a writ petition filed by a student, in her individual
capacity, seeking a direction to the college to admit her in M.B.B.S. !st
year course. She arrayed both the respondent-trust and the Government
of Gujarat as respondents to the writ petition. Both the Trust and the
. government supported the arrangement and contended. that it was valid
E and binding. There .was no conflict of interest between the Trust and the
government. There was no issue in controversy between the Trust and the
government nor was there any adjudication by the court on such an issue.
For attracting the rule of res judicata between co-defendants - according
to the terms in Section 11 of the Civil Procedure Code which provision of
F course is not, in terms, app1icable to proceedings in :,:i. writ petition - it is
necessary that there should have been some issue directly and substantially
in controversy between them which has been heard and finally decided by
the court. Same would be the position, where a plea of res judicata is sought
to be raised bet\veen co-respondents in a writ petition, on the general
principles of res judicata. Since the said basic requirement is not satisfied,
G the said judgment cannot be treated as res judicata between the Trust and
the government. At the most, it can be used as an instance where the
government had affirmed the binding nature of the said arrangement but
no more. That does not even give rise to an estoppel in the facts of this
case. Merely because the government had contended in 1974 that the said
H arrangement is a valid one and binding upon it, if cannot be said that it is·
1.

STATE OF GUJARAT v. CHARJTABLETRUST[JEEVAN REDDY,J.] 181

·~ precluded from resiling from the said position even when it has realised A
that such an arrangement is contrary to Article 14. There can be no
acquiesence or waiver in such m~tters. If an individual cannot waive the
fundamental rights conferred upon him by Part-III, the State cannot equal-
ly be prevented from discharging its obligations placed upon it by Part-III
by rules of evidence like estoppel, acquiescence or waiver.
B
Sri Ramaswamy relied upon certain decisions in support of the said
cont.ention which we may deal with briefly. The first decision relied upon
is in Federation of Directly Appointed Officers of Indian Railways & Ors. v.
Union of India & Ors., [1993] 3 S.C.C. 364. In that case, there was an earlier
decision by this court on an issue identical to the one raised in the writ c
petition. Though the earlier decision was not rendered in a writ petition
filed in a representative capacity, the issue had arisen between the very
same categories of persons and the contentions were also the same. The
petitioners sought to argue that the earlier decision is not binding upon
them in view of the "developing concept of Article 14". On the other hand, D
it was argued by the other side that the earlier decision operated as res
judicata. On an examination of the contentions which arose in the previous
case and whic~ arose in the case before them, the learned Judges compris·
ing the Divisilin Bench held that they are unable to see "any compelling
reasons to deviate from the principles enunciated in (earlier) judgment". It
was also held that "a dispute now sought to be raised under Article 32 of E
the Constitution between the officers in a representative capacity and
engineers across also in a representative capacity must be held to be barred
by principles of res judicata as alsu by the rule of constructive res judicata".
We are unable to see how the principle of the said decision helps the
respondent-trust herein. There it was a _direct conflict between two F
categories of e1up1oyce~ on both the occasions and on identical grounds. It
was for that reason that the earlier decision was treated as res judicata.

The ne,1 decision relied upon is in Ambika Prasad Mishra v. State of
Uttar Pradesh, [1980] 3 S.C.R. 1159. The principle emphasised by the G
Constitution Bench in this case is that judicial decision should not be
reviewed from time lo time since such a course has the effect of making
the law uncertain besides keeping the legislative and administrative
decisions on vital issues in perinnial suspense. There can be no quarrel with
the said principle but its relevance herein is very little. H
182 SUPREME COURT REPORTS (1994) 3 S.C.R.

A Sri Ramaswamy then cited State of Uttar Pradesh v. Nawab Hussain,
(1977] 3 S.C.R. 428. In that case, the respondent who was dismissed from
service filed a writ petition in the High Court raising a particular conten-
tion. The writ petition was dismissed. Thereafter, he filed a suit raising
another ground of challenge which was met by the State by raising the plea
of res judicata. This court held that the respondent was precluded by the
B rule of constructive res judicata from raising the said new ground in the
suit which he did not raise in the writ petition, though it was within his
knowledge and could have been taken in the writ petition.

The last decision cited by Sri Ramaswamy on this score is in Som-
C wanti v. State of Punjab, (1963] 2 S.C.R. 774. In this case, it was observed
at pages 793-794 that the mere fact that one of the contentions now raised
was not raised or considered in an earlier decision which affirmed the
validity of the enactment, does not furnish sufficient ground for reopening
the issue. None of these cases are cases relating to res judicata between
D co-defendants/co-respondents.

We are unable to see any substance in the argument that the termina-
tion of arrangement without observing the principle of natural justice (audi
alteram partem) is void. The termination is not a quasi-judicial act by any
stretch of imagination; hence it was not necessary to observe the principles
E of natural justice. It is not als_o an executive or administrative act to attract
the duty to act fairly. It was - as has been repeatedly urged by Sri
Ramaswamy - a matter governed by a contract/agreemeni between the
parties. If the matter is governed by a contract, the ·writ petition is not
maintainable since it is a public law remedy and is .not available in private
F law field, e.g., where the matter is governed by a non-statutory contract*.
Be that as it may, in view of our opinion on the main question, it is not .,
necessary to pursue this reasoning further.

Regarding the contention that" the Government of Gujarat did not
G choose to file an appeal (against the judgment of the learned Single Judge)
in the case of the pharmacy college but filed an appeal only in the case of
the M.P. Shah Medical College and that it is guilty of discrimination on
that account, we must say, we see no substance in it. It is explained by the
In this connection, see Assistant Excise Commissioner & Ors. etc. etc. v. Isaac Peter
& Ors. etc. etc., [1994] 2 J.T. 140, on the relevance of doctrine of fairness in n1atters
H governed by contract, arrived at calling for tenders, auction or by negotiations.
STATE OF GUJARAT v. CHARITABLETRUST[JEEVANREDDY,J.] 183

learned Additional Solicitor General that in the case of pharmacy college, A
only one seat was involved whereas it was twelve seats here and that too
in a medical college. In any event, since both the colleges are different and
they had filed two different writ petitions, non- filing of appeal in one case
does not disable the government from filing the appeal in the other case,
merely because the judgment is a common one. It must be deemed in such
a case that it is a judgment in each case separately. B
For the above reasons, the civil appeals are allowed and the judg-
ments of the Gujarat High Court, both of the learned Single Judge and the
Division Bench under appeal, are set aside. No order as to costs.

No orders on Interlocutory Applications. c
U.R . Appeal allowed.

...