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Friday, October 31, 2014

Allotment of site by CIDCO - later it was cancelled - Bombay High court allowed the writ and set aside the cancellation orders - Apex court held that the authorities of CIDCO showed undue favour to the respondents and managed to allot the Government land in favour of one person knowing fully well that the aforesaid proprietor of the Company, in different capacity and in dummy names, sought allotments of plots. The way CIDCO has been dealing with the Government property, it is high time, we observe, that notwithstanding Regulation 4, as contained in the Regulations, the appellant CIDCO may take all endeavour to make allotments of plots by open tender or competing bids and shall not take any decision for allotment of Government land at the instance of the Ministers and High Dignitaries for any purposes whatsoever.Taking into consideration the entire facts of the case and the law discussed hereinabove, we have no hesitation in holding that the CIDCO was justified in cancelling all the allotments made in favour of the respondents. these appeals are allowed and the judgment and order passed by the High Court in the writ petitions are set aside.=Civil Appeal No.9264 of 2014 (Arising out of Special Leave Petition (C) No. 1117 of 2010) City Industrial Development Thr. its Managing Director … Appellant (s) Versus Platinum Entertainment and others … Respondent(s) = 2014- Sept. Month - http://judis.nic.in/supremecourt/imgst.aspx?filename=41965

 Allotment of site by CIDCO  - later it was cancelled - Bombay High court allowed the writ and set aside the cancellation orders - Apex court held that the  authorities of CIDCO showed undue favour to the respondents and  managed  to  allot  the Government land in  favour  of  one  person  knowing  fully  well  that  the aforesaid proprietor of the Company, in  different  capacity  and  in  dummy names, sought allotments of plots.  The way CIDCO has been dealing with  the
Government property, it is  high  time,  we  observe,  that  notwithstanding Regulation 4, as contained in the Regulations, the appellant CIDCO may  take all endeavour to make allotments of plots by open tender or  competing  bids and shall not take any decision for allotment  of  Government  land  at  the instance of the Ministers and High Dignitaries for any purposes whatsoever.Taking into consideration the entire facts of the  case  and  the  law discussed hereinabove, we have no hesitation in holding that the  CIDCO  was justified  in  cancelling  all  the  allotments  made  in  favour   of   the respondents. these appeals are allowed and the  judgment and order passed by the High Court in the  writ  petitions  are  set  aside.=

By way of these writ  petitions,
the writ petitioners  had  challenged  orders  of  appellant-  
‘The  City  & Industrial Development Corporation’ (in short ‘CIDCO’)  by  which  allotment
of plot of lands  to  M/s.  Popcorn  and  M/s.  Platinum  Entertainment  for
erecting entertainment complex in Navi Mumbai and the allotment of  plot  of
land to  M/s.  Platinum  Square  for  establishment  of  country  club  were
cancelled. =
The respondent- M/s. Popcorn Entertainment (SLP (C) No.1290  of  2010)
in the appeal by special leave arising  out  of  Writ  Petition  No.9467  of
2005, by way of an application made a  request  for  allotment of   plot  in
Airoli  for  setting  up multiplex-cum-auditorium-cum-entertainment  centre.=

 On
29.7.2004, CIDCO  approved  the  allotment  of  a  plot  in  favour  of  the
appellant as the Board had not got any response for similar plots in  public
tender. The total lease premium in respect of the plot was  Rs.2,07,70,000/-
and  the  respondent  was  directed   to   pay   the   balance   amount   of
Rs.1,86,93,000/- by 14.9.2004. The allotment was allegedly made in terms  of
the New Bombay Land Disposal Regulations, 1975 and  also  in  terms  of  the
Land Pricing and Disposal Policy of CIDCO under  which  the  land  could  be
allotted  to  any  person  by  considering  individual  application  at  the
reserved price  fixed  by  CIDCO. =
 However, on 1.8.2005, appellant CIDCO issued a show  cause  notice  to
the respondent regarding the plot at  Airoli  seeking  cancellation  of  the
agreement to lease executed in favour of  the  respondent. =

In the case of Humanity and Anr. vs. State of West  Bengal  and  Ors.,
(2011) 6 SCC 125, this  Court  observed  that  in  the  matter  of  granting
largesse, the Government has to act fairly and without  even  any  semblance
of discrimination.  It was held as under:

 “It is axiomatic that in order to achieve a bona fide end, the  means  must
also justify the end. This Court is of  the  opinion  that  bona  fide  ends
cannot be achieved by  questionable  means,  specially  when  the  State  is
involved. This Court has not been able to get any answer from the State  why
on a request by the allottee to the Hon’ble Minister for Urban  Development,
the Government granted the  allotment  with  remarkable  speed  and  without
considering all aspects  of  the  matter.  This  Court  does  not  find  any
legitimacy in the action of the Government, which  has  to  act  within  the
discipline of the constitutional law, explained by this Court  in  a  catena
of cases. We are sorry to hold that in  making  the  impugned  allotment  in
favour of the allottee, in the facts and  circumstances  of  the  case,  the
State has failed to discharge its constitutional role.”

54.   We take serious note and express our anguish, the way the  authorities
of CIDCO showed undue favour to the respondents and  managed  to  allot  the
Government land in  favour  of  one  person  knowing  fully  well  that  the
aforesaid proprietor of the Company, in  different  capacity  and  in  dummy
names, sought allotments of plots.  
The way CIDCO has been dealing with  the
Government property, it is  high  time,  we  observe,  that  notwithstanding
Regulation 4, as contained in the Regulations, the appellant CIDCO may  take
all endeavour to make allotments of plots by open tender or  competing  bids
and shall not take any decision for allotment  of  Government  land  at  the
instance of the Ministers and High Dignitaries for any purposes whatsoever.

55.   Taking into consideration the entire facts of the  case  and  the  law
discussed hereinabove, we have no hesitation in holding that the  CIDCO  was
justified  in  cancelling  all  the  allotments  made  in  favour   of   the
respondents.

56.   For the reasons aforesaid, these appeals are allowed and the  judgment
and order passed by the High Court in the  writ  petitions  are  set  aside.
Consequently, we uphold  the  order  passed  by  the  CIDCO  cancelling  the
allotments made in favour of the respondents.

2014- Sept. Month - http://judis.nic.in/supremecourt/imgst.aspx?filename=41965  

                                                          REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        Civil Appeal No.9264  of 2014
        (Arising out of Special Leave Petition (C) No. 1117 of 2010)

City Industrial Development
Thr. its Managing Director              …      Appellant (s)

                                   Versus

Platinum Entertainment and others  …      Respondent(s)

                                    WITH

                        Civil Appeal No.9265 of 2014
(Arising out of Special Leave Petition (C) No.1215 of 2010)

City Industrial Development
Thr. its Managing Director              …      Appellant (s)

                                   Versus

Platinum Square Trust and Anr.       …       Respondent(s)


                        Civil Appeal No.9266 of 2014
         (Arising out of Special Leave Petition (C) No.1290 of 2010)

City Industrial Development
Thr. its Managing Director              …      Appellant (s)

                                   Versus

Popcorn Entertainment Corporation
and others                        …     Respondent(s)


                                  JUDGMENT
M.Y. EQBAL, J.
       Leave granted.

2.    These appeals are directed  against  the  common  judgment  and  final
order dated 01.09.2009 passed by the High  Court  of  Judicature  at  Bombay
whereby Division Bench of the High Court has allowed  three  Writ  Petitions
being W.P.Nos. 9467, 9468 of 2005 and 3423 of  2006  preferred  respectively
by M/s. Popcorn Entertainment Corporation (in short, ‘M/s.  Popcorn’),  M/s.
Platinum Entertainment (in short, ‘M/s. Platinum’) and M/s. Platinum  Square
Trust (in short, ‘M/s. Platinum Square’).   By way of these writ  petitions,
the writ petitioners  had  challenged  orders  of  appellant-  ‘The  City  &
Industrial Development Corporation’ (in short ‘CIDCO’)  by  which  allotment
of plot of lands  to  M/s.  Popcorn  and  M/s.  Platinum  Entertainment  for
erecting entertainment complex in Navi Mumbai and the allotment of  plot  of
land to  M/s.  Platinum  Square  for  establishment  of  country  club  were
cancelled.



3.    The facts giving rise to aforesaid  writ  petitions  and  consequently
present appeals are almost  similar.   However,  for  the  sake  of  clarity
factual matrix of each appeal has been mentioned here separately.

4.    The respondent- M/s. Popcorn Entertainment (SLP (C) No.1290  of  2010)
in the appeal by special leave arising  out  of  Writ  Petition  No.9467  of
2005, by way of an application made a  request  for  allotment of   plot  in
Airoli  for  setting  up multiplex-cum-auditorium-cum-entertainment  centre.
 On CIDCO’s instructions,  respondent  submitted  detailed  project  report.
CIDCO, by their letter of intent, requested the respondent herein to pay  an
Earnest Money Deposit of Rs.20,77,000/- within 15 days from the  receipt  of
the letter to enable the Board to consider the allotment in  favour  of  the
respondent.  The  respondent,  accordingly  made  EMD   on   29.6.2004.   On
29.7.2004, CIDCO  approved  the  allotment  of  a  plot  in  favour  of  the
appellant as the Board had not got any response for similar plots in  public
tender. The total lease premium in respect of the plot was  Rs.2,07,70,000/-
and  the  respondent  was  directed   to   pay   the   balance   amount   of
Rs.1,86,93,000/- by 14.9.2004. The allotment was allegedly made in terms  of
the New Bombay Land Disposal Regulations, 1975 and  also  in  terms  of  the
Land Pricing and Disposal Policy of CIDCO under  which  the  land  could  be
allotted  to  any  person  by  considering  individual  application  at  the
reserved price  fixed  by  CIDCO.  Thereafter,  by  making  balance  payment
including additional amount due to the marginal increase in the  demarcation
of  the  plot,  M/s.  Popcorn  Entertainment  made   a  total   payment   of
Rs.2,98,22,420/- being the full and final payment in  respect  of  allotment
in favour of the respondent as demanded by CIDCO. An agreement to lease  was
entered into with CIDCO in respect of the plot allotted to the respondent.

5.    However, on 1.8.2005, appellant CIDCO issued a show  cause  notice  to
the respondent regarding the plot at  Airoli  seeking  cancellation  of  the
agreement to lease executed in favour of  the  respondent.   The  respondent
submitted reply to the show cause notice and also  sought  information  from
CIDCO under the Right to Information  Act  regarding  allotment  to  various
parties and the details thereon.   The Agreement  of  Lease  was  repudiated
and rescinded, against which the respondent approached  the  High  Court  by
way of a writ petition.



6.    The respondent- M/s. Platinum Entertainment in the appeal  by  special
leave (SLP(C)No.1117/2010) arising out of Writ Petition No.9468 of 2005,  by
way of an application made a request for allotment of plot for  construction
of a multiplex at  Kharghar  Railway  Station.   Upon  being  asked  by  the
appellant CIDCO, M/s. Platinum deposited EMD of Rs.20 lakh being 10% of  the
tentative price of the plot in order to  consider  the  application  of  the
respondent. Thereafter, CIDCO  approved  the  allotment  in  favour  of  the
respondent considering the fact that there was no multiplex in the area  and
the earlier effort of CIDCO to advertise for such  plots  had  met  with  no
response. CIDCO issued allotment letter in favour of the  respondent  asking
the petitioner to pay Rs. 1,80,00,000/-  being  the  balance  price  of  the
plot. The respondent made two separate payments of Rs.90 lakh  each  towards
the balance price of the plot on 16.8.2004  and  19.8.2004.  The  respondent
paid a sum of  Rs.20,00,600/-  being  the  other  charges  demanded  by  the
appellant. The respondent was asked to pay a  further  sum  of  Rs.65,096/-,
which the respondent paid immediately. CIDCO  unilaterally  decided  to  ask
the respondent to pay a further sum of Rs.20 lakh by enhancing the  rate  at
which the plot was to be allotted  to  the  respondent  from  Rs.2500/-  per
square meter as demanded in the  allotment  letter  to  Rs.2750  per  square
meter because the plot of the  respondent  was  on  a  24  meter  road.  The
respondent herein on 17.11.2004 paid a further payment of Rs.20  lakh  along
with Rs.2,96,078/- plus Rs.4957/- being the additional cost  and  the  other
charges. On 14.1.2005, the respondent paid  a  further  sum  of  Rs.19,828/-
being the sum  demanded.   The  respondent  on  17.1.2005  entered  into  an
agreement to lease  with  the  appellant  for  the  allotment  of  plot.  On
28.2.2005,  CIDCO  being  the  development  authority  of  the  area  issued
commencement certificate to the  respondent  permitting  the  respondent  to
start construction.  However, on 14.7.2005, the respondent received  a  show
cause notice  seeking  cancellation  of  the  allotment  in  favour  of  the
respondent on the ground that the allotment was void in view of  Section  23
of the Contract Act as being opposed to public policy. The  main  ground  in
the show cause notice was that the allotment was without issuance of  tender
and was opposed to public policy. The  respondent  submitted  reply  to  the
show cause notice. On 16.12.2005,  CIDCO  issued  an  order  cancelling  the
agreement to lease and sought to resume the possession of the plot,  against
which the respondent approached the High Court by way of writ petition.



7.     The respondent- M/s. Platinum Square Trust in the appeal  by  special
leave petition (SLP(C)No.1215/2010) arising out of Writ Petition No.3423  of
2006, by way of an application made a request for allotment of plot of  land
admeasuring 80,000 sq.mtr. at Kharghar hill  for  establishment  of  country
club.   CIDCO  having  a  plot  of  land  earmarked  for  similar   purpose,
considered the request of the respondent and called upon the  respondent  to
pay Rs.39.52 lakh on or before 20th April,  2004  constituting  10%  of  the
value of the plot as EMD so as to enable the CIDCO to place the proposal  of
the respondent before the Board of Directors. CIDCO  further  requested  the
respondent to submit registration certificate either under the Trust Act  or
the Society Registration Act before allotment/ possession  of  the  land  so
that the case of  the  respondent  could  be  considered  for  allotment  at
subsidized rate in terms of the policy; otherwise commercial rates  were  to
attract for such allotment. The respondent in terms of the letter  of  CIDCO
deposited a sum of Rs.39.52 lakh with them.  The respondent  got  its  trust
deed registered on 14th May, 2004;  wherein  six  Trustees  were  appointed.
Amongst others, objectives of  the  Trust  are  to  establish  and  support,
maintain and run sports club, gymnasium, health club, amusement  park,  yoga
centre, water sports etc. and to carry out activities relating thereto.



8.    The respondent herein was allotted 50,350 sq.mtr. land by CIDCO for  a
total sale consideration of Rs. 3,43,70,800/-. Out of  the  said  amount  of
consideration, the respondent had already deposited Rs.39.52  lakh  as  such
the appellant was directed to deposit Rs. 1,52,09,400/- in two  installments
i.e. on 30th July, 2004 and  29th  August,  2004  being  the  balance  lease
premium payable in respect of the subject plot. In the allotment letter,  it
was specifically mentioned that payment of lease  premium  in  a  stipulated
period is an essence of concluded contract. It was further provided  in  the
allotment letter that extension of time could be granted which would  be  up
to 3 months for payment of the first installment and up  to  16  months  for
the payment of the second installment. It was provided therein that up to  3
months the respondent would be charged 13% interest and beyond 3 months  the
respondent would be charged 16% interest for the extended  period  of  time.
The respondent on  15th  September  2004,  paid  the  first  installment  of
Rs.1,52,09,400/- within the extended time  permitted  under  the  allotment.
The respondent on 3rd May, 2005, wrote letter to the CIDCO for extension  of
time for making payment of second installment up to December, 2005.  Clearly
in terms of the allotment letter, the  respondent  could  ask  extension  of
second installment up to 29th December,  2005.   The  respondent  Trust  was
registered under the Bombay Public Trust Act, 1950 on 19th April, 2005.  The
respondent submitted  documents  to  CIDCO  on  25th  May,  2005  evidencing
registration of the Trust.  However,  on  20th  July,  2005  the  respondent
received show cause notice seeking cancellation of  the  allotment  made  in
favour of the respondent on the basis of Shankaran Report.



9.    The respondent, on 3rd August, 2005, submitted its detailed  reply  to
the show cause notice challenging the cancellation  of  allotment  of  plot,
reiterating that the allotment was in accordance with law as such  it  could
not be cancelled.  The respondent, on 29th December, 2005, wrote  letter  to
the Marketing  Manager of CIDCO requesting him to accept payment  of  second
installment being the last date up to which the extension could  be  granted
under the allotment. However, CIDCO  refused  to  accept  the  payment.  The
respondent on the same date wrote another letter  recording  the  fact  that
CIDCO has refused to accept the second installment and that  the  respondent
would not be liable to pay any further interest from the said date and  that
the allotment could not be cancelled on the ground that the payment has  not
been made by the respondent.



10.   The respondent was served  with  the  order  dated  28th  April,  2005
cancelling allotment of plot  made  in  favour  of  the  respondent.   Being
aggrieved by the aforesaid order  of  cancellation,  the  respondent  herein
approached the High Court by way of writ petition filed  under  Article  226
of the Constitution of India.



11.   With the aforesaid factual matrix, it is also necessary to  note  that
State of Maharashtra, who is having ultimate authority and power to  control
and  regulate  the  activities  of  planning  and  development   under   the
Maharashtra Regional and Town Planning Act, 1966 (in short, ‘MRTP Act’),  in
1971 appointed appellant-CIDCO as new town planning authority  for  the  new
town - Navi Mumbai. In exercise of powers conferred  by  sub-clause  (a)  of
clause (1) of section 159 of the MRTP Act, the CIDCO has with  the  previous
approval of the State Government published  in  July  1979  the  New  Bombay
Disposal of Lands Regulations, 1975  (in  short,  ‘the  Regulations’).   The
aforesaid regulations, inter alia, provide  for  the  demarcation  of  plots
vested in the Government by CIDCO into disposable  plots  having  regard  to
their size and use. The said regulations also make provision for  conditions
of  lease,  mode  of  disposal  and  for  grant  of  land   for   religious,
educational, charitable  and  public  purposes.  For  the  present  purpose,
relevant one  is  Regulation  4  of  Chapter  IV,  according  to  which  the
Corporation may dispose of plots of land by public auction or tender  or  by
considering individual applications as the Corporation  may  determine  from
time to time.

12.   It is the case of the appellant CIDCO that  the  aforesaid  contesting
respondents had been made allotment of lands by the appellant pursuant to  a
direct application being made to the office of the then Chief  Minister  and
in other similar cases a number of public interest litigation were filed  in
the High Court.  Accordingly,  the  Government,  to  ascertain  whether  the
allotments made were bonafide, directed the then Additional Chief  Secretary
to conduct an enquiry to find out whether the Board of  Directors  of  CIDCO
disposed of lands in accordance with law.   Enquiry  was  conducted  by  the
Additional Chief  Secretary  and  submitted  the  report  (called  Shankaran
Report).  The  enquiry  inter  alia  revealed  that  subject  allotment  was
illegal, arbitrary and the  appellant  had  suffered  a  financial  loss  in
crores.   Therefore,  the  appellant  issued  notice   to   the   contesting
respondents and ultimately cancelled the subject allotments,  which  led  to
filing of the writ petition.  The writ petitions were dismissed by the  High
Court on the ground that  alternative  remedy  was  available  to  the  writ
petitioners by filing  suits  and  therefore  writ  jurisdiction  cannot  be
invoked.



13.   Aggrieved by the decision of the High  Court,  respondents  approached
this Court by way of appeals by special leave.  Those  Civil  Appeals  being
Civil Appeal Nos. 940-941 of 2007 were disposed of by this  Court  remitting
the matters back to the High  Court  for  deciding  the  writ  petitions  on
merits.  The said order is reported in  Popcorn  Entertainment  &  Anr.  vs.
City Industrial Development Corpn. & Anr., (2007) 9 SCC 593.  In  the  order
of remand this Court made some observations with regard  to  the  merits  of
the case.  For better appreciation, para 41 and  47  are  reproduced  herein
below:-

“41. At the time of hearing, it was suggested by the learned Senior  Counsel
for the respondent that the allotment was  made  without  any  justification
and that there was a huge demand for such plot, it is submitted  by  learned
counsel for the appellant that the appellant  has  sought  information  from
CIDCO under the Right  to  Information  Act  as  to  whether  there  was  no
application pending with them for allotment of the said plot prior  in  time
to the application of the appellant. CIDCO in reply has clearly stated  that
there was no application prior to the application  of  the  appellant.  Even
the allotment in favour of the appellant was  a  reasoned  allotment  taking
into consideration the lack of entertainment facilities in the area and  the
said  issue  [pic]was  also  discussed  in  the  board  meeting  before  the
allotment and these facts are clear from the  information  provided  to  the
appellant under the Right to Information Act. Our attention was  also  drawn
to the noting in the file while considering the case of  the  appellant  and
before making the allotment that
(i)  “There  is  no  cinema/multiplex  facility  available  today  for   the
residents of CBD Belapur, Kharghar and Kalamboli residents.
(ii) From accessibility and land use compatibility point of view,  Plot  No.
1, Sector 2, Kharghar admeasuring about 8000 sq m is an ideal  location  for
multiplex.
(iii) This building will be visible from highway and will add to  the  image
of the city.
(iv) Adjoining Plot 1 of Sector 1 attached to  railway  station  admeasuring
5600 m2 (not demanded yet) is earmarked for city mall.”

47. We have given our careful consideration to the  rival  submissions  made
by the respective counsel appearing on either  side.  In  our  opinion,  the
High Court has committed a grave mistake by relegating the appellant to  the
alternative remedy when clearly in terms  of  the  law  laid  down  by  this
Court, this was a fit case in which the High  Court  should  have  exercised
its jurisdiction in order to consider and grant  relief  to  the  respective
parties. In our opinion, in the instant case, 3 of the 4  grounds  on  which
writ petitions can be entertained in contractual matter were  made  out  and
hence it was completely  wrong  of  the  High  Court  to  dismiss  the  writ
petitions. In the instant case,  3  grounds  as  referred  to  in  Whirlpool
Corpn. (1998) 8 SCC 1, have been made  [pic]out  and  accordingly  the  writ
petition was clearly maintainable and the High Court has committed an  error
in relegating the appellant to the civil court.”


14.   However, this Court  took  the  view  that  the  matter  needs  to  be
remanded back to the High Court, so that the High Court  will  consider  all
the submissions made by the parties and dispose of the same afresh.



15.   The High Court on receipt of  the  remand  order  proceeded  with  the
hearing of the writ petitions and after hearing  both  the  parties  allowed
the writ petitions by passing the impugned  order  and  quashed  the  orders
passed by the appellant-CIDCO cancelling  the  allotment.   The  High  court
while passing the impugned order has gone through the merits of the case  of
both the parties but held that the observations made by this  Court  in  the
remand order (41, 43, 47, 48 and 49) relating to  non-observations  of  rule
and regulations causing substantial loss to  the  CIDCO  operate  as  obiter
and is binding on the High Court and, therefore, the High Court has to  fall
in line with the view expressed by this Court.   Para  97  of  the  impugned
order is quoted hereinbelow.

“97. As already stated hereinabove, so far as  categorical  and  unequivocal
observations made by the Apex Court revolving around the issues relating  to
non-observation of rule and regulations  causing  substantial  loss  to  the
CIDCO since no tenders were invited and interpretation of Section 23 of  the
contract Act are concerned, they operate as obiter binding on us as such  we
have to fall in line with the view expressed by the Apex Court.”



16.   We have heard learned counsel on either  side  at  length.   Mr.  B.H.
Marlapalli,  learned  senior  counsel  appearing  for  the  appellant-CIDCO,
contended that the High Court  has  misconstrued  and  misinterpreted  order
passed by this Court in the case of Popcorn  Entertainment  (supra)  in  the
first round of litigation whereunder the matter was  remanded  to  the  High
Court for fresh  consideration  on  merits  keeping  all  contentions  open.
However, the High Court chose  to  restrict  itself  to  consider  only  the
ground for cancellation of the allotment  taken  in  the  final  show  cause
notice and  recorded  in  the  final  order.   The  High  Court  would  have
considered the matter on merits without being  fettered  or  constrained  by
any observation of the Apex Court.  It has been further contended on  behalf
of the appellant that this Court has declared the law that the  disposal  of
the State owned or public property by auction or tenders is a rule and  such
disposal by private negotiation is an exception to be carved for cogent  and
compelling reasons to be recorded in writing at the time of  disposal.   The
law so declared is mandatory in its  application,  warranting  absolute  and
implicit adherence thereto  at  the  peril  of  any  act  or  commission  in
contravention thereof being illegal and non est.



17.    Mr. B.H. Marlapalli, learned senior counsel  further  submitted  that
in order to find out whether the Board of Directors of  CIDCO  disposed  off
its lands in Navi Mumbai in accordance with law, the  State  Government  had
directed the then Additional Chief Secretary - Dr. D.K. Shankaran to hold  a
discreet  enquiry  in  the  affairs  of  CIDCO.   The  CIDCO  cancelled  the
allotments due to the arbitrary manner in which the plots were allotted  and
the loss caused to CIDCO, and the basis  for  computing  the  loss  was  the
report of Dr. Shankaran, which has referred to  several  allotments  in  the
vicinity and the offer made to BARC and as such, in the  writ  jurisdiction,
the High Court cannot decide the price prevailing in the area  at  the  time
of allotment.  It is further contended on behalf of the  appellant  that  as
per Shankaran Report it  was  necessary  to  allot  the  plots  by  inviting
tenders and testing the market.  Had it been  done  so,  these  plots  would
have fetched at least  five  times  greater  value  than  the  actual  value
received.  Further Mr. Nilesh Gala, who is the proprietor of  M/s.  Platinum
Entertainment, has used the same modus operandi for obtaining  allotment  of
plots for country club at Kharghar and another multiplex  plot  in  Kharghar
and the CIDCO was found to have suffered a loss  of  Rs.10  crores  in  this
case.   Show  cause  notice  was  issued  mentioning  three  grounds,   viz.
favoritism, non-issuance of tender and loss caused to the  Corporation.   It
is  further  urged  that  the  order  of  cancellation  of   the   allotment
specifically states that the Board of Directors  of  the  Corporation  found
itself  in  substantial  concurrence  with  the  findings  recorded  by  Dr.
Shankaran.



18.   Learned senior counsel sought to justify the action of  CIDCO  on  the
basis of Sections 154 and 118 of MRTP Act contending  that  the  purpose  of
constituting CIDCO is to develop a town by making  allotment,  and  in  case
the allotments are allowed to be  made  in  arbitrary  manner  and  if  such
allotments are sustained, then it amounts deviation from the purpose of  the
Act.  It is  further  urged  that  Section  23  of  the  Contract  Act  also
envisages cancellation on account  of  the  allotment/agreement,  if  it  is
opposed to public policy and this Court may sustain the  cancellation  being
opposed to public policy.   The  allotment  made  without  inviting  tenders
leads to presumption of nepotism etc.  and  it  can  only  be  justified  by
citing compelling reasons.  Whereas in the present  case,  no  reasons  were
mentioned and allotments were made surreptitiously to one person.



19.    Rival submissions have been made by Mr.  Vikas  Singh  and  Mr.  J.P.
Cama, learned senior counsel appearing on behalf of contesting  respondents,
contending that the allotment  made  in  favour  of  these  respondents  was
cancelled by the appellant  by  issuing  show  cause  notices  referring  to
Shankaran  report  and  alleging  that  CIDCO  had  suffered   losses    and
mentioning the ground that there was non-issuance of  tender  before  making
allotment, the same being void under Section 23  of  the  Contract  Act  was
opposed to the public policy.  According to  them,  the  Apex  Court,  while
remanding the matter in the first round of litigation, in  para  48  of  the
judgment reported in (2007) 9 SCC 593 (supra) set aside the order  of  CIDCO
seeking to resile from a concluded contract  in  favour  of  the  contesting
respondents.  It is submitted on behalf of  the  respondents  that  the  New
Bombay Land Disposal Rules are the specific rules governing the disposal  of
land to be done by CIDCO.  Rule 4 of the said Rules  clearly  provided  that
CIDCO has the authority to dispose  plots  of  land  by  public  auction  or
tender or by considering  individual  application  as  the  Corporation  may
determine from time to  time.   Mr.  Vikas  Singh,  learned  senior  counsel
contended that once an allotment is made in favour of a party, CIDCO has  no
right to cancel the allotment  on  the  ground  that  no  tenders  had  been
invited.  A development authority while allotting land  can  allot  plot  of
land without calling for tender or without inviting offers from the  general
public if the statutory regulations regarding disposal  of  land  by  public
authority permit the authority to do so.  It is  further  urged  that  CIDCO
has been relying upon the aforesaid rule to justify, in various  cases,  the
allotments made in favour of commercial  complexes,  societies  as  well  as
sports complexes saying that such allotment made without issuance of  tender
were justified as being within the power vested in CIDCO  under  Rule  4  of
the aforesaid Rules.



20.    In support of his contention, Mr. Vikas Singh cited the portion of  a
paragraph of the decision of this Court  in  Kasturi  Lal  Laxmi  Reddy  vs.
State of Jammu & Kashmir, 1980 (4) SCC 1, which is reproduced here:

“22.        …….We do not think the State is bound to advertise and tell  the
people that it wants a particular industry to be set  up  within  the  State
and invite those interested to come up with proposals for the  purpose.  The
State may choose to do so, if it thinks fit and in  a  given  situation,  it
may even turn out to be advantageous for the State to  do  so,  but  if  any
private party comes before the State and offers to set up an  industry,  the
State would  not  be  committing  breach  of  any  constitutional  or  legal
obligation if it negotiates with such party and agrees to provide  resources
and other facilities for the purpose of setting up the industry.  The  State
is not obliged to tell such party: “Please wait I will first advertise,  see
whether any other offers are forthcoming  and  then  after  considering  all
offers, decide whether I should let you set up the industry.”


21.   Referring to the case of Chairman and MD, BPL Ltd. vs.  S.P.  Gururaja
and others, 2003 (8) SCC 567,  Mr.  Singh  contended  that  non-floating  of
tenders or not holding of public auction would not in all  cases  be  deemed
to be the result of the exercise of the  executive  power  in  an  arbitrary
manner.  The power of cancellation under Section 23 of the Contract  Act  is
only available to the Court and on the concept of separation  of  power  the
said power is not exercisable by executive  unilaterally  without  referring
to the Court.  It has been  further  contended  that  although  through  the
impugned order the High Court  had  quashed  the  cancellation  order,  only
CIDCO has preferred appeal whereas the State  of  Maharashtra  accepted  the
impugned order  and  has  no  grievance  with  the  quashing  of  the  order
cancelling the contesting respondents’ allotment.



22.   It  has  further  been  contended   that   the   rules    provide  for
three  methods  of  disposal  i.e.  by  tender,  by  public  auction  or  by
considering  individual  applications   and   CIDCO   vide   various   board
resolutions have specifically provided the  exact  method  of  disposal  for
various types of plots.  CIDCO has accordingly framed the Land  Pricing  and
Land Disposal Policy  as  approved  by  various  board  resolutions  wherein
various categories of plots are mentioned.  In the case of commercial  plots
where FSI 1.5 is permitted the land price rate determined under  the  policy
is 450% of the reserve price and the method of disposal is by tender and  in
the alternative at fixed rate.  Similarly for allotment  of  multiplex,  the
rate specified under the policy is  at  reserve  price  and  the  method  of
disposal is upon request at fixed rate or by competitive bidding.   The  two
different methods  of  disposal  between  a  commercial  allotment  and  the
allotment for multiplex is significant because in  the  case  of  commercial
allotment, by tender is the first  method  of  disposal  prescribed  and  at
fixed rate is the alternative method of disposal prescribed whereas  in  the
case of allotment for multiplex/auditorium on request at fixed rate  is  the
first method and  by  competitive  bidding  is  the  alternative  method  of
allotment.  Furthermore, allotment in  the  case  of  M/s.  Platinum  Square
Trust the land price of open area/running track is specified to  be  10%  of
the reserve price and of area used for construction is to be at 50%  of  the
reserve price and the method of disposal is only upon request at fixed  rate
from the registered trust/registered under the Public  Trust  Act.   Learned
senior counsel contended that allotments in favour of the  respondents  were
clearly in conformity with the rules and also in conformity  with  the  Land
Pricing and Land Disposal Policy framed by CIDCO for  allotment  of  various
types of land in the Navi Mumbai area.



23.   It has been submitted that in a similar case where allotment had  also
been cancelled on the only ground  that  the  same  had  been  made  without
inviting tenders, the Apex Court  in  Sunil  Pannalal  Banthia  vs.  City  &
Industrial Development Corpn. of Maharashtra Ltd., (2007) 10  SCC  674,  has
held that once an allotment had been made in favour of a  party,  CIDCO  has
no right thereafter to cancel the allotment on the ground  that  no  tenders
had been invited.  CIDCO had power to make  allotment  without  calling  for
tender under Rule 4 and it could not be said that the  allotment  in  favour
of Sunil Pannalal Banthia was in  any  manner  contrary  to  the  rules  for
making such allotment.



24.   It has also been contended on behalf  of  the  contesting  respondents
that according to the information provided  to  the  respondents  under  the
Right to Information Act, a public  utility  plot  has  never  been  put  to
tender by CIDCO during the period when aforesaid allotments  had  been  made
in favour of  the  respondents.   According  to  the  information  provided,
allotment to 56 allottees have been made without  inviting  tenders  as  per
Land Pricing and Land Disposal Policy and the price charged is  as  per  the
policy  as  approved  by  Board  resolutions.   These  allotments  were  not
scrutinized by Dr. Shankaran and not formed  part  of  the  enquiry  report.
Furthermore, Shankaran  report  had  been  prepared  ex-parte  i.e.  without
issuing notice to the respondents.  Copy of said report  was  not  furnished
to  the  respondents  either  along  with  show  cause  notice   or   before
cancellation order was passed although demanded by the respondents in  their
reply, in which it was specifically mentioned that the final reply could  be
given only after the  entire  report  was  given  to  them  along  with  the
methodology used by Shankaran to  arrive  at  the  alleged  losses.   It  is
contended that the cancellation order is  vitiated  being  in  violation  of
principles of natural justice, for having been passed without giving a  copy
of the Shankaran report, which had been prepared  behind  the  back  of  the
contesting respondents.

25.   Upon perusal of notice it is clear that its contents  are  similar  in
all these appeals.  The appellant CIDCO referred  the  Shankaran  Report  in
which it was observed that  the  allotments  were  made  in  favour  of  the
respondents in an arbitrary manner without calling upon to show cause as  to
why such allotment should not  be  repudiated  having  become  void  on  the
thrust of  Section  23  of  the  Indian  Contract  Act,  1872.   For  better
appreciation para 14 of the show cause notice is reproduced hereinbelow:-

      “The Board of Directors of the Corporation at its meeting held on  6th
June, 2005 considered the recommendations of Dr. D.K.  Shankaran,  the  then
additional Chief Secretary and directions of the  State  government  and  as
directed me to call upon you to show cause why the  Corporation  should  not
rescind or repudiate such allotment having become  void  on  the  thrust  of
Section 23 of Contract Act 1872 which declares that an Agreement having  its
object or consideration to defeat provision of the law or opposed to  public
policy as declared by the Hon’ble Supreme Court as aforesaid is vitiated  by
illegality and is liable to be declared void”.



26.   Section 23 of the Indian Contract Act, 1872 reads as under:-

“What consideration and objects are lawful, and what not.—The  consideration
or object of an agreement is lawful, unless –

It is forbidden by law; or

is such of such a nature that, if permitted, it would defeat the  provisions
of any law; or is fraudulent; or

involves or implies, injury to the person or property of another; or

the Court regards it as immoral, or opposed to public policy.

      In each of these cases, the consideration or object  of  an  agreement
is  said  to  be  unlawful.   Every  agreement  of  which  the   object   or
consideration is unlawful is void.”



27.    Before  dealing  with  the  legality  and  validity  of  the   notice
aforesaid, we shall first wish to mention some of the relevant facts:-

A.    Indisputably applications were made by the  respondents  to  the  then
Chief Minister for allotment of plots of land in question.

B.     On  the  application   submitted   on   behalf   of   M/s.   Platinum
Entertainment, through its proprietor Nilesh  Gala,  for  the  allotment  of
plot for constructing multiplex at Kharghar railway Station,  the  appellant
was allotted the plot at Kharghar Railway Station;

C.     The  said  person  Nilesh  Gala  as   proprietor   of   M/s   Popcorn
Entertainment Corporation made another application  for  allotment  of  plot
for the construction of multiplex-cum-entertainment centre at  Airoli.   The
appellant CIDCO acceded to the request of Mr. Nilesh Gala and  allotted  the
plot followed by lease agreement;

D.    The same person Nilesh Gala formed  a  Trust  called  Platinum  Square
Trust through one of its Trustees Damji  Kunwarji  Gala  and  made  a  third
application for allotment of plot at Kharghar Hill for the  construction  of
country club and paid part of the amount fixed for such allotment  and  rest
of the amount was to be paid in instalments.   The  matter  is  pending  and
final lease deed has not been executed.



28.   Now the important question that needs consideration is as  to  whether
the allotments of valuable  land  by  CIDCO  to  one   person  in  different
capacity for the purposes mentioned above, that too by entertaining  private
applications, are arbitrary, illegal and fraudulent and against  the  public
policy as contemplated under Section 23 of the Indian Contract Act.



29.   In the course of argument, Mr. Vikas
Singh, learned senior counsel appearing  for  the  respondents  in  all  the
three appeals filed a compilation of  different  documents  including  Rules
and Regulations.



30.   Regulation 4 lays down the mode and manner of disposal of land by  the
Corporation.  The said provision empowers  the  Corporation  to  dispose  of
lands by public auction or tender or considering individual applications  as
the Corporation may determine from time to  time.   Regulation  4  reads  as
under:-

“Manner of disposal of land – The Corporation may dispose plots of  land  by
public auction or tender or by considering individual  applications  as  the
Corporation may determine from time.”



31.   The land Pricing and Land Disposal Policy of  CIDCO  would  show  that
the commercial plots  with  FSI  1.5,  that  is  plots  for  offices,  shop,
restaurant, showrooms etc., is to be disposed of by tender/at  fixed  price.
Similarly, plots for auditorium, multiplex, theatre complex etc.,  shall  be
disposed of on request at fixed rate/by competitive  bidding.    For  better
appreciation,  the  relevant  allotment  policy  of  CIDCO   is   reproduced
hereunder:-

      “Commercial Plots (with FSI 1.5)

|Plots for offices,    |At 450% of RP in      |By tender/At   |
|Shop + Res. and pure  |Developed Nodes.      |fixed price    |
|commercial Show       |At 400% of RP in      |               |
|Rooms/Show Windows all|Developing Nodes.     |               |
|types of Banks etc.   |At 300% of RP in New  |               |
|(FSI-1.5)             |Nodes                 |               |
|Plots for Auditorium/ |At Reserve Price      |On request at  |
|Multiplex theatre     |                      |fixed rate By  |
|complex to be         |                      |competitive    |
|developed in Private  |                      |bidding        |
|Sector                |                      |               |




32.   From  the  compilation,  it  reveals  that  Respondent  M/s.  Popocorn
Entertainment Corporation sought information under the Right to  Information
Act, by mentioning  some  queries.   One  of  the  questions  asked  by  the
respondent was as to what is the method of disposal of  plot  for  multiplex
as per Land Pricing and Disposal Policy during  the  said  period.   It  was
answered that methodology as per the current land  pricing  policy  approved
by the Board is  on  request  at  fixed  rate/by  competitive  bidding.   In
another query made by the proprietor of M/s. Platinum Entertainment  was  as
to whether any other application has been made for  allotment  of  the  said
plot for the same purpose and the  answer  was  that  no  other  application
prior to this allotment for the same purpose was pending.

33.   It further appears that an audit objection was raised  by  the  office
of the Accountant General, Mumbai to the  effect  that  there  was  lack  of
transparency in the allotment of plot to M/s. Platinum Entertainment  as  no
tenders were called for the sale of the plot.  In the  clarification  letter
dated 21.4.2006 issued by the Managing Director of the  Appellant-CIDCO,  it
was admitted that no such tender was called for.  In the explanation, it  is
stated that global tender/tender was  called  for  allotment  of  plot  near
Vashi Station.  It was not fruitful and, therefore, it was thought  fit  for
allotting plot at Airoli to a competent and resourceful party on  evaluation
of the  project  report  for  multiplex  and  auditorium  and  entertainment
centre.  Similar explanation was given as against  the  audit  objection  in
respect of allotment of plot to M/s. Popcorn Entertainment Corporation.

34.   On perusal of the aforesaid documents, it is  manifest  that  although
allotment of plot for the purposes mentioned above was  either  at  a  fixed
price or by competitive  bidding,  but  no  procedure  was  adopted  by  the
appellant for allotment of these plots either by tender  or  by  competitive
bidding.  It has also come on record that as against  these  plots  allotted
to the respondents, no other application  was  either  invited  or  received
from interested persons.  Obviously, when the tender was not  advertised  or
any notice inviting applications were made then there was  no  occasion  for
any person to apply for allotment of these plots.



35.   As noticed above, the main person viz. Nilesh Gala  as  proprietor  of
two different companies viz., M/s Platinum  Entertainment  and  M/s  Popcorn
Entertainment Corporation, by making private applications to the then  Chief
Minister got allotment of two valuable plots  in  two  different  areas  for
setting  up  multiplex-cum-auditorium-cum-entertainment   centre   and   for
multiplex theatre.  This is not the end of the matter.  The same  proprietor
formed a Trust consisting jof trustees in the name  of  M/s  Platium  Square
Trust and filed application for allotment of another plot  for  the  purpose
of establishing  country  club.   These  three  applications  filed  by  the
respondents were considered by the appellant-CIDCO and  the  Board  accorded
sanction for allotment of plots in these three places.

36.   We, therefore, after having  considered  facts  detailed  hereinabove,
are prima facie of the view that no transparency has been maintained by  the
appellant-CIDCO in making these allotments of Government land.



37.   It is well settled that whenever the Government dealt with the  public
establishment in entering into  a  contract  or  issuance  of  licence,  the
Government could not act arbitrarily on its  sweet  will  but  must  act  in
accordance with law and the action of the Government  should  not  give  the
smack  of  arbitrariness.   In  the  case  of  Raman  Dayaram   Shetty   vs.
International Airport Authority of India & Ors.,  (1979)  3  SCC  489,  this
Court observed as under:-

“11. Today  the  Government  in  a  welfare  State,  is  the  regulator  and
dispenser of special services and provider of a large  number  of  benefits,
including jobs,  contracts,  licences,  quotas,  mineral  rights,  etc.  The
Government pours forth wealth, money, benefits, services, contracts,  quotas
and licences. The valuables dispensed by Government  take  many  forms,  but
they all share one characteristic. They are steadily  taking  the  place  of
traditional  forms  of   wealth.   These   valuables   which   derive   from
relationships  to  Government  are  of  many  kinds.  They  comprise  social
security benefits, cash grants for political sufferers and the whole  scheme
of State and local welfare. Then again, thousands of people are employed  in
the State and the Central Governments and local  authorities.  Licences  are
required before one can engage in many kinds  of  businesses  or  work.  The
power of giving licences  means  power  to  withhold  them  and  this  gives
control to the Government or to the agents of Government  on  the  lives  of
many people. Many individuals and many more  businesses  enjoy  largesse  in
the form of Government contracts. These contracts often resemble  subsidies.
It is virtually impossible to lose money on them and  many  enterprises  are
set up primarily  to  do  business  with  Government.  Government  owns  and
controls hundreds of acres of public land  valuable  for  mining  and  other
purposes.  These  resources  are  available  for  utilisation   by   private
corporations and individuals by way of lease  or  licence.  All  these  mean
growth in the Government largesse and  with  the  increasing  magnitude  and
range of governmental functions as we move closer to a welfare  State,  more
and more of our wealth consists of these new forms. Some of these  forms  of
wealth may be in the nature of legal rights but the large majority  of  them
are in the nature of privileges. But on that account, can it  be  said  that
they do not enjoy any legal protection? Can they  be  regarded  as  gratuity
furnished by the State so that the State may withhold, grant  or  revoke  it
at its pleasure?”

“12. ………..It must, therefore,  be  taken  to  be  the  law  that  where  the
Government is dealing with the public, whether by  way  of  giving  jobs  or
entering into contracts or issuing quotas  or  licences  or  granting  other
forms of largesse, the Government cannot act arbitrarily at its  sweet  will
and, like a private individual, deal with any person  it  pleases,  but  its
action must be in conformity with standard or norms which is not  arbitrary,
irrational or irrelevant. The power or discretion of the Government  in  the
matter of grant of largesse including  award  of  jobs,  contracts,  quotas,
licences, etc. must be confined and structured  by  rational,  relevant  and
non-discriminatory standard or norm and if the Government departs from  such
standard or norm in  any  particular  case  or  cases,  the  action  of  the
Government would be liable to be struck down, unless it can be shown by  the
Government that the departure was not  arbitrary,  but  was  based  on  some
valid  principle  which  in  itself  was  not  irrational,  unreasonable  or
discriminatory.”


38.   In the case of  Akhil Bhartiya Upbhokta Congress vs. State  of  Madhya
Pradesh & ors., (2011) 5 SCC 29, this Court while considering  the  question
of legality of allotment of land by the State or its agencies on  the  basis
of applications made by individual, observed as follows:-

“65.  What  needs  to  be  emphasised  is  that   the   State   and/or   its
agencies/instrumentalities cannot give largesse to any person  according  to
the sweet will and whims of the political entities and/or  officers  of  the
State.    Every    action/decision    of    the     State     and/or     its
agencies/instrumentalities to  give  largesse  or  confer  benefit  must  be
founded on a sound, transparent, discernible and well-defined policy,  which
shall be made known to the public by publication  in  the  Official  Gazette
and  other  recognised  modes  of  publicity  and  such   policy   must   be
implemented/executed by  adopting  a  non-discriminatory  and  non-arbitrary
method irrespective of the class or  category  of  persons  proposed  to  be
benefited by the policy. The distribution  of  largesse  like  allotment  of
land,  grant  of  quota,  permit  licence,  etc.  by  the  State   and   its
agencies/instrumentalities should always be done in  a  fair  and  equitable
manner and the element of favouritism or nepotism shall  not  influence  the
exercise of discretion, if any, conferred upon  the  particular  functionary
or officer of the State.

66. We may add that there cannot  be  any  policy,  much  less,  a  rational
policy of allotting land on the basis of applications made  by  individuals,
bodies, organisations or institutions dehors an invitation or  advertisement
by the State or its  agency/instrumentality.  By  entertaining  applications
made by individuals, organisations or institutions for allotment of land  or
for grant of any other type of  largesse  the  State  cannot  exclude  other
eligible persons from lodging competing claim.  Any  allotment  of  land  or
grant   of   other   form   of   largesse    by    the    State    or    its
agencies/instrumentalities by treating the exercise as a private venture  is
liable to be treated as arbitrary, discriminatory and an act of  favouritism
and/or nepotism violating the  soul  of  the  equality  clause  embodied  in
Article 14 of the Constitution.


39.   In the case of Kasturi Lal Lakshmi Reddy & Ors.  vs.  State  of  Jammu
and Kashmir & Anr., (1980) 4 SCC 1, this Court observed as under:-
“14.  Where  any  governmental  action  fails  to  satisfy   the   test   of
reasonableness and public interest  discussed  above  and  is  found  to  be
wanting in the quality of  reasonableness  or  lacking  in  the  element  of
public interest, it would be liable to be struck down as  invalid.  It  must
follow as a necessary corollary from this proposition  that  the  Government
cannot act in a manner which would benefit a private party at  the  cost  of
the State; such an action would be both unreasonable and contrary to  public
interest. The Government, therefore, cannot, for example,  give  a  contract
or sell or lease out its property for a consideration less than the  highest
that  can  be  obtained  for  it,  unless  of   course   there   are   other
considerations which render it reasonable and in public interest to  do  so.
Such considerations may be that some directive principle  is  sought  to  be
advanced or implemented or that the contract or the property  is  given  not
with a view to earning revenue  but  for  the  purpose  of  carrying  out  a
welfare scheme for the benefit of a particular group or  section  of  people
deserving it or that the person who has offered a  higher  consideration  is
not otherwise fit to  be  given  the  contract  or  the  property.  We  have
referred to these considerations only illustratively, for there  may  be  an
infinite variety of considerations which may have to be taken  into  account
by the Government  in  formulating  its  policies  and  it  is  on  a  total
evaluation of various considerations which have weighed with the  Government
in taking a particular action, that the court would have to  decide  whether
the action of the Government is reasonable and in public interest.  But  one
basic principle which must guide the court in arriving at its  determination
on  this  question  is  that  there  is  always  a  presumption   that   the
governmental action is reasonable and in public interest and it is  for  the
party challenging its validity to show that it is wanting in  reasonableness
or is not informed with public interest. This burden is a heavy one  and  it
has to be discharged  to  the  satisfaction  of  the  court  by  proper  and
adequate material. The court cannot lightly assume that the action taken  by
the Government is unreasonable or without public  interest  because,  as  we
said above, there are a large number of  policy  considerations  which  must
necessarily weigh with the Government in taking  action  and  therefore  the
court would not strike down governmental action as invalid on  this  ground,
unless it is clearly satisfied that the action is  unreasonable  or  not  in
public interest. But where it is so satisfied,  it  would  be  the  plainest
duty of the court under the  Constitution  to  invalidate  the  governmental
action. This is one of the most important functions of the  court  and  also
one of the most essential for  preservation  of  the  rule  of  law.  It  is
imperative in a democracy governed by the  rule  of  law  that  governmental
action must be kept within the limits  of  the  law  and  if  there  is  any
transgression, the court must be ready to condemn it.  It  is  a  matter  of
historical experience that there  is  a  tendency  in  every  Government  to
assume more and more powers and since it is not an  uncommon  phenomenon  in
some countries that the legislative check is getting diluted, it is left  to
the court as the only other reviewing authority under  the  Constitution  to
be increasingly vigilant to ensure observance with the rule of  law  and  in
this task, the court must not flinch or falter. It may be pointed  out  that
this  ground  of  invalidity,  namely,  that  the  governmental  action   is
unreasonable  or  [pic]lacking  in  the  quality  of  public  interest,   is
different from that of mala fides though it may, in a  given  case,  furnish
evidence of mala fides.

15. The second limitation on the discretion of the Government  in  grant  of
largess is in regard to the persons to whom such largess may be granted.  It
is now well settled as a result of the decision of this Court in  Ramana  D.
Shetty v. International Airport Authority of India that  the  Government  is
not free, like an ordinary individual, in selecting the recipients  for  its
largess and it cannot choose to deal with  any  person  it  pleases  in  its
absolute and unfettered discretion. The law  is  now  well-established  that
the Government need not deal with anyone, but if it does so, it must  do  so
fairly without  discrimination  and  without  unfair  procedure.  Where  the
Government is dealing with the public whether  by  way  of  giving  jobs  or
entering into contracts or granting other forms of largess,  the  Government
cannot act arbitrarily at its sweet will and,  like  a  private  individual,
deal with any person it pleases, but its action must be in  conformity  with
some standard or norm which is not arbitrary, irrational or irrelevant.  The
governmental action must not be arbitrary or capricious, but must  be  based
on some principle which meets the test of reason and  relevance.  This  rule
was enunciated by the court as a rule of administrative law and it was  also
validated by the court as an emanation flowing directly  from  the  doctrine
of equality embodied in Article 14.  The  court  referred  to  the  activist
magnitude of Article 14 as evolved in E.P. Royappa v. State  of  Tamil  Nadu
and Maneka Gandhi case, (1978) 1 SCC 248 and observed that it must follow
as a necessary  corollary  from  the  principle  of  equality  enshrined  in
Article 14 that though the  State  is  entitled  to  refuse  to  enter  into
relationship with anyone, yet if it does so, it  cannot  arbitrarily  choose
any person it likes for entering into  such  relationship  and  discriminate
between persons similarly circumstanced, but it must act in conformity  with
some standard or principle which meets that test of reasonableness and  non-
discrimination and any departure from such standard or  principle  would  be
invalid unless it can be supported or justified on some  rational  and  non-
discriminatory ground.
This decision has  reaffirmed  the  principle  of  reasonableness  and  non-
arbitrariness in governmental action which lies at the core  of  our  entire
constitutional scheme and structure.”


40.   In the case of State of Haryana vs. Jage Ram, (1983) 4  SCC  556,  the
auction of liquor vends by excise department was challenged.   Deciding  the
question this Court in para 8 held:-
 “………….When a rule requires ‘publicity’ to  be  given  to  an  auction-sale,
what is necessarily implied  is  that  due  steps  must  be  taken  to  give
sufficiently advance intimation of the intended sale and its material  terms
to the members of the public or, at least, to that  section  of  the  public
which normally engages in the kind of business which is  the  subject-matter
of the aution-sale. Even the five  special  invitees  would  have  found  it
difficult to come prepared to take part in the resale which was held on  May
23. They were not invited to a wedding feast. They were  invited  to  attend
the resale of a liquor vend and it is well known that a certain  amount  has
to be paid by the successful bidder on the fall of the hammer. We  are  also
unable to appreciate that  the  Excise  Authorities  of  the  Government  of
Haryana should have picked  and  chosen  some  five  particular  persons  as
recipients of the notice of reauction. How their names transpired  and  what
is their particular  status,  respectability  and  standing  in  the  liquor
trade, are matters on which no light is thrown. There is no material  before
us on which to doubt the integrity of the  authorities  who  were  connected
with the reauction. But their conduct must be above suspicion.”


41. In the case of Sachidanand Pandey  & Anr. vs. State  of  West  Bengal  &
Ors., (1987) 2 SCC 295, this Court after considering  various  decisions  on
this point came to the following conclusion:-
“40. On a  consideration  of  the  relevant  cases  cited  at  the  Bar  the
following propositions may be taken  as  well  established:  State-owned  or
public-owned property is not to be dealt with at the absolute discretion  of
the executive. Certain precepts and principles have to be  observed.  Public
interest is the paramount consideration. One of the methods of securing  the
public interest, when it is considered necessary to dispose of  a  property,
is to sell the property by public auction or  by  inviting  tenders.  Though
that is the ordinary rule, it is  not  an  invariable  rule.  There  may  be
situations where there are compelling reasons necessitating  departure  from
the rule but then the reasons for the departure must be rational and  should
not be suggestive of discrimination. Appearance  of  public  justice  is  as
important  as  doing  justice.  Nothing  should  be  done  which  gives   an
appearance of bias, jobbery or nepotism.”


42.    In the case of Padma vs. Hiralal Motilal Desarda, (2002) 7  SCC  564,
the process adopted by  the  City  Industrial  Development  Corporation  for
disposal of land by bulk sell came  for  consideration  before  this  Court,
when it held  as under:-
“34. There is  yet  another  angle  of  looking  at  the  propriety  of  the
questioned bulk sale of land by CIDCO and the manner in which it  was  done.
The land acquired and entrusted to CIDCO cannot  just  be  permitted  to  be
parted with guided by the sole consideration of money-making. CIDCO  is  not
a commercial concern whose performance is to be assessed by  the  amount  it
earns. Its performance would be better assessed by finding  out  the  number
of needy persons who have been able to secure shelter through CIDCO  and  by
the beauty of the township and the quality of life for the  people  achieved
by  CIDCO  through  its  planned  development  schemes.  So  long  as   such
objectives are fulfilled CIDCO’s  operation  on  “no-profit-no  loss”  basis
cannot be found fault with. There should have been no hurry on the  part  of
CIDCO in disposing of the balance land and  that  too  guided  by  the  sole
consideration of earning more money. Even that object  CIDCO  has  not  been
able to achieve for at the end it has parted with land at a price less  than
Rs 1500 per square metre — the reserved price. Even if a  sale  of  leftover
land was a felt necessity it should have satisfied at least two  conditions:
(i) a well-considered decision at the highest level;  and  (ii)  a  sale  by
public auction or by tenders after giving more wide publicity than what  was
done so as to attract a larger number of bidders.”



43.   In the case of Centre for Public  Interest  Litigation  vs.  Union  of
India, (2012) 3 SCC 1, this Court observed as under:-

“75. The State is empowered to distribute  natural  resources.  However,  as
they constitute public property/national asset, while  distributing  natural
resources the State is bound to act in consonance  with  the  principles  of
equality and public trust and ensure that no action is taken  which  may  be
detrimental   to   public   interest.   Like   any   other   State   action,
constitutionalism must be reflected at every stage of  the  distribution  of
natural resources.  In  Article  39(b)  of  the  Constitution  it  has  been
provided that the ownership and control of the  material  resources  of  the
community should be so distributed so as to best subserve the  common  good,
but no comprehensive  legislation  has  been  enacted  to  generally  define
natural  resources  and  a  framework  for  their  protection.  Of   course,
environment laws enacted by Parliament  and  State  Legislatures  deal  with
specific natural resources i.e. forest, air, water, coastal zones, etc.
                                   xxxxxxx

80.   In Jamshed Hormusji Wadia, (2004) 3 SCC  214  case,  this  Court  held
that the State’s actions and the actions of  its  agencies/instrumentalities
must be for the public good, achieving the objects for which they exist  and
should not be arbitrary or capricious. In the field of contracts, the  State
and its instrumentalities should design their activities in a  manner  which
would ensure competition and  non-discrimination.  They  can  augment  their
resources but the object should be to serve  the  public  cause  and  to  do
public good by resorting to fair and reasonable methods.”



44. The High Court in the impugned order took notice, in paragraph 85,  that
the appellant-CIDCO  tried  to  justify  their  action  of  cancellation  of
allotment of plots on the following reasons.
“1. Mr. Nilesh Gala, the proprietor of M/s. Platinum entertainment has  used
same modus operandi for obtaining allotment of plots meant for country  club
and another plot for multiplex in Kharghar.

2.   An application was  made  by  the  petitioners  to  the  Hon’ble  Chief
Minister and the same was considered favourably by the Board of CIDCO.

3.   The undue haste is shown in allotment of  Plots  resulting  in  illegal
and arbitrary allotment with malafide intention to cause  wrongful  gain  to
the individual person.  It is a case of favouritism supported by the  Report
of Dr. D.K. Shankaran.


4.    The agenda note and the resolutions demonstrate  no  discussion  about
the individual merits of the allotters except need  for  multiplexes  sought
to be justified during the case of discussion without indicating any  reason
for choosing group of petitions  for allotment of plots.

5.     Absence  of  official  members  in  the  Board  Meeting  wherein  the
decisions of allotment of plots to the petitioners were taken.

6.    The allotment of plots of land are factually for  commercial  purposes
in the garb of construction of multiplexes and country club with a  view  to
inure  profit to the allottees.

7.    The multiplex policy whereby certain tax benefits  were  granted  with
effect from year 2002 were ignored while making the allotment  of  plots  to
the petitioners overlooking the demand for multiplexes  due  to  concessions
granted by the government.

8.    No reasons are to be found to justify  allotment  of  three  plots  in
favour of one group of persons.

9.    Refusal on the part of comptroller of Auditor General  to  accept  the
reasons given by CIDCO justifying  absence  of  law  suffered  by  CIDCO  by
virtue of the subject allotments of plots to the petitioners.

10.   Dr. D.K.  Sankaran  report  is  the  basis  for  calculation  of  loss
suffered by CIDCO.

11.    Justification  of  the  powers  of  the  state  government  directing
cancellation of allotment of plots on the basis of sections 118 and  154  of
the M.R.T.P. Act.

12.   Surreptitious arbitrary allotment made without inviting tenders  leads
to the presumption of nepotism and bias etc.

13.   The petitioners M/s. Platinum Entertainment were not registered  as  a
charitable trust yet their  application  for  allotment  was  considered  by
CIDCO favourably.

14.   Failure on the part of the petitioner to produce any valuation  report
to justify at which rate the allotment was made by the CIDCO.”

45.   The High Court instead of looking into these aspects  of  the  matter,
completely ignored the same on the ground that  in  the  show  cause  notice
none of the grounds  were  made  basis  of  the  order  of  cancellation  of
allotment.  In our considered  opinion,  the  High  Court  while  exercising
power of judicial review is supposed to have gone into the  question  as  to
how the three plots were allotted in favour of one  group  of  persons.  The
High Court has lost sight of the admitted fact that by entertaining  private
applications of the same person three different  valuable  plots  have  been
allotted in different names.  The High Court fell in error in  holding  that
the allotment of plots of land to the same person but in the names of  trust
is also justified.

46.   Chapter 5 of  New  Bombay  Road  Disposal  Rules,  1975  provides  for
allotment of land for religious, educational, charitable etc.  purposes  and
though the allotment of plots of land  for  construction  of  multiplex  are
treated  as  allotment  for  public  utility  purposes,  in  substance,  the
allotment qua these allottees was for commercial  purpose.   The  allotments
which are made for the  social,  educational,  charitable  purposes  do  not
entail any profit to the allottees.  However, multiplex  is  for  commercial
exploitation, which ensures profit  to  the  allottees  and  the  manner  of
disposal of lands enumerated in the said policy by and large  suggests  that
most of the allotments have to be made by inviting tenders or bids.



47.   The  document  on  record  clearly  demonstrates  that  there  was  no
discussion about individual merits of the allottees  and  was  only  general
consideration, which resulted in making arbitrary  allotment  without  going
through the tender process.  The  report  of  the  Comptroller  and  Auditor
General would show that the reasons given by CIDCO are  not  acceptable  and
there is loss caused to the Corporation by  virtue  of  the  said  allotment
made to the respondents.



48.   The High Court ought to have seen the action  of  the  then  Board  of
Directors of CIDCO demonstrating that in the  first  meeting  of  the  Board
itself  they  cleared  the  special  proposals   without   considering   the
individual merits.   In  the  meeting,  hardly  any  official  members  were
present when the allotments were made to the respondents.



49.   State and its agencies and instrumentalities cannot give  largesse  to
any person at sweet will and whims of the political entities or officers  of
the State.  However, decisions and action of the State must be founded on  a
sound, transparent and well defined policy which shall be made known to  the
public.  The disposal of Government land by adopting  a  discriminatory  and
arbitrary method shall always be avoided and it should be  done  in  a  fair
and equitable manner as the allotment on favoritism or  nepotism  influences
the exercises of discretion.  Even assuming that if the Rule  or  Regulation
prescribes the mode of allotment by entertaining individual  application  or
by tenders or competitive bidding, the Rule of Law requires publicity to  be
given before such allotment is made.  CIDCO  authorities  should  not  adopt
pick and choose method while allotting the Government land.



50.   Furthermore, this Court has already stated in Akhil Bhartiya  Upbhokta
Congress vs. State of Madhya Pradesh & Ors.,  (2011)  5  SCC  29,  that  the
State or its agencies or instrumentalities must give largesse founded  on  a
sound, transparent, discernible and well-defined  policy,  which  should  be
made known to the public at large and further held that  a  rational  policy
of allotting land on the basis of individual applications cannot de hors  an
invitation or advertisement by the State or  its  instrumentality,  bringing
it to the knowledge of public at large so that the eligible  persons  should
not be excluded from lodging their competitive claims.



51.   The action of cancellation of allotment  of  plots,  as  tried  to  be
justified by CIDCO, would show that the  High  Court  failed  to  appreciate
such cogent reasons in deciding the matter while  exercising  the  power  of
judicial review.  It is more evident and  clear  that  arbitrariness  had  a
role to play in the matter while allotting the three plots in favour of  one
group  of  persons  which  certainly  would  come  within  the  meaning   of
arbitrariness on the part of CIDCO and against the public policy.   Such  an
action on the part of CIDCO, it appears to us, is nothing but a  favouritism
based on nepotism and was irrational and unreasonable and functioning  in  a
discriminatory manner as voiced by this Court in the case of  Raman  Dayaram
Shetty (supra).



52.   Rule 4,  to  which  our  notice  was  drawn  by  the  learned  counsel
appearing on behalf of the respondents, although provided  an  authority  to
dispose of plots of land by public auction or by tender  or  by  considering
individual applications as the Corporation  would  determine  from  time  to
time, but such action on the part of the Corporation should have been  taken
rationally and after applying  the  methods  which  are  more  rational  and
reflect non-arbitrariness and would  not  be  smacked  under  the  clout  of
favouritism   and/or   nepotism    or   being   influenced   by    political
personalities.  In our opinion, although CIDCO had the power  to  allot  the
land in any one of the manners stated in Rule 4 above, but  the  conduct  of
such allotment should have been  more  clear  and  transparent  and  without
presence of any element of favouritism and/or  nepotism  and  without  being
influenced by any such thing  in exercising the  discretion  conferred  upon
CIDCO.



53.   In the case of Humanity and Anr. vs. State of West  Bengal  and  Ors.,
(2011) 6 SCC 125, this  Court  observed  that  in  the  matter  of  granting
largesse, the Government has to act fairly and without  even  any  semblance
of discrimination.  It was held as under:

 “It is axiomatic that in order to achieve a bona fide end, the  means  must
also justify the end. This Court is of  the  opinion  that  bona  fide  ends
cannot be achieved by  questionable  means,  specially  when  the  State  is
involved. This Court has not been able to get any answer from the State  why
on a request by the allottee to the Hon’ble Minister for Urban  Development,
the Government granted the  allotment  with  remarkable  speed  and  without
considering all aspects  of  the  matter.  This  Court  does  not  find  any
legitimacy in the action of the Government, which  has  to  act  within  the
discipline of the constitutional law, explained by this Court  in  a  catena
of cases. We are sorry to hold that in  making  the  impugned  allotment  in
favour of the allottee, in the facts and  circumstances  of  the  case,  the
State has failed to discharge its constitutional role.”




54.   We take serious note and express our anguish, the way the  authorities
of CIDCO showed undue favour to the respondents and  managed  to  allot  the
Government land in  favour  of  one  person  knowing  fully  well  that  the
aforesaid proprietor of the Company, in  different  capacity  and  in  dummy
names, sought allotments of plots.  The way CIDCO has been dealing with  the
Government property, it is  high  time,  we  observe,  that  notwithstanding
Regulation 4, as contained in the Regulations, the appellant CIDCO may  take
all endeavour to make allotments of plots by open tender or  competing  bids
and shall not take any decision for allotment  of  Government  land  at  the
instance of the Ministers and High Dignitaries for any purposes whatsoever.

55.   Taking into consideration the entire facts of the  case  and  the  law
discussed hereinabove, we have no hesitation in holding that the  CIDCO  was
justified  in  cancelling  all  the  allotments  made  in  favour   of   the
respondents.

56.   For the reasons aforesaid, these appeals are allowed and the  judgment
and order passed by the High Court in the  writ  petitions  are  set  aside.
Consequently, we uphold  the  order  passed  by  the  CIDCO  cancelling  the
allotments made in favour of the respondents.

                                                              …………………………….J.
                                                                (M.Y. Eqbal)



                                                              …………………………….J.
                                                      (Pinaki Chandra Ghose)
New Delhi,
September 26, 2014.