Court overturns arbitrary rejection of solvency certificate application, directs reconsideration

The court found the rejection of the solvency certificate application to be arbitrary and mala fide. The petition was allowed, the rejection order was quashed, and the Collector was directed to reconsider the application. No costs were awarded, and the security amount was to be refunded to the petitioner.

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Issues:
Challenge to the rejection of solvency certificate application on the grounds of mala fide and arbitrariness.

Analysis:
The petitioner filed a petition under Article 226 challenging the rejection of his application for a solvency certificate required for submitting a tender for construction of tube-wells. The petitioner alleged that the rejection was mala fide due to personal grudge against his father. The respondent, however, denied any mala fide intent and stated that the refusal was due to the lack of immovable property owned by the petitioner, which is a requirement for granting solvency certificates based on government instructions.

The respondent raised a preliminary objection, contending that the petition was not maintainable as the grant of solvency certificates is regulated by non-statutory government instructions. Citing Supreme Court decisions, it was argued that administrative instructions do not confer a right to seek a writ against the government. However, the court highlighted that while the grant of solvency certificates may not be governed by statutory provisions, administrative functions must be exercised fairly and without discrimination. Any arbitrary or biased action by a government officer can be challenged if it offends Article 14 of the Constitution.

The court emphasized the importance of public authorities exercising their powers honestly, reasonably, and without malice. Quoting previous judgments, the court reiterated that any attempt to exercise powers corruptly or with mala fides renders such actions null and void. The plea of mala fides has been consistently recognized as relevant in determining the validity of government actions. The court also noted that the arbitrary refusal of a solvency certificate infringes upon the fundamental right to carry on trade or business guaranteed by Article 19 of the Constitution.

After examining the evidence and circumstances of the case, the court inferred that the rejection of the solvency certificate application was arbitrary and mala fide. Consequently, the court allowed the petition, quashed the rejection order, and directed the Collector to reconsider the application based on the material provided by the petitioner. No costs were awarded, and the security amount was to be refunded to the petitioner.

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