2009 (5) TMI 1009 - SC - Indian Laws

Swiss Challenge Method for public-private partnerships upheld as valid for developing government lands through joint ventures

The SC upheld the validity of the Swiss Challenge Method adopted by MHADA for developing government lands through public-private partnerships. The Court ... Pilot project - Validity of the Swiss Challenge Method adopted by the Maharashtra Housing and Area Development Authority ('MHADA') - Inviting public tender for development of the Government lands - proposal received from a private entrepreneur i.e. Ravi Development for development of undeveloped land - HELD THAT:- In the present project, constructed built up area with richer specifications is to be handed over by Ravi Development to MHADA free of costs in turn MHADA will be at liberty to price these tenements in accordance with policies of MHADA or as may be determined by MHADA. Therefore, utilization of maximum permissible FSI, adopting higher specifications and effecting utilization of scarce land for housing and yet make LIG, MIG housing group financially attractive to the people is possible through joint venture of public and private bodies in which reasonable built area be available by private developer free of cost to MHADA. The above claim and concept cannot be ignored lightly. We conclude that the impugned pilot project or initiation taken by the Government of Maharashtra along with MHADA to encourage public-private participation is in accordance with the need of the time as well as a laudable effort. But to make it an effective approach Swiss Challenge Method or any other encouraging concept should be duly publicized first. The effort of public-private participation can only be possible when private entities are aware of such scheme. Also in the scheme of availing a new system thorough rules and regulations are needed to be followed otherwise unfairness, arbitrariness or ambiguity may creep in. In order to avoid such ill-effects the State Government is suggested to consider the following aspects: 1. The State/Authority shall publish in advance the nature of Swiss Challenge Method and particulars; 2. Publish the nature of projects that can come under such method; 3. Mention/notify the authorities to be approached with respect to the project plans; 4. Mention/notify the various fields of the projects that can be considered under the method; 5. set rules regarding time limits on the approval of the project and respective bidding: 6. the rules are to be followed after a project has been approved by the respective authorities to be considered under the method. 7. All persons interested in such developmental activities should be given equal and sufficient opportunity to participate in such venture and there should be healthy inter se competition amongst such developers. These suggestions are not exhaustive and the State is free to incorporate any other clauses for transparency and proper execution of the scheme. The State Government is suggested to frame regulations/instructions on the above lines and take necessary steps thereafter in future. Thus, the common impugned judgment and order of the Bombay High Court in W.P. (L) are set aside. Consequently, the appeals are allowed. Issues Involved:1. Validity of the Swiss Challenge Method.2. Allegations of arbitrariness and unreasonableness in awarding the contract.3. Influence of the Chief Minister of Maharashtra.4. Legality and transparency of the tender process.5. Need for innovative proposals under the Swiss Challenge Method.6. Public-private partnership in housing development.Issue-wise Detailed Analysis:1. Validity of the Swiss Challenge Method:The Supreme Court examined the legitimacy of the Swiss Challenge Method adopted by MHADA for the development of undeveloped land. The court noted that this method is widely used in various countries and several Indian states. The method involves a developer submitting a suo motu proposal, which is then subjected to public bidding. The original proposer has the right to match the highest bid. The court found this method to be valid and not inherently arbitrary or unreasonable.2. Allegations of Arbitrariness and Unreasonableness:The respondents argued that the Swiss Challenge Method was arbitrary and lacked transparency. However, the Supreme Court found that MHADA had issued a clear public notice detailing the method and the right of first refusal for the original proposer. The court emphasized that all bidders were aware of these terms and had accepted them. The court concluded that the method was applied fairly and transparently, and there was no arbitrariness in awarding the contract to Ravi Development.3. Influence of the Chief Minister of Maharashtra:The High Court had raised concerns about the influence of the Chief Minister in the decision-making process. The Supreme Court examined the sequence of events and found that Ravi Development had initially submitted its proposal to the CEO of MHADA and later to the Chief Minister. The court noted that the Chief Minister, who also held the housing portfolio, had merely forwarded the proposal for further examination without any undue influence or favoritism. The court dismissed the High Court's concerns as baseless.4. Legality and Transparency of the Tender Process:The Supreme Court reiterated that the tender process was conducted in a transparent manner. The public notice and bid documents clearly mentioned the Swiss Challenge Method and the right of first refusal. The court highlighted that Shree Ostwal Builders Ltd., one of the bidders, had participated in the process with full knowledge of these terms and had given an undertaking to that effect. The court found no merit in the argument that the process lacked transparency.5. Need for Innovative Proposals Under the Swiss Challenge Method:The High Court had observed that the proposal by Ravi Development lacked innovation, which it deemed necessary under the Swiss Challenge Method. The Supreme Court disagreed, stating that there was no requirement for the proposal to be innovative. The court noted that the method itself does not mandate innovativeness, and the proposal by Ravi Development was in line with MHADA's objectives. The court found the High Court's observations on this matter unsustainable.6. Public-Private Partnership in Housing Development:The Supreme Court acknowledged the efforts of the Government of Maharashtra and MHADA to promote public-private partnerships in housing development. The court noted that such partnerships are encouraged by national and state housing policies to address the housing needs of economically weaker sections and lower-income groups. The court emphasized the importance of maximizing land utilization and providing affordable housing through joint ventures.Conclusion:The Supreme Court set aside the Bombay High Court's judgment, validating the Swiss Challenge Method and the contract awarded to Ravi Development. The court emphasized the need for clear regulations and transparency in implementing such methods and suggested guidelines for future projects. The appeals were allowed, and the court recognized the importance of public-private partnerships in addressing housing challenges.