TaxTMI 
TaxTMI 
2014 (9) TMI 1164
X X X X Extracts X X X X
X X X X Extracts X X X X
....hallenged 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 can....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uction 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 peti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ither 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 imp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther 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 cr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erent 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 wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eproduced 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplications 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 respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ium-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 dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 giv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hest 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 pub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....overnment 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tate-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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ident 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 ....