TaxTMI 
TaxTMI 
2021 (11) TMI 1214
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....ar, Adv., Mr. Gaurav Nair, Adv., Ms. Pranati Bhatnagar, Adv., Mr. Saurabh Chaudhary, Adv., Ms. Anne Mathew, AOR JUDGMENT N.V. RAMANA, C.J.I. 1. These Civil Appeals arise out of the impugned judgment dated 06.12.2013 passed by the High Court of Judicature at Bombay in Writ Petition No. 702 of 2011, Writ Petition No. 5245 of 2011, and Public Interest Litigation No. 55 of 2011. 2. At the outset, a brief sketch of the facts is necessary for determining the issue. On 11.06.2008, the Appellants in Civil Appeal Nos. 3956-3957 of 2017 (City and Industrial Development Corporation of Maharashtra, for short "CIDCO") called for a tender for lease of land within its jurisdiction, for purposes of development of necessary infrastructure such as Hotels etc., around Navi Mumbai Airport. Respondent - M/s. Metropolis Hotels was one of the bidders. 3. Before approval of the tender, technical qualifications of the bidders were scrutinized and approved by the CIDCO's legal team on 25.07.2008 in the following manner: Metropolis Hotels is a Partnership firm consisting of M/s. Sun-n-Sand Hotel Pvt. Ltd. and Shishir Realty Pvt. Ltd. having their share 30% each. A short question a....
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....ear the proposed Navi Mumbai Airport. 6. Thereafter, on 29.12.2009, M/s. Metropolis Hotels-Respondent No. 1, by way of a letter to CIDCO, applied for change of user of 34,000 sq. mtrs. of the said plot to commercial-cum-residential use. On 11.02.2010, this request for change/expansion of user of Plot No. 5 was considered and subsequently permitted only for 23,000 sq.mtrs. 7. On 11.03.2010, M/s. Metropolis Hotels requested for subdivision of the Plot No. 5 into two, i.e. 24,000 sq. mtrs. for the five-star hotel and 23,000 sq. mtrs. for the residential-cum-commercial plot. By way of a letter dated 29.03.2010, CIDCO demarcated the said plot as requested, forming Plot No. 5 (admeasuring 24,000 sq. mtrs.) and Plot No. 5A (admeasuring 22,999.08 sq. mtrs). M/s. Metropolis Hotels also requested assignment of their rights in respect of the plot on which the residential-cum-commercial user was permitted, i.e. Plot No. 5A. Assignment of this plot to M/s. Shishir Realty Private Ltd. was approved by CIDCO in its letter dated 30.03.2010, wherein it referred to the said assignee as one of the partners in the original allotment. 8. On 30.03.2010, the CIDCO executed two separate lease deed....
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....nsideration, as identified in the said order, are reproduced as under: SL. NO. ISSUES FINDINGS 1. Whether M/s. Metropolis Hotels was eligible to participate in the bidding process for allotment of 5­ Star Hotel Plot, in accordance with Clause 4(c) of the invitation of offer? No 2. Whether change of user for part of the plot admeasuring 23,000 m2 and sub­division of plot in breach of the terms and conditions represented in the Tender document and letter of allotment? Yes 3. Whether transfer of part of the sub­divided plot of admeasuring 23,000m2 with change of user in favour of M/s. Shishir Realty Pvt. Ltd. before execution of agreement to lease was consistent with Condition No.16 of the General Terms and Conditions of Tender and Condition No.21 of the letter of allotment? No 4. Whether change of user and subdivision of plot has adversely affected the object of development of 5 Star Hotel in Navi Mumbai? Yes 5. Whether change of user and subdivision of plot and transfer of part of the plot was legal, just and proper? [No] 11. Pertaining to the first issue of the eligibility of M/s. Metropolis Hotels to participate ....
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....be applicable as specific terms of the tender and letter of allotment were deviated. Further, such deviations were not in public interest. Accordingly, the two lease deeds in favour of the Respondents-lessees were cancelled. 16. Aggrieved by the cancellation of the lease deeds, M/s. Metropolis Hotels and Shishir Realty Pvt. Ltd., challenged the aforesaid order of the Vice Chairman, CIDCO, through two writ petitions being Writ Petition No. 702 of 2011 and Writ Petition No. 5245 of 2011 before the High Court of Judicature at Bombay. Separately, a PIL was also filed challenging the allotment of the plot in question, change of land use, and sub-division of the said plot. 17. The High Court, vide impugned order dated 06.12.2013, while quashing the aforesaid cancellation order passed by CIDCO, held that the change of land use and sub-division of the plot had taken place with due authorization of the CIDCO. Further, it held that the CIDCO was not able to show any concrete violations which go to the root of the matter. Finally, the High Court held that, without producing any pressing need on record, the CIDCO is precluded and estopped on the doctrine of promissory estoppel from cance....
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....Appellant in C.A. No. 3959-3961, has argued that: a) The PIL Petitioner/Appellant is a social activist and is involved in the business of construction services. b) The change of land use is in violation of Clause 15 of the letter of allotment, which mandated that the allotted land shall be used only for the construction of a five star hotel. c) The change of land use was illegal and arbitrary. d) The sub-division of plots was also invalid. 22. Dr. Abhishek Manu Singhvi, learned Senior Counsel, appearing on behalf of Shishir Realty Pvt. Ltd., argues that: a) M/s. Metropolis Hotels was a partnership firm and had applied for registration. When bid was made, they had declared the same to CIDCO. The enforcing committee received the bid being fully aware that the application for registration of partnership firm was pending before the registrar and decided to go with their bid as it was Rs. 23 crore higher than the next bid. b) Additionally, the enquiry that was conducted against the said allocation was in complete abrogation of natural justice. No notice was issued to the Respondents during the pendency of the enquiry. Even while a....
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....is Court to uphold certain discretion accruing to the government and disallow certain conduct in light of prevailing circumstances. Merely instilling an agency with discretion may not be prohibited by the Constitution, rather it is unfettered use of such discretion, that is prohibited; the Constitution frowns upon those decisions which are taken in gross abuse of law. English Courts have developed many legal standards for evaluating administrative decisions, one of them being enumerated in the case of Council of Civil Service Unions v. Minister for the Civil Service, [1985] AC 374, wherein Lord Diplock has summarized the grounds of challenging such decisions under the broad heads of illegality, irrationality, procedural impropriety and legitimate expectation. Beyond these grounds, a recent development in the form of proportionality has further increased the scope of judicial review. 26. Being governed under "rule of law" every action of the State or its instrumentality while exercising its executive powers must met the aforesaid requirements. While recognising the existing principle of freedom to enter or not to enter into contracts by the state and its instrumentalities, the ma....
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....odern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbit....
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.... Municipal Corporation directing them not to carry any further construction and stay the development. 33. On 03.11.2010, the enquiry committee submitted its report to the State Government recommending the cancellation of tender. On 19.11.2010, the State Government accepted the findings of the enquiry committee and directed CIDCO, to implement the findings of the enquiry committee. 34. Shishir Realty Private Ltd. has placed on record letter dated 23.12.2010 addressed to the Urban Development Department and CIDCO, stating that he was shocked to see a newspaper report stating that a committee appointed by the State Government has recommended the cancellation of the allotment done in their favour. The aggrieved Respondent challenged the aforesaid recommendation as it was passed without affording an opportunity of hearing them-the aggrieved party. 35. Subsequent to the aforesaid letter, on 28.12.2010, the Respondents-lessees received a show-cause notice dated back to 06.12.2010. The Respondents-lessees submitted their responses on 30.12.2010, 13.01.2011 and on 19.02.2011. Finally hearing was given to the Respondent on 03.03.2011. Thereafter, finally on 16.03.2011, the CIDCO can....
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....arity, which goes to the root of the matter. The conduct of the Appellant authorities indicate that the enquiry was not conducted with an open mind. The preexisting findings of the Principal Secretary recommending the cancellation of allocation has the potential to color the entire proceedings held subsequently just to meet the procedural requirements. 38. Natural justice is an important aspect while reviewing the administrative orders. Providing effective natural justice to affected parties, before a decision is taken, it is necessary to maintain Rule of law. Natural justice is the sworn enemy of intolerant authority. Any attempt by authority to circumvent the requirement of providing effective hearing before reaching a conclusion, cannot pass the muster. Coming to the facts herein, the post-decisional hearing given to the Respondent-lessee is reduced to a lip-service, which cannot be upheld in the eyes of law. 39. As a first step of judicial review, we need to note that when statutory functionaries such as CIDCO render an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of an aff....
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....bjections were raised while assessing the technical bids. 44. The second objection which the CIDCO in its order notes as under: Apart from this, M/s. Sun-N-Sand Hotels Pvt. Ltd., one of partners of M/s. Metropolis Hotels also submitted separate offer in the bidding process. Such multiple offers were submitted by M/s. Sun-N-Sand Hotels Pvt. Ltd. with a view to get the land allotted. On this count also, the offer of M/s. Metropolis Hotels stand vitiated, and the concluded agreement is liable to be terminated. 45. In our considered opinion, the aforesaid paragraph does not indicate sufficient reasons. There is no reason provided as to what provision of law such bids violate. Further, there is no concrete allegation or adjudication on the suggested cartelization. There is no reasoning considered as to why such a practice was harmful to public interest. We may note that such considerations are important elements of party autonomy and commercial freedoms while framing the contract, which is not within the purview of judicial review. As there is no such law or contract provision which bars such conduct, the considerations undertaken by the order of CIDCO are extraneous and ....
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....alone permit the Corporation to add the same as a ground for supporting the order recalling-the grant of the change. The order passed by the Corporation/its Managing Director cancelling the earlier change was based entirely on the alleged absence of authority vested in it to direct such a change. (emphasis supplied) 47. Upon the perusal of the above cited decision, we are of the opinion that the aforesaid opinion is squarely applicable in the present case. Although the argument made by the CIDCO is attractive at the outset, a deeper analysis makes it clear that such argument is devoid of merit. In this context, it may be necessary to note certain clauses contained in the Tender Document and Allotment Letter: 4. Who is eligible to offer to acquire plot (a) A person competent to contract under the Indian Contract Act is eligible to make offer to acquire plot. (b) A company incorporated under the Indian companies Act, 1956 is eligible to make offer to acquire plot. (c) A partnership firm registered under Indian Partnership Act, 1932 is eligible to offer to acquire plot. Offer shall be signed by all partners and enclosed with a true certified c....
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....verned by the prevailing provisions contained in the General Development Control Regulation of Navi Mumbai. Any modification to the said Regulation and in particular to the Floor Space index and charge of use of the land shall not be made automatically applicable but the intending lessee, if you so desire, may apply for the application of the modified Regulation of the General Development Control. (emphasis supplied) Clause 15 of the tender document and the corresponding Condition 19 of the allotment letter, allows for such modification. Although the language used in the aforesaid Clause is contradictory, this Court needs to interpret the same to harmonize and eliminate any absurdity. Ramana Dayaram Shetty v. International Airport Authority of India AIR 1979 SC 1628. If the interpretation supplied by CIDCO, by reading Clause 15(m) and (n) of allotment letter with Clause 15 of the tender document in isolation, is accepted, then the phrase 'If he so desires, may apply for the application of the modified Regulation of the General Development Control Regulation to CIDCO', as occurring under Clause 15 of the tender document, is rendered redundant. In this context, the afor....
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....ands during that period were comparable or some cases lower than the plot in question. But nonetheless the fact of depressed market cannot be ignored. In cases of some of the plots which are sold at higher rates, the Bidders did not pay the first installment and therefore their EMD's were forfeited and in some cases on their request references have been made to the government for extension of time for payment. From the aforesaid reasoning, CIDCO has not been able to show as to how the its own order was illegal or arbitrary. Moreover, they have not been able to identify whether the consideration taken by CIDCO at that time was deficient. The prevailing circumstances and changes in the factual conditions need to be appropriately considered. In our considered opinion, it may be noted that delay in construction of Navi-Mumbai airport, economic slump and loss-making endeavors by similarly situated hotels are 'material considerations' and the order has appropriately taken the same into account. 51. The last submission on this aspect which the learned Senior Counsel for the CIDCO, Shri Rakesh Dwivedi, takes is that the relaxation of land use was made under the policy of ....
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....r unfairness in the aforesaid transaction. Learned Senior Counsel representing the Appellants have submitted that allowing subdivision of plots with change in land use, had caused substantive loss to the State largesse, as many people would have shown a proclivity to buy land with different land use. On the contrary, the learned Senior Counsel representing the Respondents-lessees have stated that the allotment, change in land use and transfer have taken place in accordance with law. There is no substantial deviation as sought to be projected by the Appellants herein. The Appellants herein have sought to invoke the doctrine of promissory estoppel to argue that the CIDCO could not have walked out of the bargain, merely because of the possibility of larger profits. It is pertinent to note that, the CIDCO has failed to prove any losses suffered. 54. When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination. The larger public interest of u....
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....e allotment made in favour of the Respondent - M/s. Metropolis Hotel during the tenure of the earlier executive head. Even the inquiry, that was conducted against the Respondents-lessees stood vitiated as no proper notice or hearing was given to them before passing the impugned order. Additionally, from the above analysis it clear that the change of usage and the subsequent division was well-within the statutory limitations. Therefore, the earlier undertakings taken by the Appellant-authorities cannot be set aside with the change of person in power, without any rhyme or reason. After all one cannot change the Rules of the game once it has started. 58. From the contradictory submissions asserted before this Court and the concessions given regarding practice of CIDCO to allow change in land use in other cases, clearly points to a 'regime revenge'. Such conclusion reached herein is further buttressed by the fact that no inquiry or disciplinary proceedings were initiated against the earlier Vice-Chairman, whose orders have been annulled. Such phenomenon is clearly detrimental to the constitutional values and Rule of law. 59. As the last leg of the submission, the Responde....
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....e, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promisee and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts as have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter h....
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....romise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it. (emphasis supplied) 61. Therefore, although the Appellants are right in claiming that Government cannot be compelled to perform its undertaking, but equity demands that the Government must place on record sufficient material on record to claim such exemption. The aforesaid opinion was affirmed by this Court in the case of Vasantkumar Radhakisan Vora (Dead) by His LRs. v. Board of Trustees of the Port of Bombay, (1991) 1 SCC 761. The court held therein: 20. When it seeks to relieve itself from its application the government or the public authority are bound to place before the court the material, the circumstances or grounds on which it seeks to resile from the promise made or obligation undertaken by insistence of enforcin....
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....vely prejudiced if the order of cancellation is upheld by this Court after investing a significant amount and facing prolonged litigation. 66. Lastly, the PIL Petitioner-Appellant in C.A. Nos. 3959-3961 of 2017 has tried to argue the case on the same lines as that of the CIDCO. The public interest as sought to be shown in his PIL, is doubtful, in light of his involvement in the business of construction service. Moreover, the tone and tenor of the notice dated 12.01.2009, issued by the PIL Petitioner to the CIDCO, threatening the concerned officers with criminal prosecution Under Sections 405, 406, 420 read with Section 120(b) of Indian Penal Code, inter alia, on the ground of allowing partnership firm, which was in the process of registration, to bid, needs to be viewed with some suspicion. In fact, the non-prosecution of the erring officials for the alleged mismanagement and irregularities is quite telling. 67. Before we state the conclusions, this Court would like to reiterate certain well-established tenets of law pertaining to Government contracts. When we speak of Government contracts, constitutional factors are also in play. Governmental bodies being public authorities ....