THE VICE CHAIRMAN & MANAGING DIRECTOR, CITY AND INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD.& ANR. versus SHISHIR REALTY PRIVATE LIMITED & ORS. ETC on 29 November 2021

SUPREME COURT REPORTS

[2021] 13 S.C.R.

ATHE VICE CHAIRMAN & MANAGING DIRECTOR, CITY ANDINDUSTRIAL DEVELOPMENT CORPORATION OFMAHARASHTRA LTD.& ANR.

v.

SHISHIR REALTY PRIVATE LIMITED & ORS. ETCB

(Civil Appeal Nos. 3956-3957 of 2017)

NOVEMBER 29, 2021

[N. V. RAMANA, CJI, VINEET SARAN ANDSURYA KANT, JJ.]

C

Government contracts: Judicial review – Scope of – On facts,appellant (CIDCO) invited tender for lease of land for thedevelopment of Hotels – Issuance of allotment letter in favour ofthe highest bidder – Complaints regarding irregularities in allotmentof plots of land, change of user and deviation from the terms andDconditions of the tender – On the basis of preliminary enquiry,issuance of notice to the highest bidder and the respondent-lesseeby the newly appointed Vice Chairman – Thereafter, cancellationof lease deed, pursuant to the enquiry – Writ petitions – High Courtquashed the cancellation order – On appeal, held: There is anelement of abuse of bureaucratic power behind subsequent changeEin the tender allotment – When a contract is being evaluated, themere possibility of more money in the public coffers, does not initself serve public interest – Blanket claim by the State claiming lossof public money cannot be used to forgo contractual obligations –On facts, post-decisional hearing given to respondent-lessee wasFjust to sanctify the process of cancellation – Change of usage andthe subsequent division was within the statutory limitations – Thus,the earlier undertakings taken by the appellant-authorities cannotbe set aside with the change of person in power, without any rhymeor reason – Phenomenon of ‘regime revenge’ is detrimental to theconstitutional values and rule of law – Equity demands that whenGthe State failed to produce an iota of evidence of either financialloss or any other public interest that has been affected, it should becompelled to fulfill its promises – Thus, the order of CIDCO, interalia, annulling the allotment on hyper-technical grounds cannot besustained for being contrary to the doctrine of fairness, and is setHaside – Judicial restraint.

Government contracts: Tender process – Judicial review of –Power of constitutional courts – Explained.

Government contracts: Constitutional factors – Satisfactionof – Held: Governmental bodies being public authorities areexpected to uphold fairness, equality and rule of law even whiledealing with contractual matters – Right to equality u/Art. 14 abhorsarbitrariness – Public authorities have to ensure that no bias,favouritism or arbitrariness are shown during the bidding process,unless public interest demands otherwise – Degree of compromiseof any private legitimate interest must correspond proportionatelyto the public interest, so claimed – On mere grounds of public interestor loss to the treasury, the successor public authority cannot undothe work undertaken by the previous authority – In that case,businessmen would be hesitant to enter Government contract ormake any investment.

Administrative law: Administrative orders – Principle ofnatural justice – Significance of – Held: Natural justice is animportant aspect while viewing the administrative orders – Tomaintain rule of law, effective natural justice is to be provided toaffected parties, before a decision is taken – Any attempt by authorityto evade the requirement of providing effective hearing beforereaching a conclusion, cannot pass the muster.

Dismissing the appeals, the Court

Conclusion

HELD: 1.1 The Constitution of India allows the governmentto enter into contracts and perform certain commercial activities.Due to increase in government business, there is a requirementof this Court to uphold certain discretion accruing to thegovernment and disallow certain conduct in light of prevailingcircumstances. Merely instilling an agency with discretion maynot be prohibited by the Constitution, rather it is unfettered useof such discretion, that is prohibited; the Constitution frowns uponthose decisions which are taken in gross abuse of law. [Para25][210-C]

1.2 Being governed under “rule of law” every action of theState or its instrumentality while exercising its executive powersmust met the aforesaid requirements. While recognising theexisting principle of freedom to enter or not to enter into contracts A

B

C

DE

F

G

H

Aby the state and its instrumentalities, the manner, method andmotive behind the aforesaid decision can be subjected to judicialreview on the touchstone of equality, fairness, proportionality andnatural justice. The decision of the executive must strike abalance with the alleged violation with that of the penalty imposed.This Court, in many of its orders reviewing tender conditions,Bhas vouched for providing sufficient discretion and independenceto administrative authorities so as to enable them to performtheir duties in the interest of the public. Further, the observationof judicial restraint while reviewing such contracts is a continuingtrend. The power of judicial review accorded to ConstitutionalCCourt of India and its jurisdiction is supervisory. [Para 26, 27][210-F-H; 211-A]1.3 The principles elucidated in Tata Cellular case acquireimportance as the efficacy of commercial activities in the publicsector increases greatly. It appears that public interest litigationDhas opened a large window to entertain any tender, regardless ofscale, which are now sought to be challenged as a matter ofroutine. Such disruption could hardly have been the objective ofexpanding the need of Constitutional Review. Close scrutiny ofminute details, contrary to the view of the tendering authority,makes execution of contracts in the public sector a cumbersomeEexercise. Often, it is the case that parties entertain the idea of along-drawn-out litigation at the very threshold itself. The purposeof imbibing the spirit of competition in a process such as that ofthe bidding process, is lost in this meandering exercise and delayssuffered due to pending litigation. This causes great disadvantageFto the government and public sector in general. This Court, inappropriate cases while interpreting the contract, can restrictthe review mechanism by not inuring to the interpretation soprovided by third parties or parties competing for the tender,unless the impugned interpretation is shown to be gross abuseof law. The object of judicial review cannot be that in everyGcontract where some parties lose out, a second opportunity isprovided to such parties to pick holes so as to disqualify successfulparties, on grounds which even the party floating the tender findto be without merit. [Para 30][212-E-H; 213-A-B]

H

H

1.4 The perusal of the materials produced on record showsthat the initiation of the enquiry by the Principal Secretary, UrbanDevelopment Department was suo-motu, without any naturaljustice being provided for the respondents-lessees. After arrivingat a conclusion, a show-cause notice was issued by CIDCO tosanctify the enquiry. The said fact of post-decisional hearing justto sanctify the process of cancellation is clearly evidenced in theorder dated 16.03.2011, passed by the Vice-Chairman andManaging Director CIDCO, cancelling the tender. Such illegalprocedure adopted, clearly vitiates the subsequent order by theVice-Chairman, due to the irregularity, which goes to the root ofthe matter. The conduct of the appellant authorities indicate thatthe enquiry was not conducted with an open mind. The pre-existing findings of the Principal Secretary recommending thecancellation of allocation has the potential to color the entireproceedings held subsequently just to meet the proceduralrequirements. [Para 36-37][214-A-B, H; 215-A]

1.5 Natural justice is an important aspect while viewingthe administrative orders. Providing effective natural justice toaffected parties, before a decision is taken, it is necessary tomaintain rule of law. Natural justice is the sworn enemy ofintolerant authority. Any attempt by authority to circumvent therequirement of providing effective hearing before reaching aconclusion, cannot pass the muster. Coming to the facts, the post-decisional hearing given to the respondent-lessee is reduced toa lip-service, which cannot be upheld in the eyes of law. [Para38][215-B-C]

1.6 As a first step of judicial review, when statutoryfunctionaries such as CIDCO render an order based on certaingrounds, its validity must be judged by the reasons so mentionedand cannot be supplemented by fresh reasons in the shape of anaffidavit or otherwise. To this extent, the submission that thescope of this Court is limited is accepted. [Para 39][215-D]

1.7 The perusal of the bid document clearly indicates thatthe respondent at the time of applying for the bid had dulydisclosed that the firm had already applied for registration andhad also forwarded the Registration Form and Partnership Deed AB

C

D

E

F

G

H

Aalong with the tender documents. Subsequently, on 16.01.2009the Registrar of the firms issued the certificate of registration infavour of the respondent. Having considered the communicationand legal opinion tendered before accepting the highest bid,CIDCO’s law officers did their due diligence, who opined thatpartnerships being creatures of contracts, the requirement ofBBoard resolutions and other technical objections raised were notan essential condition. Therefore, at this stage it may not beequitable to review such issues in detail. Moreover, afteraccepting the lease premium of Rs.282,39,99,700/- and a transferfee of Rs. 1,38,56,000/-, the appellant authority cannot contendCthat the respondents-lessees lacked the eligibility to contend inthe tender. The respondents-lessees also pointed out that, beingthe highest bidder with a margin of Rs. 23 crores over the secondhighest bidder, the appellant authority did not go into thetechnicalities behind the matter. Even, the High Court whilepassing the impugned judgment has commented that the appellantDwas aware about the pending registration, and even assented tothe same as no objections were raised while assessing thetechnical bids. [Para 41- 43][215-G-H; 216-A-D]

1.8 As regards, the second objection by the CIDCO ofmultiple offers, there is no reason provided as to what provisionEof law such bids violate. Further, there is no concrete allegationor adjudication on the suggested cartelization. There is noreasoning considered as to why such a practice was harmful topublic interest. Such considerations are important elements ofparty autonomy and commercial freedoms while framing theFcontract, which is not within the purview of judicial review. Asthere is no such law or contract provision which bars such conduct,the considerations undertaken by the order of CIDCO areextraneous and the same cannot be accepted. [Para 45][216-F-G]

G1.9 Clause 15 of the tender document and the correspondingCondition 19 of the allotment letter, allows for such modification.Although the language used in the aforesaid clause iscontradictory, this Court needs to interpret the same to harmonizeand eliminate any absurdity. If the interpretation supplied byCIDCO, by reading Clause 15 (m) and (n) of allotment letter withH

Clause 15 of the tender document in isolation, is accepted, thenthe phrase ‘If he so desires, may apply for the application of themodified regulation of the General Development ControlRegulation to CIDCO’, as occurring under Clause 15 of the tenderdocument, is rendered redundant. In this context, the said clauseneeds to be interpreted to mean that, ‘lessee cannot apply forchange of land use as a matter of right, rather, CIDCO, on itsdiscretion could grant such ‘change in land use’ on satisfactionbased on material considerations’. The contradictory contractualclauses, seen within various documents issued by CIDCO, haveled to this seemingly unending dispute, which required more thana decade to be settled. This only emphasizes the importance ofdue diligence and careful drafting, which could have avoided suchtype of litigation in the first place. In the same breath, the CIDCOhas fairly conceded that the power of change of land of use doesexist with CIDCO and has, on multiple occasions, been used tochange the land use pattern. Most importantly, in the instant case,after accepting the change of user fee, the authorities cannot post-facto question the same. [Para 47-49][220-C-G]

1.10 The plots fell in the zone of commercial-cum-residential area, and through the contract, this condition wasearmarked for construction of a five-star hotel. As seen from therecords, the respondents-lessees sought dilution of this conditionbasing on the fact that the airport, which was supposed to comeup near the area had not materialized; similarly situated hotelswere loss-making endeavors; and a general economic slump.Further, the order of the CIDCO dated 11.02.2010 clearlyindicates the reasons as to the change in land use in view ofprevailing circumstances. From the said reasoning, CIDCO hasnot been able to show as to how the its own order was illegal orarbitrary. Moreover, they have not been able to identify whetherthe consideration taken by CIDCO at that time was deficient.The prevailing circumstances and changes in the factual conditionsneed to be appropriately considered. It may be noted that delayin construction of Navi-Mumbai airport, economic slump and loss-making endeavors by similarly situated hotels are ‘materialconsiderations’ and the order has appropriately taken the sameinto account. [Para 50][221-A-B; 222-A]

AB

C

D

E

F

G

H

[2021] 13 S.C.R.

ACIDCO Maharashtra Ltd. v. M/s. Shree AmbicaDevelopers C.A. No.7581 of 2012 – relied on.

1.11 The submission that the relaxation of land use wasmade under the policy of 1997 which has been substituted by anew policy in 2004, is patently wrong, considering the fact thatBthe letter dated 11.02.2010 specifically alludes to the expandedpolicy of 2004 whereby additional categories of land use wereadded. It is mentioned in the letter that the policy of the CIDCOwas not to impose any limit on the user of an area out of allottedarea which can be converted. In light of the said discussion, thechange of land use from five-star hotel to partly residential-cum-Ccommercial purpose cannot be said to be illegal or arbitrary. [Para51][222-B-C]

1.12 On perusal of the Clause 16 of the General Terms andConditions and the corresponding Condition 21 of the allotmentletter, it is clearly revealed that the allottee was permitted toDtransfer or assign his rights, interests or benefits with prior writtenpermission of the Corporation and on payment of such transfercharges as may be prescribed by the Corporation. Both the clauseand the condition have further stipulated that such permissioncould be granted only after the agreed lease premium has beenEpaid in full and after execution of agreement to lease. In theinstant case, agreed lease premium was paid in full. However,agreement to lease was made on the very next day, i.e. on30.03.2010. Merely because the agreement to lease wasexecuted on the very next day, the assignment and transfer wouldnot be invalidated. Such breach cannot in itself be termed as aFfundamental to annul the tender, especially after receiving thelease amount, CIDCO cannot question the subsequent transfer.Such clause can be construed as a warranty alone rather than acondition, in light of the circumstances. The CIDCO, being apublic body, had a duty to act fairly. Having acquiescence of theGfacts and allowing such transfer, they ought not to have takensuch a hyper-technical view on contractual interpretation. Thus,no substantial reason sought to be adduced by the CIDCO todiffer from the High Court is found. [Para 52][222-D-H]

H

1.13 There is no substantial deviation as sought to beprojected by the appellants. The appellants have sought to invokethe doctrine of promissory estoppel to argue that the CIDCOcould not have walked out of the bargain, merely because of thepossibility of larger profits. It is pertinent to note that, the CIDCOhas failed to prove any losses suffered. [Para 53][223-B-C]

1.14 When a contract is being evaluated, the merepossibility of more money in the public coffers, does not in itselfserve public interest. A blanket claim by the State claiming lossof 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 upholding contracts and the fairnessof public authorities is also in play. Courts need to have a broaderunderstanding of public interest, while reviewing such contracts.[Para 54][223-D]

Jagdish Mandal v. State of Orissa (2007) 14 SCC 517;Andhra Pradesh Dairy Development CorporationFederation v. B. Narasimha Reddy (2011) 9 SCC 286 :[2011] 14 SCR 1 – referred to.

1.15 It is clear that the change of usage and the subsequentdivision was well-within the statutory limitations. Therefore, theearlier undertakings taken by the appellant-authorities cannotbe set aside with the change of person in power, without any rhymeor reason. After all one cannot change the rules of the game onceit has started. [Para 57][224-F-G]

1.16 From the contradictory submissions asserted beforethis Court and the concessions given regarding practice of CIDCOto allow change in land use in other cases, clearly points to a‘regime revenge’. Such conclusion reached is further buttressedby the fact that no inquiry or disciplinary proceedings wereinitiated against the earlier Vice-Chairman, whose orders havebeen annulled. Such phenomenon is clearly detrimental to theconstitutional values and rule of law. [Para 58][224-G-H; 225-A]

1.17 The respondents-lessees claimed that considering theyhave acted upon the directions of the appellant authority and have

AB

C

D

E

FG

H

Aduly paid the requisite amounts to the tune of Rs. 321.32 crores,CIDCO is bound by the doctrine of promissory estoppel. On thecontrary, principles of estoppel do not apply if enforcing thepromise would lead to the prejudice of public interest. [Para59][225-B]

B1.18 Although the appellants are right in claiming thatGovernment cannot be compelled to perform its undertaking,but equity demands that the Government must place on recordsufficient material on record to claim such exemption. [Para61][227-H; 228-A]

CMotilal Padampat Sugar Mills Co. Ltd. v. State of UttarPradesh (1979) 2 SCC 409 : [1979] 2 SCR 641; Unionof India v. Godfrey Philips India Ltd. (1985) 4 SCC369 : [1985] 3 Suppl. SCR 123; VasantkumarRadhakisan Vora (Dead) by His LRs. v. Board ofTrustees of the Port of Bombay (1991) 1 SCC 761 :D[1990] 3 SCR 825 – referred to.

1.19 There is no substantial violation portrayed by theappellants with respect to allotment of the scheduled land. Further,the tender documents, make it clear that the CIDCO had thepower to change the land use, sub-divide and transfer the plotsEand accordingly, has been carried out in terms of the same. It isobserved that ‘good faith standards’ applicable in Governmentcontracts, serve an important purpose in reinforcing the ‘relianceinterest’ in contracts. Even, the High Court while passing theimpugned judgment correctly held that respondents-lessees haveFacted pursuant to the permission granted by CIDCO. Moreover,after getting the commencement certificate and other necessaryclearances, the respondents-lessees borrowed a substantial sumof money from other financial institutions for the development ofthe plot. However, due to the ongoing dispute, no developmentcould take place for the past decade. [Para 63, 64][228-E-G]G

1.20 It is admitted as per record that the respondent wasthe highest bidder. Moreover, the appellants failed to bringanything on record to prove that the state exchequer has sufferedlosses pursuant to the said allotment. Nothing has been produced H

on record, the public interest that will be prejudiced if therespondents-lessees are allowed to go ahead with the said project.On the contrary, the respondents-lessees acting in furtheranceof the assurances given by the authorities, obtained huge financialassistance. Equity demands that when the State failed to producean iota of evidence of either financial loss or any other publicinterest that has been affected, it should be compelled to fulfillits promises. In fact, it is respondents-lessees who shall be gravelyprejudiced if the order of cancellation is upheld by this Courtafter investing a significant amount and facing prolonged litigation.[Para 65][228-H; 229-A-C]

1.21 The public interest as sought to be shown in by thePIL petitioner is doubtful in light of his involvement in thebusiness of construction service. Moreover, the tone and tenorof the notice dated 12.01.2009, issued by the PIL Petitioner tothe CIDCO, threatening the concerned officers with criminalprosecution under Sections 405, 406, 420 read with Section 120(b)IPC, inter alia, on the ground of allowing partnership firm, whichwas in the process of registration, to bid, needs to be viewedwith some suspicion. In fact, the non-prosecution of the erringofficials for the alleged mismanagement and irregularities is quitetelling. [Para 66][229-C-E]

1.22 When the Government contracts are spoken about,the constitutional factors are also in play. Governmental bodiesbeing public authorities are expected to uphold fairness, equalityand rule of law even while dealing with contractual matters. Rightto equality under Article 14 abhors arbitrariness. Publicauthorities have to ensure that no bias, favouritism orarbitrariness are shown during the bidding process. A transparentbidding process is much favoured by this Court to ensure thatconstitutional requirements are satisfied. [Para 67][229-E-G]

1.23 Fairness and the good faith standard ingrained in thecontracts entered into by public authorities mandates such publicauthorities to conduct themselves in a non-arbitrary mannerduring the performance of their contractual obligations. [Para68][229-G]

AB

C

D

E

F

G

H

A

A1.24 The constitutional guarantee against arbitrariness asprovided under Article 14, demands the State to act in a fair andreasonable manner unless public interest demands otherwise.However, the degree of compromise of any private legitimateinterest must correspond proportionately to the public interest,so claimed. [Para 69][229-H; 230-A]B

1.25 By merely using grounds of public interest or loss tothe treasury, the successor public authority cannot undo the workundertaken by the previous authority. Such a claim must beproven using material facts, evidence and figures. If it wereotherwise, then there would remain no sanctity in the words andCundertaking of the Government. Businessmen would be hesitantto enter Government contract or make any investment infurtherance of the same. Such a practice is counter-productive tothe economy and the business environment in general. [Para70][230-B-C]D

1.26 From the facts and circumstances, it is clear that thereis an element of abuse of bureaucratic power behind subsequentchange in the tender allotment. After conducting a tender processand receiving money, the Government backtracked which led tothis present prolonged litigation. The impugned order of CIDCO,Einter alia, annulling the allotment on hyper- technical groundscannot be sustained for being contrary to the doctrine of fairness.The reasons stated in the said order are perverse and per-sebased on extraneous considerations. Any substantive violationof law or tender conditions, which mandate annulling the allotmentand subsequent arrangements, thereby proving the conduct ofFthe appellant authority to be disproportionate are not beenidentified. [Para 71][230-D-E]

M/s Star Enterprises v. City and Industrial DevelopmentCorporation of Maharashtra Ltd. (1990) 3 SCC 280 :[1990] 2 SCR 826; Municipal Corporation, Ujjain v.GBVG India Ltd., (2018) 5 SCC 462 : [2018] 6 SCR861; Tata Cellular v. Union of India (1994) 6 SCC 651: [1994] 2 Suppl. SCR 122; B. S. N Joshi & sons Ltd. v.Nair Coal Services Ltd. (2006) 11 SCC 548 : [2006] 8Suppl. SCR 11; Mohinder Singh Gill v. Chief ElectionCommissioner, New Delhi (1978) 1 SCC 405 : [1978] 2

H

SCR 272; Ramana Dayaram Shetty v. InternationalAirport Authority of India AIR 1979 SC 1628; MotilalPadampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh(1979) 2 SCC 409 : [1979] 2 SCR 641 – referred to.

Council of Civil Service Unions v. Minister for the CivilService [1985] AC 374 – referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3956-3957 of 2017.

From the Judgment and Order dated 06.12.2013 of the High Courtof Judicature at Bombay in Writ Petition Nos.702 and 5245 of 2011.

With

Civil Appeal Nos. 3959-3961 of 2017

Rakesh Dwivedi, A. S. Nadkarni, Mukul Rohatgi, J. P. Cama, Sr.Advs., Harinder Toor, Amol Nirmalkumar Suryawanshi, Shikhil Suri,Ms. Madhu Suri, Arya Tripathy, Ms. Divya Swami, M/s Karanjawala &Co., Gaurav Goel, Vilol Khaladkar, Arunabh Chowdhury, Dhawal Mehta,Pranaya Goyal, Nanki Grewal, Chiranjivi Sharma, Dharav Shah,Ms. Priyakshi Bhatnagar, Mrs. Pragya Baghel, Ms. Liz Mathew, RahulChitnis, Sachin Patil, Aaditya A. Pande, Geo Joseph, Nishant Ramakantro A

B

C

D

E

F

G

H

AKatneshwarkar, Sanjay Udeshi, Aditya Udeshi, Darshan Ashar, GauravNair, Ms. Pranati Bhatnagar, Saurabh Chaudhary, Ms. Anne Mathew,Advs. for the appearing parties.

The Judgment of the Court was delivered by

N. V. RAMANA, CJIB

1. These Civil Appeals arise out of the impugned judgment dated06.12.2013 passed by the High Court of Judicature at Bombay in WritPetition No. 702 of 2011, Writ Petition No. 5245 of 2011, and PublicInterest Litigation No. 55 of 2011.

C2. At the outset, a brief sketch of the facts is necessary fordetermining the issue. On 11.06.2008, the appellants in Civil Appeal Nos.3956-3957 of 2017 (City and Industrial Development Corporation ofMaharashtra, for short “CIDCO”) called for a tender for lease of landwithin its jurisdiction, for purposes of development of necessaryinfrastructure such as Hotels etc., around Navi Mumbai Airport.DRespondent- M/s Metropolis Hotels was one of the bidders.

3. Before approval of the tender, technical qualifications of thebidders were scrutinized and approved by the CIDCO’s legal team on25.07.2008 in the following manner:

“Metropolis Hotels is a Partnership firm consisting ofEM/s Sun-n-Sand Hotel Pvt. Ltd. and Shishir Realty Pvt. Ltdhaving their share 30% each. A short question arises for thedetermination is whether Board Resolution of the partnershipfirm is required to be annexed with the offer.

It appears from the technical bid of M/s Metropolis HotelsFthat the said bid is signed by both the partners jointly. Section4 of the Indian Partnership Act 1932 defines ‘Partner’ and‘Partnership’ is the relation between persons who have agreedto share the profits of a business carried on by all or any ofthem acting for all. Persons who have entered into partnershipGwith one another are called individually “partners” andcollectively “a firm”, and the name under which their businessis carried on is called the “Firm Name”. Partnership is notcreated by status and arises from contract. In the IndianPartnership Act, 1932, there are no directors, and all thepartners are jointly and severally responsible for all the actsHof the firm.

In view of this Board Resolution is not required. Therefore,the remarks appearing on the scrutiny sheet at Sr. No. 19,requires to be ignored and technical offer should beaccepted.”

On 25.07.2008, the financial bids were opened, which stood asunder:

4. On 25.07.2008, M/s. Indian Hotels Company Ltd., who wereH2 in the bidding process, wrote to CIDCO, objecting to the eligibility ofthe highest bidder in the following manner:

“3. We are informed that the highest bidder is a partnershipfirm and has relied on the experience of one of this partnersto satisfy the eligibility norm. The same partner has also bidon its own. This amounts to multiple bidder with the sameexperience being concerned for more than one bid.”

On 04.08.2008, these objections were considered by the lawofficers of the CIDCO and subsequently rejected.

5. On 07.08.2008, the CIDCO issued a letter of allotment in favourof M/s. Metropolis Hotels. Being the highest bidder, M/s. MetropolisHotels was accordingly, allotted Plot No. 5, admeasuring about 47,000sq. mtrs., for construction of a five-star hotel near the proposed NaviMumbai Airport.

6. Thereafter, on 29.12.2009, M/s. Metropolis Hotels-Respondentno.1, by way of a letter to CIDCO, applied for change of user of 34,000sq. mtrs. of the said plot to commercial-cum-residential use. On11.02.2010, this request for change/expansion of user of Plot No.5 wasconsidered and subsequently permitted only for 23,000 sq. mtrs.

7. On 11.03.2010, M/s. Metropolis Hotels requested for subdivisionof the Plot No.5 into two, i.e. 24,000 sq. mtrs. for the five-star hotel and23,000 sq. mtrs. for the residential-cum-commercial plot. By way of a A

B

C

D

E

F

G

H

Aletter 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 requestedassignment of their rights in respect of the plot on which the residential-cum-commercial user was permitted, i.e. Plot No.5A. Assignment ofthis plot to M/s. Shishir Realty Private Ltd. was approved by CIDCO inBits letter dated 30.03.2010, wherein it referred to the said assignee asone of the partners in the original allotment.

8. On 30.03.2010, the CIDCO executed two separate lease deedsin respect of the two plots, i.e. Plot No. 5 and Plot No. 5A. M/s. ShishirRealty Private Ltd. took further steps for mortgaging their plot with theCpermission of the CIDCO and obtained loan for development of the saidplot for commercial-cum-residential user. Third-party rights were alsocreated.

9. As complaints were made regarding irregularities in allotmentof plots of land, change of user and deviation from the terms andDconditions of the tender, a preliminary enquiry was held by the PrincipalSecretary, Urban Development Department as per the directions of theState Government of Maharashtra. Based on such enquiry, the newlyappointed Vice-Chairman issued a show-cause notice dated 06.12.2010to M/s. Metropolis Hotels and M/s. Shishir Realty Private Ltd.E(respondents-lessees) as to why the lease deeds which were executedin their favour should not be cancelled on account of breach of tenderconditions by M/s. Metropolis Hotels. It may be relevant to noteobservations made in the show cause notice which inter alia read asunder:

F“13. Since the tenders were invited for grant of lease offive-star hotel plot, only bidders interested in development of5-star Hotel participated in the bidding process. Had theCorporation invited tenders with residential + commercial useof the plot, several bidders could have participated in thebidding process and the Corporation might have fetchedGhigher revenue. Due to change of user and sub-division ofthe plot contrary to the terms and conditions of invitation ofoffer, several eligible bidders were deprived and also causedfinancial loss to the public exchequer. Besides this, due tochange of user and sub-division of the plot, the basic objectHof development of 5-star hotel is frustrated.

THE VC & MD, CITY AND IND. DEVEL. CORP. OF MAHARASHTRALTD. v. SHISHIR REALTY PVT. LTD. [N. V. RAMANA, CJI.]

14. For the bench or benches (sic) of the terms and conditionsof tender and letter of allotment dated – 07.08.2008, you arehereby called upon to show cause as to why the Corporationshould not cancel or revoke the agreements concluded videLetter of Allotment dated 07.08.2008 and Agremeents to leasedated 30.03.2010, in respect of Plot No.5, admeasuring24,000 m[2] in favour of M/s. Metropolis Hotels and Plot No.5A,admeasuring 23,000 m[2] in favour of M/s. Shishir Realty Pvt.Ltd.”

10. Vide order dated 16.03.2011, the Vice Chairman, CIDCO,cancelled the lease deeds, pursuant to the enquiry. The issues underconsideration, as identified in the said order, are reproduced as under:

11. Pertaining to the first issue of the eligibility of M/s. MetropolisHotels to participate in the bidding process, the order held that Clause4(c) of the tender document obligated the bidders to have a registeredpartnership firm. It concluded that since M/s. Metropolis Hotels was notregistered, on the date of submission of the bid, they were ineligible forbidding. Accordingly, their offer was void ab initio. The second reasonprovided was that M/s. Sun-N-Sand Hotels, being partners in A

B

C

D

E

F

G

H

AM/s. Metropolis Hotels, could not have submitted a separate bid, whichalso vitiated the bid made by Metropolis Hotels.

12. On the aspect of whether sub-division of the plots and changeof land use were consistent with the terms and conditions of the tenderdocument and letter of allotment, the order observed that offers wereBinvited for five-star hotels and sub-division/change of use could not havebeen permitted as such changes were not conducive to public interestand were against express terms and conditions mentioned within theagreement.

13. On the third issue of whether transfer of part of the sub-Cdivided plot to Shishir Realty Pvt. Ltd was consistent with terms of thetender and letter of allotment or not, the order observed that the terms ofthe allotment letter read with the General Terms and Conditions clearlyshowed that the transferee should fulfil all eligibility criteria prescribedin the invitation of offer. As there was nothing on record to establish thatM/s. Shishir Realty Pvt. Ltd. had fulfilled such criteria, the transfer wasDheld to be in violation of such terms and conditions.

14. On the aspect of whether the change of user and sub-divisionof the plot adversely affected the object of development of a five-starhotel, the order noted that the change of user and sub-division of plotswere in contravention of the terms and conditions initially offered. DueEto such changes, the basic object of development of a five-star hotel inNavi Mumbai was frustrated.

15. On the aspect of whether allotment of the plot, change of landuse, and sub-division of plots was arbitrary, illegal, and unjustified, theorder noted that the deviations could be categorized as major deviationsFfrom the terms and conditions mentioned in both the tender documentsand letter of allotment. Such deviation frustrated the basic purpose ofdevelopment of a five-star hotel. Therefore, it was concluded that theaspect of promissory estoppel against the CIDCO would not be applicableas specific terms of the tender and letter of allotment were deviated.GFurther, such deviations were not in public interest. Accordingly, the twolease 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 theaforesaid order of the Vice Chairman, CIDCO, through two writ petitionsbeing Writ Petition No. 702 of 2011 and Writ Petition No. 5245 of 2011H

before the High Court of Judicature at Bombay. Separately, a PIL wasalso filed challenging the allotment of the plot in question, change of landuse, and sub-division of the said plot.

A

17. The High Court, vide impugned order dated 06.12.2013, whilequashing the aforesaid cancellation order passed by CIDCO, held thatthe change of land use and sub-division of the plot had taken place withdue authorization of the CIDCO. Further, it held that the CIDCO wasnot able to show any concrete violations which go to the root of thematter. Finally, the High Court held that, without producing any pressingneed on record, the CIDCO is precluded and estopped on the doctrineof promissory estoppel from canceling the allotment.

B

C

18. Aggrieved by the impugned judgment, the CIDCO and PILpetitioner- appellant in C.A. Nos. 3959-3961 of 2017 have filed separateappeals before this Court.

19. Mr. Rakesh Dwivedi, learned Sr. Counsel, appearing on behalfof the CIDCO, has argued that:

D

a)The High Court judgment cannot be sustained as the samewas delivered ignoring blatant violations and illegalitiescommitted during the tender process.

b)Primarily, the bid by M/s. Metropolis Hotels itself was illegalas it has only registered subsequent to the allotment, which isEa clear violation of clause 4(c) and 8(b) of the tenderdocument.

c)Moreover, subsequent to the award of the contract,M/s. Metropolis Hotels went beyond the tender conditionsand expanded the usage to residential-cum-commercial.Additionally consequent to change of usage, theM/s. Metropolis Hotels sub-divided the plot and executed afresh lease in favour of Shishir Realty Pvt. Ltd. The aforesaidacts were in breach of the original allotment letter.

F

d)This Court while concerned with distribution of State largesse,should ensure that no arbitrariness, favouritism has taken place.

G

e)The Respondents cannot claim any relief based on the doctrineof promissory estoppel as being a creature of equity, it mustyield when the equity so requires. Considering it would beinequitable to hold the Government to the promise made by it, H

Athe Court should not raise an equity in favour of the promiseeand enforce the promise against the Government.

f)It is well settled legal proposition that the private interest wouldalways yield place to the public interest. Considering, theirregularities committed by the respondents, it is expedient toBrevoke the allotment in favour of the Respondents especiallywhen no grave prejudice will be caused to the allottee.

20. Mr. Atmaram Nadkarni, learned Sr. Counsel, appearing onbehalf of the State of Maharashtra while supporting the submissionsmade by CIDCO, has argued that:C

a)This court, in a catena of judgments, has held that therepresentations made to the public by way of tender conditionsand policies cannot be changed arbitrarily after the allotment.

b)The rules of the game cannot be changed once the game isplayed.D21. Mr Harinder Toor, learned Counsel, appearing on behalf ofthe PIL petitioner-appellant in C.A. No. 3959-3961, has argued that:

a)The PIL petitioner/appellant is a social activist and is involvedin the business of construction services.

Eb)The change of land use is in violation of clause 15 of theletter of allotment, which mandated that the allotted land shallbe 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.

F22. Dr. Abhishek Manu Singhvi, learned Senior Counsel, appearingon behalf of Shishir Realty Pvt. Ltd., argues that:

a)M/s.Metropolis Hotels was a partnership firm and had appliedfor registration. When bid was made, they had declared theGsame to CIDCO. The enforcing committee received the bidbeing fully aware that the application for registration ofpartnership firm was pending before the registrar and decidedto go with their bid as it was Rs.23 crore higher than the nextbid.

H

b)Additionally, the enquiry that was conducted against the saidallocation was in complete abrogation of natural justice. Nonotice was issued to the respondents during the pendency ofthe enquiry. Even while accepting the report of the PrincipalSecretary, no hearing was given to the respondents.

c)Not only is CIDCO bound by the principles of estoppel, butthey have also failed to prove any losses attributable to therespondent.

d)CIDCO has only raised bald allegations of collusion withmanagement. Had there been any real apprehension ofcollusion or financial losses arising out of this transaction, theState would have taken criminal action/disciplinary actionsagainst the erring officials. However, CIDCO have failed toplace anything on record to prove the same.

23. Mr. Mukul Rohatgi, Learned Senior Counsel, appearing onbehalf of M/s. Metropolis Hotels argues that:

a)The purpose of construction of a five-star hotel has beenfrustrated considering the fact that the same was contingenton the coming up of Navi Mumbai Airport.

b)Without there being an airport, it would be commercially absurdto construct a five-star hotel in the middle of nowhere.

c)The bidding process was conducted in 2008, when there wasa huge recession both globally and in India. The tender hadattracted M/s. Metropolis Hotels because it was stated thatthe Navi Mumbai Airport would be built near the concernedplot, and the area would be declared a Special Economic Zone.However, the promises of the tender document were notfulfilled and hence, an application for change of user wasmade. The 1997 policy allows for a change of user and hence,there is no illegality.

d)There is no violation of any condition of the tender documentconcerning sub-division of plots.

e)Moreover, even after the allotment was made the respondentshave complied with the due procedure and have paid therequisite fees. After accepting the requisite charges to the A

B

C

D

E

F

G

H

210SUPREME COURT REPORTS

Atune of Rs. 321 crores, the cancellation of the allotment after13 years is not only highly inequitable but will also cause graveprejudice to the respondents.

f)He disputes the bona-fides of the PIL petitioner.

24. Heard learned counsels from both sides.B

25. Before we delve into analysis of the case, it is pertinent toexamine the role of Constitutional Courts in reviewing the tender process.The Constitution of India allows the government to enter into contractsand perform certain commercial activities. Due to increase in governmentbusiness, there is a requirement of this Court to uphold certain discretionCaccruing to the government and disallow certain conduct in light ofprevailing circumstances. Merely instilling an agency with discretion maynot be prohibited by the Constitution, rather it is unfettered use of suchdiscretion, that is prohibited; the Constitution frowns upon those decisionswhich are taken in gross abuse of law. English Courts have developedDmany legal standards for evaluating administrative decisions, one of thembeing enumerated in the case of Council of Civil Service Unions v.Minister for the Civil Service, [1985] AC 374, wherein Lord Diplockhas summarized the grounds of challenging such decisions under thebroad heads of illegality, irrationality, procedural impropriety and legitimateexpectation. Beyond these grounds, a recent development in the form ofEproportionality has further increased the scope of judicial review.

26. Being governed under “rule of law” every action of the Stateor its instrumentality while exercising its executive powers must met theaforesaid requirements. While recognising the existing principle offreedom to enter or not to enter into contracts by the state and itsFinstrumentalities, the manner, method and motive behind the aforesaiddecision can be subjected to judicial review on the touchstone of equality,fairness, proportionality and natural justice. The decision of the executivemust strike a balance with the alleged violation with that of the penaltyimposed.G27. This Court, in many of its orders reviewing tender conditions,

27. This Court, in many of its orders reviewing tender conditions,has vouched for providing sufficient discretion and independence toadministrative authorities so as to enable them to perform their duties inthe interest of the public. Further, the observation of judicial restraintwhile reviewing such contracts is a continuing trend which can be seen H

in a catena of cases.[1] The power of judicial review accorded toConstitutional Court of India and its jurisdiction is supervisory.

28. This court in the case of M/s Star Enterprises v. City andIndustrial Development Corporation of Maharashtra Ltd., (1990)3 SCC 280 reiterated the aforesaid concerns and stated the necessityof judicial review even with respect to the commercial transactionsundertaken by the State. This court held as follows:

“10. In recent times, judicial review of administrative action hasbecome expansive and is becoming wider day by day. Thetraditional limitations have been vanishing and the sphere of judicialscrutiny is being expanded. State activity too is becoming fastpervasive. As the State has descended into the commercialfield and giant public sector undertakings have grown up,the stake of the public exchequer is also large justifyinglarger social audit, judicial control and review by openingof the public gaze; these necessitate recording of reasonsfor executive actions including cases of rejection of highestoffers. That very often involves large stakes and availabilityof reasons for actions on the record assures credibility tothe action; disciplines public conduct and improves theculture of accountability. Looking for reasons in support ofsuch action provides an opportunity for an objective reviewin appropriate cases both by the administrative superior”and by the judicial process.

29. In this context, this Court in Tata Cellular v. Union of India,1994 (6) SCC 651, observed certain principles elucidated as under:

“94.The principles deducible from the above are:

(1) The modern trend points to judicial restraint inadministrative action.

(2) The court does not sit as a court of appeal but merelyreviews the manner in which the decision was made.

(3) The court does not have the expertise to correct theadministrative decision. If a review of the administrative 1 Municipal Corporation, Ujjain v. BVG India Ltd., (2018) 5 SCC 462

A

B

C

D

E

F

G

H

Adecision 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 tojudicial scrutiny because the invitation to tender is in the realmof contract. Normally speaking, the decision to accept theBtender or award the contract is reached by process ofnegotiations through several tiers. More often than not, suchdecisions are made qualitatively by experts.

(5) The Government must have freedom of contract. In otherwords, a fair play in the joints is a necessary concomitant forCan administrative body functioning in an administrativesphere or quasi-administrative sphere. However, the decisionmust not only be tested by the application of Wednesburyprinciple of reasonableness (including its other facts pointedout above) but must be free from arbitrariness not affected bybias or actuated by mala fides.

D

(6) Quashing decisions may impose heavy administrativeburden on the administration and lead to increased andunbudgeted expenditure.”

E

30. These principles acquire importance as the efficacy ofcommercial activities in the public sector increases greatly. It appearsthat public interest litigation has opened a large window to entertain anytender, regardless of scale, which are now sought to be challenged as amatter of routine. Such disruption could hardly have been the objectiveFof expanding the need of Constitutional Review. Close scrutiny of minutedetails, contrary to the view of the tendering authority, makes executionof contracts in the public sector a cumbersome exercise. Often, it is thecase that parties entertain the idea of a long-drawn-out litigation at thevery threshold itself. The purpose of imbibing the spirit of competition inGa process such as that of the bidding process, is lost in this meanderingexercise and delays suffered due to pending litigation. This causes greatdisadvantage to the government and public sector in general. This Court,in appropriate cases while interpreting the contract, can restrict the reviewmechanism by not inuring to the interpretation so provided by third partiesor parties competing for the tender, unless the impugned interpretation isH

shown to be gross abuse of law.[2] The object of judicial review cannot bethat in every contract where some parties lose out, a second opportunityis provided to such parties to pick holes so as to disqualify successfulparties, on grounds which even the party floating the tender find to bewithout merit. With this brief background on the standard of judicialreview, we may analyze the case at hand.

31. At the outset, the respondents-lessees have argued that entireprocess of cancellation of the tender stood vitiated as it was based onthe enquiry conducted by the Principal Secretary, Urban DevelopmentDepartment, without affording a chance to be heard.

32. It is borne from the records that, upon receiving the certaincomplaints, the State Government initiated enquiry against the allegedirregularities during the tender process. On 18.09.2010, the Shishir RealtyPrivate Ltd. received an order from the Navi Mumbai MunicipalCorporation directing them not to carry any further construction andstay the development.

33. On 03.11.2010, the enquiry committee submitted its report tothe State Government recommending the cancellation of tender. On19.11.2010, the State Government accepted the findings of the enquirycommittee and directed CIDCO, to implement the findings of the enquirycommittee.

34. Shishir Realty Private Ltd. has placed on record letter dated23.12.2010 addressed to the Urban Development Department andCIDCO, stating that he was shocked to see a newspaper report statingthat a committee appointed by the State Government has recommendedthe cancellation of the allotment done in their favour. The aggrievedRespondent challenged the aforesaid recommendation as it was passedwithout affording an opportunity of hearing them-the aggrieved party.

35. Subsequent to the aforesaid letter, on 28.12.2010, theRespondents-lessees received a show-cause notice dated back to06.12.2010. The respondents-lessees submitted their responses on30.12.2010, 13.01.2011 and on 19.02.2011. Finally hearing was given tothe respondent on 03.03.2011. Thereafter, finally on 16.03.2011, theCIDCO cancelled/revoked the letter of allotment and the subsequentpermissions. Vide the aforesaid order, the Manager (Town Services)was also directed to take over possession of the plots within 15 days.

2 B. S. N Joshi & sons Ltd. v. Nair Coal Services Ltd., (2006) 11 SCC 548

A

B

C

D

E

F

G

H

A36. The perusal of the materials produced on record shows thatthe initiation of the enquiry by the Principal Secretary, Urban DevelopmentDepartment was suo-motu, without any natural justice being providedfor the respondents-lessees. After arriving at a conclusion, a show-causenotice was issued by CIDCO to sanctify the enquiry. The afore-saidfact of post-decisional hearing just to sanctify the process of cancellationBis clearly evidenced in the order dated 16.03.2011, passed by the Vice-Chairman and Managing Director CIDCO, cancelling the tender in thefollowing terms:

“1. The Government of Maharashtra through the PrincipalSecretary, Urban Development Department conducted enquiryCinto the irregularities in allotments of plots, change of user anddeviation of the terms and conditions of the tender made by thethen Vice Chairman and Managing Director, CIDCO, during theperiod from Ist October, 2009 to 31[st] March, 2010. The PrincipalSecretary Urban Development Department conducted the enquiryDand submitted his report to the State Government on 03.11.2010.The change of user, sub-division and transfer of part of plotno. 5, Sector 46A, Nerul, to M/s Metropolis Hotels wasalso covered in the enquiry conducted by the PrincipalSecretary, Urban Development Department. The StateGovernment accepted the findings and recommendationsEof the enquiry committee and directed the ManagingDirector, CIDCO, vide letter dated 19.11.2010, toimplement the findings and recommendations of thePrincipal Secretary, Urban Development Department. ThePrincipal Secretary has recorded his findings about the Firregularities in acceptance of tender and breach of tender-conditions, change of user, subdivision of plot and furthertransfer of part of the plot and further recommendedcancellation of the tender process.

2. Although the State Government issued directions to cancelGthe entire tender process, it was felt necessary to re-examinethe entire issue for allotment of land …. by conducting an”enquiry and giving opportunity of hearing to the parties.

37. Such illegal procedure adopted, clearly vitiates the subsequentorder by the Vice-Chairman, due to the irregularity, which goes to theHroot of the matter. The conduct of the appellant authorities indicate that the enquiry was not conducted with an open mind. The pre-existingfindings of the Principal Secretary recommending the cancellation ofallocation has the potential to color the entire proceedings heldsubsequently just to meet the procedural requirements.

38. Natural justice is an important aspect while reviewing theadministrative orders. Providing effective natural justice to affectedparties, before a decision is taken, it is necessary to maintain rule of law.Natural justice is the sworn enemy of intolerant authority. Any attemptby authority to circumvent the requirement of providing effective hearingbefore reaching a conclusion, cannot pass the muster. Coming to thefacts herein, the post-decisional hearing given to the respondent-lesseeis 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 whenstatutory functionaries such as CIDCO render an order based on certaingrounds, its validity must be judged by the reasons so mentioned andcannot be supplemented by fresh reasons in the shape of an affidavit orotherwise.[3] To this extent, we agree with the submission of Dr. AbhishekManu Singhvi, that the scope of this Court is limited. Hence, we will onlyconsider the impugned order of CIDCO dated 16.03.2011 and thereasoning supplied therein.

40. At this juncture, it is pertinent to consider certain allegationsof violation raised by the appellant authorities. The first aspect for theconsideration of this Court is whether M/s. Metropolis Hotels Ltd. wasdisqualified from participating in the bidding process. The impugned orderdated 16.03.2011 of CIDCO provides two reasons: the first being thatM/s. Metropolis Hotels was not a registered partnership firm whileapplying for the tender process, and the second that one of the partnersof M/s. Metropolis Hotels, namely M/s. Sun-N-Sand Hotels Pvt. Ltd,had submitted a separate bid.

41. The perusal of the bid document clearly indicates that therespondent- M/s. Metropolis Hotels at the time of applying for the bidhad duly disclosed that the firm had already applied for registration andhad also forwarded the Registration Form and Partnership Deed alongwith the tender documents. Subsequently, on 16.01.2009 the Registrarof the firms issued the certificate of registration in favour of therespondent- M/s. Metropolis Hotels.

3 Mohinder Singh Gill v. Chief Election Commissioner, New Delhi, (1978) 1 SCC405.

A

BC

D

E

F

G

H

A42. Having considered the communication and legal opiniontendered before accepting the highest bid, CIDCO’s law officers didtheir due diligence, who opined that partnerships being creatures ofcontracts, the requirement of Board resolutions and other technicalobjections raised were not an essential condition. Therefore, at this stageit may not be equitable to review such issues in detail.B

A

43. Moreover, after accepting the lease premium ofRs.282,39,99,700/- and a transfer fee of Rs. 1,38,56,000/-, the appellantauthority cannot contend that the respondents-lessees lacked the eligibilityto contend in the tender. The respondents-lessees also pointed out that,being the highest bidder with a margin of Rs. 23 crores over the secondChighest bidder, the appellant authority did not go into the technicalitiesbehind the matter. Even, the High Court while passing the impugnedjudgment has commented that the appellant was aware about the pendingregistration, and even assented to the same as no objections were raisedwhile assessing the technical bids.D44. The second objection which the CIDCO in its order notes asunder:

“Apart from this, M/s. Sun-N-Sand Hotels Pvt. Ltd., one ofpartners of M/s. Metropolis Hotels also submitted separateoffer in the bidding process. Such multiple offers wereEsubmitted by M/s. Sun-N-Sand Hotels Pvt. Ltd. with a view toget the land allotted. On this count also, the offer ofM/s. Metropolis Hotels stand vitiated, and the concludedagreement is liable to be terminated.”

45. In our considered opinion, the aforesaid paragraph does notFindicate sufficient reasons. There is no reason provided as to whatprovision of law such bids violate. Further, there is no concrete allegationor adjudication on the suggested cartelization. There is no reasoningconsidered as to why such a practice was harmful to public interest. Wemay note that such considerations are important elements of partyGautonomy and commercial freedoms while framing the contract, whichis not within the purview of judicial review. As there is no such law orcontract provision which bars such conduct, the considerations undertakenby the order of CIDCO are extraneous and the same cannot be accepted.

46. The second aspect considered by the appellant (CIDCO)was the change of land use. According to CIDCO, such change of landH

use was not permitted under the contract. Therefore, it was argued tobe not valid. On the contrary, the respondents have argued that not onlyCIDCO was authorized to change the usage but also the Clause 19 ofthe allotment letter provided that development of the plot was governedunder the General Development Control Regulations for Navi Mumbaiwhich also had similar provisions. Moreover, the respondents-lesseescontended that, this was not the first instance of change of usage. Tosupport the said averment, the respondents-lessees placed strong relianceupon the decision of this Court in the identical matter of CIDCOMaharashtra Ltd. v. M/s. Shree Ambica Developers, in C.A.No.7581 of 2012. This Court held therein:

“We have as a measure of abundant caution examined the relevantofficial record which was produced before us by Mr. Bhasme,counsel appearing for the appellant. While the application forchange may have been filed only a few days after the auctionwas conducted, the same was processed at different levelsgiving an opportunity to officials dealing with specialisedfields to record their opinion on the permissibility of theproposed change. From a perusal of the notings recordedon the file, we are satisfied that the change was found to bepermissible in – accordance with General DevelopmentControl Regulations. We must say to the credit of M/s Lalitand Bhasme that they did not question the correctness of theviews recorded by the officers, who examined the permissibilityof a change as prayed for by the company. It was not theircontention that the change was against the development plan thatcould have made the same untenable in law, nor was there anysuggestion that any one of the functionaries associated with thedecision making process had played a fraud on the statute or theexercise of power vested in him. It is true that the officialrecord produced before us, does not reveal that thequestion of financial implications, if any, involved in thechange which could and perhaps ought to have beenexamined was examined by any one at any stage. But solong as the appellant did not make absence of such aconsideration a ground for cancellation of change in use,we cannot help leave alone permit the Corporation to addthe same as a ground for supporting the order recalling –the grant of the change. The order passed by the Corporation/

A

B

C

D

E

F

G

H

218SUPREME COURT REPORTS

[2021] 13 S.C.R.

Aits Managing Director cancelling the earlier change was basedentirely on the alleged absence of authority vested in it to directsuch a change.”

47. Upon the perusal of the above cited decision, we are of theBopinion that the aforesaid opinion is squarely applicable in the presentcase. Although the argument made by the CIDCO is attractive at theoutset, a deeper analysis makes it clear that such argument is devoid ofmerit. In this context, it may be necessary to note certain clauses containedin the Tender Document and Allotment Letter:

C“4. Who is eligible to offer to acquire plot (a)A person competent to contract under the IndianContract Act is eligible to make offer to acquire plot.

(b) A company incorporated under the Indian companiesAct, 1956 is eligible to make offer to acquire plot.

D

(c) A partnership firm registered under Indian PartnershipAct, 1932 is eligible to offer to acquire plot. Offer shallbe signed by all partners and enclosed with a truecertified copies of Deed of Partnership and certificateof registration.E

(d) A public trust registered under Public Trust Act, 1950and also registered under Society Registration Act, 1860is eligible to offer to acquire plot.

(e) A Co-operative society registered under theFMaharashtra Co-operative Societies Act, 1960. TheOffer form must be signed by the Chairman or the Hon.Secretary of the society without which it will be heldinvalid. The authorization of general body must beenclosed with the offer.

G18. General

CIDCO reserves the rights to amend, revoke or modifythe above conditions at its discretion as well as to rejectany or all offers without assigning any reasons.

…

H

General Terms and Conditions prescribed for disposalof plots by open offer.

….

….

15. Application of General Development ControlRegulation for Navi Mumbai The development of land will be governed by theprevailing provision contained in the GeneralDevelopment Control Regulation of Navi Mumbai. Anymodification to the said Regulation and in particular tothe Floor Space Index and change of use of the landshall not be made lessee (sic). If he so desires, mayapply for the application of the modified regulation ofthe General Development Control Regulation to CIDCO.The Corporation may at its sole discretion, apply themodification of such regulation on payment of (1)Development charges (2) Additional premium and (3)other charges if any as may be decided by theCorporation from time to time. (…)

16. Transfer of assignment of rights

The intending lease can transfer or assign his rights,interests of benefits which may accrue to him from theAgreement with the prior written permission of theCorporation and on payment of such transfer chargesas may be prescribed by the Corporation from time totime. Such permission can however be granted only afterthe agreed lease premium and any other amount requiredhas been paid in full and after execution of Agreementto lease. In case of transfer of plot, the Transfereeshould fulfill all eligibility conditions prescribed incondition 4 of the invitation of offer.”

Conditions provided in the Allotment letter:

19. Application of General Development ControlRegulation for Navi Mumbai A

B

C

D

E

F

G

H

AThe development of land will be governed by theprevailing provisions contained in the GeneralDevelopment Control Regulation of Navi Mumbai. Anymodification to the said regulation and in particular tothe Floor Space index and charge of use of the landshall not be made automatically applicable but theBintending lessee, if you so desire, may apply for theapplication of the modified regulation of the GeneralDevelopment Control.

A

CClause 15 of the tender document and the corresponding Condition19 of the allotment letter, allows for such modification. Althoughthe language used in the aforesaid clause is contradictory, thisCourt needs to interpret the same to harmonize and eliminate anyabsurdity.[4] If the interpretation supplied by CIDCO, by readingClause 15 (m) and (n) of allotment letter with Clause 15 of theDtender document in isolation, is accepted, then the phrase ‘If heso desires, may apply for the application of the modifiedregulation of the General Development Control Regulationto CIDCO’, as occurring under Clause 15 of the tender document,is rendered redundant. In this context, the aforesaid clause needsEto be interpreted to mean that, ‘lessee cannot apply for change ofland use as a matter of right, rather, CIDCO, on its discretioncould grant such ‘change in land use’ on satisfaction based onmaterial considerations’.

48. The contradictory contractual clauses, seen within variousFdocuments issued by CIDCO, have led to this seemingly unending dispute,which required more than a decade to be settled. This only emphasizesthe importance of due diligence and careful drafting, which could haveavoided such type of litigation in the first place.

49. In the same breath, the CIDCO has fairly conceded that theGpower of change of land of use does exist with CIDCO and has, onmultiple occasions, been used to change the land use pattern. Mostimportantly, in the present case, after accepting the change of user fee,the authorities cannot post-facto question the same.

4 Ramana Dayaram Shetty v. International Airport Authority of India, AIR 1979 SCH1628.

50. In this case, the plots fell in the zone of commercial-cum-residential area, and through the contract, this condition was earmarkedfor construction of a five-star hotel. As seen from the records, therespondents-lessees sought dilution of this condition basing on the factthat the airport, which was supposed to come up near the area had notmaterialized; similarly situated hotels were loss-making endeavors; anda general economic slump. Further, the order of the CIDCO dated11.02.2010 clearly indicates the reasons as to the change in land use inview of prevailing circumstances in the following manner:

“The plot was aid (sic) in August 2008 for development of aFive Star Hotel along with the allied activities and it receiveda price of Rs.60085.10 per sq. mtr. The plot was initially with1.5 FSI which was increasable to FSI 2.0 as per GovernmentPolicy. For the period prior and after the date of saleinstances of sale of plots by tender for various usages arekeep as C/351 to C/377. It is well know fact that the realestate markets in the later part of the year 2008 literallycrashed and the downward trend of 25% to 30% was noticedacross various real estate markets and segments. As a resultof this, the Board had also decided to bring down the pricesof NRI Phase-II Pat-II by 10% as well as rescheduling theinstallments. Also the DPC rates were brought down to 10%.The sale instances on the file show that the prices of residentialand commercial lands during that period were comparableor some cases lower than the plot in question. But nonethelessthe fact of depressed market cannot be ignored. In cases ofsome of the plots which are sold at higher rates, the Biddersdid not pay the first installment and therefore their EMD’swere forfeited and in some cases on their request referenceshave been made to the government for extension of time forpayment.”

From the aforesaid reasoning, CIDCO has not been able to showas to how the its own order was illegal or arbitrary. Moreover, they havenot been able to identify whether the consideration taken by CIDCO atthat time was deficient. The prevailing circumstances and changes inthe factual conditions need to be appropriately considered. In ourconsidered opinion, it may be noted that delay in construction of Navi-Mumbai airport, economic slump and loss-making endeavors by similarly AB

C

D

E

F

G

H

Asituated hotels are ‘material considerations’ and the order has appropriatelytaken the same into account.

51. The last submission on this aspect which the learned seniorcounsel for the CIDCO, Shri Rakesh Dwivedi, takes is that the relaxationof land use was made under the policy of 1997 which has been substitutedBby a new policy in 2004. However, such submission is patently wrong,considering the fact that the letter dated 11.02.2010 specifically alludesto the expanded policy of 2004 whereby additional categories of landuse were added. It is mentioned in the letter that the policy of the CIDCOwas not to impose any limit on the user of an area out of allotted areawhich can be converted. In light of the aforesaid discussion, the changeCof land use from five-star hotel to partly residential-cum-commercialpurpose cannot be said to be illegal or arbitrary.

52. The third aspect which needs to be considered is the legalityof sub-division of plots and subsequent transfer of rights. It has beencontended that the terms of the tender and letter of allotment do notDallow such transfer. However, on perusal of the aforementioned Clause16 of the General Terms and Conditions and the corresponding Condition21 of the allotment letter, it is clearly revealed that the allottee waspermitted to transfer or assign his rights, interests or benefits with priorwritten permission of the Corporation and on payment of such transferEcharges as may be prescribed by the Corporation. Both the clause andthe condition have further stipulated that such permission could be grantedonly after the agreed lease premium has been paid in full and afterexecution of agreement to lease. In the present case, agreed leasepremium was paid in full. However, agreement to lease was made onthe very next day, i.e. on 30.03.2010. In our view, merely because theFagreement to lease was executed on the very next day, the assignmentand transfer would not be invalidated. Such breach cannot in itself betermed as a fundamental to annul the tender, especially after receivingthe lease amount, CIDCO cannot question the subsequent transfer. Wecan only state that such clause can be construed as a warranty aloneGrather than a condition, in light of the circumstances. The CIDCO, beinga public body, had a duty to act fairly. Having acquiescence of the factsand allowing such transfer, they ought not to have taken such a hyper-technical view on contractual interpretation. In light of the aforesaidreasoning, we do not find any substantial reason sought to be adducedby the CIDCO to differ from the High Court.H

53. Ultimately, we need to consider whether there was any illegalityor unfairness in the aforesaid transaction. Learned senior counselrepresenting the appellants have submitted that allowing subdivision ofplots with change in land use, had caused substantive loss to the Statelargesse, as many people would have shown a proclivity to buy land withdifferent land use. On the contrary, the learned senior counsel representingthe Respondents-lessees have stated that the allotment, change in landuse and transfer have taken place in accordance with law. There is nosubstantial deviation as sought to be projected by the appellants herein.The appellants herein have sought to invoke the doctrine of promissoryestoppel to argue that the CIDCO could not have walked out of thebargain, merely because of the possibility of larger profits. It is pertinentto note that, the CIDCO has failed to prove any losses suffered.

54. When a contract is being evaluated, the mere possibility ofmore money in the public coffers, does not in itself serve public interest.A blanket claim by the State claiming loss of public money cannot beused to forgo contractual obligations, especially when it is not based onany evidence or examination. The larger public interest of upholdingcontracts and the fairness of public authorities is also in play. Courtsneed to have a broader understanding of public interest, while reviewingsuch contracts.

55. In Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, itwas held as under:

“22…The tenderer or contractor with a grievance can alwaysseek damages in a civil court. Attempts by unsuccessfultenderers with imaginary grievances, wounded pride andbusiness rivalry, to make mountains out of molehills of sometechnical/procedural violation or some prejudice to self, andpersuade courts to interfere by exercising power of judicialreview, should be resisted. Such interferences, either interimor final, may hold up public works for years, or delay relief andsuccour to thousands and millions and may increase the projectcost manifold.

56. Similarly, this Court in the case of Andhra Pradesh DairyDevelopment Corporation Federation v. B. Narasimha Reddy, (2011)9 SCC 286 held as under:

A

B

C

D

E

F

G

H

A“40. In the matter of the Government of a State, thesucceeding Government is duty-bound to continue and carry onthe unfinished job of the previous Government, for the reason thatthe action is that of the “State”, within the meaning of Article 12of the Constitution, which continues to subsist and therefore, it isnot required that the new Government can plead contrary to theBState action taken by the previous Government in respect of aparticular subject. The State, being a continuing body can bestopped from changing its stand in a given case, but whereafter holding enquiry it came to the conclusion that actionwas not in conformity with law, the doctrine of estoppelCwould not apply. Thus, unless the act done by the previousGovernment is found to be contrary to the statutoryprovisions, unreasonable or against policy, the State shouldnot change its stand merely because the other political partyhas come into power.“Political agenda of an individual or apolitical party should not be subversive of rule of law.” TheDGovernment has to rise above the nexus of vested interest andnepotism, etc. as the principles of governance have to be testedon the touchstone of justice, equity and fair play.”

E57. In the present case, it was argued by the respondents thatwith the change in the executive head in CIDCO, enquiry was initiatedagainst the allotment made in favour of the respondent- M/s. MetropolisHotel during the tenure of the earlier executive head. Even the inquiry,that was conducted against the respondents-lessees stood vitiated as noproper notice or hearing was given to them before passing the impugnedForder. Additionally, from the above analysis it clear that the change ofusage and the subsequent division was well-within the statutory limitations.Therefore, the earlier undertakings taken by the appellant-authoritiescannot be set aside with the change of person in power, without anyrhyme or reason. After all one cannot change the rules of the gameGonce it has started.

58. From the contradictory submissions asserted before this Courtand the concessions given regarding practice of CIDCO to allow changein land use in other cases, clearly points to a ‘regime revenge’. Suchconclusion reached herein is further buttressed by the fact that no inquiryHor disciplinary proceedings were initiated against the earlier Vice- Chairman, whose orders have been annulled. Such phenomenon is clearlydetrimental to the constitutional values and rule of law.

59. As the last leg of the submission, the respondents-lessees haveclaimed that considering they have acted upon the directions of theappellant authority and have duly paid the requisite amounts to the tuneof Rs. 321.32 crores, CIDCO is bound by the doctrine of promissoryestoppel. On the contrary, principles of estoppel do not apply if enforcingthe promise would lead to the prejudice of public interest.

60. Before we delve into the aforesaid arguments, it is imperativefor us to go to have a look at certain decisions of this Court. This Courtin the case of Motilal Padampat Sugar Mills Co. Ltd. v. State ofUttar Pradesh, (1979) 2 SCC 409 laid down the necessity of thegovernment being bound by the principles of promissory estoppel in thefollowing words:

“24. … The law may, therefore, now be taken to be settledas a result of this decision, that where the Government makesa promise knowing or intending that it would be acted onby the promisee and, in fact, the promisee, acting in relianceon it, alters his position, the Government would be heldbound by the promise and the promise would be enforceableagainst the Government at the instance of the promisee,notwithstanding that there is no consideration for thepromise and the promise is not recorded in the form of aformal contract as required by Article 299 of theConstitution. … It is indeed difficult to see on what principlecan a Government, committed to the rule of law, claim immunityfrom the doctrine of promissory estoppel…It was laid down bythis Court that the Government cannot claim to be immunefrom the applicability of the rule of promissory estoppeland repudiate a promise made by it on the ground that suchpromise may fetter its future executive action. If theGovernment does not want its freedom of executive actionto be hampered or restricted, the Government need notmake a promise knowing or intending that it would be actedon by the promisee and the promisee would alter hisposition relying upon it. But if the Government makes sucha promise and the promisee acts in reliance upon it andalters his position, there is no reason why the Government AB

C

D

E

F

G

H

A

Ashould not be compelled to make good such promise likeany other private individual.The law cannot acquire legitimacyand gain social acceptance unless it accords with the moral valuesof the society and the constant endeavour of the Courts and thelegislature, must, therefore, be to close the gap between law andmorality and bring about as near an approximation between theBtwo as possible. The doctrine of promissory estoppel is a significantjudicial contribution in that direction.But it is necessary to pointout that since the doctrine of promissory estoppel is anequitable doctrine, it must yield when the equity sorequires. If it can be shown by the Government that havingCregard to the facts as they have transpired, it would beinequitable to hold the Government to the promise madeby it, the Court would not raise an equity in favour of thepromisee and enforce the promise against the Government.The doctrine of promissory estoppel would be displaced in such acase because, on the facts, equity would not require that theDGovernment should be held bound by the promise made by it.When the Government is able to show that in view of the facts ashave transpired since the making of the promise, public interestwould be prejudiced if the Government were required to carryout the promise, the Court would have to balance the public interestEin the Government carrying out a promise made to a citizen whichhas induced the citizen to act upon it and alter his position and thepublic interest likely to suffer if the promise were required to becarried out by the Government and determine which way the equitylies.….The burden would be upon the Government to showthat the public interest in the Government acting otherwiseFthan in accordance with the promise is so overwhelmingthat it would be inequitable to hold the Government boundby the promise and the Court would insist on a highly”rigorous standard of proof in the discharge of this burden.

G

In the aforesaid case, this Court held that it would not be enoughfor the Government to merely state that public interest requires that theGovernment should not be compelled to carry out the promise. It isimperative that the Government when seeking exoneration from liabilityof enforcing contract, must satisfy the Court as to how public interest H

overrides the necessity of enforcing the contract. The aforesaid opinionhas been reiterated in the case Union of India v. Godfrey Philips IndiaLtd., (1985) 4 SCC 369 :

“12.There can therefore be no doubt that the doctrine ofpromissory estoppel is applicable against the Government in theexercise of its governmental, public or executive functions andthe doctrine of executive necessity or freedom of future executiveaction cannot be invoked to defeat the applicability of the doctrineof promissory estoppel. …

13. Of course we must make it clear, and that is also laid down inMotilal Sugar Mills case[(1979) 2 SCC 409 : 1979 SCC (Tax)144 : (1979) 2 SCR 641] that there can be no promissory estoppelagainst the Legislature in the exercise of its legislative functionsnor can the Government or public authority be debarred bypromissory estoppel from enforcing a statutory prohibition. It isequally true that promissory estoppel cannot be used tocompel the Government or a public authority to carry out arepresentation or promise which is contrary to law or whichwas outside the authority or, power of the officer of theGovernment or of the public authority to make. We mayalso point out that the doctrine of promissory estoppel beingan equitable doctrine, it must yield when the equity sorequires; if it can be shown by the Government or publicauthority that having regard to the facts as they havetranspired, it would be inequitable to hold the Governmentor public authority to the promise or representation madeby it, the Court would not raise an equity in favour of theperson to whom the promise or representation is made andenforce the promise or representation against theGovernment or public authority.The doctrine of promissoryestoppel would be displaced in such a case, because on the facts,equity would not require that the Government or public authorityshould be held bound by the promise or representation made byit.”

61. Therefore, although the appellants are right in claiming thatGovernment cannot be compelled to perform its undertaking, but equity A

B

C

D

E

F

G

H

Ademands that the Government must place on record sufficient materialon record to claim such exemption. The aforesaid opinion was affirmedby this Court in the case of Vasantkumar Radhakisan Vora (Dead) byHis LRs. v. Board of Trustees of the Port of Bombay, (1991) 1 SCC761. The court held therein:

B“20. When it seeks to relieve itself from its applicationthe government or the public authority are bound to placebefore the court the material, the circumstances or groundson which it seeks to resile from the promise made orobligation undertaken by insistence of enforcing thepromise, how the public interest would be jeopardised asCagainst the private interest. It is well settled legal propositionthat the private interest would always yield place to the publicinterest.”

D62. The learned senior counsel, Mr. Rakesh Dwivedi, has soughtto argue that promises made to the respondents-lessees are contradictedby the representation given to the general public, that the land was beingallotted for construction of a 5-star Hotel. He has sought to create anexception of public interest as a limit to promissory estoppel.

E63. As we have noted earlier, there is no substantial violationportrayed by the appellants herein with respect to allotment of thescheduled land. Further, the tender documents, as analyzed above, makeit clear that the CIDCO had the power to change the land use, sub-divide and transfer the plots and accordingly, has been carried out interms of the same. In this context, we may only observe that ‘good faithFstandards’ applicable in Government contracts, serve an importantpurpose in reinforcing the ‘reliance interest’ in contracts.

64. Even, the High Court while passing the impugned judgmenthas correctly held that respondents-lessees have acted pursuant to thepermission granted by CIDCO. Moreover, after getting theGcommencement certificate and other necessary clearances, therespondents-lessees borrowed a substantial sum of money from otherfinancial institutions for the development of the plot. However, due tothe ongoing dispute, no development could take place for the past decade.

65. It is admitted as per record that the respondent- M/s. MetropolisHHotel was the highest bidder. Moreover, the appellants failed to bring anything on record to prove that the state exchequer has suffered lossespursuant to the said allotment. Nothing has been produced on record,the public interest that will be prejudiced if the respondents-lessees areallowed to go ahead with the said project. On the contrary, therespondents-lessees acting in furtherance of the assurances given bythe authorities, obtained huge financial assistance. Equity demands thatwhen the State failed to produce an iota of evidence of either financialloss or any other public interest that has been affected, it should becompelled to fulfill its promises. In fact, it is respondents-lessees whoshall be gravely prejudiced if the order of cancellation is upheld by thisCourt after investing a significant amount and facing prolonged litigation.

66. Lastly, the PIL petitioner-Appellant in C.A Nos. 3959-3961 of2017 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 lightof his involvement in the business of construction service. Moreover, thetone and tenor of the notice dated 12.01.2009, issued by the PIL Petitionerto the CIDCO, threatening the concerned officers with criminalprosecution under Sections 405, 406, 420 read with Section 120(b) ofIPC, inter alia, on the ground of allowing partnership firm, which was inthe process of registration, to bid, needs to be viewed with some suspicion.In fact, the non-prosecution of the erring officials for the allegedmismanagement and irregularities is quite telling.

67. Before we state the conclusions, this Court would like toreiterate certain well-established tenets of law pertaining to Governmentcontracts. When we speak of Government contracts, constitutional factorsare also in play. Governmental bodies being public authorities are expectedto uphold fairness, equality and rule of law even while dealing withcontractual matters. It is a settled principle that right to equality underArticle 14 abhors arbitrariness. Public authorities have to ensure that nobias, favouritism or arbitrariness are shown during the bidding process.A transparent bidding process is much favoured by this Court to ensurethat constitutional requirements are satisfied.

68. Fairness and the good faith standard ingrained in the contractsentered into by public authorities mandates such public authorities toconduct themselves in a non-arbitrary manner during the performanceof their contractual obligations.

69. The constitutional guarantee against arbitrariness as providedunder Article 14, demands the State to act in a fair and reasonable manner AB

C

D

E

F

G

H

Aunless public interest demands otherwise. However, the degree ofcompromise of any private legitimate interest must correspondproportionately to the public interest, so claimed.

70. At this juncture, it is pertinent to remember that, by merelyusing grounds of public interest or loss to the treasury, the successorBpublic authority cannot undo the work undertaken by the previousauthority. Such a claim must be proven using material facts, evidenceand figures. If it were otherwise, then there will remain no sanctity inthe words and undertaking of the Government. Businessmen will behesitant to enter Government contract or make any investment infurtherance of the same. Such a practice is counter-productive to theCeconomy and the business environment in general.

71. From a consideration of the aforesaid facts and circumstances,it is clear that there is an element of abuse of bureaucratic power behindsubsequent change in the tender allotment. After conducting a tenderprocess and receiving money, the Government backtracked which led toDthis present prolonged litigation. The impugned order of CIDCO, interalia, annulling the allotment on hyper-technical grounds cannot besustained for being contrary to the doctrine of fairness. The reasonsstated in the aforesaid order are perverse and per-se based on extraneousconsiderations. As analyzed above, we are not able to identify anyEsubstantive violation of law or tender conditions, which mandate annullingthe allotment and subsequent arrangements, thereby proving the conductof the appellant authority to be disproportionate.

72. In light of the above discussion, we find no merit in the appealof the appellants herein. Accordingly, these civil appeals are dismissedwith costs.F

73. Pending applications, if any, stand disposed of.

Nidhi Jain

Appeals dismissed.

G

H