POWAI PANCHSHEEL CO-OP HSG. SOCIETY & ANR. versus MAHARASHTRA HOUSING AREA DEVELOPMENT AUTHORITY (MHADA) & ORS. on 12 October 2018

[2018] 13 S.C.R. 999

POWAI PANCHSHEEL CO-OP HSG. SOCIETY & ANR.

v.

MAHARASHTRA HOUSING AREA DEVELOPMENTAUTHORITY (MHADA) & ORS.

(Civil Appeal No. 7608 of 2009)

OCTOBER 12, 2018

[ABHAY MANOHAR SAPRE AND S. ABDUL NAZEER, JJ.]

Public allotment: State largesse – Disposal of, amongst thecitizens – On facts, State Housing Board, by a resolution acceptedthe offers of the three societies for purchase of flats of the Project,however excluded appellant No.1’s offer – Justification of – Held:Government, is not and should not be as free as an individual inselecting the recipients for its largesse – Government would besubject to restraints, in its position in a democratic society – In viewthereof, the Board was not justified in considering only the offersmade by the three societies without considering appellant No.1’soffer on its merit – Board was under a legal obligation to considerall the four offers (appellant No.1 and three societies) with a viewto decide as to which one out of these was the best one for itsacceptance – Exclusion of appellant No.1’s offer and keepingappellant no.1 out from the zone of consideration by the Board inits meetings and only confining the consideration of the offers madeby the three societies vitiates the entire decision of the Board –Reason given by the Board for non-consideration of appellantNo.1’s offer that appellant No.1’s letter was not an offer, thus, wasnot considered, had no basis – Resolution of the Board as regardsits decision for sale/disposal of flats of the Project in favour ofthree societies is quashed.

Allowing the appeal, the Court

HELD: 1.1 The Government, is not and should not be asfree as an individual in selecting the recipients for its largesse.Whatever its activity, the Government is still the Governmentand will be subject to restraints, in its position in a democraticsociety. A democratic Government cannot lay down arbitrary andcapricious standards for the choice of persons with whom aloneit will deal. The Board was not justified in considering only the

A

B

CDE

F

G

H

Aoffers made by the three societies without considering appellantNo.1’s offer on its merit. The Board was under a legal obligationto consider also appellant No.1’s offer which appellant No.1 hadmade to the Board through M/s. K Constructions for purchaseof the flats of the Project along with the other offers made by thethree societies in their meetings. [Para 24][1009-G]B

R. D. Shetty v. International Airport Authority (1979) 3

SCC 497 – relied on.

1.2 M/s. K Constructions was the authorized agentappointed by the Board itself for sale and disposal of the flats ofCthe Project. M/s. K Constructions on receipt of appellant No.1’soffer rightly forwarded it to the Board on the same date for itsconsideration. The appellant’s offer was, therefore, very muchavailable to the Board for its consideration prior to the meetingsheld on 14.05.2003. In other words, the date on which the Boardwas considering the offers of the three societies in its meetingDthe offer of appellant No.1 was with the Board for its consideration.The very fact that M/s K Constructions entertained appellantNo.1’s offer and forwarded it to the Board was indicative of thefact that offer to purchase the flats of the Project could be madeby any party either to the Board or to M/s. K Constructions andEhad to be considered as being a valid offer made to the Boardonly. Reading of appellant No.1’s letter to M/s. K Constructionswould clearly indicate that it was essentially an offer made byappellant No.1 to the Board for purchase of 110 flats for Rs.17crores. In other words, it could not be treated as letter forsoliciting some information from the Board as contended by theFBoard for its consideration. Keeping in view these factors, theBoard was under a legal obligation to consider all the four offers(appellant No.1 and the three societies) in their meetings heldon 10/14.05.2003 with a view to decide as to which one out of thefour offers was the best one for its acceptance. Exclusion ofGappellant No.1’s offer dated 03.03.2003 and keeping appellantno.1 out from the zone of consideration by the Board in itsmeetings held on 10/14.05.2003 and only confining theconsideration of the offers made by the three societiesvitiates the entire decision of the Board taken on 10/14.05.2003.[Para 25- 29][1009-G-H; 1010-A-F]H

1.3 Appellant No.1 had a legitimate right and so theexpectation that it would get equal treatment from the Boardlike the other three societies because all four were similarlysituated while considering the issue of sale of flats of PowaiProject. Indeed, there was no valid reason for the Board toexclude appellant No.1’s case/offer from the zone ofconsideration. The reason given by the Board for non-consideration of appellant No.1’s case/offer namely that appellantNo.1’s letter dated 03.03.2003 was not an offer and, therefore, itwas not considered, had no basis for three reasons.[Para 31][1011-A]

1.4 The so-called reason ought to have been deliberatedand reduced in writing by the Board in its Minutes of Meetingsheld on 10/14.05.2003. It was, however, not done. The Boardhad no right to disclose the reason for the first time in the HighCourt. It was not legally permissible. The reason given for itsnon-consideration also had no basis because the appellant No.1’sletter dated 03.03.2003 was in fact an offer to purchase the flatsquoting therein the price for purchase and, therefore, it wascapable of being considered on its merits treating it as an offer topurchase the flats along with the offers of the three societies inthe meetings held by the Board on 10/14.05.2003. In view thereof,the decision to sale/dispose of the flats of the Project taken bythe Board in its meetings held on 10/14.05.2003 is vitiated asbeing unreasonable, arbitrary and violative of principles enshrinedin Article 14 of the Constitution of India. It is not legally sustainableand has to be, therefore, set aside. The writ petition filed by theappellants is allowed. The impugned Resolution of therespondent-Board insofar as it relates to the decision taken bythe Board for sale/disposal of flats of the Project in favour of thethree societies is concerned, the same is hereby quashed byissuance of writ of certiorari. [Paras 32-36][1011-B-G]

V. Punnan Thomas v. State of Kerala AIR 1969 Ker 81

– referred to.

AB

C

D

E

F

G

H

ACIVIL APPELLATE JURISDICTION: Civil Appeal No. 7608of 2009

From the Judgment and Order dated 26.03.2008 of the HighCourt of Judicature at Bombay in Writ Petition No. 2017 of 2003.

Shekhar Naphade, Sr. Adv., Chinmoy Khaladkar, Abhikalp PratapSingh, Siddharth Dharmadhikari, Vishnu Shankar Jain, K. V. Sreekumar,Advs. for the appellants.

B

Nitin S. Tambwekar, B. S. Sai, K. Rajeev, Umesh Mishra, SanjayJain, Kuldeep S. Parihar, H. S. Parihar, Chirag M. Shroff, Ms. PriyaHingorani, Kripa Shankar Prasad, Chandra Bhushan Prasad, Advs.Cfor the respondents.

The Judgment of the Court was delivered by ABHAY MANOHAR SAPRE, J. 1. This appeal is directedagainst the final judgment and order dated 26.03.2008 passed by theDHigh Court of Bombay in Writ Petition No.2017 of 2003 whereby theHigh Court dismissed the Writ Petition filed by the appellants.

2. In order to appreciate the issues involved in this appeal, it isnecessary to set out the facts in detail hereinbelow.

3. The appellants herein were the writ petitioners whereas theErespondents herein were the respondents in the writ petition out of whichthis appeal arises.

4. Respondent no.1 is a statutory authority created under theMaharashtra Housing & Area Development Authority Act, 1976 (forshort called “MHADA Act”). It is known as Maharashtra Housing andFArea Development Board (for short “Board”). One of the objects of theBoard is to make housing schemes for the benefit of different sectionsof the people and provide them the houses at reasonable costs. TheBoard is, therefore, a State within the meaning of Article 12 of theConstitution of India.

5. On 26.6.1995, the Board issued an advertisement for sale of1924 flats (1673 non-deluxe and 251 deluxe) at the rate of Rs.2,995/-per square feet at Powai (Mumbai)-called (Powai Project). To executeand supervise this project, the Board appointed M/s. KamathConstructions & Estate Consultants (as their sole selling/commissionagent) [for short hereinafter called “M/s Kamath Constructions”)].

G

H

6. For some reasons, only 123 flats could be sold, out of 1924, bythe Board. The Board, therefore, from 1995 to 1999 issued sevenadvertisements for sale of remaining flats, pursuant to which 1597 flats(which included sale of 123 flats) could be sold leaving still 327 flatsunsold. The Board, therefore, decided to reduce the price from Rs.2995/- per sq. feet to Rs.2200/- per sq. feet for sale of remaining 327 flats soas to enable it to sell the said unsold flats.

7. It is, with these background facts, the Board issued 8thadvertisement in local newspapers for sale of remaining unsold flats(which included 251 deluxe flats with a area of 893 sq. feet in PowaiProject) and also some other flats situated in other location in Mumbai atthe rate of Rs.2200/- per sq. feet on the terms and conditions set out inthe advertisement/booklet. The Board, however, again claimed that theydid not receive good response.

8. On 10.02.2003, 11.02.2003 and 12.02.2003, three Co-operativeSocieties namely (1) Shree Amey Co-operative Housing Society (2) ShriGuru Krupa Co-operative Housing Society and (3) Shree Sai ShraddhaCo-operative Housing Society (respondent nos.4, 5 and 6 in Writ PetitionNo. 2017 of 2003 respectively before the High Court) (hereinafterreferred to as “three societies”) made their offers in writing forallotment of 500 flats in Powai Project on the terms offered by each ofthem in their respective offers.

9. So far as appellant No.1 herein is concerned, it is also a co-operative housing society and they also applied on 03.03.2003 (AnnexureP-6) to M/s Kamath Constructions and offered to purchase 110 flats ofPowai Project for Rs.17 crores. Appellant No.1 also simultaneouslyapplied to the Board on 03.03.2003 requesting them to supply all necessarydetails regarding the Powai Project to enable them to book the said flats.

10. On the same day, M/s. Kamath Construction, on their part,forwarded the offer of appellant No.1 to the Board along with threeother offers, which they received from Andhra Bank, Canara Bank andBank of Baroda.

11. The Board on 10.05.2003/14.5.2003 held meetings to considerseveral matters. Amongst them, one matter was regarding sale of flatsof Powai Project with which we are concerned here in this appeal andthe offers made by the three societies and the appellant No.1 for purchaseof the flats of Powai Project.

A

B

C

D

E

F

G

H

A

A12. The Resolution No.192 which dealt with this matter revealsthat the Board considered only the offers made by the three societiesand eventually accepted their offers with some modifications. The Board,however, did not consider the offer of appellant No.1 at all. TheResolution No.192 accepting the offers of the three societies reads asunder:-B

“ Annexure P-7

O. No.Dir.Mktg./M.B./105/2003Dated: 10/5/03 14.05.03

Office Note:-

C

Subject: In the matter of sale in nature of lumpsum ofunallotted Delux and non-Delux tenements at Powai.

In the Meeting of the Authority held on 10.05.2003,discussion was held on the Item Note No. 192/20 of theabove subject and the Authority did not give approval inthe form as it is to the Resolution no. 16/2402 dated25.02.2003 passed by the Board. Approval was not grantedas proposed by the Administration in the above Item Note.By carrying out necessary changes therein, the Authorityhas granted approval.

D

E

While according approval to the Resolution, adiscussion to this effect has been taken that if the amountis not paid within the time-limit, interest at the rate of 14.5be charged on the arrears of the amount. A decision wasalso taken that if the Chief Promoters of the societies havenot paid the sale price of the tenements within the period,allotment should be cancelled and amount of 10% of thesale price be forfeited. It shows inconsistency therein itdoes not become clear as to how and when allotment shallbe cancelled if the interest has to be charged on the amountof arrears and as to when 10% of the sale price shall beforfeited. Hence it is necessary that there should be clarityin this respect.

F

G

As per the notes taken by me in the meeting of theAuthority, a draft is submitted herewith. However, afterconfirming the minutes in connection with the business of H

the meeting, an authorized Resolution be kindly madeavailable so that it would be convenient for taking furtheraction thereon.

As the implementation of this Resolution has to beimplemented without waiting for its confirmation, theResolution of the Authority be kindly made available withnecessary amendments in the enclosed draft resolution.Hence this request.

Sd/-Director, Marketing/M.B.

Sd/-Joint Chief Officer/M.B.

Sd/-Chief Officer/M.B.

As there is inconsistency with each other shown in “A”the Resolution is submitted for correcting the same.

SecretaryC.O./M.B.

DRAFT RESOLUTION NO. 192 Dt. 10.5.2003

1) Chief Promoters of all these three Societies should paythe deposit amount at the rate of Rs. 25,000/- per tenementto the Board within 90 days from the date of receipt of theallotment letter. So also a list of Members of the Societyshould be submitted to the Board within 90 days.

2) Amount of 25 per cent of the sale price of the tenementsshould be paid within 190 days from the receipt of theallotment letter. However, 5% amount of 25% be paid within120 days, 10 per cent amount be deposited within 150 daysand the remaining 10 per cent amount be paid within 180days.

3) The payment of the remaining amount of the sale-pricebe made by the Chief promoters of the Society within 270days from the receipt of the allotment letter.

A

B

C

D

E

F

G

H

A4) If the payment is not made within the above period,interest at the rate of 13.5 per cent on the amount of arrearsbe paid.

5) Within a period of 270 days, the Chief promoters of theSociety can effect change in the list of their Members byBpaying charges at the rate of Rs.500/- per member.However, thereafter in case of change in membership,amount to the extent of 1 per cent of the sale price of thetenement shall be deducted from the deposit amount of theoriginal member and besides that, transfer fee shall becharged to a new member to the extent of Rs.5,000/- perCtenement.

6) At least allotment of 100 tenements be allotted to eachone of these three societies so that it would be possible togive them 15 per cent concession on the sale-price.However, out of the above societies, 10 per cent concessionDinstead of 15 per cent of the sale price shall be payable tothe society which will purchase less than 100 tenements.

7) As all the unallotted tenements at Powai are allotted tothe above Societies and these are stray tenements locatedin the buildings where it will be binding on the members ofEthe above Societies to become members of the existingco-operative housing societies registered or beingregistered in future in respect of those respective buildings.Hence unless they submit affidavits to that effect, they shallnot be eligible for tenements to be allotted to them.

F

8) If the Chief promoters of the Society do not payinstallments of Sale-price of tenements as per the abovetime-table, 10 per cent of the sale price for the tenementsshould be forfeited.

9) Repair work of the unallotted tenements should be takenGin hand immediately.

10) Whatever allotment letters have been given to theapplicants and 51 deluxe tenements in B.No.4 to the BankBaroda, allotment of tenements be made to them.Thereafter, sale of tenements be stopped.

H

Implementation of this Resolution be implementedwithout waiting for its confirmation.

(True translation in English)

Item No. 192/20

Subject: In the matter of sale in the nature of lump-sum ofunallotted deluxe and non-delux tenements at Powai.

Reference: 1 Letter dated 12.02.2003 from the ChiefPromoter, Shri. Saisraddha Co-op. Hsg. Socy (Proposed)addressed in writing to the Chairman/Mumbai Board.

2. Letter dated 11.02.2003 from the Chief Promoter, Shri.Gurukripa Co-op. Hsg. Socy (Proposed), addressed inwriting to the Chairman/Mumbai Board.

3. Letter dated 10.02.2003 from the Chief Promoter Shri.Ameya Co-op. Hsg. Socy(Proposed), addressed in writingto the Chairman/Mumbai Board.

4. Letter dated nil written by Pooja Estate Consultant &Construction dated nil to the Vice-president/Au. to theChairman/Mumbai Board.

5. Authority Resolution No. 178/5715dated 21.07.2001.”

13. Appellant No.1, therefore, felt aggrieved and filed writ petitionbefore the High Court of Bombay out of which this appeal arises andchallenged therein the Board’s decision in accepting the offers of threesocieties and not considering along with them the offer of appellant No.1in the meetings held by the Board on 10.05.2003/14.05.2003. Thechallenge was founded inter alia on the ground of mala fides attributedto the officials for extending undue favour to the three societies inaccepting their offers, including the manner in which their offers wereaccepted. The challenge was also founded on legal grounds.

14. The Board and the three Societies contested the writ petition.In substance, the Board while defending its resolution dated 10/14.05.2003inter alia contended that appellant No.1 never submitted its offer butwhat it had actually submitted was one letter dated 03.03.2003 addressedto the Board and M/s. Kamath Constructions, wherein appellant No.1made an inquiry to get more details from the Board about the sale of A

B

C

D

E

F

G

H

Aflats of Powai Project. It was contended that the Board received appellantNo.1’s letter on 03.03.2003 late as compared to the offers of the threesocieties on 10.02.2003/11.02.2003/12.02.2003. It was, therefore,contended that due to these reasons, the Board did not entertain appellantNo.1’s offer and considered only the offers made by the three societies.So far as the allegations of mala fides were concerned, they were deniedBby the Board.

15. So far as the three societies are concerned, they justified thestand taken by the Board and supported their offers made to the Boardfor purchase of the flats as being just, reasonable and proper, calling nointerference in the decision of the Board in their favour on 10/14.05.2003.C

16. By impugned order, the High Court dismissed the writ petitionfinding no fault in the Board’s decision taken in the meetings on 10/14.05.2003, which gave rise to filing of this appeal by way of specialleave to appeal in this Court by unsuccessful writ petitioners.

17. So the short question, which arises for consideration in thisappeal, is whether the decision of the Board in accepting the offers ofthe three societies for purchase of flats (Building No.8) of Powai Projectand exclusion of appellant No.1’s offer in their meetings held on 10/14.05.2003, is justified.

D

18. In other words, the question arises for consideration in thisappeal is whether the High Court was justified in upholding the decisionof the Board contained in their Resolution No.192 in relation to sale offlats of Powai Project (Building No.8) to the three societies withoutconsidering appellant No.1’s offer.

E

19. Having heard the learned counsel for the parties and on perusalFof the record of the case, we are inclined to allow the appeal, set asidethe impugned order, allow the appellants’ writ petition, out of which thisappeal arises, and issue writ of certiorari to quash the decision of meetingsdated 10/14.5.2003 and further issue a writ of mandamus against therespondents-Board and the three societies to ensure its compliance asGdirected hereinbelow in detail.

20. The law on the question as to how and in what manner theState should deal with its largesse at the time of its disposal amongst thecitizens is now a well settled principle laid down by this Court in series ofdecisions beginning from the case of R.D. Shetty vs. InternationalHAirport Authority (1979) 3SCC 497.

21. A three Judge Bench speaking through Justice Bhagwati (asHis Lordship then was and later became CJI) in R.D. Shetty ‘s case(supra) approved the observation of Justice Mathew (as His Lordshipthen was the Judge of Kerala High Court and later became a Judge ofthis Court) which the learned Judge made in V. Punnan Thomas vs.State of Kerala (AIR 1969 Ker 81). In Para 12 at page 505 of R.D.Shetty’s case (supra) Justice Bhagwati said in the following words:- “We agree with the observations of Mathew, J, in V.Punnan Thomas vs State of Kerala that:

The Government, is not and should not be as free asan individual in selecting the recipients for its largesse.Whatever its activity, the Government is still theGovernment and will be subject to restraints, inherein inits position in a democratic society. A democraticGovernment cannot lay down arbitrary and capriciousstandards for the choice of persons with whom alone it willdeal.”

22. Since then the Courts have been consistently following theaforesaid dictum of law, which is later explained by this Court in severalcases whenever the question relating to disposal of State largesse amongstthe citizens arose for consideration for deciding the rights of the partiesqua each other and the State. It is, however, not necessary to mentionthese cases which have reiterated this principle as it will only burden ourorder.

23. Keeping in view the aforementioned principle of law, whenwe examine the facts of this case, we are of the considered opinion thatthe Board was not justified in considering only the offers made by thethree societies without considering appellant No.1’s offer dated03.03.2003 on its merit.

24. In our view, the Board was under a legal obligation to consideralso appellant No.1’s offer which appellant No.1 had made to the Boardthrough M/s. Kamath Constructions vide its letter dated 03.03.2003 forpurchase of the flats of Powai Project along with the other offers madeby the three societies in their meetings held on 10/14.05.2003.

25. This we say for the reasons that firstly, M/s. KamathConstructions was the authorized agent appointed by the Board itself AB

C

D

E

F

G

H

Afor sale and disposal of the flats of Powai Project: Secondly, M/s. KamathConstructions on receipt of appellant No.1’s offer on 03.03.2003 rightlyforwarded it to the Board on 03.03.2003 for its consideration; Thirdly,the appellant’s offer dated 3.3.2003 was, therefore, very much availableto the Board for its consideration prior to the meetings held on 10/14.05.2003. In other words, the date on which the Board was consideringBthe offers of the three societies in its meeting on 10/14.05.2003, theoffer of appellant No.1 dated 03.03.2003 was with the Board for itsconsideration.

26. Fourthly, the very fact that M/s Kamath Constructionsentertained appellant No.1’s offer on 03.03.2003 and forwarded it to theCBoard was indicative of the fact that offer to purchase the flats of PowaiProject could be made by any party either to the Board or to M/s. KamathConstructions and had to be considered as being a valid offer made tothe Board only.

27. Fifthly, reading of appellant No.1’s letter dated 03.03.2003 toDM/s. Kamath Constructions would clearly indicate that it was essentiallyan offer made by appellant No.1 to the Board for purchase of 110 flatsfor Rs.17 crores. In other words, it could not be treated as letter forsoliciting some information from the Board as contended by the Boardfor its consideration.E28. In our view, keeping in view these five factors which wereadmittedly present in the case, the Board was under a legal obligation toconsider all the four offers (appellant No.1 and the three societies) intheir meetings held on 10/14.05.2003 with a view to decide as to whichone out of the four offers was the best one for its acceptance.F

29. Indeed, exclusion of appellant No.1’s offer dated 03.03.2003and keeping appellant no.1 out from the zone of consideration by theBoard in its meetings held on 10/14.05.2003 and only confining theconsideration of the offers made by the three societies vitiates the entiredecision of the Board taken on 10/14.05.2003.G30. In our view, appellant No.1 had a legitimate right and so the G30. In our view, appellant No.1 had a legitimate right and so theexpectation that it would get equal treatment from the Board like theother three societies because all four were similarly situated whileconsidering the issue of sale of flats of Powai Project. Indeed, therewas no valid reason for the Board to exclude appellant No.1’s case/offer from the zone of consideration.H

31. The reason given by the Board for non-consideration ofappellant No.1’s case/offer namely that appellant No.1’s letter dated03.03.2003 was not an offer and, therefore, it was not considered, hadno basis for three reasons.

32. First, the so-called reason ought to have been deliberated andreduced in writing by the Board in its Minutes of Meetings held on 10/14.05.2003. It was, however, not done; Second, the Board had no rightto disclose the reason for the first time in the High Court. It was notlegally permissible; Third, the reason given for its non- considerationalso had no basis because as held above, the appellant No.1’s letterdated 03.03.2003 was in fact an offer to purchase the flats quoting thereinthe price for purchase and, therefore, it was capable of being consideredon its merits treating it as an offer to purchase the flats along with theoffers of the three societies in the meetings held by the Board on 10/14.05.2003.

33. In the light of the foregoing discussion, we are of the consideredview that the decision to sale/dispose of the flats of Powai Project takenby the Board in its meetings held on 10/14.05.2003 (Resolution No.192)is vitiated as being unreasonable, arbitrary and violative of principlesenshrined in Article 14 of the Constitution of India. It is not legallysustainable and has to be, therefore, set aside.

34. Since we have set aside the impugned Resolution on legalgrounds, we need not go into the challenge made by the appellants againstthe officials on the ground of mala fides. It is not necessary.

35. The appeal thus succeeds and is allowed. Impugned order isset aside. The writ petition filed by the appellants out of which this appealarises is allowed.

36. The impugned Resolution No.192 dated 10/14.05.2003(Annexure P-7 of SLP at page 52) of the respondent-Board insofar as itrelates to the decision taken by the Board for sale/disposal of flats ofPowai Project in favour of the three societies is concerned, the same ishereby quashed by issuance of writ of certiorari. The Board is at libertyto proceed in the matter in accordance with law.

Nidhi Jain

Appeal allowed.

A

B

C

D

E

F

G

H