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PETITIONER: G.B. MAHAJAN AND ORS.

       Vs.

RESPONDENT: JALGAON MUNICIPAL COUNCIL AND ORS.

DATE OF JUDGMENT13/09/1990

BENCH: VENKATACHALLIAH, M.N. (J) BENCH: VENKATACHALLIAH, M.N. (J) OJHA, N.D. (J)

CITATION:  1991 AIR 1153            1990 SCR  Supl. (3)  20  1991 SCC  (3)  91        1991 SCALE  (1)378

ACT:     Constitution of India, 1950: Articles 14 and  298--State Instrumentality--Municipal  Council entering  into  contract with  private developer for construction of Commercial  Com- plex on self financing basis--Adoption of such an  unconven- tional technique as a policy option--Validity of.     Article   226--Resort  to--Contractual  transaction   of Government  or  its  instrumentality--Presence  public   law element--Essential for invoking Judicial Review.     Municipalities:  Maharashtra Municipalities  Act,  1965: Sections 92 & 272(1)--Municipal Market--Disposal of occupan- cy  rights-Construction of Commercial  Complex--Private  de- veloper to undertake on self financing basis--Giving  admin- istrative building to Municipal Council free of  cost--Shops to be given to allottees--Liberty to dispose of the  remain- ing  accommodation  to cover financial outlays  and  project ---Whether valid.     Administrative     Law:     Judicial      Review--Policy decision--Government or its instrumentality--Whether free to evolve and adopt any method for executing of a Project--Such decisions--whether open to Judicial Review.     Test of ’Reasonableness’--To distinguish between  proper use  and  improper use of power--Applicability of  the  test depends upon context.     Delegation of power----Statutory function under  Section 272  of the Maharashtra Municipalities Act, 1965   Occupancy rights--Powers  to substitute occupiers in its own place  by developer--Whether permissible.     Interpretation  of Statutes: Use of same word/phrase  or concept  in  different  laws--Distinction  in  meaning   and usage--Need for.     Words    &    Phrases.’    ’Reasonableness’--’Reasonable man’--Meaning of.

HEADNOTE: 21     The respondent Municipal Council received by way of gift certain  lands from one ’L’ and the said lands were used  by the Agricultural Produce Market Committee as a cotton market and  wholesale fruit and vegetables market.  The  Respondent Council,  in  order  to put the land to a  better  and  more profitable  use, persuaded the Market Committee to yield  up

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possession.  However,  since  the  gift  stipulated  certain conditions  regarding the user, the Respondent  Council  ap- proached  the heirs of the donor for amending the  terms  of the gift, and the heirs bargained for and secured a  benefit that  five shops be given to them free of cost in  the  pro- posed commercial complex. The entire project of constructing the  Administrative  building,  an  adjacent  structure  for vegetable market and a commercial complex was to be executed by  a developer at his own expense. The  estimated/financial outlay was about Rs.11 crores. It was contemplated that  the developer was to hand over the Administrative building  free of cost to the Municipality and the vegetable market to  the allottees  and the five shops to the heirs of the  donee  of the  land.  Thereafter the developer would  be  entitled  to dispose  of the occupancy rights in respect of the  rest  of the  accommodation in the commercial complex and retain  the promia received therefrom to cover the financial outlays and profit  thereon. The occupiers to whom allotments were  made as also the occupiers inducted by the developer were to  pay rents to the Respondent Council for 50 years.     Tenders were issued for the project, and after  scrutiny of  the tenders submitted by five developers, the tender  of Respondent No. 6 was accepted by the Respondent-Council, and a formal agreement was entered into between the Council  and Respondent No. 6.     The appellants, residents of the area petitioned to  the Collector  to suspend the Resolutions of the Council  under- taking  the  said  project and the  agreement  entered  with Respondent No. 6, on the grounds that the proposed  transac- tion  amounted to a lease for 50 years which was  prohibited under  Section  92 of the  Maharashtra  Municipalities  Act, 1956;  that sanction of the Development Department  was  not obtained; that an impermissible encumbrance would be created on the Councils property in favour of the developer and that the  intended user violated the original terms of the  gift. On the said petition, the Collector passed orders suspending the Resolutions. On revision, the Minister stayed the opera- tion of the Collector’s order.     Meanwhile,  a  Writ Petition was filed before  the  High Court, assailing the said Resolutions. Another Writ Petition was  filed  challenging the Minister’s  orders  staying  the order of the Collector. Both the 22 Writ  Petitions were heard together. The main contention  of the Writ Petitioners was that the financial estimates of the project  were  made grossly  under-estimating  the  probable receipts by way of premia for the grant of occupancy  rights with  the  intention  of giving an  opportunity  for  unjust enrichment to Respondent No. 6. The High Court directed that occupancy  rights in regard to the shops at the disposal  of the developer tenders be called from the public, so that the difference between what was taken into account in the  esti- mate  and what was actually secured might go to the  benefit of the Municipality. Accordingly, advertisement were issued, but  it did not evoke any favourable response from the  pub- lic.  The matter was listed again before the High Court.  It was held that the High Court’s earlier order was self-execu- tory, and the Writ Petitions were dismissed. Review Petition was  also dismissed. Another Writ Petition  challenging  the advertisement issued pursuant to High Court’s earlier  order was also dismissed.     The Special Leave Petitions fried against the above-said orders of the High Court, were dismissed by this Court  with the observations that it was open to the petitioners to move the  Minister  for  final disposal and  the  Minister  would

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expeditiously  dispose of the matter taking into  considera- tion whether the scheme was in conformity with the statutory provisions.  The Minister disposed of the Revision  Applica- tion  recording his findings against the appellants.  There- upon, the appellants filed a fresh Writ Petition before  the High Court challenging the Minister’s orders. The High Court declined to interfere. Aggrieved by the High Court’s  order, appellate preferred the present appeal by special leave.     It  was contended on behalf of the appellants  that  the scheme  of  financing the project was not, as  a  matter  of policy,  open and permissible to a  Governmental  authority; that the Municipal authority could have put up the construc- tion  itself departmentally or awarded the execution of  the whole  project to a building contractor; that the method  of financing  and the execution of the project are, beyond  the powers  of the Municipal authority under the Act;  that  the terms of the agreement with the developer that the latter be at liberty to dispose of the occupancy rights in the commer- cial  complex  in such manner and on such terms  as  it  may choose  would amount to an impermissible delegation  of  the statutory functions of the Municipal Council, under  Section 272 of the Maharashtra Municipalities Act; that the project, in effect amounted to disposal of Municipal property by  way of a long term lease with rights of sub-letting in favour of the developer and hence violative of Section 92 of the  Act; and  that the scheme was arbitrary, unreasonable and  viola- tive of Article 14 of the Constitution. It was further con- 23 tended that the project was patently intended to provide for an unjust enrichment of Respondent No. 6 at public expense.     On  behalf of the Respondent it was contended  that  the increasing  revenue expenditure and other financial  commit- ments  rendered it impossible for the Municipal  Council  to set  apart  the financial inputs required for  the  project; that in the management of the transaction regarding disposal of  occupancy rights and prompt mobilisation of  funds,  the deficiencies  and limitations of the bureaucratic  machinery should not be ignored in assessing the value and utility  of the alternatives; that all the said Resolutions in regard to the  Project were passed unanimously which lend credance  to the propriety and wisdom of the measure and its  reasonable- ness;  that  the  estimates and calculations  on  which  the scheme  was worked out by the Respondent Council would  show that the developer had no opportunity of making any run-away profits or exploitative gains. Dismissing the appeal, this Court,     HELD: 1. A project, otherwise legal, does not become any the less permissible by reason alone that the local authori- ty,  instead  of executing the project itself,  had  entered into  an  agreement with a developer for its  financing  and execution. The question is not whether it is un-conventional by  the standard of the extant practices, but whether  there was  something  in the law rendering  it  impermissible.  No doubt  there  is a degree of public  accountability  in  all governmental  enterprises. But, the present question is  one of  the extent and scope of judicial review over  such  mat- ters.  With  the expansion of the State’s presence  in.  the field of trade and commerce and of the range of economic and commercial enterprises of government and its  instrumentali- ties  there is an increasing dimension to governmental  con- cern  for  stimulating efficiency, keeping costs  down,  im- proved  management  methods,  prevention of  time  and  cost over-runs  in  projects, balancing of  costs  against  time- scales, quality-control, cost-benefit ratios. etc. In search of these values it might become necessary to adopt appropri-

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ate  techniques of management of projects with  concommitant economic  expediencies.  There are  essentially  matters  of economic  policy with lack adjudicative disposition,  unless they violate constitutional or legal limits on power or have demonstrable  pejorative environmental implications,  or  if they  amount  to  clear abuse of power. This  again  is  the judicial  recognition of administrator’s right to trial  and error,  as  long as both trial and error are bona  fide  and within the limits of authority. [35C-G] 24     Forward  Construction  Co.  & Ors.  v.  Prabhat  Mandal, [1986] 1 SCC 100; relied on.     Ramana Dayanand Shetty v. International Airport Authori- ty, [1979] 3 SCR 1014; Kasturilal Laxmi Reddy v. State of  J JUDGMENT:     New State Ice Company v. Ernest A. Liebmann, 285 US  262 Dissenting  opinion  of Brandeis J; Education  Secretary  v. Tameside B.C., [1977] AC 1014; referred to,     "The Purpose and Scope of Judicial Review" by Sir Garard Brennan is "Judicial Review of Administrative Action in  the 1980s", Oxford University Press; referred to.     2.  In the ever increasing tempo of urban life  and  the emerging  stresses  and strains of planning, wide  range  of policy  options not inconsistent with the objectives of  the statute  should be held permissible. In the context  of  ex- panding  exigencies of urban planning it will  be  difficult for  the  court to say that a particular policy  option  was better  than another. The project is not ultra vires of  the powers  of  the  Municipal Council, and hence  there  is  no justification  for quashing the Resolution of the  Municipal Council. [36G]     Policy making Paradigms in Administrative Law" by  Colin S. Diver in Harward Law Review, vol. 95 p. 393; referred to.     3. In the instant case, it is possible to fit the  power exercised by the Municipal authority into Section 272(1)  of the  Maharashtra  Municipalities Act and hence there  is  no reason why the provision be interpreted unduly restrictively to exclude such enterprise. [40E]     4.  It has not been established that the essential  ele- ments of the transaction are such that Section 92 of the Act is  violated. It would, indeed be unduly restrictive of  the statutory  powers  of  the local authority  if  a  provision enabling the establishment of markets and disposal of  occu- pancy-rights therein are hedged in by restrictions not found in  the statute. The developer who was authorised to  induct occupiers  in respect of the area earmarked for  him  merely exercised, with the consent of the Municipal Council a power to  substitute  an Occupier in his own place.  This  is  not impermissible  when  it is with the express consent  of  the Municipal Council. [40H; 41A-B] 25     5.1  Some phrases which pass from one branch of  law  to another--as  did the expression ’void’ and  ’voidable’  from private  law areas to public law situations-carry over  with them meanings that may be inapposite in the changed context. Some  such  thing has happened to  the  words  "Reasonable", "Reasonableness" etc. Different contexts in which the opera- tion  of "Reasonableness" as test of validity must  be  kept distinguished.  The administrative law test of  ’reasonable- ness’  as the touch-stone of validity of the  Resolution  in the instant case is different from the test of the ’reasona- ble  man’  familiar to the law of torts,  whom  English  Law figuratively identifies as the "man on the clapham omnibus". In the latter case the standards of the ’reasonable-man’, to the extent such a ’reasonable man’ is court’s creation, is a

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mere transferred epithet. Yet another area of reasonableness which must be distinguished is the constitutional  standards of  ’reasonableness’ of the restrictions on the  fundamental rights of which the Court of Judicial Review is the arbiter. [42F-G; 43A-B]     5.2.  The  ’reasonableness’ in administrative  law  must distinguish between proper and improper use of power. [44D]     Davis Contractors v. Fareham U.D.C., [1956] 2 AH ER 145; Associated  Provincial  Picture Houses  Ltd.  v.  Fednesbury Corporations, [1948] 1 KB 223; Nottinghamshire County  Coun- cil  v. Secretary of State for Environment, [1986]  AC  240; Tiller v. Atlantic Coast Line Rail Road Company, 318 US  54; Chief Constable v. Evans, [1982] 3 All ER 141; referred to.     Administrative  Law, by H.W.R. Wade, 6th Edn., pp.  407, 408;  Legal Control of Government, by Bernard  Sehwartz  and H.W.R. Wade, p. 253; referred to.     6.  While it is true that principles of judicial  review apply to the exercise by a government body of its contractu- al  powers,  the inherent limitations on the  scope  of  the inquiry  are  themselves a part of those  principles.  In  a matter  even as between the parties, there must be  shown  a public law element to the contractual decision before  judi- cial  review  is invoked. In the present case  the  material placed  before  the Court fails far short of  what  the  law requires to justify interference. [46F]     7. There is no merit in the contention that the  Project Scheme  was tailored to suit Respondent No. 6 alone or  that the  project  as put to tender did not admit of  tenders  on fixed comparable parameters. No 26 other  tenderer  expressed any grievance. The  tenders  were such  that the tenderer could identify the terms which  form the  basis  of comparative evaluation. The charge  of  arbi- trariness cannot be upheld. [46G-H; 47A]     8. To condemn the Municipal authority’s decision, other- wise valid, on the ground alone that the developer is likely to  resort to transactions of unaccounted money would, as  a judicial remedy, be plainly unthinkable. [47E]

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