NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION   

CIVIL APPEAL NO.10015  OF 2010 (Arising out of S.L.P. (C) No.21458 of 2010)

Himachal Pradesh Housing and ……..Appellant Urban Development Authority

Versus

Universal Estate and another        ……..Respondents

J U D G M E N T

G.S. Singhvi,  J.

1. Leave granted.

2. Whether Chief Executive Officer of the Himachal Pradesh Housing  

and  Urban  Development  Authority  (hereinafter  referred  to  as  `the  Chief  

Executive Officer’) could reject the highest bid given by respondent No.1 in  

respect  of  commercial  site  measuring  9947  square  meters  situated  at  

Parwanoo after it had deposited 10% of the bid money is the question which

arises for consideration in this appeal  filed against  order dated 14.6.2010  

passed by the Division Bench of the Himachal Pradesh High Court in CWP  

No.607 of 2010.

3. The  Chief  Executive  Officer  invited  sealed  bids  from the  general  

public for allotment of 4 institutional/industrial/school plots at Atal Shiksha  

Kunj, Kallujhanda (Baddi), Bhatolikalan (Baddi) and Basal at Solan and two  

commercial sites at Parwanoo, one measuring 475.40 square meters and the  

other measuring 9947 square meters on leasehold basis for 99 years.  The  

reserve price of both the sites was shown as Rs.9,000/- per square meter.  

Later on, the same was reduced to Rs.6,000/- per square meter.   

4. Respondent  No.1  gave  bids  for  both  the  commercial  sites.   One,  

Chunni Lal Chauhan, who was partner of respondent No.1 (averments to this  

effect have been made in paragraphs 3(i) and 4 of the rejoinder affidavit  

filed by the appellant to the counter affidavit of the respondents) also gave  

bid for the site measuring 475.40 square meters.  The address disclosed in  

the bids given by respondent No.1 and Chunni Lal Chauhan was the same  

(an averment to this effect is contained in paragraphs 11 and 12 of the reply  

filed by the appellants to the writ petition of respondent No.1).  Three other  

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persons gave bids for the site measuring 9947 square meters.    The rates  

quoted by four bidders were as under:

SR.  NO.

NAME  OF  BIDDER

RESERVE  PRICE

RATES  PER SQM.  QUOTED   

PARTICIPATION  BID  MONEY  DEPOSITED

1. M/s.  HPR  INFRA

Rs.6000/- Rs.6,131 Rs.60.00 lacs

2. M/s.  Universal  Estates

Rs.6000/- Rs.6,551 Rs.60.00 lacs

3 M/s.  Bansal  Industries

Rs.6000/- Rs.6,022 Rs.60.00 lacs

4. M/s.  Aggarwal  Sales  Corporation

Rs.6000/- Rs.6,101 Rs.60.00 lacs

5. All the bids were opened on 8.2.2010 and it was found that bid of  

Rs.25,299/-  per  square  meter  given  by  Chunni  Lal  Chauhan  for  the  site  

measuring  475.40  square  meters  was  highest.   However,  instead  of  

depositing 10% of the bid money as per the requirement of clause 5(2) of the  

Himachal Pradesh Housing and Urban Development Authority (Allotment,  

Sale  of  Houses,  Flats  and  Plots)  Regulations,  2004  (for  short,  ‘the  

Regulations’), Chunni Lal Chauhan withdrew his bid on that very day.  As a  

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consequence, participation money of all other bidders including respondent  

No.1, who had offered to pay Rs.20,335.00 per square meter was refunded.  

In respect of the second site, the bid of Rs.6,551/- per square meter given by  

respondent No.1 was found to be highest.  The representative of respondent  

No.1  who  had  already  deposited  Rs.60  lacs  as  participation  money,  

deposited another sum of Rs.8,50,000/- to comply with the requirement of  

Clause 5(2) of the Regulations. However, before the bid could be accepted  

by  the  Chief  Executive  Officer,  the  State  Government  intervened  in  the  

matter because it had received information that the second commercial site  

was being disposed of at a low price and vide letter dated 10.2.2010, the  

Additional Chief Secretary (Housing) directed the Chief Executive Officer  

not to accept the bids and also give clarification on the following points:

(i) In  what  circumstances  were  sealed  bids  invited  when  normally  one  would  expect  an  open  auction  process  to  be  resorted to in order to maximize return.

(ii) Given the  value  of  the  land  what  steps  were  taken  to  ensure wide dissemination of the sale in Parwanoo, Himachal  Pradesh and outside the State.

(iii) What was the basis for the fixing of the reserve price and  on what basis was it revised downwards.  

6. The Chief Executive Officer sent reply dated 17.2.2010 and justified  

disposal of various sites/plots by inviting sealed bids, but after two days he  

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decided to reject  the bid of  respondent  No.1 on the ground that  the  rate  

offered by it was lower than the rate quoted for the other site.  This was  

communicated to respondent No.1 in the form of order dated 24.2.2010.

7. Respondent No.1 challenged rejection of bid by filing a petition under  

Articles 226 and 227 of the Constitution of India mainly on the ground that  

the decision of the Chief Executive Officer was not  only contrary to the  

statutory  provisions  but  was  totally  arbitrary  and  unjustified.    In  the  

affidavit filed by respondent No.2, it was averred that even though the bid of  

respondent No.1 was highest and it had deposited 10% of the bid amount,  

the  Chief  Executive  Officer  arbitrarily  cancelled  the  bid.   In  the  reply  

affidavit filed on behalf of the appellant, an objection was taken to the very  

maintainability of the writ petition on the ground that an effective alternative  

remedy is available by way of arbitration.  On merits, it was pleaded that the  

highest bid of respondent No.1 was rejected because the rate offered by it  

were on lower side as compared to other commercial site.

8. The Division Bench of the High Court allowed the writ petition and  

quashed order dated 24.2.2010 by observing that in view of clause 11 of the  

Regulations, the lease will be deemed to have taken effect from the date of  

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acceptance of bid and as soon as 10% amount approved by the Presiding  

Officer was deposited, the bid of respondent No.1 stood accepted.  The High  

Court  further  observed  that  after  acceptance  of  25% or  10% of  the  bid  

money, the Chief Executive Officer had no right to reject the bid.  

9. Shri  P.P.  Rao,  learned  senior  counsel  appearing  for  the  appellant  

argued that deposit of 10% of the bid money did not create any tangible right  

in favour of respondent No.1 and the reasons assigned by the High Court for  

nullifying rejection of the bid of respondent No.1 are legally unsustainable  

and  the  order  under  challenge  is  liable  to  be  set  aside.   Learned  senior  

counsel  further  argued  that  the  High  Court  committed  serious  error  by  

presuming acceptance of the bid ignoring that the allotment letter had not  

been issued in favour of  respondent  No.1 in  terms of  clause 5(2)  of  the  

Regulations.  Shri Rao submitted that acceptance of the bid by the Chief  

Executive Officer is a condition precedent for issue of allotment letter and  

till that is done, he can reject the bid without assigning any reason.  In the  

end, the learned senior counsel argued that the Chief Executive Officer did  

not commit any illegality by rejecting the bid because the price offered by  

respondent No.1 was highly inadequate.   

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10. Shri  Ranjit  Kumar,  learned  senior  counsel  appearing  for  the  

respondents argued that the premise on which the Chief Executive Officer  

rejected the highest bid of respondent No.1 was wholly erroneous and the  

High Court did not commit  any error by quashing order dated 24.2.2010  

because there was no significant difference in the price of the two sites.  Shri  

Ranjit Kumar submitted that the price offered for the two commercial sites  

was bound to be different because of huge difference in their size and the  

fact  that  they  were  located  at  different  places  and  the  Chief  Executive  

Officer was not at all justified in rejecting the bid given by respondent No.1  

for 9947 square meters land by comparing it with the bid given for a small  

plot measuring 475.40 square meters.  Learned senior counsel referred to the  

documents  filed  with  the  counter  affidavit  to  show  that  HIMUDA  had  

allotted/disposed of various sites  between 2007 and 2010 at  substantially  

lower price and argued that cancellation of the bid of respondent No.1 was  

rightly annulled by the High Court because the Chief Executive Officer had  

not applied his mind and mechanically passed order under the dictates of the  

State Government.   

11. We  have  considered  the  respective  submissions.   HIMUDA  is  an  

Authority established under Section 3 of the Himachal Pradesh Housing and  

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Urban Development Authority Act, 2004 (for short, ‘the Act’) for planning  

and development of land and creation of infrastructure to meet the housing  

needs of different income groups and to provide for development schemes,  

for mobilizing  public  and private  resources for the promotion of housing  

colonies  and  related  infrastructure  and  to  provide  for  the  creation  of  

appropriate Authority and mechanism for planned development of housing  

colonies.  Section 33 of the Act empowers the Authority to dispose of by  

way of sale, exchange, lease or auction any land acquired by it or transferred  

to  it  by  the  State  Government  after  undertaking  or  carrying  out  such  

development  as  provided  in  housing  and  development  schemes.   The  

exercise of power under sub-section (1) is subject to any direction which  

may be issued by the State Government under Section 43.  Section 51(1)  

lays  down  that  the  Authority  can,  with  the  prior  approval  of  the  State  

Government, make regulations consistent with the provisions of the Act and  

the Rules made thereunder.   

12. For  the  sake  of  convenient  reference,  Section  33  of  the  Act  is  

reproduced below:

“33. Disposal of land.– (1) Subject to any direction issued by  the  State  Government  under  this  Act,  the  Authority  may  dispose of by way of sale, exchange, lease or auction any land  acquired by it or transferred to it by the State Government after  

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undertaking or carrying out such development as provided in  housing and development scheme, in such manner, as may be  prescribed and subject to such terms and conditions, as it thinks  fit.

(2) Subject  to  the  provisions,  of  sub-section  (1),  the  Authority  may  sell,  lease  or  otherwise  transfer  whether  by  auction or  allotment  any land or  building belonging to  it  on  such  terms  and  conditions  as  it  may,  from  time  to  time,  determine.

(3) The  consideration  money  for  any  transfer  under  this  section shall be paid to the Authority, in such manner, as may  be prescribed by regulations.

(4) Any land or building, or both, as the case may be, shall  continue  to  belong  to  the  Authority  until  the  entire  consideration  money  together  with  interest  and  any  other  amount, if any, due to the Authority, on account of the transfer  of such land or building or both, is paid.

(5) Subject  to  the  provisions  of  regulations,  the  transferee  shall  not  further  transfer  any  of  his  rights  in  the  land  or  buildings except with the prior permission of the Authority on  an application accompanied by such fees, as may be prescribed.

13. In exercise of the power vested in it under Section 51(1) of the Act,  

the  Authority  framed  the  regulations,  the  relevant  clauses  of  which  are  

reproduced below:

“2. Definitions.–  In  these  regulations,  unless  the  context  otherwise requires,–

(c) “Authority”  means  the  Himachal  Pradesh Housing and  Urban Development Authority  established under section 3 of  the Act.

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(e) “allotment letter” means a letter in such a form as may be  specified by the Authority from time to time, making allotment  of a particular house or plot to an applicant.

3. Mode of disposal.– Subject to any direction issued by  the State Government under sub-section (1) of section 33 of the  Act,–

(a) the Authority may dispose of any land belonging to it in  developed or an underdeveloped form;

(b) the Authority may dispose of any land or building of the  Authority by way of sale or lease or exchange by the creation of  any easement right or privilege or otherwise;

(c) the Authority may dispose of its land or building by way  of sale or lease either by allotment or by auction, which may be  by open bid or by inviting tenders.

4. Fixation  of  tentative  price/premium.–  The  tentative  price/premium  for  the  disposal  of  land  or  building  by  the  Authority shall be such as may be determined by the Costing  Committee taking into consideration the cost of land estimated  cost  of  development,  cost  of  buildings  and  other  direct  and  indirect  charges,  as  may  be  determined  by  the  Costing  Committee from time to time.

5. Sale or lease of house or plot by auction.– (1) In the  case  of  sale  or  lease  by  auction,  the  price/premium  to  be  charged  shall  be  such  reserve  price/premium  as  may  be  determined  taking  into  consideration  the  various  factors  as  indicated in regulation 4 or any higher amount determined as a  result of bidding in open auction.

(2) Ten percent of the highest bid shall be paid on the spot  by the highest bidder in cash or by means of a demand draft  payable  to  the  Chief  Executive  Officer  and  drawn  on  any  scheduled bank situated at Shimla.  The successful bidder shall  be issued allotment letter by registered post and another fifteen  percent of the bid accepted shall be payable by the successful  

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bidder, in the manner indicated, within thirty days of the date of  allotment letter conveying acceptance of the bid by the Chief  Executive Officer, failing which the ten percent amount already  deposited  shall  stand  forfeited  to  the  Authority  and  the  successful  bidder  shall  have  no  claim  to  the  house  or  plot  auctioned.

(3) xx xx xx xx xx

(4) xx xx xx xx xx

(5) The general terms and conditions of auction shall be such  as may be framed by the Chief Executive Officer from time to  time and announced to the public before auction on the spot.

8. Issue of notice for inviting applications and power of  Authority to allot houses or plots.–  (1) The Authority shall  issue  a  public  notice  in  such  newspapers  having  wide  circulation in the area as it may think fit or inviting applications  for  allotment  of  houses  or  plots  offered  under  any  scheme  before such date as may be specified in the notice.

(2) The  notice  shall  specify  the  location  of  the  houses  or  plots,  their  tentative  costs,  details  of  approximate  accommodation,  area available for allotment and the class of  persons to whom houses or plots under any scheme are reserved  and the payment Schedule.

(3) Every applicant  shall  deposit  the earnest  money in the  office of the Authority and shall  enclose with his application  the  receipt  obtained  in  token  of  such  deposit.   The  earnest  money shall be refunded to the applicant at any time without  interest  and  after  deduction  of  administrative  charges  if  he  requests in writing for the refund.  If he is allotted house or plot,  the earnest money shall be adjustable against cost.”

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Paragraphs 3, 10, 11 and 13 of the terms and conditions for sale of  

commercial sites laid down by the Chief Executive Officer under clause 5(5)  

of the Regulations read as under:

“3. The  Estate  Manager  reserves  to  himself  the  right  to  withdraw any number of Commercial sites that may have been  announced for auction and to accept or reject the highest bid  without assigning any reason.

10. The  successful  bidder  shall  have  to  pay  25%  of  the  amount of bid on the spot at the fall of hammer in cash or by  means of demand draft drawn in favour of the Estate Manager,  HP  Housing  and  Urban  Development  Authority  on  any  scheduled bank at  Shimla.   Payment  by cheque shall  not  be  accepted.  However, the Presiding Officer as a special case may  allow the successful bidder to deposit not less than 10% of the  bid  on the  condition that  the  difference  between the amount  deposited and 25% of the bid shall  be deposited in the same  manner within 30 days from the issue of allotment letter.  The  remaining 75% premium is to be paid in accordance with the  condition No.11 (eleven) below.

11. The lease shall be deemed to have taken effect from the  date of bid acceptance and from this date the interest @ 12%  shall  be  charged  on the  75% balance  of  the  premium.   The  balance 75% premium can be paid in lump sum within 30 days  from the date of acceptance of bid without interest or with 12%  per annum interest in three annual instalments, first instalment  being payable within one year from the date of the allotment  along with lease rent. It will be the responsibility of the lessees  to pay annual instalment without waiting for any notice and the  Authority will not be under any obligation to issue any demand  notice.

13. After  making payment  of  25% of  the  premium,  lessee  shall  execute  a  lease  deed  in  the  prescribed  form  in  such  manner as may be directed by the Estate Manager within one  month of the date of allotment or with in such extended period  

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as may be allowed by the Estate Manager,  failing which the  Estate Manager may cancel allotment and forfeit  25% of the  premium.  The lessee shall bear and pay all expenses in respect  of execution of lease deed i.e. the stamp duty & registration fee  payable thereof in accordance with the Law in force at the time  of execution of lease deed.”

14. A careful reading of the relevant clauses of the Regulations shows that  

the Authority is bestowed with the power to dispose of any land or building  

by way of sale or lease either by allotment or by auction.  The exercise of  

this  power is  subject  to  any direction  which may be issued by the State  

Government under Section 33(1) of the Act.  The tentative price/premium  

for disposal of land or building is required to be determined by the Costing  

Committee which, in turn, has to take into consideration the cost of land, the  

estimated cost of development, cost of building and other direct and indirect  

charges  to  be  determined  by  the  Costing  Committee  from time  to  time.  

Clause  5(1)  of  the  Regulations  provides  for  determination  of  reserve  

price/premium by taking into consideration the factors enumerated in clause  

4 of the Regulations.  When any land or building is sold or leased out by  

open  auction,  the  priceless  premium  to  be  charged  is  the  reserve  

price/premium or any higher amount offered by the highest bidder.  In terms  

of clause 5(2) of the Regulations, the highest bidder is required to deposit  

10% of the bid on the spot either in cash or in the form of demand draft.  

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Thereafter, the Chief Executive Officer has to take a decision on the issue of  

acceptance  of  bid.   This  necessarily  involves application  of  mind by the  

concerned officer to the relevant factors, the most dominant being the public  

interest.  The Chief Executive Officer has to ensure that the land or building  

belonging to the Authority is sold or leased out or otherwise transferred at  

the maximum price.  If the Chief Executive Officer finds that the bidders  

have formed a cartel or joined hands to manipulate the price or have done  

anything  which  is  detrimental  to  the  interest  of  the  Authority  or  public  

interest, he is not only entitled but is duty bound to reject the highest bid.  

Once the bid is accepted, the allotment letter is required to be issued to the  

bidder by registered post.  The issue of allotment letter is a strong indication  

of acceptance of bid by the competent authority i.e.,  the Chief Executive  

Officer.  By virtue of the deeming provision contained in paragraph 11 of  

the terms and conditions laid down by the Chief Executive Officer for sale  

of commercial sites, the lease becomes effective from the date of acceptance  

of the bid.  There is nothing in the plain language of clause 5(2) from which  

it can be inferred that the highest bid is deemed to have been accepted on  

receipt of 10% of the bid money.  The Regulations do not contain any time  

schedule  within  which  the  Chief  Executive  Officer  is  required  to  take  a  

decision on the issue of acceptance or rejection of the bid.  Therefore, his  

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inaction in the matter or failure to pass a positive order within a specified  

time cannot lead to an inference that the highest bid has been accepted and  

the lease has become effective.         

15. In view of the above, it must be held that the Division Bench of the  

High Court was clearly wrong in declaring that the bid of respondent No.1  

stood accepted as soon as 10% amount approved by the Presiding Officer of  

the Auction Committee was deposited and that the Chief Executive Officer  

had no right to reject the bid after acceptance of 10% of the bid money.   

16. We shall  now consider  whether  the  action  of  the  Chief  Executive  

Officer  to  reject  the  bid  of  respondent  No.1  was  arbitrary,  unfair,  

unreasonable and amounted to violation of Article 14 of the Constitution,  

but before doing that we deem it proper to observe that the scope of judicial  

review  in  such  matters  is  very  limited  and  the  Court  will  exercise  its  

discretion only when it is satisfied that the action of the public authority is  

detrimental to public interest.  In  Air India Ltd. v. Cochin International  

Airport  Ltd.  (2000)  2  SCC 617,  the  Court  while  dealing  with  a  matter  

involving award of contract, made it clear that the public authority is free not  

to accept the highest or the lowest offer and the scope of judicial review is  

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confined to the scrutiny of decision making process, which can be annulled  

if  the  same  is  found  to  be  vitiated  by  malafides,  arbitrariness  or  total  

unreasonableness.   Some  of  the  observations  made  in  the  judgment  are  

extracted below:

“The award of a contract, whether it is by a private party or by a  public  body  or  the  State,  is  essentially  a  commercial  transaction. In arriving at a commercial decision considerations  which are paramount are commercial considerations. The State  can choose its own method to arrive at a decision. It can fix its  own terms of invitation to tender and that is not open to judicial  scrutiny. It can enter into negotiations before finally deciding to  accept one of the offers made to it. Price need not always be the  sole  criterion for awarding a contract.  It  is  free to grant  any  relaxation, for bona fide reasons, if the tender conditions permit  such a relaxation.  It  may not accept  the offer even though it  happens  to  be  the  highest  or  the  lowest.  But  the  State,  its  corporations,  instrumentalities  and  agencies  are  bound  to  adhere to the norms, standards and procedures  laid down by  them  and  cannot  depart  from  them  arbitrarily.  Though  that  decision  is  not  amenable  to  judicial  review,  the  court  can  examine the decision-making process and interfere if it is found  vitiated by mala fides, unreasonableness and arbitrariness. The  State, its corporations, instrumentalities and agencies have the  public duty to be fair to all concerned. Even when some defect  is found in the decision-making process the court must exercise  its discretionary power under Article 226 with great caution and  should exercise it only in furtherance of public interest and not  merely on the making out of a legal point.  The court  should  always keep the larger public interest in mind in order to decide  whether its intervention is called for or not. Only when it comes  to  a  conclusion  that  overwhelming  public  interest  requires  interference, the court should intervene.”

(emphasis supplied)

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In  Jagdish Mandal v. State of Orissa (2007) 14 SCC 517, a two-

Judge Bench,  after  taking note of the propositions laid down in  Sterling  

Computers Ltd. v. M & N Publications Ltd. (1993) 1 SCC 445,  Tata  

Cellular v. Union of India (1994) 6 SCC 651,  Air India Ltd. v. Cochin  

International Airport Ltd. (supra) and B.S.N. Joshi & Sons Ltd. v. Nair  

Coal Services Ltd. (2006) 11 SCC 548 observed:

“Judicial review of administrative action is intended to prevent  arbitrariness,  irrationality,  unreasonableness,  bias  and  mala  fides.  Its  purpose  is  to  check  whether  choice  or  decision  is  made “lawfully” and not to check whether choice or decision is  “sound”.  When  the  power  of  judicial  review  is  invoked  in  matters relating to tenders or award of contracts, certain special  features should be borne in mind. A contract is a commercial  transaction.  Evaluating  tenders  and  awarding  contracts  are  essentially  commercial  functions.  Principles  of  equity  and  natural  justice  stay  at  a  distance.  If  the  decision  relating  to  award of contract is bona fide and is in public interest, courts  will not, in exercise of power of judicial review, interfere even  if a procedural aberration or error in assessment or prejudice to  a tenderer, is made out. The power of judicial review will not  be permitted to be invoked to protect private interest at the cost  of  public  interest,  or  to  decide  contractual  disputes.  The  tenderer  or  contractor  with  a  grievance  can  always  seek  damages in a civil  court.  Attempts by unsuccessful  tenderers  with imaginary grievances, wounded pride and business rivalry,  to  make  mountains  out  of  molehills  of  some  technical/procedural  violation  or  some  prejudice  to  self,  and  persuade  courts  to  interfere  by  exercising  power  of  judicial  review, should be resisted. Such interferences, either interim or  final, may hold up public works for years, or delay relief and  succour to thousands and millions and may increase the project  cost manifold. Therefore, a court before interfering in tender or  

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contractual  matters  in  exercise  of  power  of  judicial  review,  should pose to itself the following questions: (i)  Whether  the  process  adopted  or  decision  made  by  the  authority is mala fide or intended to favour someone;

OR Whether the process adopted or decision made is so arbitrary  and irrational that the court can say: “the decision is such that  no responsible  authority  acting reasonably and in accordance  with relevant law could have reached”; (ii) Whether public interest is affected. If  the  answers  are  in  the  negative,  there  should  be  no  interference under Article 226. Cases involving blacklisting or  imposition of  penal  consequences on a tenderer/contractor  or  distribution of State largesse (allotment of sites/shops, grant of  licences, dealerships and franchises) stand on a different footing  as they may require a higher degree of fairness in action.”

Meerut Development Authority v. Association of Management Studies  

(2009) 6 SCC 171 is a case arising out of the demand of the respondent for  

allotment of land.  Initially, the respondent had given tender for allotment of  

plot measuring 37,000 square meters at the rate of Rs.500 per square meter.  

The appellant offered the plot at the rate of Rs.690 per square meter because  

other  parties  were  prepared to take the  land at  that  price.   Later  on,  the  

Authority decided to issue open tender-cum-auction notice.  Officer’s Class  

Housing  Society  of  the  Canal  Colony  offered  to  pay  Rs.775  per  square  

meter.  At that stage, the respondent indicated its willingness to purchase the  

land  at  Rs.690  per  square  meter.   The  appellant  did  not  accept  the  

respondent’s  prayer  for  transfer  of  land  at  that  rate.   Thereupon,  the  

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respondent filed writ petition for issue of a direction to the appellant to allot  

land at  the  rate  of  Rs.690 per  square  meter.   By an interim order  dated  

7.5.2002, the High Court allowed the appellant to allot the land pursuant to  

advertisement dated 15.4.2002 but made it subject to the decision of the writ  

petition.  Shri Pawan Kumar Agarwal gave an offer of Rs.1365 per square  

meter.   This  was  accepted  by  the  appellant.   But,  after  some  time,  the  

allotment made in favour of Pawan Kumar Agarwal was cancelled.  The  

High Court allowed the writ petition filed by the respondent and dismissed  

the one filed by Pawan Kumar Agarwal.  This Court allowed the appeal and  

reversed the order of the High Court insofar as it related to the respondent  

and observed that the decision taken by the appellant was neither arbitrary  

nor vitiated due to mala fides and the respondent did not have any right to be  

allotted  land.   The  Bench  relied  on  the  principles  laid  down  in  several  

decisions and reiterated the following observations in Kasturi Lal Lakshmi  

Reddy v. State of J&K (1980) 4 SCC 1:

“…  It  must  follow  as  a  necessary  corollary  from  this  proposition that the Government cannot act in a manner which  would benefit a private party at the cost of the State; such an  action  would  be  both  unreasonable  and  contrary  to  public  interest.  The Government, therefore, cannot, for example, give   a contract or sell or lease out its property for a consideration  less  than  the  highest  that  can  be  obtained  for  it,  unless  of  course there are other considerations which render it reasonable  and in public interest to do so.”

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17. The  ostensible  reason  given  by  the  Chief  Executive  Officer  for  

rejecting the bid of respondent No.1 was that the price offered by it was less  

than  the  price  quoted  for  the  commercial  site  measuring  475.40  square  

meters.   If  that  reason  is  considered  in  isolation,  one  may  reasonably  

conclude that the decision of the Chief Executive Officer to reject the bid  

was arbitrary because while comparing the price of the two sites, he ignored  

that there was huge difference in the size of the two plots and they were  

located in different  sectors  of  Parwanoo.   However,  if  the said reason is  

scrutinized  in  the  backdrop  of  the  fact  that  an  attempt  was  made  by  

respondent No.1 to subvert the effort of the Authority to get the appropriate  

price,  rejection of the bid cannot be dubbed as arbitrary or unreasonable.  

The  averments  contained  in  the  written  statement  filed  by  the  appellant  

before the High Court and the rejoinder affidavit filed in this Court, which  

have remained uncontroverted show that respondent No.l had manipulated  

offer of a lower price.  It had given bids for both the sites and one of its  

partners, namely, Chunni Lal Chauhan gave bid for the smaller plot.  The  

highest  bid  for  the  smaller  site  was  given  by  Chunni  Lal  Chauhan  but  

without  any  rhyme and  reason,  he  withdrew his  offer  on  the  same  day.  

Respondent  No.1,  whose  bid  was  the  next  highest  did  not  press  for  

acceptance  of  its  bid  and  willingly  accepted  the  refund  of  participation  

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money.  This was quite unusual.  For the other site, the bid of respondent  

No.1  was  higher  than  the  other  bids  by  few  hundred  rupees  only,  the  

maximum  difference  being  Rs.529/-.   The  State  Government  must  have  

sensed the mischief and realised that an attempt was being made to grab a  

commercial  site  measuring  9947  square  meters  with  huge  potential  for  

development at a very low price.  This is the reason why the Chief Executive  

Officer was directed not to confirm the bid and give clarification on three  

issues.  Initially, he tried to justify the methodology adopted for disposal of  

the commercial  sites but finally realised that adequate price has not been  

offered for the site and, therefore, he rejected the bid of respondent No.1.  

The  direction  given  by  the  State  Government  through  Additional  Chief  

Secretary (Housing) was in conformity with Section 33(1)  and the Chief  

Executive  Officer  did  not  commit  any  illegality  by  taking  action  in  

furtherance of that direction.    There cannot be any manner of doubt that if  

instead of inviting sealed bids, the Chief Executive Officer had resorted to  

open auction process,  the site measuring 9947 square meters would have  

fetched much higher price and that would have certainly been in the interest  

of the Authority and public interest.   

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18. The  arguments  of  Shri  Ranjit  Kumar  that  the  rate  offered  by  

respondent No.1 was commensurate with the price at which HIMUDA had  

disposed  of  several  plots  does  not  commend  acceptance.    The  first  

transaction relates to plot measuring 164 square meters which was leased out  

to M/s. Multi Color Cartons at the rate of Rs.6,000/- per square meter.  This  

plot  is  located  in  Sector–II,  Parwanoo  on  hill  side  and  requires  lot  of  

development.  The second transaction relates to plot measuring 454.2 square  

meters  adjoining  Block  No.22,  Sector–VI,  Parwanoo.   It  was  sold  to  

Balvinder Singh Matharoo for residential purpose.  This plot is situated far  

away from the second commercial site for which respondent No.1 had given  

the bid of Rs.6651/- per square meter.  The third document relates to plot  

measuring 53 square meters.  For this plot leasehold rights were given at the  

rate of Rs.12,000/- per square meter.  This plot was taken by the owner of  

the house for laying access road.  The last transaction by HIMUDA involves  

sale of plot measuring 721.87 square meters.  This plot was sold in 2007 at  

the rate of Rs.5625/- per square meter.  In our view, none of the transactions  

can be relied upon for nullifying the decision of the Chief Executive Officer  

to reject  the bid of respondent No.1 because the size and location of the  

various plots were different, the last one of which was sold more than two  

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years  and  almost  six  months  prior  to  consideration  of  the  bid  given  by  

respondent No.1.

19. In the result, the appeal is allowed, the impugned order is set aside  

and the writ petition filed by the respondents is dismissed.  The parties are  

left to bear their own costs.  If respondent No.1 has so far not taken the  

refund of Rs.68,50,000/-, then the appellant shall refund the amount within  

one month from today.     

....….………………….…J.       [G.S. Singhvi]

     ……..…..………………..J.       [Asok Kumar Ganguly]

New Delhi November 25, 2010.

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