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CASE NO.: Appeal (civil)  2694-2695 of 2005

PETITIONER: M/s Makhija Construction & Enggr. P. Ltd

RESPONDENT: Indore Development Authority and Ors

DATE OF JUDGMENT: 19/04/2005

BENCH: Ruma Pal & C.K. Thakker

JUDGMENT: J U D G M E N T

(Arising out of SLP) Nos. 21113-21114 of 2001)

RUMA PAL, J.

       Leave granted.

       The appellant’s grievance is that his tender for allotment  of land reserved for educational use was not accepted by the  respondent- authority.  The tender notice was published on   22nd September 1993.  It invited tenders from "registered  institutions who manage educational activities or are constituted  for this purpose" for 10,340 sq. mtrs. of land reserved for  educational purposes under the respondent-authority’s scheme.   Of the tenders submitted the three tenderers  were \026 the  appellant, Jagriti Bal Mandir Society (hereafter referred to as  ’Jagriti’) and Crescent Public school (hereafter referred to as  ’Crescent’) who bid Rs. 261 per Sq.m., Rs.201 per Sq.m. and  Rs. 177.60 per Sq.m. respectively.  The appellant, as its name  suggests,  is a construction company.  However, one of its  objects in its Memorandum of Association is claimed to be to  construct and establish schools.  Because the appellant did not  have any experience of managing an educational institution its  tender was rejected  on 28th December  1993 and , the  respondent authority allotted the land in equal halves to Jagriti  and Crescent.   The appellant and Jagriti filed writ petitions in the Gujarat  High Court.  The appellant’s grievance was that he was the  highest tenderer having quoted for the land at Rs.261 per sq.  mtr. and that his tender was rejected unreasonably.  Jagriti’s  grievance was that it had bid for the land at  Rs.201 per sq. mtr.  which was higher than the bid of Crescent which had offered  only Rs.177.60 per sq. mtr.  Jagriti, therefore, claimed that the  whole of the land should have been made available to it.         Both the writ petitions were disposed of by an order dated  4th March 1998 by which the Court directed the respondent-  authority to consider the representations of the appellant and  Jagriti.  The matter was re-considered by respondent No. 1 and  again by resolution dated 7th December 1998, the decision  taken earlier was re-affirmed.   Pursuant to the decision, a letter  of allotment was issued to Jagriti and Crescent.         This led to a second round of litigation by the appellant  and Jagriti reiterating their earlier stand.  Both the writ petitions  were allowed by a common order on 29th February 2000.  The  learned Single Judge was of the view that the requirement in  the tender that the tender would be accepted only from

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registered institutions which are engaged in educational  activities had an alternative which was ignored by the  respondent No.1, namely, that the institutions constituted for  that purpose could also participate.  Since the appellant’s  memorandum showed that the appellant was constituted, inter- alia, for setting up schools, it could not be disqualified on this  ground.  The respondent No. 1 was accordingly required to  decide the representations of the appellant and Jagriti afresh  with a speaking order without being influenced by the earlier  recommendations or earlier resolutions.         Three appeals were preferred from this order before the  Division Bench.  One appeal was by Jagriti and two by  Crescent. Jagriti’s appeal was dismissed for default.  One of  Crescent’s appeal was dismissed on the ground that the Single  Judge had done substantial justice.         The respondent No. 1 \026 authority then reconsidered the  matter again and by a resolution dated 18th September 2000, in  keeping with the observations of the High Court, held that the  appellant was competent to tender and accept the tender. Its  tender was accepted and allotment of the entire plot of 10,340  sq. mtrs.  was made to the appellant.          Immediately after this, Jagriti’s Letters Patent Appeal  was  restored and ultimately after hearing the parties allowed by the  impugned order. The learned Single Judge’s decision  was set  aside and the respondent No. 1 was given the liberty to  implement and give effect to the advertisement published by it  on 22nd September 1993.         The appellant has challenged the decision of the Division  Bench contending that the dismissal of Crescent’s Letters    Patent Appeal from the order of the learned Single Judge  operated as res judicata and that in any event, the  advertisement had been misconstrued by the Division Bench to  mean that the tenderers had to be engaged in education  without considering that the advertisement allowed institutions  which were merely constituted for the purpose of education to  apply.           The respondents have submitted that there was no  question of the order of the Division Bench dismissing  Crescent’s appeal operating as res judicata against Jagriti  because Jagriti was only a co-respondent in Crescent’s appeal.   It is also argued that the principle of res judicata would only  apply if there was a hearing and a decision -  both which were  absent when the order on Crescent’s appeal was passed.  On  the question of the eligibility of the appellant to apply, it was  contended that irrespective of the construction of the  advertisement since Jagriti had established experience in the  field of education it was better qualified than the appellant.   It is  submitted that the appellant could not be said to have been  constituted for the purpose of education.  The objects of  Memorandum of Association merely list possible fields of  diversification.  It is also submitted that there was nothing in the  advertisement from which it could be assumed that the tender  would be given to the highest bidder.  In fact, money was not  the sole governing factor.  In this connection, reference was  made to Government Order dated 28th August 1986 from  Madhya Pradesh Tender Advertisement Law Manual.  It  records that the Government had taken a decision that public  institutions like educational, religious and charitable institutions  may be allotted space for the purposes for which they were set  up by determining the price of land allotted on the principle of  ’No Profit No Loss’ basis.   On the merits, Jagriti’s submissions appear to be correct.   The tender notice had asked for bids from registered institutions  carrying on educational activities.  The clear implication of the  language is that the institution must be one which is constituted

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for the purpose of educational activities, if  it does not already  manage educational activities.  The tender notice specified,  inter alia, that the tender form had to be accompanied with  "description of activities managed earlier by the society".  In  response to the appellant’s tender, by letter dated                    1st December, 1993, the respondent No.1 had informed the  appellant that it was required to submit the detailed particulars  of the educational activities of the institution.  The appellant admittedly has no experience in  educational activities of any sort. The question then is- Was it  constituted for educational purposes? Out of 67 objects  mentioned in its Memorandum of Association, the main objects  of the appellant were to carry on the business of constructing,  building, roads, bridges etc. and to act as a supplier of  hardware, paints, sanitary fittings, construction material and so  on. The objects incidental or ancillary to the attainment of the  main objects, are specified in Clauses 3 to 28.  Other objects  are mentioned in Clauses 30 to 67.  These include a wide  variety of possible diversification of the appellants businesses.  The last Clause reads: " 67. To establish and construct  shopping markets, show rooms Nursing  homes, schools, clubs houses, cinemas,  office premises and other buildings for  commercial purposes on lands seized  and licence basis".

We do not read this as in any way justifying the  appellant’s claim that it was constituted for educational  purposes.  To be ’constituted for’ means the primary objective  of the constitution.  The primary objective of the appellant was  certainly not to carry on educational activities.    Besides the  language of Clause 67 does not indicate that even this object is  to carry on the running of the management of the school, but  rather pertains to the construction of school buildings. Where  the object was to carry on the business, this has been  specifically so stated in the remaining objects clauses, for  example in Clauses 30-31, 34-37, 40-42, 44-64 and 66 of the  Memorandum. The importance of the requirement for being involved with  educational activities will also appear from the Regulations for  Transfer of Property and Other Ancillary Matters, 1987 framed  under the Madhya Pradesh Nagar Tatha Gram Nivesh  Adhiniyam 1973, where Regulation 33 (which refers to the  respondent No.1 as ’the Authority’) says  that:- (i)     The Authority may transfer any property  ear-marked in the layout of any scheme  for fulfillment of any community needs  like education, medical, social, etc. by  direct negotiations with such registered  institutions which run hospitals, schools  or to such bodies dedicated to science,  art, music, literature etc. or engaged in  other social or community purposes.

(ii)    The Authority shall determine the rate of  premium on "No profit No loss basis",  each year commencing from 1st  October, at which such property shall be  transferred to such institutions or  bodies."

The fact that the appellant had bid the highest was, in the  circumstances, immaterial as the object of allotting the land to  an educational institution was not the making of profit.  The

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learned Single Judge was therefore wrong in construing the  advertisement dated 22nd September, 1993 in the manner he  did and the Appellate Court erred in dismissing Crescent’s  appeal.  In our opinion the appellant was not competent to  participate in the tender. However, the appellant is entitled to succeed on the  ground that the order of the Division Bench disposing of   Crescent’s appeal operated as res judicata to bind not only  Crescent but also Jagriti and the appellant. It makes no  difference that Jagriti was a co-respondent with the appellant.   The principle of res judicata has been held to bind co- defendants if the relief given or refused by the earlier decision  involved a determination of an issue between co-defendants      (or co-respondents as the case may be). This statement of the  law has been approved as far back as in 1939 in Munni Bibi  vs.  Trilokinath 58 I.A. 158,165, where it has been said that to  apply the rule of res judicata  as between co-defendants three  conditions are requisite. "(1.) There must be a conflict of interest  between the defendants concerned; (2.) it  must be necessary to decide this conflict in  order to give the plaintiff the relief he claims;  and (3.) the question between the defendants  must have been finally decided."

This view has been consistently followed by this Court.  [See:  Iftikhar Ahmed Vs. Sahid Meharban Ali, (1974) 2 SCC  151  where the principle was extended to bind co-plaintiffs;  Mahboob Sahab vs. Syed Ismail AIR 1995 SC 1205].  

In the present case the facts show that all the three  conditions were fulfilled.  There was a conflict of interest  between the two co-respondents in Crescent’s appeal, namely  between Jagriti and the appellants. For the purposes of  deciding the relief, if any, to be granted to Crescent it was  necessary for the Appellate Court to decide whether the  appellant was entitled to participate.  Although, the decision of  the Appellate Court is cryptic, nevertheless, it cannot be said  that the Court had not applied its judicial mind to the merits of  the case.  The exact language of the order disposing  of the  Crescent’s appeal reads as follows:-

" Heard.   Dismissed as the order of the Hon’ble Single  Judge has done substantial justice, it also  says that I.D.A. would decide the matter by all  considerations.  This order is passed after  hearing the L/C for the parties for about an  hour."

Jagriti’s counsel  was recorded as being present.  The  fact that the Appellate Court was wrong in affirming the decision  of the learned Single Judge would not make the decision less  binding. [See: State of West Bengal vs. Hemant Kumar  Bhattacharjee AIR 1966 SC 1061; Gorie Gouri Naidu vs.  Thandrothu Bodemma AIR 1997 SC 808, 809]    The counsel for Jagriti has referred us to several  decisions viz. Gopal Upadhyaya and Ors. vs. Union of India  and Ors. 1986 (Supp) SCC 501, Ambica Quarry Works vs.  State of Gujarat & Ors. (1987) 1 SCC 213, Deena Alias Deen  Dayal & Ors. vs. Union of India &  Ors. etc.etc. (1983) 4 SCC  645 and Krishena Kumar Vs. Union of India & Ors. (1990) 4  SCC 207.  None of  the decisions are apposite.  They refer to  the principle of precedent which is distinct from the principle of

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res judicata. A precedent operates to bind in similar situations  in a distinct case.  Res judicata operates to bind parties to  proceedings for no other reason, but that there should be an  end to litigation.  In the circumstances, the appeals are allowed without any  order as to costs.