REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.                OF 2009 (Arising out of S.L.P. (C) No. 13149 of 2008)

Ravi Development       .... Appellant(s)

Versus

Shree Krishna Prathisthan & Ors.              .... Respondent(s)

WITH CIVIL APPEAL NOS………….OF 2009

(Arising out of S.L.P.(c) Nos. 11229, 11355-11356,  21754-21755 & 21756-21757 of 2008)

J U D G M E N T  

P. Sathasivam, J.

1) Ravi  Development  and  Maharashtra  Housing  and  

Area  Development  Authority  (in  short  “MHADA”)  filed  

S.L.P.(c) No. 13149 of 2008, S.L.P.(c) Nos. 11229 of 2008  

and  11355-11356  of  2008  against  the  common  order  

dated 27.03.2008 in W.P. (L) No. 2714 of 2007 with PIL  

No. 72 of 2007 of the High Court of Bombay, whereby it  

was  held  that  inviting  public  tender  on  20.05.2007  for  

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development  of  the  Government  lands  by  invoking  the  

Swiss Challenge Method with a view to confer preferential  

treatment  to  Ravi  Development  was  wholly  unfair,  

unreasonable, arbitrary, illegal and quashed the contract  

awarded  to  Ravi  Development.   As  in  the  impugned  

judgment,  High  Court  disapproved  the  Swiss  Challenge  

Method and accordingly,  MHADA had refused to  award  

the contract to Shree Developers to whom land at Kavesar,  

Thane was allotted and Gurukrupa Developers, to whom  

land at Chhitalsar Manpada at Thane was allotted, both  

the  said  developers  filed  S.L.P.(c)  Nos.  21754-21755  &  

21756-21757  of  2008  respectively  challenging  the  very  

same  common  order  after  getting  permission  from  this  

Court.

2) Leave granted.

3) The  common  issue  involved  in  all  these  appeals  

centres around the validity of the Swiss Challenge Method  

adopted by the MHADA on a pilot basis with respect to a  

proposal  received  from  a  private  entrepreneur  i.e.  Ravi  

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Development for development of undeveloped land owned  

by MHADA.  

4) Brief facts in a nutshell are as under:

Ravi Development submitted a proposal dated 25.08.2006  

to the Chief Executive Officer, MHADA for development of  

undeveloped land in Survey No. 126 to 130, 150 (pt.), 151  

(pt.) at Mira Road, District Thane which was received by  

MHADA on 31.08.2006.  On 11.10.2006, similar proposal  

was  also  submitted  by  Ravi  Development  to  the  Chief  

Minister  of  Government  of  Maharashtra  who  was  also  

holding  the  portfolio  of  Housing.    The  Desk  Officer,  

Housing  Department,  Government  of  Maharashtra  

forwarded the aforesaid proposal received by the office of  

Chief Minister on 11.10.2006 to MHADA calling upon a  

detailed  report.   On  04.12.2006,  the  Chief  Executive  

Officer, MHADA submitted note regarding proposal of Ravi  

Development  to  Housing  Department  of  Government  of  

Mahrashtra.  The Chief Executive Officer, Maharashtra on  

24.04.2007 submitted detailed report of West Bengal Joint  

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Venture Method and Jaipur Swiss Challenge Method to  

Housing Department of Government of Maharashtra and  

recommended for Swiss Challenge Method thereby seeking  

Government’s  approval.   It  was  recommended  that  

proposal  received  could  be  advertised  under  Swiss  

Challenge Method on pilot basis.   

5) The  Housing  Department  of  Government  of  

Maharashtra  approved  Swiss  Challenge  Method  on  

17.05.2007 and directed MHADA to use the same on pilot  

project  basis  and  for  other  similar  proposals  in  future  

MHADA  should  take  policy  decision  at  its  own  level.  

Pursuant  to  the  said  decision  MHADA  issued  a  public  

notice  on  20.05.2007  for  development  of  the  land  in  

question and two other lands by Swiss Challenge Method.  

In  the  public  notice  as  well  as  bid  document,  it  was  

specifically stated that Swiss Challenge Method would be  

applied.  The Swiss Challenge Method was also explained  

in the publication as well as in bid document making it  

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clear that the developer, who has given proposal, would  

have first right of refusal.   

6) In respect of the land in question, MHADA received  

four  bids  on  11.06.2007,  they  are:   (a)  M/s  EBR  

Enterprises; (b) M/s Harshad P. Doshi Associates; (c) M/s  

Ravi Developments; and (d) M/s Ostwal Builders Ltd.  All  

the bidders including M/s Ostwal Builders Ltd. accepted  

knowledge of initiator of proposal and following of Swiss  

Challenge Method and gave an undertaking to the effect  

that they are well aware of Swiss Challenge Method and  

that the original proposer shall be given an opportunity to  

take up the project on the highest eligible bid offer.  They  

were  also  informed  that  in  case  the  original  proposer  

agrees  to  match  his  bid  to  the  highest  offer  then  the  

project shall be awarded in his favour.  On 14.06.2007,  

Ravi Development wrote a letter to MHADA accepting to  

match  highest  bid  amount.   While  so  on  04.09.2007,  

Shree Krishna Pratisthan filed PIL No. 72 of 2007 before  

the High Court of Bombay challenging the public notice  

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dated  20.05.2007  issued  by  MHADA only  in  respect  of  

Mira Road Project and not in respect of two other projects.

7) On 22.11.2007, MHADA passed Resolution No. 6284  

of  2007  accepting  the  bid  of  Ravi  Development  and  

awarded  contract  to  them  for  getting  construction  of  

30,000 Sq. Mtr.  + 18,841 sq. mtr.  (in lieu of receivable  

amount)  =  48,841  sq.  mtr.   After  giving  undertaking  

accepting  the  Swiss  Challenge  Method  and  after  

participation and having failed in tendering process, M/s  

Ostwal  Builders  Ltd.  filed  W.P.  (L)  No.  2714  of  2007  

challenging  the public notice dated 20.05.2007 as well as  

MHADA’s resolution dated 22.11.2007.  The High Court of  

Bombay,  by  the  impugned  common  order  dated  

27.03.2008, allowed the writ petition holding that Swiss  

Challenge  Method  itself  is  arbitrary  and  unreasonable  

consequently,  struck  down  the  action  taken  thereto.  

Aggrieved by the said order, MHADA, Ravi Development,  

Shree  Developers  and  Gurukrupa  Developers  filed  the  

above appeals by way of special leave petitions.

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8) Heard Mr. G.E. Vahanwati, learned Solicitor General  

of India for State of Maharashtra and  MHADA, Mr. P.P.  

Rao,  learned  senior  counsel  for  Ravi  Development,  Mr.  

Mukul  Rohtagi,  learned  senior  counsel  for  Shree  

Developers,  Mr.  P.H.  Parekh,  learned senior  counsel  for  

Gurukrupa  Developers  and  Mr.  Shyam Diwan  and  Mr.  

Rakesh Dwivedi, learned senior counsel for the contesting  

respondents.

9) Learned Solicitor General for the State and MHADA  

and  learned  senior  counsel  appearing  for  Ravi  

Development contended that there was no flaw in applying  

Swiss Challenge Method and awarding contract in favour  

of Ravi Development.  They also submitted that there is no  

arbitrariness or illegality in the said contract as concluded  

by the High Court,  on the other hand, Swiss Challenge  

Method is followed in many countries as well as several  

States  in  India  also.   It  was  also  pointed  out  that  by  

adopting the said method proper public notice was issued,  

all  the  intending  developers  offered  their  bid  and  

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originator of proposal was given an opportunity to match  

the  highest  bid  amount  and  after  fulfilling  all  the  

formalities  the  contract  was  accepted  in  favour  of  Ravi  

Development.   It  was  further  submitted  that  the  

Government of Maharashtra was, in no way, suffered any  

financial loss or sidelined the other developers in awarding  

contract in favour of Ravi Development.   It is their claim  

that the High Court cannot substitute its decision in the  

light  of  various  clauses  in  the  tender  documents,  

particularly, when the policy decision of the Government  

is  based upon the expert  opinion.   On the other  hand,  

learned  senior  counsel  appearing  for  the  contesting  

respondents  submitted  that  in  the  absence  of  any  

innovative  method  offered  by  Ravi  Development,  

application of  Swiss  Challenge Method and awarding  of  

contract in their favour cannot be sustained.  They also  

submitted  that  the  High  Court  was  fully  justified  in  

quashing the public  notice  and awarding of  contract  in  

favour of Ravi Development.  

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10) We  have  considered  the  rival  contentions  and  

perused the relevant materials.   It  was highlighted that  

the High Court has gone totally wrong in observing that  

the proposal of Ravi Development under Swiss Challenge  

Method ought to have been innovative and since the said  

proposal  was not  innovative,  the same should not have  

been  processed  under  Swiss  Challenge  Method.   With  

regard  to  the  said  conclusion,  MHADA  and  the  

Government of Maharashtra placed materials to show that  

the  said  proposal  under  Swiss  Challenge  Method  by  

‘originator of proposal’ need not be innovative at all and  

the said requirement has nowhere been stated under the  

said Swiss Challenge Method.  Accordingly, it was pointed  

out that the repeated observations of the High Court to  

that effect are unsustainable.   

11) It  is  useful  to  refer  the  Project  details  about  the  

contract allotted to Ravi Development:

“Project Details

1.1 Maharashtra  Housing  and  Area  Development  Authority  (MHADA)  established  under  MHADA  

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Act,  1976  is  engaged  in  the  activity  of  housing  development,  Konkan  Housing  and  Area  Development Board is a regional unit of MHADA.  An  opportunity  to  private  develop  land  at  Mira  Road, District Thane, owned by MHADA, is made  available.  

1.2 Scheme of the Project:

1. The  work  of  Planning,  scheme,  actual  construction and for that purpose obtaining  necessary sanctions from various authorities  concerned shall be done by the developer.

2. The area of the said project is approximately  3.55  hectares,  bearing  survey  Nos.  226  to  230, 150 (part) and 151 (part).

3. The  successful  developer  has  to  prepare  plans/designs in consultation with MHADA.

4. In this project approximately 60% of the flats  should  be  for  Lower  Income  Group,  is  possible.

5. Plans shall have got to be sanctioned by the  Mira-Bhayander  Municipal  Corporation.  Save and except the minimum area required  to be handed over to MHADA free of costs,  the  developer  will  be  at  liberty  to  sell  remaining area at market price.

1.3 Details of the Project:

1. Area Approximately 3.55 hectares.

2. Area  available  for  construction  approximately 70,000 sq. meters.

3. The  specifications  of  the  flats,  which  are  required to be handed over to MHADA free of  costs, shall be as directed by MHADA.  

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4. The  remaining  area,  as  per  sanctions  of  Mira-Bhayandar Municipal Corporation, may  be  utilized  for  High  Income  Group  and  Commercial purpose.

1.6 SWISS CHALLENGE METHOD

1. MHADA has received a Suo Moto proposal from a  developer  for  development  of  this  land.   The  tenders  will  be  received  in  response  to  this  advertisement will be compared with the proposal  given  by  the  developer  (original  proposer)  to  MHADA.  As per the Swiss Challenge method the  developer who has given the original proposal has  the opportunity (first  right of refusal).   However,  the  said  developer  has  to  match/raise  his  bid  (rate)  with  the  highest  proposal  tendered.   The  original  proposer  shall  have  the  opportunity  to  take up the project  on highest  offer,  and in the  event if he refuses, then the highest bidder shall  have right to implement the project.  

As such if the original proposer exercises his  right of first refusal then the project will be offered  to the highest bidder.   However,  if  such highest  bidder refuses the offer then the amount deposited  shall be forfeited.”   

12) It  was  highlighted  by  the  appellants  that  Swiss  

Challenge  Method  is  adopted  in  Chile,  Coasta  Rica,  

Guram  (U.S.  Territory),  Indonesia,  Korea,  Philippines,  

South Africa,  Sri  Lanka,  Taiwan (China),  Virginia  (U.S.)  

and also in India by Andhra Pradesh, Rajasthan, Madhya  

Pradesh,  Chhattisgarh,  Gujarat,  Uttaranchal,  Punjab  

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States  and  Cochin  Port  authorities.   The  above  

information  by  way  of  an  assertion  shows  that  Swiss  

Challenge  Method  is  already  in  prevalence  in  various  

States in India as well as overseas.   

13) The application of Swiss Challenge Method by MHADA is  

accused  of  being  not  fair  and  transparent  but  the  said  

contention raised by the respondent as well as concluded in  

the impugned judgment cannot be relied upon as the public  

notice  for  tender  dated  20.05.2007  issued  by  MHADA  had  

clearly mentioned about the said method and the scheme to be  

followed under it. Moreover, in the said notice the rule of “First  

right  to refusal”  to the “originator  of  the proposal”  has also  

been  discussed  accordingly.  Though  the  name  of  the  

“originator of the proposal” may not have been mentioned but  

it was contended in the said public notice that “MHADA has  

received a suo motu proposal from a developer for development  

of this land” pointing out the land marked in the said public  

notice for due development. So it can be concluded that the  

existence of the “originator of the proposal” was very much in  

knowledge of the other builders at the time of applying for the  

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said bidding.   The relevant portion of  the Judgment of  this  

Court in Monarch Infrastructure (P) Ltd. vs. Commissioner,  

Ulhasnagar Municipal  Corporation and Others,  (2000)  5  

SCC 287, which has been relied upon by the High Court in the  

impugned judgment reads as under :-

“10. There have been several decisions rendered by this  Court on the question of tender process, the award of  contract and have evolved several principles in regard to  the same. Ultimately what prevails with the courts in  these matters is that while public interest is paramount  there should be no arbitrariness in the matter of award  of  contract  and all  participants  in the tender  process  should  be  treated  alike.  We  may  sum  up  the  legal  position thus:

(i)  The Government  is  free  to  enter  into  any contract  with citizens but the court may interfere where it acts  arbitrarily or contrary to public interest.

(ii)  The  Government  cannot  arbitrarily  choose  any  person it likes for entering into such a relationship or to  discriminate between persons similarly situate.

(iii)  It  is  open  to  the  Government  to  reject  even  the  highest  bid  at  a  tender  where  such  rejection  is  not  arbitrary or unreasonable or such rejection is in public  interest for valid and good reasons.”

We are of the view that the said rejection of the highest bidder  

has  been  made  by  following  the  pre-condition  of  the  

acceptance  of  the  tender  already  given  in  the  said  public  

notice.

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14) The  appellant  had  provided  MHADA  in  its  innovative  

project  plan how to balance with highly developed high-rise  

with the low-rise building of lower specifications built up for  

the EWS, LIG and MIG groups and in that way this project  

plan was in accordance with the objective MHADA was looking  

for  as  well  as  profit  sharing  mode  in  a  public-private  

partnership. After going through this idea, it can be concluded  

that  the contention given in  the  impugned judgment  of  the  

High  Court  that  there  was  dearth  of  innovativeness  and  

originality in the proposal made by the appellant is wrong on  

factual  ground.   Moreover,  the  acceptance  letter  of  the  

appellant  to  accept  the  project  on the  terms offered by the  

highest bidder to MHADA was sent on 14.06.2007 i.e. much  

before the filing of PIL No. 72 of 2007 to challenge the public  

tender. So it can be concluded that failure in the said bidding  

has  raised  the  question  of  acceptability  of  Swiss  Challenge  

Method  and  not  before  that  when  the  public  notice  was  

actually published.  

15) It was also pointed out that the tender notice and bid  

documents  specify  the  details  about  Swiss  Challenge  

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Method  without  mentioning  the  innovativeness  of  the  

proposal, in such circumstances, interference by the High  

Court under the wrong assumption of innovativeness as  

one  of  the  pre-conditions  in  the  proposal  of  Ravi  

Development is totally incorrect.   

16)   The  following  materials  are  culled  out  from  the  

information  furnished  by  MHADA  and  State  of  

Maharashtra.  They are:-

At Mira Road, total land available with MHADA is  

100286.25 sq.mtr. and out of the same (excluding  

area of 18969.40 sq.mtr. which went under D. P.  

Road,  Nalla,  amenities,  open  spaces  etc.),  near  

about 46400 sq.mtr. have been utilized and on the  

same, construction of merely 17840.23 sq.mtr. is  

actually carried.  Thus, it  is a fact that with the  

available  subsidy  to  keep  prices  of  LIG,  EWS &  

MIG affordable MHADA has to construct low rise  

structures  with  poor  specifications  and  MHADA  

was  not  able  to  utilize  the  potential  of  the  land  

which is the case in most of the MHADA layouts.  

Further from the year 2001 to 2005 MHADA was  

not able to sale these constructed houses even at  

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reduced prices & MHADA had same experience in  

case of another property at Ambernath, Thane.  As  

against this, in the present proposal submitted by  

M/s  Ravi  Development  on  the  available  balance  

land  of  35500  sq.  mtr.,  construction  of  70000  

sq.mtr.   was proposed with  richer  specifications.  

Furthermore,  for  allowing  0.8  TDR,  additional  

construction 65052.80 sq.mtr. (with the total share  

of MHADA to 48841.02 sq.mtr.) will be there on the  

said land of 35500 sq.mtr. from that point of view,  

proposal  of  Ravi  Developments  can  be  called  as  

innovative  proposal.   Further,  though  as  stated  

herein above, Swiss Challenge Method is adopted  

in various countries outside,  and also in various  

States in India,  but for  MHADA and for State of  

Maharashtra,  this was suggested and applied for  

the first time therefore, it can certainly be called as  

pilot  innovative  proposal  of  M/s.  Ravi  

Developments.

17)   It  is  also  seen  from  the  approved  order  of  the  

Government of Maharashtra dated 17.05.2007 that Swiss  

Challenge Method has to be applied in the area of Mira  

Road land, Kavesar land, Chitalsar Manpada land on Pilot  

Project basis and MHADA has to evolve its own policy for  

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taking  decision  in  future  in  identical  cases.   In  those  

circumstances,  as  rightly  pointed  out  by  Mr.  G.E.  

Vahanwati,  learned  Solicitor  General  appearing  for  

MHADA and Mr. P.P. Rao, learned senior counsel for Ravi  

Development  that  requirement  of  innovativeness  is  not  

there  in  Swiss  Challenge  Method,  even  otherwise,  the  

above mentioned facts clearly show that the proposal of  

Ravi Development under the Swiss Challenge Method was  

a  new  innovative  venture  for  MHADA  and  for  State  of  

Maharashtra.

18)  The next ground on which the High court interfered  

with  the  decision  of  MHADA  awarding  contract  for  

developing Mira Road in favour of Ravi Development was  

about the influence of the Chief Minister of Maharashtra.  

With regard to the said allegation,  the MHADA and the  

State  of  Maharashtra  placed  relevant  materials  which  

show  that  at  first  Ravi  Development  submitted  their  

proposal  to  the  Chief  Executive  Officer,  MHADA  on  

25.08.2006  and  thereafter,  to  the  Chief  Minister  of  

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Maharashtra  on  11.10.2006.   It  is  clear  from  the  

provisions  of  MHADA  Act,  1976,  that  MHADA  is  an  

undertaking  working  under  the  control  and  in  

coordination with the Housing Department of Government  

of Maharashtra.  It was explained that Ravi Development  

on  25.08.2006  submitted  the  proposal  to  the  CEO,  

MHADA and since no immediate decision was taken by  

MHADA level as the same was new proposal, therefore, on  

11.10.2006 similar proposal was submitted by them to the  

Chief  Minister  of  Government  of  Maharashtra.   It  was  

pointed  out  that  the  Chief  Minister  had  portfolio  of  

Housing  Department  and  as  per  Rules  3  and  12  of  

Maharashtra Government Rules for Conduct of Business,  

1975  –  business  of  the  concerned  Department  of  the  

Government are transacted by the Cabinet Minister of the  

said  Department.   In  those  circumstances,  there  was  

nothing  wrong  in  submitting  the  same  proposal  to  the  

Chief Minister of Maharashtra on 11.10.2006.  As rightly  

pointed  out  by  Mr.  P.P.  Rao,  learned senior  counsel,  if  

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there  was  no  decision  by  MHADA  in  respect  of  their  

proposal dated 25.08.2006, naturally the party concerned  

viz., Ravi Development in the normal circumstances could  

approach to the higher authorities, in the case on hand,  

Cabinet  Minister  of  Housing  Department  (i.e.  Chief  

Minister  of  Maharashtra),  hence  rightly  approached  the  

Chief  Minister  by  submitting  the  same  proposal  on  

11.10.2006  which   cannot  be  motivated  or  deemed  as  

contrary to any of the Government orders.  It was pointed  

out that the Chief Minister or Government has not at all  

favoured Ravi Development and no order or endorsement  

to that effect was either made or reflected anywhere in the  

record.  On the other hand, the Desk Officer of Housing  

Department  of  Government  of  Maharashtra,  by  letter  

dated  20.10.2006,  simply  forwarded  the  proposal  

submitted by Ravi Development to MHADA thereby calling  

upon  a  detailed  report.   Pursuant  to  the  said  

communication, CEO, MHADA recommended the proposal  

of Ravi Development on 04.12.2006 and also submitted a  

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detailed  study  report  on  24.04.2007  to  Principal  

Secretary,  Housing  Department,  Government  of  

Maharashtra after examining the merits and demerits of  

‘West  Bengal  Joint  Venture  Method’  and  ‘Jaipur  Swiss  

Challenge  Method’  and  recommended  for  following  the  

Swiss  Challenge  Method  and  sought  Government’s  

approval.  It is seen that thereafter, Housing Department  

of  Government  of  Maharashtra,  by  letter  dated  

17.05.2007,  issued  directions  to  follow Swiss  Challenge  

Method  as  recommended  by  MHADA  and  also  directed  

MHADA to take policy decision at its own level for other  

similar  proposals  in  future.   It  was  pointed  out  that  

thereafter, by a letter dated 14.06.2007, in terms of the  

Ravi Developments willingness to match the highest bid,  

MHADA took a decision on 22.11.2007 to award the said  

contract  to  Ravi  Development.   In  those  circumstances  

and  in  view  of  the  materials  placed,  particularly,  two  

letters  dated  20.10.2006 and 10.05.2007 issued by  the  

Housing Department of Government of Maharashtra, it is  

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clear  that  no  favoritism  was  ever  shown  to  Ravi  

Development  at  the  instance  of  the  Chief  Minister  of  

Maharashtra.  We are satisfied that contrary observations  

of the High Court are baseless and not warranted.   

19) Apart from the above information and conclusion by  

us,  it  was  highlighted  that  MHADA,  as  a  State  

Government  Undertaking,  works  under  the  control  of  

Housing Department of Government of Maharashtra and  

as per Section 164 of the MHADA Act, 1976, Government  

could  issue  instructions  if  really  had  to  favour  Ravi  

Development and the same would be statutorily binding  

on MHADA.  However, the materials placed by the State  

and MHADA show that  on receipt  of  the representation  

from the Ravi Development without any endorsement or  

direction to  consider  the case of  Ravi  Development,  the  

officer concerned merely forwarded the same to the Chief  

Executive  Officer,  MHADA  to  offer  their  remarks.   As  

rightly  pointed  out,  perusal  of  the  entire  documents  

clearly shows that there was no attempt either from the  

21

authorities of the State of Maharashtra or from the Chief  

Minister  to  favour  Ravi  Development.   In  such  

circumstances,  the  contention  of  the  learned  Solicitor  

General  appearing  for  the  State  and  MHADA  is  well  

founded and the contrary conclusion of the High Court is  

liable to be rejected.  

20) In  the  public  notice  and  bid  documents  dated  

20.05.2007,  it  was  specifically  mentioned  about  the  

principle  of  “initiator  or  proposer”  and  with  the  said  

understanding  Shree  Ostwal  Builders  Ltd.  has  

participated  in  the  tender  process  and  also  gave  an  

undertaking  on  11.06.2007  while  submitting  their  bid  

document.  The following undertaking submitted by them  

which is not in dispute is as follows:-

“We are well aware of Swiss Challenge method and that  the original proposer of the suo moto proposal shall be  given opportunity to take up the project on the highest  eligible bid offer.  In case the original proposer agrees to  match his bid to the highest offer then the project shall  be awarded in his favour.”

In view of clear undertaking, as rightly pointed out by the  

State, after participation in tender process and failing in  

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the  same  when  the  contract  was  awarded  to  Ravi  

Development by MHADA’s decision dated 22.11.2007 only  

at  that  point  of  time  i.e.  on  11.12.2007  Shree  Ostwal  

Builders filed a writ petition in the High Court.    

21) It  is  relevant  to  mention  that  the  legality  of  Swiss  

Challenge Method in its entirety is not challenged. Except  

the land at Mira Road, in respect of other two remaining  

properties, no challenge was ever raised till  date by any  

party.   Only  after  issuance  of  public  notice  in  the  

newspaper  to  follow  Swiss  Challenge  Method,  Krishna  

Pratisthan choose to file public interest litigation that too  

only  in  respect  of  land  at  Mira  Road,  Thane  and  

admittedly no challenge was raised in respect of other two  

properties.  

22) It  was  submitted  by  the  learned  Solicitor  General  

before us that as per the initial  tender document, what  

was  receivable  for  MHADA  was  30,006  sq.  mtr.  

construction (out of 70000 sq.mtr. construction) with 1.2  

Floor Space Index (FSI).  As per the rules, with the help of  

23

Transferable  Development  Rights  (TDR),  FSI  can  be  

extended upto 2 that means 0.8 TDR = 65052.80 sq.mtr.  

can  be  utilized.   For  this  utilization  of  0.8  TDR  i.e.  

additional construction of 65052.80 sq.mtr., MHADA was  

entitled to receive amount of Rs.2750/- per sq. mtr. which  

comes to Rs.17.89 crores.  However,  it  was pointed out  

that changing the said terms in the approval order dated  

22.11.2007, it is the assertion of MHADA that it gained  

more and Ravi Development had to loose more, as in view  

of  the  said  amount  of  Rs.17.89  crores,  M/s  Ravi  

Development was directed to give additional constructed  

carpet area of 18841 sq. mtr., whose actual market value  

comes to Rs.60.69 crores.  Thus, it was pointed out that  

after the said alternate construction of Rs.60.69 crores is  

compared to receivable amount of  Rs.17.89 crore,  then,  

MHADA is in fact gaining advantage of Rs.42.80 crores.  It  

was brought to our notice that all the details are matter of  

record.  In those circumstances, it was pointed out that  

the terms were altered to the great advantage of MHADA  

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and more dis-advantage of Ravi Development.   

23) The  further  particulars  furnished  by  the  State  of  

Maharashtra  show  that  National  Housing  Policy  &  

Maharashtra State  Housing Policy promote Public-Private  

partnership  for  construction  of  EWS  (Economically  

Weaker Section), LIG (Lower Income Group), MIG (Middle  

Income Group) Housing. MHADA is a major player for the  

same  in  state  of  Maharastra.   Subsidy  provided  is  not  

adequate  and MHADA has no control  on actual  quality  

construction, therefore, MHADA has to construct low rise  

and ground floor structures with poor specifications so as  

to keep the prices of the EWS, LIG, MIG houses affordable  

to masses and FSI of 1.20 is unutilized due to the low rise  

structures  and  poor  specifications  in  almost  all  the  

layouts  of  MHADA  in  Mumbai  and  in  Mumbai  

Metropolitan region and MHADA is finding it  difficult to  

sell  even these  houses at  concessional  rates.  Therefore,  

MHADA  conducted  a  detailed  survey  of  Public  Private  

Participation (PPP) options available for carrying out land  

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developments  for  construction  of  better  EWS,  LIG  and  

MIG  houses  at  affordable  price.  In  the  report  dated  

24.04.2007, written to the Government, pros and cons of  

Joint  Venture  Method and Swiss  Challenge  Method are  

clearly  reflected  and  Swiss  Challenge  Method  is  

recommended with due application of mind. Therefore, on  

that  count  also,  application  of  Swiss  Challenge  Method  

into  present  allotment  of  Mira  Road  land  at  Thane  is  

justified and not violative of Article 14 of the Constitution.

24) As  pointed  out  earlier,  in  the  Swiss  Challenge  

Method, there is no provision for allowing other tenderers  

to  raise  the  bid  further,  when  “initiator  of  proposal”  

accepts to raise up to the highest bid.  It was brought to  

our notice that even there was no such request by Shree  

Ostwal Builders Ltd. after Ravi Development accepting to  

match highest bid by their letter dated 14.06.2007.  

25) It  is  well  settled  principle  that  in  the  matters  of  

Government contract, the scope for judicial review is very  

limited  and  that  the  Court  cannot  substitute  its  own  

26

decision for that of the government vide  Tata Cellular  

vs.  Union of India, (1994) 6 SCC 651 and Air India vs.  

Cochin International Airport, (2000) 2 SCC 617.  Even  

as  early  as  in  State  of  M.P.  and Others vs.  Nandlal  

Jaiswal and Others, (1986) 4 SCC 566, this Court held  

that  when the State  Government is  granting licence for  

putting up a new industry, it is not at all necessary that it  

should  advertise  and  invite  offers  for  putting  up  such  

industry.  The State Government is entitled to negotiate  

with those who have come up with an offer to set up such  

industry.  In that case, the predominant purpose of the  

policy  decision  dated  30.12.1984  was  to  ensure  

construction  and  setting  up  of  new  distilleries  with  

modern technologically advanced plant and machinery at  

new sites where there would be no possibility of air and  

water pollution and if for achieving this purpose the State  

Government  considered  the  offer  of  the  existing  

contractors  and  negotiated  with  them  and  ultimately  

decided to grant to them licences for construction of new  

27

distilleries  on  the  terms  and  conditions  set  out  in  the  

recommendations  of  the  Cabinet  Sub-Committee.   This  

method  was  approved  by  the  Court  and  held  that  the  

State  Government  could  not  be  said  to  have  acted  

arbitrarily or capriciously in violation of Article 14. In 5 M  

& T Consultants, Secunderabad vs.  S.Y. Nawab and  

Another, (2003) 8 SCC 100, it is worthwhile to refer the  

following conclusion in para 17:  

“17. … … …  It is by now well settled that non-floating  of  tenders  or  absence  of  public  auction  or  invitation  alone is no sufficient reason to castigate the move or an  action  of  a  public  authority  as  either  arbitrary  or  unreasonable  or  amounting  to  mala  fide  or  improper  exercise or improper abuse of  power by the authority  concerned.   Courts  have  always  leaned  in  favour  of  sufficient  latitude  being  left  with  the  authorities  to  adopt their own techniques of management of projects  with  concomitant  economic  expediencies  depending  upon the exigencies of a situation guided by appropriate  financial  policy  in  the  best  interests  of  the  authority  motivated by public interest as well in undertaking such  ventures. … …”

26) The decision to apply Swiss Challenge Method clearly  

fell  within the realm of  executive  discretion and in this  

case, exercised after due application of mind. It is clear  

from the materials placed before us that there is neither  

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arbitrariness nor unreasonableness in the adoption of the  

said policy.   

27) Recently,  there has been shift  towards encouraging  

private  participation  in  the  government  works  and  

promoting of public-private partnership.  The Ministry of  

Housing  and  Urban  Poverty  Alleviation  in  its  National  

Urban Housing Habitat Policy, 2007 specifically mentions  

participation  of  private  sector  as  one  of  its  aims.   It  

envisages  that  the  State  Government  and  the  Central  

Government  shall  act  as  facilitators  and enablers.   The  

Maharashtra  State  Housing  Policy  dated  23.07.2007  

provides  for  private  participation.   Pursuant  to  the  

declared policy by the Central and State Governments, the  

Maharashtra State Housing Board and MHADA are well  

within their rights to apply the Swiss Challenge Method  

with  respect  to  the  MHADA  lands  that  were  lying  

undeveloped since  the  same was  being  applied  only  on  

trial  basis  as  a  method  of  encouraging  private  

participation.  Though an argument was built up by the  

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contesting  respondents  based  on  Ramanna  Dayaram  

Shetty vs.  International Airport Authority of India &  

Ors., (1979) 2 SCC 489, E.P. Royappa vs. State of Tamil  

Nadu,  (1974)  4  SCC 3,  Maneka Gandhi vs.  Union of  

India, (1978) 1 SCC 248, and  Erusion Equipment and  

Chemicals Ltd. vs. State of West Bengal, (1975) 1 SCC  

70, in the light of the stand of the State of Maharashtra  

and MHADA and the materials placed before us, we are of  

the view that while holding that  there is no doubt about  

the principles laid down but they are not helpful to the  

case on hand.  On the other hand, we are satisfied that  

the  State  of  Maharashtra,  after  due  deliberations  and  

study  of  the  methodologies  which  is  prevailing  in  the  

country for dealing with suo motu development proposals,  

decided to apply Swiss Challenge method to the proposal  

of  Ravi  Development.   Further,  Swiss Challenge method  

was being applied by the State Government only on a pilot  

basis.   The method is  transparent  inasmuch as  all  the  

parties  were  well  aware  of  the  “right  of  first  refusal”  

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accorded  to  the  “originator  of  proposal”.   As  per  the  

method which was known to all the parties the originator  

of the proposal must in consideration of his vision and his  

initiative be given to the benefit of matching the highest  

bid submitted.  As pointed out earlier, the said method is  

beneficial to the government inasmuch as the government  

does not loose any revenue as it is still getting the highest  

possible value.  Further, in view of financial crunch and  

availability  of  undeveloped  lands,  National  and  State  

Housing  Policies  provide  for  encouragement  of  private  

participation. The State Government is also well within its  

rights to try out on pilot basis a methodology recognized  

internationally  as  well  as  in  India.   In  those  

circumstances, the High Court is not justified in striking  

out  the  Swiss  Challenge  Method  without  allowing  the  

State Government to exercise its executive discretion on a  

pilot basis.  It is not possible to reject the claim of State of  

Maharashtra  and  MHADA,  in  view  of  shortage  of  land,  

increasing cost in housing sector, the Central and State  

31

Governments  recommended  strongly  for  public  private  

joint ventures and in the said category Swiss Challenge  

method is the acceptable democratic method as compared  

to other options.   

28) The slums in urban area are primarily a resultant of  

shortage of supply of housing and shortage in supply of  

LIG/MIG category of housing.  To ensure that the lands  

for public housing and metropolis like Mumbai are put to  

maximum utilization and maximum tenements are made  

available for families of MIG and LIG categories for which  

in the present scenario one of the way outs is joint venture  

development by public and private bodies.  

29) Due to  shortage  of  land,  ever  increasing  cost,  and  

maximum  utilization  of  permissible  FSI,  by  adopting  

public-private  joint  ventures,  it  would  be  possible  to  

minimize the cost of LIG, EWS and MIG categories.  In the  

present  project,  land  is  partially  developed  by  MHADA  

with ground floor structures and low rise buildings with  

lower specifications so as to make housing affordable for  

32

EWS,  LIG  and  MIG  with  the  subsidies  granted  by  the  

Government. The balance FSI cannot be utilized without  

high  rise  buildings  which  involves  higher  cost  and  

expenses.  Ravi  Development  has  proposed  multi-storied  

building  to  consume  balance  FSI  with  60% number  of  

tenements under LIG and EWS category as per DCR 33(5)  

of  Mira  Bhainder  Municipal  Corporation,  which  if  

constructed  by  MHADA  will  require  higher  cost  of  

construction  and  subsidies  required  to  make  MIG,  LIG  

houses  will  be  quite  high.  In  the  present  project,  

constructed built up area with richer specifications is to  

be handed over by Ravi Development to MHADA free of  

costs  in  turn  MHADA  will  be  at  liberty  to  price  these  

tenements  in  accordance with  policies  of  MHADA or  as  

may be determined by MHADA.  Therefore,  utilization  of  

maximum permissible FSI, adopting higher specifications  

and effecting utilization of scarce land for housing and yet  

make LIG, MIG housing group financially attractive to the  

people  is  possible  through  joint  venture  of  public  and  

33

private bodies in which reasonable built area be available  

by  private  developer  free  of  cost  to  MHADA.  The  above  

claim and concept cannot be ignored lightly.

30) Lastly,  we conclude that the impugned pilot  project  or  

initiation taken by the Government of Maharastra along with  

MHADA  to  encourage  public-private  participation  is  in  

accordance with the need of  the time as well  as a laudable  

effort. But to make it an effective approach Swiss Challenge  

Method  or  any  other  encouraging  concept  should  be  duly  

publicized first. The effort of public-private participation can  

only  be  possible  when  private  entities  are  aware  of  such  

scheme. Also in the scheme of availing a new system thorough  

rules  and  regulations  are  needed  to  be  followed  otherwise  

unfairness, arbitrariness or ambiguity may creep in.  In order  

to avoid such ill-effects the State Government is suggested to  

consider the following aspects:-

1. The  State/Authority  shall  publish  in  advance  the  

nature of Swiss Challenge Method and particulars;

2. Publish the nature of projects that can come under  

such method;  

34

3. Mention/notify  the  authorities  to  be  approached  

with respect to the project plans;

4. Mention/notify the various fields of the projects that  

can be considered under the method;

5. set  rules regarding time limits  on the approval  of  

the project and respective bidding:

6. the rules are to be followed after a project has been  

approved  by  the  respective  authorities  to  be  

considered under the method.

7. All  persons  interested  in  such  developmental  

activities  should  be  given  equal  and  sufficient  

opportunity to participate in such venture and there  

should  be  healthy  inter  se competition  amongst  

such developers.

These suggestions are not exhaustive and the State is free to  

incorporate  any  other  clauses  for  transparency  and  proper  

execution of the scheme.  The State Government is suggested  

to frame regulations/instructions on the above lines and take  

necessary steps thereafter in future.

31) In view of the above discussion and conclusion, the  

common impugned judgment and order dated 27.03.2008  

of the Bombay High Court in W.P. (L) No. 2714 of 2007  

35

and P.I.L. No. 72 of 2007 are set aside.  Consequently, the  

appeals are allowed.  No costs.          

.….…….……………………CJI.                                                   (K.G. BALAKRISHNAN)

...…………………………………J.                   (P. SATHASIVAM)  

NEW DELHI; MAY 11, 2009.   

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