http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: STAR ENTERPRISES ETC. ETC.

       Vs.

RESPONDENT: CITY AND INDUSTRIAL DEVELOPMENT CORPORATIONOF MAHARASHTRA LT

DATE OF JUDGMENT30/04/1990

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH KULDIP SINGH (J) SAHAI, R.M. (J)

CITATION:  1990 SCR  (2) 826        1990 SCC  (3) 280  JT 1990 (2)   401        1990 SCALE  (1)44

ACT:     Maharashtra  Regional  Town Planning Act, 1966:  s.  113 (3A)New  Town Planning Authority--Whether a  ’State’  within the meaning of Art. 12 of the Constitution--Whether entitled to look for best deal in regard to its properties.     Constitution  of  India: Articles 298 &  14:  Government Company entering commercial.field--Refusing to accept  high- est  offer  in  response to  public  tender--Action  whether arbitrary.     Indian  Contract  Act,  1872:  Public  authority  making contract-Invitation  by public  tender--Highest  offer--When rejected.     Administrative    law--Administrative     action--Public authority  rejecting highest tender--Duty to record  reasons to lend credibility to action--Need for public accountabili- ty.

HEADNOTE:     The appellants had given the highest offers for  certain specified  plots  for  lease in response  to  invitation  by public  tender  by the respondent Corporation  a  Government Company, and complied with the requirements of deposit.  The respondent,  however, rejected the said offers  without  as- signing any reason.     The  appellants challenged the action of the  respondent before  the  High Court as arbitrary,  unconstitutional  and contrary to rule of law. The High Court, dismissed the  writ petitions in limine.     In these appeals by special leave, it was contended  for the appellants that the respondent Corporation was a ’State’ under  Article  12 of the Constitution, that  the  power  of rejection of offers without assigning any reason was unregu- lated and unfettered, contrary to the requirement of rule of law, and that it was in the interest of the public authority itself, the State and everyone in the society at large  that reasons  for State action are placed on record and  or  even communicated to the persons from whom the offers came. 827 Dismissing the appeals, the Court,     HELD:  1.  The respondent No. 1 was ’State’  within  the meaning  of Article 12 of the Constitution and in its  deal-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

ings with the citizens of India, it would be required to act within  the ambit of rule of law and would not be  permitted to conduct its activities arbitrarily. [829B-C]     R.D. Shetty v. International Airport Authority of  India JUDGMENT: Sehravardi, [1981] 2 SCR 79, referred to.     2. The State is certainly entitled to look for the  best deal in regard to its properties. In the instant case, there was no allegation of mala fides in the conduct of respondent No.  1 in refusing to accept the highest offers.  It  could, therefore,  be presumed that in so doing the respondent  had been  actuated  by the consideration of looking  for  better offers  for  the specific plots in  its  economic  interest. There was thus no arbitrariness in respondent trying to  get proper price for its plots. [829E-F, 828E-F]     3. When highest offers of commercial nature are rejected reasons  sufficient  to  indicate the stand  of  the  public authority  should be made available and the same  should  be communicated  to the concerned parties unless there  be  any specific  justification  not  to do so.  That  would  assure credibility  to  the action, discipline public  conduct  and improve the culture of accountability and provide an  oppor- tunity for an objective review in appropriate cases both  by the  administrative  superior and by the  judicial  process. [830F-G, E-F] State  of U.P. v. Raj Narain & Ors., [1975] 4 SCC  428,  re- ferred to.

&     CIVIL  APPELLATE JURISDICTION: Civil Appeal  Nos.  2076- 2078 of 1990.     From   the  Judgment  and  Orders  dated   25.8.   1989, 10.11.1989 & 5.9. 1989 of the Bombay High Court in W.A. Nos. 2198, 3377 and 2197 of 1989. D.N. Dwivedi and Sarva Mitter for the Appellants.     Arun Jetley, Additional Solicitor General, Raian  Karan- jawala, H.S. Anand, Nandini Gore, Ravi Kumar, M.  Karanjawa- la, V,N. Patil and A.S. Bhasme for the Respondents. The Judgment of the Court was delivered by 828 RANGANATH MISRA, J. Special leave granted.     Three  applications were filed under Article 226 of  the Constitution before the High Court of Bombay by the  respec- tive appellants before us challenging the rejection of their highest  offers in response to invitation by  public  tender without  assigning  any reason for the  same  as  arbitrary, unconstitutional and contrary to rule of law.     The  respondent a Government company within the  meaning of section 617 of the Companies Act has been constituted  as the  New Town Development Authority under sub-s. (3A) of  s. 113 of the Maharashtra Regional Town Planning Act, 1966. The respondent is empowered to dispose of land vested in it  and the respondent has formulated with the approval of the State Government under s. 159 of the said Act a code for  regulat- ing, inter alia disposal of land. Regulation 4 provides: "The Corporation may dispose of plots of lands by putting to auction  or considering the individual applications  as  the Corporation determines from time to time."     According to the appellants the normal practice  adopted by the Corporation is to invite tenders for the disposal  of specified  plots  which the Corporation  chooses  to  assign according to the terms and conditions for lease of plots for mercantile  use.  The appellants maintained  that  they  had

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

given the highest offers by way of tender for certain speci- fied plots by complying with the requirements of deposit and claim that though the offers were the highest, yet the  same have  not been accepted. Each of the appellants  was  before the  High Court challenging the action of respondent  No.  1 but  the writ petitions were dismissed in limine  by  saying that  there  was no arbitrariness in the  respondent  No.  1 trying to get proper price for its plots.     It  is not disputed that the scheme which  is  operating provides that "respondent No. 1 reserves the fight to amend, revoke or modify the scheme at its discretion as well as  to reject any or all offers for allotment without assigning any reason." Obviously it is in exercise of this power that  the highest tenders have not been accepted.     It is the contention of Mr. Dwivedi appearing in support of these appeals that the respondent is ’State’ under  Arti- cle  12  of  the Constitution and conferment  of  naked  and unguided  power as referred to above is arbitrary  and  con- trary  to the provisions of Article 14 of the  Constitution; and  since there is no prescribed norm or guideline  and  he power  is unregulated and unfettered and the  highest  offer after  complying with the prescribed requirements is  avail- able to be rejected 829 without  assigning  any reasons, citizens are likely  to  be affected by exercise of such uncanalised power. Shortly put, Mr.  Dwivedi submits that the procedure is contrary  to  the requirement  of  rule of law and therefore, cannot  be  sus- tained. An affidavit in opposition has been filed on  behalf of  respondent No. 1 wherein the circumstances  under  which the highest offers have not been accepted has been indicated and the position has been explained.     We do not find it difficult to agree with Mr.  Dwivedi’s submissions  that  respondent No. 1 is  ’State’  within  the meaning of Art. 12 and in its dealings with the citizens  of India  it would be required to act within the ambit of  rule of law and would not be permitted to conduct its  activities arbitrarily.  It is too late in the day for  an  institution like respondent No. 1 to adopt the posture that the activity in question is commercial and as respondent No. 1 is engaged in  trading  activity it would be open to it to  act  as  it considers  appropriate  for the purpose  of  protecting  its business  interest. An instrumentality of the State  as  has been  laid down by this Court in a series  of  authoritative decisions  beginning with R.D. Shetty v. International  Air- port  Authority  of India & Ors., [1979] 1 SCR 1042  and  in Ajay Hasia v. Khalid Mujib Sehravardi, [1981] 2 SCR 79 and a number  of decisions thereafter has to act within the  ambit of  rule of law and would not be allowed to  conduct  itself arbitrarily  and  in its dealings with the public  would  be liable to judicial review.     The  State  is certainly entitled to look for  the  best deal in regard to its properties. This has been accepted  by several  decisions  of this Court with  reference  to  State action under the Excise Laws. There is no allegation of mala fides  in  the conduct of respondent No. 1  in  refusing  to accept the highest offer. We must, therefore, proceed on the footing that respondent No. 1 acted bona fide and in  refus- ing to accept the highest offers of the appellants in regard to specific plots has been actuated by the consideration  of looking  for  better offers for the specific  plots  in  the economic interest of respondent No. 1.     The question which still remains to be answered is as to whether when the highest offer in response to an  invitation is  rejected would not the public authority be  required  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

provide  reasons for such action? Mr. Dwivedi has not  asked us to look for a reasoned decision but has submitted that it is in the interest of the public authority itself, the State and every one in the society at large that reasons for State action are placed on record and are even communicated to the persons  from  whom  the offers came so  that  the  dealings remain above board; the interest of the public authority  is adequately  protected  and a citizen knows where  he  stands with reference to his offer. What this Court 830 said in State of U.P.v. Raj Narain & Ors., [1975] 4 SCC  428 may be usefully recalled here: "In a government of responsibility like ours, where all  the agents of the public must be responsible for their  conduct, there  can  be but few secrets. The people of  this  country have  a right to know every public act, everything  that  is done  in a public way, by their public  functionaries.  They are entitled to know the particulars of every public  trans- action  in  all  its bearing. The right to  know,  which  is derived  from the concept of freedom of speech,  though  not absolute,  is  a  factor which should make  one  wary,  when secrecy is claimed for transactions which can, at any  rate, have no repercussion on public security. To cover with  veil of  secrecy,  the  common routine business, is  not  in  the interest of the public."     In  recent  times,  judicial  review  of  administrative action  has  become expansive and is becoming wider  day  by day. The traditional limitations have been vanishing and the sphere of judicial scrutiny is being expanded. State activi- ty too is becoming fast pervasive. As the State has descend- ed into the commercial field and giant public sector  under- takings have grown up, the stake of the public exchequer  is also large justifying larger social audit, judicial  control and review by opening of the public gaze; these  necessitate recording  of reasons for executive actions including  cases of  rejection  of highest offers. That very  often  involves long  stakes and availability of reasons for action  on  the record assures credibility to the action; disciplines public conduct and improves the culture of accountability.  Looking for reasons in support of such action provides an opportuni- ty for an objective review in appropriate cases both by  the administrative  superior  and by the judicial  process.  The submission of Mr. Dwivedi, therefore, commends itself to our acceptance, namely, that when highest offers of the type  in question  are  rejected reasons sufficient to  indicate  the stand of the appropriate authority should be made  available and  ordinarily the same should be communicated to the  con- cerned  parties unless there be any  specific  justification not to do so.     We  do not intend. to go into matters any further in  as much as we do not propose to apply this test to the  present appeals.  These  appeals  fail but we make no  order  as  to costs. P.S.S.                                    Appeals dismissed. 831