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CASE NO.: Appeal (civil)  1219 of 2007

PETITIONER: SUNIL PANNALAL BANTHIA & ORS

RESPONDENT: CITY AND INDUSTRIAL DEVELOPMENT CORPN. OF MAHARASHTRA LTD. & ANR

DATE OF JUDGMENT: 08/03/2007

BENCH: Dr.AR. Lakshmanan & Altamas Kabir

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No.14300/2006)

ALTAMAS KABIR, J.

       Leave granted.         This appeal is directed against the order passed by the  Division Bench of the  Bombay High Court dismissing the  writ  petition filed by the appellants herein challenging the action of  the respondent,  City and Industrial Development Corporation  of Maharashtra Ltd. (for short ’CIDCO’) in cancelling the  allotment  made in favour of the appellants.  The Division  Bench indicated in its impugned order that in identical  matters other writ petitions filed at different points of time had  been dismissed on the ground of alternative remedy available.          The facts  as can be garnered from the materials on  record, indicate that the CIDCO had issued a letter of  allotment of a commercial plot measuring 1453.75 sq. mts. on  lease in plot No.1 in Sector 9,  Panvel (West), Navi Mumbai, for  a period of 60 years for a premium of Rs.2,12,24,750/-   in  favour  of Mrs. Meera Balkrishna Dhumale and Mrs. Neeta  Hemant Patankar jointly.  The original allottees applied for  transfer of the said plot to the appellants herein.  Upon  accepting the transfer charges of Rs.2 lacs, CIDCO  issued  a  corrigendum to the original allotment letter  dated 5th  February, 2004 and executed a Deed of Lease in favour of the  appellants on receipt of the full  lease premium of Rs.  2,12,24,750/-.  CIDCO  also executed a Deed of Confirmation  in favour of the appellants and issued the Development  Permission and Commencement Certificate  in terms of   Section 45 of the Maharashtra  Regional Town  Planning Act,  1966 ( for short   ’the MRTP Act’).         On the  basis  of the above, the appellants   commenced  the construction work and proceeded up to the   1st floor and  also completed the construction  of the underground water  tank.  However, on 19th July, 2005, CIDCO  issued a Show  Cause Notice to the appellants to show cause why the  agreement to lease should not be terminated as being void  under Section 23 of the Contract Act.  The appellants duly  replied to the show cause notice through  their learned  advocate, but despite the  above, on 29th March, 2006, CIDCO   passed an order terminating the Agreement of Lease and  demanded  return of possession of the allotted plot with a  threat of forcible resumption unless the demand was   complied with.         The appellants filed a writ petition against CIDCO  

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challenging   the show cause notice dated 19th July, 2005, and  the order dated 29th March, 2006, terminating the Agreement  of Lease and demanding possession  of the allotted plot on 13th  April, 2006.  The matter was  hotly contested before the  Bombay High  Court and all the aforesaid facts  were brought  to its notice.   On behalf of the respondents, it was  sought  to  be highlighted that the allotment had been made  by it in  contravention of the provisions of Section 23 of the  Contract  Act by not  calling for tenders and such action on its part  was  void as being  opposed to public policy.   Without going into the aforesaid questions, the Bombay  High Court simply dismissed the writ petition on the ground of  alternative remedy available.         On behalf of the appellants, it was   sought to be urged  by Mr. J.P. Cama, learned senior advocate, that two similar  matters, being Civil Appeal No. 408/07 (Amey Co-operative  Housing Societies Limited vs.  Public Concern for Governance  Trust & Ors) and Civil Appeal No.410/07 filed by M/s. Vijay  Associates (Wadhwa) Developers, had been considered  in  detail by this Court and the said appeals had been disposed of  on 1st February, 2007 by a judgment  in which most of the  points  raised in the instant appeal had also been raised and  decided.  Mr. Cama submitted that on the issues as  already  decided, nothing further was  needed to be added, but there  was a basic  difference between  the  reliefs sought for in the  said appeals and the instant appeal.  Mr. Cama pointed out  that  the said two appeals had arisen out of two  writ petitions  filed by way of Public Interest Litigation and   one of the  grievances of the writ petitioners was that the  properties   which had been allotted  had been undervalued, thereby  causing huge  loss to  CIDCO.  Besides asking for cancellation  of the allotments, the writ petitioners had made  an alternate  prayer for the appointment of an independent valuer to   revalue the plots allotted and in the event the valuation was  found to be higher, for a direction upon the allottees to pay the  balance to CIDCO  on account of the fact that the construction  work had reached an irreversible stage.         Mr. Cama submitted that in the instant case, there was  no such prayer and it was the appellants herein  who had  challenged the cancellation of  their allotment by CIDCO in  terms of its order dated 29th March, 2006 purportedly on  account of violation of the provisions of Section 23 of the  Contract Act.  According to  Mr. Cama, the only question to be  decided in this appeal is whether having accepted the entire  premium lease from the appellants as also the transfer fees  from the original allottees and having  issued Sanction and  Commencement Certificate,  CIDCO was entitled to  resile  from its original  actions  and to cancel the allotment   unilaterally  on the ground of violation  by CIDCO itself of its  own  Regulations which  attracted the provisions of Section 23  of the  Contract Act.  It was urged that since the appellants  had substantially altered  their position to their prejudice on  the assurances  held out by CIDCO by investing huge  amounts on the development of  the allotted plot,  CIDCO  was  estopped in law from resiling from its earlier  assurances and  seeking eviction  of the appellants on the ground that the  allotment  had not been made in accordance with the  Regulations.                            Referring to the decision of the Court of Appeal in the  case of Falmouth Boat Construction Limited vs. Howell,   reported in (1950) 1 All.E.R. 538, Mr. Cama referred to the  observations made by Lord Denning with regard to the steps  taken on the basis of an oral assurance.  While dealing with  the situation where a Ship Builder had proceeded to effect  repairs on the basis of an oral direction, Lord Denning held

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that whenever government officers, in their dealings with a  subject, take on themselves to assume authority in a matter  with which the subject is concerned, he is entitled to rely on  their having  the authority  which they assume.  He does not  know  and cannot be expected to know, the limits of their   authority   and he ought not to suffer if they  exceed it.         Mr. Cama submitted that the defence being taken on  behalf of the CIDCO  that it had  acted arbitrarily and in  contravention of  its own rules, was not available to CIDCO   since the appellants had acted and  altered their position on  the basis of such assurance and the appellants were not  required to know whether  CIDCO  had acted in conformity   with its rules or not.         In this connection, Mr. Cama also referred to the decision  of this Court in the case of Century Spinning and  Manufacturing Company Ltd.and Anr. vs.  The  Ulhasnagar Municipal Council and Anr., reported in (1970)  1 SCC 582, wherein it was observed as under:-                

"Public bodies are as much bound as  private individuals to carry out  representations of facts and promises  made by them, relying on which other   persons have altered their position to  their prejudice.  The obligation arising  against an individual out of his   representation amounting to a promise  may be  enforced ex contractu by a  person who acts upon the promise: when  the law  requires that a contract  enforceable  at law against a public body  shall be in  certain form  or be executed   in the manner prescribed  by statute, the  obligation may be enforced  against it in  appropriate cases in equity.  In Union   of  India  and Ors. vs. M/s. Indo-Afghan  Agencies  Ltd., (1968) 2 SCR 366, this  Court  as held that the Government is    not exempt  from the equity arising out of  the acts done by citizens to their   prejudice, relying upon the  representations as to its future  conduct   made by the  Government.  This Court  held that the following observations made  by Denning, J., in Robertson v. Minister  of Pensions, (1949) 1 KB 227, applied in  India:           

       "The Crown cannot  escape by  saying that estoppels do not bind the   Crown   for that doctrine has long been  exploded.  Nor can the Crown escape by  praying in aid the doctrine of executive  necessity, that is, the doctrine that the  Crown cannot  bind itself so as to fetter  its future executive  action."

We are in this case not concerned to deal  with the question whether Denning L.J.,  was right in extending  the rule to a  different class of cases as in  Falmouth  Boat Construction Co. Ltd. v. Howell,  (1950) 1 All ER 538 where he observed at  p.542:

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       "Whenever Government officers in  their dealings with a subject take on  themselves to assume authority in  a  matter with which the subject is  concerned, he is entitled  to rely on their  having the authority which they assume.  He does not know, and cannot be  expected to know, the limits  of their  authority, and he  ought  not to  suffer if  they exceed it."

It may be sufficient  to observe that in  appeal  from that judgment (Howell v.  Falmouth Boat Construction Co.Ltd.)  (supra) Lord Simonds observed after  referring to the observations of Denning,  L.J.:

       "The illegality  of an act is the  same  whether the action has been misled by an  assumption of authority on  the part of a  Government officer  however high or low  in the hierachy.

The question is whether the character of  an act done in force of a  statutory   prohibition is affected  by the fact that it  had been induced by  a misleading   assumption of authority.  In my opinion  the answer is clearly: No."                               It was further observed that different standards   of   contract  for the people and the public  bodies could not  ordinarily be permitted and the public body was not  exempt  from the liability to carry out  its obligation arising out of   representations made by it relying upon which a citizen has  altered his position to his prejudice.         The same sentiments  have also been expressed by this  Court in  another decision in the case of U.P. Rajkiya Nirman  Nigam Ltd. vs. Indure Private Limited & Ors., (1996) 2 SCC  667,  where the concept of indoor management was argued on  behalf of the appellant.   Repelling such argument, this Court  held that when the negotiations were undertaken on behalf of  the appellant, the respondent was led to believe that the officer  was competent to  enter into the contract on behalf of the  appellant.  When the counter proposal  was sent, the appellant  had not returned the proposal.  It, therefore,   amounted to  acceptance and hence  a concluded contract came into  existence.         On the strength of the above, Mr. Cama submitted  that  having allotted the plot in question to the appellants, it was  not open to CIDCO to unilaterally claim that such allotment  was void since it had no authority to make such allotment in  the manner in which it had been  done.          Mr. Cama submitted that even such a stand was  untenable in view of  Regulation 4 of the  New Bombay  Disposal of Land Regulations,  1975,  which had  been framed   under Section 159 of the  MRTP Act and  provides  as follows:-

Manner of disposal of land: "The  Corporation may dispose plot of land by  public auction or tender or by  considering  individual applications as  the Corporation may determine from time  to time."

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       Mr. Cama submitted that CIDCO had also  adopted  Resolutions on the aforesaid basis, which issue had been dealt  with by this Court  in the case of Amey Co-operative Housing  Society Limited (supra).  It was  not, therefore,  available  to  CIDCO  to contend  that the allotment could not have been   made on the basis of  an individual application  and that the  same was void on account of the fact that no public auction  had been  held in connection   with such allotment.         Mr. Cama also submitted that  the availability of an  alternate remedy which was less efficacious   than a  writ  petition,  did not absolutely bar the filing of a writ petition and  even on such ground the impugned order of the High Court   was liable to be set aside, particularly when  the writ petition  had been admitted and the parties  had  completed their  pleadings.  Mr. Cama submitted that the subject-matter of the  instant appeal  being different from those decided earlier by  this Court, there was no reason  for  the appeal to be remitted  back to the High Court since the only  question   involved in  the instant appeal was whether the allotment made was at all  void in terms of Section 23 of the Contract Act, 1872 and also  whether  CIDCO  acted within its jurisdiction in cancelling  such allotment unilaterally.         Appearing for CIDCO,  Mr. Altaf  Ahmed, learned Senior  Advocate, submitted that  certain other similar appeals which  had been disposed of by the High Court without  going into  merits, had been remitted  to the High Court  for fresh  determination and there was no difference in the instant case   where also the High Court had adopted a similar procedure.   Mr. Ahmed  contended that since the merits of the matter had  not been gone into by the  High Court, it was  not available to  the appellants to argue the merits  which the High Court had  no occasion to consider.  The question of valuation  or the  mode of allotment was  yet to be adjudicated upon  and the  matter was, therefore, required    to be remitted to the High  Court for a full adjudication thereupon.         Mr. Ahmed  tried to urge that having  regard to Section  23 of the Contract Act, an  agreement would not be lawful if it  was found to be immoral or opposed to public policy.  He  urged   that since CIDCO had made the allotment in violation  and/or  contravention of its own rules regarding such  allotment, the allotment  must be held to be opposed to public  policy and was therefore unlawful and void  in terms of   Section 23 of the Contract Act, 1872.   Mr. Ahmed  submitted that the decisions   cited by Mr.  Cama  were not applicable to the facts of this case since  the  High Court did not go into the facts  to determine as to  whether  the allotment was, in fact, opposed to public policy  and was, therefore, illegal and void.         Although, we  were  at one stage inclined to remit the  matter to the High Court since the writ petition had not been  considered on merits and had been dismissed on the   existence of an alternate remedy by way of  suit, after  considering the submissions made on behalf of  the respective  parties, we have decided otherwise.  We are inclined  to accept  Mr. Cama’s submission  that the facts of this  appeal are  different from those which have been earlier remitted to the  High Court  for re-consideration on merits and also  for  making a re-valuation.  In the present appeal, we are only  concerned with the question of law as to whether CIDCO  had  acted in excess of its jurisdiction and authority  in cancelling   the allotment made to  the appellants on a unilaterally  consideration that the allotment  had been  made in  contravention of  its rules and regulations and was thereby  opposed to public policy and was illegal and void  in terms of

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Section 23 of the Contract Act, 1872.   No decision is required  to be taken in the matter on facts, which could have merited  an order of remand.   On the legal question, it is quite obvious that having  acted and held out assurances  to the appellants which  caused the appellants to alter their    position  to their  prejudice, it was not open to CIDCO to take a unilateral  decision to cancel the allotment on the ground that it had  acted without jurisdiction and/or  in excess of jurisdiction and  in violation of its rules and  regulations.  Even on that score,  the argument advanced on behalf of CIDCO  is unacceptable  having regard to Regulation 4 of the New Bombay Disposal of  Land Regulations, 1975 extracted hereinabove which   empowered CIDCO          to dispose  of  plots of  land even on the  basis of  individual applications.  The said aspect of the matter  has been dealt with in detail in  Civil Appeal Nos. 408/07 and   410/07 referred to hereinabove.         On the question of the allotment being opposed to public  policy,  we failed to see how CIDCO   can raise such an issue.   On the other hand, the stand taken by CIDCO  is, in our view,  opposed to public policy  since CIDCO  was not entitled to take  a unilateral decision to cancel the allotment after   the  appellants had acted on the basis thereof and had  expended  large sums of money towards the construction which has  progressed  to some extent.  The Regulations allowed CIDCO   to entertain individual applications for allotment, as has been  done in the instant case.  Merely by indicating that the law   declared by this Court  was universally  binding  under Article  141 of the Constitution, it could not contend that such  allotment  was contrary to public policy   on a fresh  consideration made by the  Board of Directors of the  Corporation upon considering the recommendations made by  Dr. D.K. Shanakran, the then Addl. Secretary (Planning) of the  State of Maharashtra.  It may be mentioned that Dr.  Shankaran had been appointed by the State Government  in  January 2005 to conduct a discreet  inquiry  into  allotments  of certain plots of land    made by the Corporation during the  tenure  of Shri V.M. Lal,  the then  Vice-Chairman and  Managing Director allegedly in contravention of the  established  Rules, Regulations and Conventions.         That consideration, in our view, was not sufficient in the  instant case to cancel the allotment  which had been made in  accordance with the Regulations and the appellants had made   payments as directed by the Corporation, which, in fact, was  higher than  the price  recommended by the Shankaran  Committee. For the reasons aforesaid, we  allow the appeal, set aside  the order of the High Court impugned in this appeal and  quash the order dated 29th March, 2006 passed by CIDCO as  also the Show Cause Notice dated 19th July, 2005 on the basis   of which the aforesaid order of cancellation   of allotment was  made. There will,  however, be no order as to costs.