Enterprises Vs. City and Industrial Development Corporation of Maharashtra L  INSC 167 (30 April 1990)
Rangnath Misra Rangnath Kuldip Singh (J) Sahai, R.M. (J)
1990 SCR (2) 826 1990 SCC (3) 280 JT 1990 (2) 401 1990 SCALE (1)44
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
of India: Articles 298 & 14: Government
Company entering commercial. field--Refusing to accept high- est offer in
response to public tender--Action whether arbitrary.
Contract Act, 1872: Public authority making contract-Invitation by public
tender--Highest offer--When rejected.
law--Administrative action--Public authority rejecting highest tender--Duty to
record reasons to lend credibility to action--Need for public accountabili- ty.
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.
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.
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.
Dismissing the appeals, the Court,
1. The respondent No. 1 was 'State' within the meaning of Article 12 of the
Constitution and in its deal- 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
 2 SCR 79, referred to.
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
was thus no arbitrariness in respondent trying to get proper price for its
plots. [829E-F, 828E-F]
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.
E-F] State of U.P. v. Raj Narain & Ors.,  4
SCC 428, re- ferred to. & CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
2076- 2078 of 1990.
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.
and Sarva Mitter for the Appellants.
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.
Judgment of the Court was delivered by 828 RANGANATH MISRA, J. Special leave
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.
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:
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 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.
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.
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
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.,  1 SCR 1042 and in
Ajay Hasia v. Khalid Mujib Sehravardi,  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.
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.
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 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.,  4 SCC 428 may be usefully
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.
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.