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                            REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO.4655/2014 [Arising out of Special Leave Petition (Civil) No. 7301 of 2011]

Rishi Kiran Logistics Pvt. Ltd. …....... Appellant (s)

Versus

Board of Trustees of Kandla Port Trust & Ors. …...... Respondent (s)

J U D G M E N T

A.K. SIKRI, J.

1.Leave granted.

2.The  factual  matrix  which  needs  to  be  taken  note  of,  for  the  purpose  of  

deciding the present appeal, unfolds as under:-

Respondent No. 2 herein, viz., the Board of Trustees of Kandla Port  

Trust (hereinafter referred to as the 'Port Trust') has number of plots,  

in and around Kandla Port, which are of different sizes. The Port  

Trust took a decision, sometime in the year 2005, to allot these plots  

on  leasehold  basis  for  a  period  of  30  years  for  the  purpose  of  

enabling the allottees thereof to put up the construction of liquid  

storage tanks. For this purpose the Kandla Port Trust issued notice  

inviting tenders dated 12.3.2005. The annual rent in respect of these  

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plots was fixed at a nominal rate of Re. 1/- per plot. However, the  

bidders  were  required  to  submit  the  price  bid  in  the  form  of  

premium in respect of the concerned plots for which they intended  

to bid. The basic value of this premium was fixed at Rs. 612/- per  

sq. mtr. The bids were to accompany the earnest money deposit of  

Rs. 3 lakhs per plot. As per the prescribed procedure in such matters,  

the Port Trust held pre-bid meeting on 21.4.2005 wherein the terms  

of NIT of the bidders were explained and querries answered. The  

bidders were also informed that since these plots fall under Coastal  

Regulatory Zone (CRZ), requisite permission from the competent  

authority under CRZ was required which would be obtained by the  

Kandla Port Trust. However, at the same time it was also made clear  

that any specific clearance like safety, pollution control etc. was to  

be obtained by the individual lessee (s). This was also reiterated vide  

communication dated 25.5.2005. In this letter it was also stated that  

the  successful  bidder  was  required  to  pay the  premium within  a  

period of 3 months from the issuance of formal letter of allotment or  

CRZ clearance whichever was earlier.  One more pre-bid meeting  

was held on 20.6.2005 and, thereafter the last date of submitting the  

tender was also postponed and subsequently fixed as 11.8.2005.

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3.The  appellant  submitted  its  bid  in  respect  of  Plot  Nos.  14,  15  and  17.  The  

technical  bids  of  the  bidders,  including  that  of  the  appellant,  were  opened  on  

11.8.2005. Bid of the appellant was found to be technically qualified. Thereafter,  

price bids were opened on 30.8.2005. These bids were scrutinised by the Tender  

Committee of the Port Trust. Recommendations were placed before the Board of  

Trustees in its  meeting held on 8.12.2005. It  was followed  by communication  

dated 7.1.2006 to the appellant in the form of Letter of Intent (LOI), inter alia  

stating that the leasehold rights in respect of Plot Nos. 14, 15 and 17 were given for  

a premium of Rs. 3,200/- per sq. mtrs., 3,150/- per sq. mtr.  and 3,120 per sq. mtr.  

respectively. This communication further mentioned that the formal letter will be  

issued to the appellant after the receipt of CRZ clearance in general.

4.The  letter  of  allotment  to  the  various  successful  bidders  went  into  limbo  

thereafter,  presumably  awaiting  CRZ  clearance.  The  Gandhidham  Chamber  of  

Commerce and Industry was informed about this road block by the Port Trust in  

response  to  its  representation,  wherein  the  Port  Trust  also  requested  the  said  

Chamber of Commerce and Industry to use its good office with the Ministry of  

Environment and Forest, Union of India for early clearance of CRZ permission.

5.It appears that CRZ clearance was ultimately received on 16.8.2010. However,  

this occurred more than 5 years after the NIT dated 12.3.2005 was floated. This  

prolonged  time  lag resulted  in  taking  decision  by  the  Board  of  Trustees  on  

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9.12.2010, in the form of Resolution No. 108, deciding to cancel the tender process  

started  in  the  year  2005.  This  decision  of  the  Port  Trust  was  conveyed to  the  

appellant vide letter dated 9.12.2010. Similar letters were written to other tenderers  

as well who were issued similar LOI's.  

6.All these affected persons challenged the validity of Resolution No. 108 of the  

Port Trust  by preferring Writ Petitions under Article 226 of the Constitution of  

India in the High Court of Gujarat.  One such Writ Petition being Special Civil  

Application No. 286 of 2011 filed by M/s. Nikhil Adhesives Ltd. was dismissed by  

the High Court vide detailed reasoned judgment dated 4.2.2011. Another SCA NO.  

1328 of 2011 filed by IMC Limited was also dismissed by detailed reasoned order  

on 7.2.2011. When the petition of the appellant herein i.e. SCA No. 1877 of 2011  

came up before the same Bench of the High Court on 10.2.2011, following the  

decision  in  the  said  two Writ  Petitions  the Court  dismissed the  petition  of  the  

appellant as well with one paragraph order, which reads as follows:-

“Identical petitions for the same purpose and with the same prayer  being Special Civil Application Nos. 286 of 2011 and 1328 of 2011  have been decided by this Court by CAV judgment dated 4.2.2011  and order dated 7.2.2011 respectively. Since no new issue is raised  and the  factual  matrix  admittedly  remains the  same,  present  petition is summarily dismissed for the reasons discussed in detail  in CAV judgment dated 4.2.2011 in Special Civil Application No.  286 of 2011.”

7.Appellant has challenged the aforesaid order in the present appeal.  

8.We may also record at this stage that IMC limited, M/s. Nikhil Adhesive Ltd. as  

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well as one more similarly situated person had also filed Special Leave Petitions.  

All these four petitions were listed and were taken together for hearing from time  

to time. When these matters came up for hearing 14.3.2014 other three petitioners  

sought  permission  to  withdraw  their  Special  Leave  Petitions  which  were  

accordingly dismissed as withdrawn on 14.3.2014. Case of the appellant herein  

only remain in which we have heard the arguments in detail.  

9.Before we proceed to take note of the submissions of the learned Counsel for the  

parties  on  either  side,  it  would  be  better  to  glance  through  the  two  reasoned  

judgments rendered by the High Court which have been followed in the case of the  

appellant herein.  

10.In M/s. Nikhil Adhesive Limited, after taking note of the factual background  

starting from the issuance of tender and culminating in cancellation of said tender  

process  by  the  impugned  Resolution  No.  108,  the  High  Court  found  that  the  

challenge to the said resolution was predicated on the following premise:-

I. With the issuance of LOI to the successful highest bidder, a  

concluded contract was arrived at between the parties and, therefore,  

it  was  not  permissible  for  the  Port  Trust  to  terminate  the  tender  

process thereafter.

II. Doctrine of promissory estoppel was applicable in as much as  

by its  actions  and conduct,  the Port  Trust  had given a  clear  and  

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unequivocal promise, with intention to create legal relation to arise  

in future and the Port Trust i.e. the promissory was bound by the  

said promise and to honour its commitment and not to back out of  

its obligation.  

III. The action of the Port Trust, which was an instrumentality of  

the  state  being  “other  authority”  under  Article  12  of  the  

Constitution, was arbitrary as it was not based on any rational or  

relevant principle. There amounted to infraction of Article 14 of the  

Constitution.

11. The High Court negated all the aforesaid propositions. Answering the first  

argument, the High Court concluded that the LOI issued by the Port Trust was just  

an information that the addressee (the petitioner therein) had been declared highest  

bidder for the plot for which it had submitted its tender. This letter further informed  

that formal allotment letter shall be issued after the receipt of CRZ clearance in  

general by Port Trust for tank forms for handling all hazardous and non-hazardous  

and also informing that additional CRZ clearance if required for installation, safety,  

pollution control etc. had to be obtained by the said petitioner, from time to time at   

its cost. This letter also mentioned that payment will be made by the said petitioner  

after obtaining CRZ clearance for the individual premises allotted to it or within 3  

months of issuance of allotment letter whichever was earlier. In the opinion of the  

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High Court it did not result in any concluded contract.  

In the process, the High Court also noted that after the issuance of LOI on  

12.1.2006 till  the passing of Resolution No. 108 dated 22.11.2010, no effective  

steps were taken by the said petitioner despite the fact that it was informed by the  

Port Trust on 15.2.2006 that the work of preparation of EIA studies in respect to  

allotment of 17 plots for construction of Liquid Storage Tanks for obtaining CRZ  

clearance from the Government of India, Ministry of Environment has already been  

entrusted  to  M/s.  NIOT,  Chennai  along  with  other  project  works  and  the  said  

institute had already completed site survey work for the purpose. The petitioner  

was  also informed that  the said M/s.  NIOT, Chennai  had suggested  to  provide  

following  information  for  incorporation  of  the  same  in  EIA  Studies:-  (I)  

Approximate estimation for the activity. (ii) Proposed activity (type of Cargos to be  

stored)  (iii)  Proposed  storage  capacity  (approximate  quantum  of  the  liquid  

commodity, size etc.)

The  petitioner  was  specifically  informed  that  the  said  information  was  

urgently required to be furnished to the NIOT so that the same would enable the  

said Institute to submit the report as early as possible for obtaining CRZ clearance  

in the matter. Since these informations were not supplied by the petitioner, another  

letter was issued by the respondent Trust on 13.5.2008 reiterating the same request  

to provide the said information.  

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However,  instead  of  doing the  needful  by  furnishing  the  details  it  only  

indulged in worthless correspondence and ultimately vide letter dated 18.1.2010  

sought permission to carry out construction portion and maintenance of storage  

tanks in the name of one M/s Sanghvi Logistics Pvt. Ltd. instead o its own name  

which request was turned down vide letter dated 20.3.2010. Thereafter impugned  

resolution came to be passed. This showed that delay was entirely attributed to the  

said petitioner. Taking note of aforesaid contracts, the position is summed up by the  

High Court in the following words:-

“In  view  of  the  matter,  it  cannot  be  said  that  there  was  any  concluded contract between the petitioner and the respondent Port  Trust nor any promise was given by the respondent Port Trust to  allot Plot No. 8 to the petitioner. The letter of intent issued by the  respondent was merely an expression of intention and imparting an  information that the petitioner stood highest bidder and on receipt of  CRZ  clearance,  the  formal  letter  of  allotment  would  be  issued.  However,  the  petitioner  had  not  cooperated  in  the  meantime  for  obtaining CRZ clearance and before any formal letter of allotment is  issued, the earlier tender process stood cancelled..”

12. In so far as argument based on Article 14 is concerned, the High Court  

found  that  the  action  on  the  part  of  the  Port  Trust  was  neither  arbitrary  nor  

malafide.  Before  taking the  decision,  the Board  had sought  the opinion of  the  

Additional Solicitor General. Further, the Port Trust was within its right to take  

such a decision in the year 2010 keeping in mind the larger public interest. The  

court noted that the original tender premium in the year 2005 was fixed on Rs.  

612/-  per  sq.  mtr.  whereas  fresh  tender  premium,  after  the  cancellation  of  the  

earlier tender process was fixed at Rs. 8358 per sq. mtrs.  

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13. In so far as argument of promissory estoppel is concerned the same was  

rejected on the ground that the LOI did not amount to any promise. Further, the  

petitioner had paid only Rs. 3 lakhs by way of earnest money as against the total  

premium amount which was 23.74 crores and was to be paid only after receipt of  

the said CRZ clearance, which amount was never paid.  

14. The reading of the judgment in IMC Limited case would reveal that the  

Counsel  for  the  petitioner  in  that  case  had  argued  that  their  case  was  

distinguishable from the case of Nikhil Adhesives Limited on facts. Endeavour was  

made to demonstrate that in so far as the petitioner in IMC is concerned, it had  

supplied all the requisite details promptly and because of this reason the Port Trust  

had not issued any letters to them alleging default on their part in furnishing the  

details. Therefore, it could not be held responsible for delaying the tender process.  

It was, thus, argued that there was a concluded contract in their case and not a  

contingent one. Further, in any case the only contingency at the time of issuing  

LOI was the clearance of CRZ authorities which also was granted subsequently. In  

view of aforesaid argument, the court went into the specific question as to whether  

there was already a concluded contract between the parties. This issue has been  

answered against the petitioner in the said case holding that merely a Letter of  

Intent  was issued and this  expressed an intention of  the parties  to enter  into a  

contract but no concluded contract ultimately fructified nor there was any promise  

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given by the Port Trust. The Court reproduced the following discussion from its  

earlier judgment in Nikhil Adhesives Limited:

“The  letter  of  intent  issued  by  the  respondent  Port  Trust  on  12.1.2006,  at  best,  can  be  said  to  be  an  agreement  to  issue  the  allotment letter and to execute the lease document in favour of the  petitioner subject  to  fulfilment  of  certain conditions.  However,  in  absence  of  issuance  of  allotment  letter,  the  said  letter  of  intent  cannot be enforced in the court of law. The Apex Court in Dresser  Rand S.A. v. Bindal Agro Chem Limited and others (supra) clearly  stated that a letter of intent merely indicates a party's intention to  enter into a contract with the other party in future. Such a letter of  intent is not intended to bind either party ultimately to enter into any  contract. Even in Speech & Software Technologies (India) Pvt. Ltd.  v. Neos Interactive Limited (Supra), the Apex Court clearly held that  an agreement to enter into an agreement is not enforceable nor does  it confer any right upon the parties.”

15. Before us as well, edifice of the case was sought to be erected on the same  

three  pillars  by  Mr.  Vikas  Singh,  learned  Senior  Counsel  for  the  appellant.  

Therefore, we propose to straightaway go into these three aspects of the case and  

while  discussing  the  same,  we  would  take  note  of  the  arguments  which  were  

advanced by both the sides on these propositions.  

I WHETHER  DECISION  CONTAINED  IN   RESOLUTION NO. 108 DATED  9.12.2010  IS   ARBITRARY AND MALAFIDE.

16. Few  facts,  leading  to  this  impugned  Resolution,  which  need  to  be  

recapitulated are the following:-

Tenders for allotment of plots on leasehold basis were floated on  

12.3.2005. After receiving bids and evaluating technical as well as  

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price  bids  respectively,  the  Tender  Committee  had recommended  

the  cases  for  allotment  of  plots.  In  so  far  as  the  appellant  is  

concerned in respect of all the three plots bearing No. 14, 15 and 17,  

LOI  was  issued  after  the  Board  agreed  to  accept  the  

recommendations of the Tender Committee in its meeting held on  

8.12.2005. However, in the LOI it was made clear that formal letter  

of  allotment  will  be issued after  receiving the CRZ clearance in  

general  and  if  any  further  CRZ  clearance  was  required  for  

installation, safety, pollution etc. the same was to be obtained by the  

appellant. The Port Trust applied to the Ministry of Environment,  

Government of India for such permission. However, for one reason  

or the other, this permission/ clearance was not forthcoming. Even  

when Ghandhidham Chamber of Commerce and Industry wrote to  

the Port Trust, on behalf of these allottees who were issued LOI's  

and were waiting for formal letter of allotment, in reply the Port  

Trust had requested the said Chamber of Commerce and Industry to  

also  use  its  good  offices  with  the  Ministry  of  Environment  and  

Forests  for  early  clearance  of  CRZ permission.  It  is  a  matter  of  

record that for more than 5 years the clearance had not been granted  

and came to be granted only on 16.8.2010. By that time significant  

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change had occurred from the date of the issuance of the NIT in  

March, 2005. The prices of the property had taken quantum jump.  

Though in the NIT premium was fixed on Rs. 612/- per sq. mtr., it  

was more than Rs. 8,000/- per sq. mtr. in 2010. In this backdrop the  

Port Trust wanted to take a decision as to whether it could go for  

fresh  tenders.  It  is  more  than  obvious  that  larger  public  interest  

demanded  fresh  tender  process  in  order  to  receive  maximum  

amount as the premium of Rs. 612/- per sq. mtr originally fixed and  

even the quotation of Rs. 3,000/- and odd of the appellant which  

were found to be highest, was far below the marked rate. Further,  

even when total premium amount to be paid by the appellant was to  

the tune of several crores for each plot at which LOI was issued in  

the year 2006, the appellant had paid only Rs. 3 lakhs by way of  

EMD in each case. No further amount was paid for want of final  

allotment  letter.  However  before  taking  a  final  decision  in  the  

matter, the Port Trust sought legal opinion specifically on the point  

as to whether it would be prudent to cancel 2005 tender process and  

start  fresh  process  so  as  to  fetch  the  realistic  marked  price  in  

accordance with present market value of the land. Based upon the  

expert  legal  opinion  i.e.  there  was  no  legal  impediment  in  

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cancellation of the tender process,  the decision was taken by the  

Port  Trust  to cancel  the earlier  tender process and  to start  fresh  

process.

17. On  the  aforesaid  facts  there  is  hardly  any  scope  for  argument  that  the  

decision of the Port Trust is arbitrary. It is based on valid considerations. We have  

to  keep  in  mind  that  while  examining  this  aspect  we  are  in  the  realm  of  

administrative law. The contractual aspect of the matter has to be kept aside which  

would be examined separately while dealing with the issue as to whether there was  

a concluded contract between the parties. This distinction is lucidly explained in  

Kisan Sehkari Chini Mills & Ors. v. Vardan Linkers & Ors.;  (2008) 12 SCC 500.  

Keeping in mind this distinction between the two, we are not required to bring in  

the  contractual  elements  of  the  case  while  dealing  with  the  administrative  law  

aspects.  

18. When competing claims are private interest v. public interest, then in the  

case of disposal of public property the question would be whether the right of the  

person, who has earned the right to the public property in a public auction, is to be  

preferred over the right of the public in ensuring that valuable public assets were  

not disposed of except for a fair price and in a fair and transparent manner. Whether  

this court should, in judicial review, sit in judgment over the decision of a public  

body which is of the view that it need not go further ahead with the tender process.  

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It is true if such a decision is taken without any reasons to support it or mere ipsi  

dixit it would be arbitrary. In this case there are reasons. The High Court analysed  

the reasons and has taken the view that those reasons are valid. In our view in  

matters particularly to the disposal of valuable assets by the State when the State  

seeks to explore the possibility of getting higher price.  

19. The  guiding  principles  in  such  cases  can  be  noted  from the  judgments  

discussed hereinafter.

In Meerut Development Authority v. Assn. of Management  Studies; (2009)  

6 SCC 171, the decision related to disposal of public property by an instrumentality  

of the State. In the said context, the Court inter alia held as follows:

“26.  A tender  is  an  offer.  It  is  something  which  invites  and  is  communicated  to  notify  acceptance.  Broadly  stated  it  must  be  unconditional;  must  be in the proper form, the person by whom  tender  is  made  must  be  able  to  and  willing  to  perform  his  obligations. The terms of the invitation to tender cannot be open to  judicial scrutiny because the invitation to tender is in the realm of  contract.  However,  a limited judicial  review may be available in  cases  where  it  is  established  that  the  terms  of  the  invitation  to  tender were so tailor made to suit the convenience of any particular  person with a view to eliminate all others from participating in the  biding process.

The bidders participating in the tender process have no other right  except  the  right  to  equality  and  fair  treatment  in  the  matter  of  evaluation  of  competitive  bids  offered  by  interested  persons  in  response to notice inviting tenders in a transparent manner and free  from hidden agenda. One cannot challenge the terms and conditions  of the tender except on the above stated ground, the reason being  the terms of the invitation to tender are in the realm of the contract.  No bidder  is  entitled  as  a  matter  of  right  to  insist  the authority  

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inviting tenders to enter into further negotiations unless the terms  and conditions of notice so provided for such negotiations.  It is so well settled in law and needs no restatement at our hands  that  disposal  of  the  public  property  by  the  State  or  its  instrumentalities partake the character of a trust. The methods to be  adopted for disposal of public property must be fair and transparent  providing an opportunity to all the interested persons to participate  in the process.  

The authority has the right not to accept the highest bid and even to  prefer a tender other than the highest bidder, if there exist good and  sufficient  reason,  such  as,  the  highest  bid  not  representing  the  market  price  but  there  cannot  be  any doubt  that  the  Authority's  action  in  accepting  or  refusing  the  bid  must  be  free  from  arbitrarinesses or favouritism.”

20. Lucid enunciation on the scope of judicial review of administrative action,  

that too in tender matters can be found in Tata Cellular v. Union of India (1994 (6)  

SCC 651), where following discussion is worthy of extraction:

“70. It  cannot  be  denied  that  the  principles  of  judicial  review  would apply to the exercise of contractual powers by Government  bodies in order to prevent arbitrariness or favouritism. However, it  must be clearly stated that there are inherent limitations in exercise  of that power of judicial review. Government is the guardian of the  finances of the state. It is expected to protect the financial interest of  the State. The right to refuse the lowest or any other tneder is always  available to the Government. But the principles laid down in Article  14 of the Constitution have to be kept in view while accepting or  refusing  a  tender.  There  can  be  no  question  of  infringement  of  Article 14 if the government tries to get the best person or the best  quotation.  The  right  to  choose  cannot  be  considered  to  be  an  arbitrary power. Of course, if the said power is exercised for any  collateral purpose the exercise of that power will be struck down.  Judicial review is concerned with reviewing not the merits of the  decision in support of which the application for judicial review is  

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made, bu the decision making process itself.  The duty of the court is to confine itself to the question of legality.  Its concern should be:

(i) Whether a decision making authority exceeded its  powers? (ii) Committed an error of law, (iii) Committed a breach of rules of natural justice, (iv) reached a decision which no reasonable tribunal  would have reached or, (v) Abused its powers.  

Therefore, it is not for the court to determine whether a particular  policy or particular decision taken in the fulfilment of that policy is  fair. It is only concerned with the manner in which those decisions  have been taken. The extent of the duty to act fairly will vary from  case to case. Shortly put, the grounds upon which an administrative  action is subject to control by judicial review can be classified as  under:

(i) Illegality: This means the decision maker must  understand correctly  the law that  regulates his  decision  making power and must give effect to it. (ii) Irrationally,  namely  Wednesbury  unreasonableness.  (iii) Procedural impropriety.

The  above  are  only  the  broad  grounds  but  it  does  not  rule  out  addition of further grounds in course of time. As a matter of fact in  R.V. Secretary of State for the Home Department, ex Brind Lord  Diplock (1991) 1 AC 694, Lord Diplock refers specifically to one  development namely,  the possible recognition of  the principle of  proportionality. In all these cases the test to be adopted is that the  court  should  “consider  whether  something  has  gone  wrong of  a  nature and degree which requires its intervention.” Two other facets of irrationality may be mentioned.

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i) It  is  open  to  the  court  to  review  the  decision  maker's evaluation of the facts. The court will intervene  where  the  facts  taken  as  a  whole  could  not  logically  warrant  the  conclusion  of  the  decision  maker.  If  the  weight  of  facts  pointing  to  one  course  of  action  is  overwhelming, then a decision the other way cannot be  upheld. Thus, in Emma Hotels Ltd. v. Secretary of State  for Environment (1980) 41 P&* CR 255; the Secretary of  State referred to a number of factors which led him to the  conclusion  that  a  non  resident's  bar  in  a  hotel  was  operated in such a way that the bar was not an incident of  the  hotel  use  for  planning  purposes,  but  constituted  a  separate  use.  The  divisional  court  analysed  the  factors  which led the Secretary of State to that conclusion and,  having done so, set it aside. Donaldson, L.J. Said that he  could not  see on what basis the Secretary of  State  had  reached his conclusion.  

ii) A decision would be regarded as unreasonable if it  is  impartial  and  unequal  in  its  operation  as  between  different  classes.  On  this  basis  in  R.V.  Barnet  London  Borough Council, ex. P. Johnson 35 (1989) 88 LGR 73  the  condition  imposed  by  a  local  authority  prohibiting  participation by those  affiliated with political  parties  at  events  to  be  held  in  the  authority's  parks  was  struck  down.”

21. In  Tejas Constructions and Infrastructure (P) Ltd. v.  Municipal Council,   

Sendhwa & Anr.;  2012  (6)  SCC 464,  the  Court  was  dealing  with  the  case  of  

challenge to the awarding of contract to the 2nd respondent in the writ petition on  

the ground that he had not complied with eligibility requirements in NIT. Paragraph  

17 of that case reads as follows:  

“In Raunaq International Ltd. v. IV.R. Construction Ltd. (1999) 1  SCC 492, this Court reiterated the principle governing the process  of judicial review and held that the writ court would not be justified  

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in interfering with commercial transaction in which the State is one  of the parties to the same except where there is substantial public  interest involved and in cases where the transaction is mala fide.”

22. In so far as argument of malafides is concerned, apart from bald averment,  

there are no pleadings and there is not even a suggestion as to how the aforesaid  

decision  was  actuated  with  malafides  and  on  whose  part.  Even  at  the  time  of  

arguments Mr. Vikas Singh did not even advert to this aspect. In fact, the entire  

emphasis  of  Mr.  Vikas  Singh  was  that  since  there  was  a  concluded  contract  

between the parties, cancellation of such a contract amounted to arbitrariness. As  

already pointed out above that  can hardly be a ground to test  the validity of a  

decision in administrative law. For the sake of argument, even if you presume that  

there a concluded contract, mere termination thereof cannot be dubbed as arbitrary.  

A concluded contract  if  terminated  in  a  bonafide  manner,  that  may amount  to  

breach of contract and certain consequences may follow thereupon under the law  

of  contract.  However,  on  the  touch  stone  of  parameters  laid  down  in  the  

administrative  law to  adjudge  a  decision  as  are  arbitrary  or  not,  when  such  a  

decision  is  found  to  be  bonafide  and  not  actuated  with  arbitrariness,  such  a  

contention  in  administrative  law  is  not  admissible  namely  how  and  why  a  

concluded contract is terminated.

23. We, therefore, reject this contention of the appellant.  

II WHETHER DOCTRINE OF PROMISSORY ESTOPPEL  APPLIES.

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24. Again, we clarify at the outset that even the principle of PROMISSORY  

estoppel is in the field of administrative law and while entertaining the arguments  

and discussion on this issue, the question Has to whether there was a concluded  

contract or not as to be kept aside. Precisely this was done in Kisan Sehkari Chini  

Mills Case (Supra). The Court dealt with the issue of legitimate expectation etc.  

separating it  from the issue pertaining to conclude contract and made following  

pertinent observation in the process:

“23. If  the  dispute  was  considered  as  purely  one  relating  to  existence of an agreement, that is whether there was a concluded  contract and whether the cancellation and consequential non-supply  amounted to breach of such contract, the first respondent ought to  have approached the civil  court  for damages.  On the other  hand,  when  a  writ  petition  was  filed  in  regard  to  the  said  contractual  dispute,  the  issue  was  whether  the  Secretary  (Sugar),  had  acted  arbitrarily or unreasonably in stying the operation of the allotment  letter  dated  26.3.2004  or  subsequently  cancelling  the  allotment  letter. In a civil suit, the emphasis is on the contractual right. In a  writ  petition,  the  focus  shifts  to  the  exercise  of  power  by  the  authority, that is, whether the order of cancellation dated 24.4.2004  passed by the Secretary (Sugar), was arbitrary or unreasonable. The  issue whether there  was a  concluded contract  and breach thereof  becomes secondary. In exercising writ jurisdiction, if the High Court  found that the exercise of power in passing an order of cancellation  was not arbitrary and unreasonable, it should normally desist from  giving any finding on disputed or complicated questions of fact as to  whether  there  was  a  contract,  and  relegate  the  petitioner  to  the  remedy of a civil suit. Even in cases where the High Court finds that  there is a valid contract, if the impugned administrative action by  which the contract is cancelled, is not unreasonable or arbitrary, it  should still refuse to interfere with the same, leaving the aggrieved  party to work out his remedies in a civil court. In other words, when  there is a contractual dispute with a public law element, and a party  

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chooses the public law remedy by way of a writ petition instead of a  private  law  remedy  of  a  suit,  he  will  not  get  a  full  fledged  adjudication of his contractual rights, but only a judicial review of  the  administrative  action.  The  requisition  whether  there  was  a  contract and whether there was a breach may, however, be examined  incidentally  while  considering  the  reasonableness  of  the  administrative action. But where the question whether there was a  contract, is seriously disputed, the High Court cannot assume that  there was a valid contract and on that basis, examine the validity of  the administrative action.  

In this case,  the question that  arose for consideration in the writ  petition  was  whether  the  order  dated  24.4.2004  passed  by  the  Secretary (Sugar),  cancelling the allotment letter  dated 26.3.2004  was arbitrary and irrational or violative of any administrative law  principles. The question whether there was a concluded contract or  not, was only incidental to the question as to whether cancellation  order dated 24.4.2004 by the Secretary (Sugar), was justified. As  the  case  involved  several  disputed  questions  in  regard  to  the  existence  of  the  contract  itself,  the  High  Court  ought  to  have  referred the first respondent to a civil court. But the High Court in  exercise of its writ jurisdiction, proceeded as if it was dealing with a  pure and simple civil suit relating to breach of contract.”

25. Having noted the conceptual aspect of the doctrine of promissory estoppel,  

let us consider as to whether the appellant can successfully invoke this principle in  

the present case?  For this, let us recapitulate the salient features of this case having  

bearing on this issue. Apart from paying EMD of Rs. 3 lakhs alongwith  tender  

documents, the appellant did nothing more and in fact, no occasion for the same  

even occurred in the present case. As stated above LOI was issued but it clearly  

mentioned that  the total  premium amount in  respect  of  each of  the three plots  

(which runs into several crores in each case) was not to be paid on the issuance of   

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said LOIs. Reason for this was that formal LOI or leased documents were to be  

executed  only  after  the  CRZ  clearance.  For  this  reason  it  was  specifically  

mentioned in the LOI itself  that  the premium amounts were to  be paid by the  

appellant only after the receipt of CRZ clearance in general and after issuance of  

allotment letter  as well  as  individual  CRZ clearance and on execution of  these  

documents. Before these events could happen, the Port Trust decided to cancel the  

entire process.  Thus,  except making payment of Rs.  3 lakhs by way of earnest  

money the appellants did not incur any other expenses or suffered any liabilities or  

took any steps to implement the project of construction and maintenance of the  

tanks. The High Court has, therefore, rightly remarked that even if it is assumed  

that  issuance  of  LOI  tantamounted  to  a  promise  given  by  the  Port  Trust,  the  

appellants  did not  alter  its  position to its  prejudice pursuant thereto to such an  

extent which could inspire the court to take the decision that holding the promisor  

to its representation is necessary to do justice between the parties.

26. In MP Mathur & Ors. v. OIC & Ors.; 2006 (13) SCC 706 it is held  

that once the public interest is accepted as the superior equity which can override  

individual  equity,  the  principle  would  be  applicable.  If  there  is  a  supervening  

public equity, the Government would be allowed to change its stand and has the  

power to withdraw from representation made by it which induced persons to take  

certain steps  which may have  gone adverse  to  the  interest  of  such persons  on  

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account of such withdrawal. Merely because the resolution was announced for a  

particular period, it did not mean that the Government could not amend and change  

the policy under any circumstances. If the party claiming application of doctrine  

acted on the basis of a notification, it should have known that such notification was  

liable to be amended or rescinded at any point of time, if the Government felt that  

it  was  necessary  to  do  so  in  public  interest.  This  contention  of  the  appellant,   

therefore, is equally devoid of any merits.  

III WHETHER THERE WAS CONCLUDED CONTRACT  BETWEEN THE PARTIES:-

27. We have already indicated above that the     of the doctrine of fairness as  

well as promissory estoppel are in the realm of administrative law, whereas the  

issue as to whether a concluded contract was entered into between the parties and if  

so, the question of enforcement of such a contract would be in the field of law of  

contract.  Bearing in mind this  distinction becomes more important  as the High  

Court was dealing with the petition filed by the appellant under Article 226 of the  

Constitution.  

28. Before proceeding further in the matter we would again like to discuss the  

judgment of this court in Kisan Sahkari Chini Mills Ltd. & Ors. (Supra) which has  

been earlier referred to. This case unambiguously explains the approach which the  

High Court will have in such a petition filed under Article 226 of the Constitution,  

dealing with the arguments predicated on contractual aspects.

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In that case there were six State controlled sugar mills in Uttaranchal State  

which  produced  molasses.  Sale  of  molasses  by  them  was  controlled   by  the  

Molasses Sale Committee (MSC) constituted  by the State Government.

A tender notice was published by the appellant sugar mill inviting offers  

from bona fide consumers for purchase of molasses from the other five sugar mills.  

The tenders were to be submitted to the ACC in accordance with the conditions  

specified in the tender notice. The proceedings in regard to the tenders received  

culminated  in  an  order  from the  ACC permitting  the  respondent  to  lift  85,000  

quintals of molasses from the five sugar mills at a price of Rs. 127 per quintal.  

Around that time, the State Government received several reports that the prevailing  

price of molasses was much higher. The Secretary, Cane Development and Sugar  

Industries (Secretary (Sugar)) therefore, stayed the operation of ACC's order.  

The respondent then approached the High Court by a writ petition seeking a  

direction for  continuance of  supply of  the entire  quantity  of  85,000 quintals  of  

molasses to it. By an interim order, the High Court directed the State Government  

to  decide  the  respondent's  claim  after  hearing  the  respondent.  Pending  such  

decision, the High Court permitted the respondent to lift up to 20,000 quintals of  

molasses. After hearing the respondent, the Secretary (Sugar) held that there was no  

valid contract for supply of molasses to the first respondent and that, therefore, the  

allotment letter issued by the ACC was without any authority.  Consequently he  

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cancelled the same.

Aggrieved by the interim order of the High Court to supply 20,000 quintals  

of molasses to the respondent, the appellants approached the Supreme Court which  

in turn, set aside that interim order and permitted the respondent to amend the writ  

petition to challenge the order of the Secretary (Sugar).

The respondent amended its writ petition accordingly. During the hearing,  

certain disputed facts cropped up. The High Court called the managers of two of the  

sugar mills and put some questions to them and recorded their statements. The High  

Court reached the conclusion that there was a concluded contract between the five  

sugar mills and the respondent for sale of 85,000 quintals of molasses at a price of  

Rs. 127 per quintal. Thereafter, it held that having regard to the doctrines of part  

performance, legitimate expectation, estoppel and acquiescence, the cancellation of  

the allotment letter issued by ACC was unsustainable. Therefore, the High Court  

quashed the order of the Secretary (Sugar) and directed that the respondent should  

be allowed to lift 85,000 quintals of molasses less the quantity already lifted. The  

said judgment of the High Court was challenged in these appeals.  

The question before the Supreme Court were: (I) Whether  the  High  Court  

was  right  in  concluding/  assuming  that  there  was  a  valid  contract?   And  (ii)  

Whether  the  High  Court  was  justified  in  quashing  the  order  of  the  Secretary  

(Sugar)?

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This court answered the aforesaid questions in the negative and set aside the  

judgment of the High Court holding that ordinarily, the remedy available for a party  

complaining of breach of contract lies for seeking damages. He would be entitled to  

the relief of specific performance, if the contract was capable of being specifically  

enforced in law. The remedies for a breach of contract being purely in the realm of  

contract are dealt with by civil courts. The public law remedy, by way of a writ   

petition under Article 226 of the Constitution, is not available to seek damages for  

breach  of  contract  or  specific  performance  of  contract.  However,  where  the  

contractual dispute has a public law element, the power of judicial review under  

Article 226 may be invoked.

It is clear that the aforesaid case is closest to the facts of the present case.  

29. It thus stands crystalised that by way of writ petition under Article 226 of  

the Constitution, only public law remedy can be invoked. As far as contractual  

dispute is concerned that is outside the power of judicial review under Article 226  

with the sole exception in those cases where such a contractual dispute has a public  

law element.

30. We have already held that the impugned decision of the Port Trust was not  

arbitrary,  unreasonable  or  malafide  and further  that  the  doctrine  of  promissory  

estoppel has no application in the present fact situation.  

31. In so far as the issue regarding concluded contract in the present case is  

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concerned, this falls squarely in the realm of the contract law, without any hue or  

shade of any public law. In fact, that is not even pleaded or argued. At the same  

time, whether there was a concluded contract or not is seriously disputed by the  

respondents and, therefore, in the first instance it was not even necessary for the  

High Court to go into this issue and could have relegated the appellant to ordinary  

civil  remedy. We are  conscious of  the position that  merely because one of  the  

authorities raises a dispute in regard to the facts, it may not be always necessary to  

relegate the parties to a suit. This was so stated in ABL International Ltd. & Anr. v.  

Export Credit Guarantee Corporation of India Ltd. & Ors.; JT 2013 (10) SC 300  

in the following manner:-

“37. In our opinion, this limited areas of dispute can be settled by  looking into the terms of the contract of insurance as well as the  export contract, and the same does not require consideration of any  oral evidence or any other documentary evidence other than what is  already on record. The claim of the contesting parties will stand or  fall on the terms of the contracts, interpretation of which, as stated  above, does not require any external aid.”

32. At the same time, as already noted in Kisan Sahkari (Supra) this court had  

taken  a  view  that  where  the  question  whether  there  was  a  contract  or  not  is  

seriously disputed, the court is not to assume that there was a valid contract and on  

that basis examined the validity of the administrative action. Therefore, keeping in  

view the aforesaid understanding of the law, a very limited inquiry on this aspect is  

permissible.  

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33. Having considered the matter from this limited angle in exercise of powers  

of judicial review, we are of the view that on the facts of this case, no interference  

is required.  Case of the appellant is that with the issuance of LOI a concluded  

contract was entered into. He had submitted that only CRZ clearance was required  

and  even  if  LOI,  which  amounted  to  acceptance  of  the  author  given  by  the  

appellant in his bid was contingent based on CRZ clearance, even that clearance  

was granted by the competent authority ultimately. However, what is lost sight, in  

the entire process is that the said clearance was delayed by a period of  5 years.  

Because of that neither any final LOI could be issued, nor possession of the plots  

given or  the payments received.  It  is  also to be borne in mind that  apart  from  

general CRZ clearance, specific clearances on individual basis in this behalf were  

also to be obtained.  

34. At this juncture, while keeping the aforesaid pertinent features of the case  

in mind, we would take note of the 'Rules and Procedure for Allotment of Plots' in  

question issued by Kandla Port Trust. As per clause 12 thereof the Port Trust had  

reserved  with  itself  right  of  acceptance  or  rejection  of  any  bid  with,  specific  

stipulation that mere payment of EMD and offering of premium will not confer any  

right or interest in favour of the bidder for allotment of land. Such a right to reject  

the bid could be exercised 'at  any time without assigning any reasons thereto'.  

Clause  13  relates  to  'approvals  from  statutory  authorities',  with  unequivocal  

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assertion therein that the allottees will have to obtain all approvals from different  

authorities and these included approvals from CRZ as well. As per clause 16, the  

allotment was to be made subject  to the approval  of  Kandla Port  Trust  Board/  

Competent Authority. In view of this material on record and factual position noted  

in earlier paras we are of the opinion that observations in the case of Dresser Rand  

S. A. v. M/s. Bindal Agro Chem. Ltd. & Anr.; AIR 2006 SC 871, would be squarely  

available in the present case, wherein the court held that a letter of intent merely  

indicates a parties intention to enter into a contract with the other party in future.  A  

letter  of  intent  is  not  intended to bind either  party ultimately to enter  into any  

contract. It is no doubt true that a letter of intent may be construed as a letter of  

acceptance  if  such  intention  is  evident  from its  terms.  It  is  not  uncommon in  

contracts involving detailed procedure, in order to save time, to issue a letter of  

intent communicating the acceptance of the offer and asking the contractor to start  

the work with a stipulation that a detailed contract would be drawn up later. If such  

a letter is issued to the contractor, though it may be termed as a letter of intent it  

may amount to acceptance of the offer resulting in a concluded contract between  

the parties. But the question whether the letter of intent is merely an expression of  

an intention to place an order in future or whether there is a final acceptance of the  

offer thereby leading to a contract, is a matter that has to be decided with reference  

to the terms of the letter. When the LOI is itself hedged with the condition that the  

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final allotment would be made later after obtaining CRZ and other clearances, it  

may  depict an intention to enter into contract at a later stage.  Thus, we find that  

on the facts of this case it appears that a letter with intention to enter into a contract  

which could take place after all other formalities are completed. However, when  

the completion of these formalities had taken undue long time and the prices of  

land, in the interregnum, shot up sharply, the respondent had a right to cancel the  

process which had not resulted in a concluded contract.  

35. We would also like to record here that Mr. Salve, learned Senior Counsel  

appearing for the respondent had submitted with vehemence that the case of the  

appellant herein was same as that of Nikhil Adhesives Ltd.  in as much as even the  

appellant was responsible for contributing to the delay in obtaining the permission.  

Mr. Vikas Singh had attempted to refute this submission. However, we find that  

even  when  the  High  Court  in  the  impugned  order  specifically  referred  to  the  

decision in the case of Nikhil Adhesives Limited and observed that factual matrix  

remains the same, there is no pleading or ground in the SLP to the effect that the  

said judgment is not applicable to the case of the appellant as the appellant had  

submitted all requisite documents or obtaining the CRZ clearance and there was no  

delay on his part. However, since we are dismissing the appeal on merits, it is not  

necessary to dwell on this aspect any further.  

36. We  again  emphasise  that  the  issue  of  the  argument  of  their  being  a  

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concluded contract is raised in a petition filed under Article 226 of the Constitution  

and not by way of suit.  The issue whether there was a concluded contract  and  

breach thereof become secondary and is examined by us with that limited scope in  

mind. In such proceedings main aspect which has to be   is as to whether impugned  

decision of the Port Trust was arbitrary or unreasonable. It is also important to  

remark that in a given case even if it is held that there was a concluded contract,   

whether specific performance can be ordered or not would be a moot question in  

writ proceedings. The appellant took the calculated risk in not going to the civil  

court and choosing to invoke extraordinary jurisdiction of the High Court, which is  

also discretionary in nature.  

37. The outcome of the aforesaid discussion would be to hold that there is no  

merit in this appeal which is accordingly dismissed with costs.  

…....................................J. [Surinder Singh Nijjar]

…..................................J. [A.K. Sikri]

New Delhi April 21, 2014

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