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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No.9264  of 2014 (Arising out of Special Leave Petition (C) No. 1117 of 2010)

City Industrial Development  Thr. its Managing Director    …      Appellant (s)

Versus

Platinum Entertainment and others  …      Respondent(s) WITH

Civil Appeal No.9265 of 2014 (Arising out of Special Leave Petition (C) No.1215 of 2010)

City Industrial Development  Thr. its Managing Director    …      Appellant (s)

Versus

Platinum Square Trust and Anr.       …       Respondent(s)

Civil Appeal No.9266 of 2014 (Arising out of Special Leave Petition (C) No.1290 of 2010)

City Industrial Development  Thr. its Managing Director    …      Appellant (s)

Versus

Popcorn Entertainment Corporation and others … Respondent(s)

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JUDGMENT

M.Y. EQBAL, J.

Leave granted.

2. These  appeals  are  directed  against  the  common  

judgment and final order dated 01.09.2009 passed by the  

High Court of Judicature at Bombay whereby Division Bench  

of  the  High  Court  has  allowed  three  Writ  Petitions  being  

W.P.Nos. 9467,  9468 of 2005 and 3423 of 2006 preferred  

respectively by M/s. Popcorn Entertainment Corporation (in  

short, ‘M/s. Popcorn’), M/s. Platinum Entertainment (in short,  

‘M/s.  Platinum’)  and M/s.  Platinum Square  Trust  (in  short,  

‘M/s. Platinum Square’).   By way of these writ petitions, the  

writ petitioners had challenged orders of appellant- ‘The City  

& Industrial Development Corporation’ (in short ‘CIDCO’) by  

which allotment of  plot  of  lands to M/s.  Popcorn and M/s.  

Platinum Entertainment for erecting entertainment complex  

in  Navi  Mumbai  and the allotment  of  plot  of  land to  M/s.  

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Platinum  Square  for  establishment  of  country  club  were  

cancelled.

3. The  facts  giving  rise  to  aforesaid  writ  petitions  and  

consequently present appeals are almost similar.  However,  

for the sake of clarity factual matrix of each appeal has been  

mentioned here separately.

4. The respondent-  M/s.  Popcorn Entertainment  (SLP (C)  

No.1290 of 2010) in the appeal by special leave arising out  

of Writ Petition No.9467 of 2005, by way of an application  

made a  request  for  allotment of  plot in Airoli  for  setting  

up multiplex-cum-auditorium-cum-entertainment centre.  On  

CIDCO’s instructions, respondent submitted detailed project  

report.  CIDCO,  by  their  letter  of  intent,  requested  the  

respondent  herein  to  pay  an  Earnest  Money  Deposit  of  

Rs.20,77,000/- within 15 days from the receipt of the letter  

to enable the Board to consider the allotment in favour of  

the respondent. The respondent, accordingly made EMD on  

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29.6.2004. On 29.7.2004, CIDCO approved the allotment of a  

plot in favour of the appellant as the Board had not got any  

response for similar plots in public tender.  The total lease  

premium in respect of the plot was Rs.2,07,70,000/- and the  

respondent  was  directed  to  pay  the  balance  amount  of  

Rs.1,86,93,000/- by 14.9.2004. The allotment was allegedly  

made  in  terms  of  the  New  Bombay  Land  Disposal  

Regulations, 1975 and also in terms of the Land Pricing and  

Disposal  Policy  of  CIDCO  under  which  the  land  could  be  

allotted to any person by considering individual application  

at the reserved price fixed by CIDCO. Thereafter, by making  

balance  payment  including  additional  amount  due  to  the  

marginal  increase  in  the  demarcation  of  the  plot,  M/s.  

Popcorn  Entertainment  made   a  total  payment  of  

Rs.2,98,22,420/- being the full and final payment in respect  

of allotment in favour of the respondent as demanded by  

CIDCO. An agreement to lease was entered into with CIDCO  

in respect of the plot allotted to the respondent.

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5. However, on 1.8.2005, appellant CIDCO issued a show  

cause notice to the respondent regarding the plot at Airoli  

seeking cancellation of the agreement to lease executed in  

favour of the respondent.  The respondent submitted reply  

to the show cause notice and also sought information from  

CIDCO  under  the  Right  to  Information  Act  regarding  

allotment to various parties and the details thereon.   The  

Agreement of Lease was repudiated and rescinded, against  

which the respondent approached the High Court by way of  

a writ petition.  

6. The  respondent-  M/s.  Platinum  Entertainment  in  the  

appeal by special leave (SLP(C)No.1117/2010) arising out of  

Writ  Petition  No.9468  of  2005,  by  way  of  an  application  

made a request for allotment of plot for construction of a  

multiplex at Kharghar Railway Station.  Upon being asked by  

the appellant CIDCO, M/s. Platinum deposited EMD of Rs.20  

lakh being 10% of the tentative price of the plot in order to  

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consider  the  application  of  the  respondent.  Thereafter,  

CIDCO approved the allotment in favour of the respondent  

considering the fact that there was no multiplex in the area  

and the earlier effort of CIDCO to advertise for such plots  

had met with no response. CIDCO issued allotment letter in  

favour  of  the respondent  asking the petitioner  to  pay Rs.  

1,80,00,000/-  being  the  balance  price  of  the  plot.  The  

respondent made two separate payments of Rs.90 lakh each  

towards  the  balance  price  of  the  plot  on  16.8.2004  and  

19.8.2004.  The  respondent  paid  a  sum  of  Rs.20,00,600/-  

being the  other  charges  demanded by the  appellant.  The  

respondent was asked to pay a further sum of Rs.65,096/-,  

which the respondent paid immediately. CIDCO unilaterally  

decided to ask the respondent to pay a further sum of Rs.20  

lakh  by  enhancing  the  rate  at  which  the  plot  was  to  be  

allotted to the respondent from Rs.2500/- per square meter  

as demanded in the allotment letter to Rs.2750 per square  

meter because the plot of the respondent was on a 24 meter  

road. The respondent herein on 17.11.2004 paid a further  

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payment  of  Rs.20  lakh  along  with  Rs.2,96,078/-  plus  

Rs.4957/- being the additional cost and the other charges.  

On  14.1.2005,  the  respondent  paid  a  further  sum  of  

Rs.19,828/- being the sum demanded.  The respondent on  

17.1.2005  entered  into  an  agreement  to  lease  with  the  

appellant  for  the  allotment  of  plot.  On  28.2.2005,  CIDCO  

being  the  development  authority  of  the  area  issued  

commencement certificate to the respondent permitting the  

respondent to start  construction.   However,  on 14.7.2005,  

the  respondent  received  a  show  cause  notice  seeking  

cancellation of the allotment in favour of the respondent on  

the ground that the allotment was void in view of Section 23  

of the Contract Act as being opposed to public policy. The  

main ground in the show cause notice was that the allotment  

was without issuance of tender and was opposed to public  

policy.  The respondent submitted reply to the show cause  

notice. On 16.12.2005, CIDCO issued an order cancelling the  

agreement to lease and sought to resume the possession of  

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the plot, against which the respondent approached the High  

Court by way of writ petition.

7.  The  respondent-  M/s.  Platinum  Square  Trust  in  the  

appeal  by  special  leave  petition  (SLP(C)No.1215/2010)  

arising out of Writ Petition No.3423 of 2006, by way of an  

application  made  a  request  for  allotment  of  plot  of  land  

admeasuring  80,000  sq.mtr.  at  Kharghar  hill  for  

establishment of country club.  CIDCO having a plot of land  

earmarked for similar purpose, considered the request of the  

respondent and called upon the respondent to pay Rs.39.52  

lakh on or before 20th April,  2004 constituting 10% of the  

value of the plot as EMD so as to enable the CIDCO to place  

the proposal of the respondent before the Board of Directors.  

CIDCO  further  requested  the  respondent  to  submit  

registration  certificate  either  under  the  Trust  Act  or  the  

Society Registration Act before allotment/ possession of the  

land so that the case of the respondent could be considered  

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for  allotment  at  subsidized  rate  in  terms  of  the  policy;  

otherwise  commercial  rates  were  to  attract  for  such  

allotment.  The respondent in terms of the letter of CIDCO  

deposited  a  sum  of  Rs.39.52  lakh  with  them.   The  

respondent got its trust deed registered on 14th May, 2004;  

wherein  six  Trustees  were  appointed.  Amongst  others,  

objectives of the Trust are to establish and support, maintain  

and run sports  club,  gymnasium,  health  club,  amusement  

park,  yoga  centre,  water  sports  etc.  and  to  carry  out  

activities relating thereto.  

8. The respondent herein was allotted 50,350 sq.mtr. land  

by CIDCO for a total sale consideration of Rs. 3,43,70,800/-.  

Out of the said amount of consideration, the respondent had  

already deposited Rs.39.52 lakh as such the appellant was  

directed to deposit Rs. 1,52,09,400/- in two installments i.e.  

on 30th July, 2004 and 29th August, 2004 being the balance  

lease premium payable in respect of the subject plot. In the  

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allotment letter, it was specifically mentioned that payment  

of  lease  premium in  a  stipulated  period  is  an  essence of  

concluded contract. It was further provided in the allotment  

letter that extension of time could be granted which would  

be up to 3 months for payment of the first installment and  

up to 16 months for the payment of the second installment.  

It was provided therein that up to 3 months the respondent  

would be charged 13% interest and beyond 3 months the  

respondent would be charged 16% interest for the extended  

period of time.  The respondent on 15th September 2004,  

paid  the  first  installment  of  Rs.1,52,09,400/-  within  the  

extended  time  permitted  under  the  allotment.   The  

respondent on 3rd May, 2005, wrote letter to the CIDCO for  

extension of time for making payment of second installment  

up  to  December,  2005.  Clearly  in  terms  of  the  allotment  

letter,  the  respondent  could  ask  extension  of  second  

installment  up  to  29th  December,  2005.   The respondent  

Trust  was  registered  under  the  Bombay  Public  Trust  Act,  

1950  on  19th  April,  2005.  The  respondent  submitted  

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documents  to  CIDCO  on  25th  May,  2005  evidencing  

registration of the Trust.  However, on 20th July, 2005 the  

respondent received show cause notice seeking cancellation  

of the allotment made in favour of the respondent on the  

basis of Shankaran Report.  

9. The  respondent,  on  3rd  August,  2005,  submitted  its  

detailed  reply  to  the  show  cause  notice  challenging  the  

cancellation  of  allotment  of  plot,  reiterating  that  the  

allotment was in accordance with law as such it could not be  

cancelled.  The respondent, on 29th December, 2005, wrote  

letter to the Marketing  Manager of CIDCO requesting him to  

accept payment of second installment being the last date up  

to  which  the  extension  could  be  granted  under  the  

allotment. However, CIDCO refused to accept the payment.  

The  respondent  on  the  same  date  wrote  another  letter  

recording  the  fact  that  CIDCO  has  refused  to  accept  the  

second installment  and that  the respondent would not  be  

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liable to pay any further interest from the said date and that  

the allotment could not be cancelled on the ground that the  

payment has not been made by the respondent.   

10. The respondent was served with the order dated 28th  

April, 2005 cancelling allotment of plot made in favour of the  

respondent.   Being  aggrieved  by  the  aforesaid  order  of  

cancellation,  the  respondent  herein  approached  the  High  

Court by way of writ petition filed under Article 226 of the  

Constitution of India.  

11. With the aforesaid factual matrix, it is also necessary to  

note  that  State  of  Maharashtra,  who  is  having  ultimate  

authority and power to control and regulate the activities of  

planning and development under the Maharashtra Regional  

and Town Planning Act, 1966 (in short, ‘MRTP Act’), in 1971  

appointed appellant-CIDCO as new town planning authority  

for  the  new  town  -  Navi  Mumbai.  In  exercise  of  powers  

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conferred by sub-clause (a) of clause (1) of section 159 of  

the MRTP Act, the CIDCO has with the previous approval of  

the  State  Government  published  in  July  1979  the  New  

Bombay Disposal of Lands Regulations, 1975 (in short, ‘the  

Regulations’).  The aforesaid regulations, inter alia, provide  

for the demarcation of plots vested in the Government by  

CIDCO into disposable plots having regard to their size and  

use. The said regulations also make provision for conditions  

of lease, mode of disposal and for grant of land for religious,  

educational, charitable and public purposes. For the present  

purpose,  relevant  one  is  Regulation  4  of  Chapter  IV,  

according to which the Corporation may dispose of plots of  

land by public auction or tender or by considering individual  

applications as the Corporation may determine from time to  

time.  

12. It is the case of the appellant CIDCO that the aforesaid  

contesting respondents had been made allotment of lands  

by the appellant pursuant to a direct application being made  

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to the office of the then Chief Minister and in other similar  

cases a number of public interest litigation were filed in the  

High  Court.   Accordingly,  the  Government,  to  ascertain  

whether  the allotments  made were bonafide,  directed the  

then Additional Chief Secretary to conduct an enquiry to find  

out  whether  the  Board  of  Directors  of  CIDCO disposed of  

lands in accordance with law.  Enquiry was conducted by the  

Additional Chief Secretary and submitted the report (called  

Shankaran  Report).  The  enquiry  inter  alia  revealed  that  

subject allotment was illegal, arbitrary and the appellant had  

suffered a financial loss in crores.  Therefore, the appellant  

issued notice to the contesting respondents and ultimately  

cancelled the subject allotments, which led to filing of the  

writ petition.  The writ petitions were dismissed by the High  

Court on the ground that alternative remedy was available to  

the  writ  petitioners  by  filing  suits  and  therefore  writ  

jurisdiction cannot be invoked.  

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13. Aggrieved  by  the  decision  of  the  High  Court,  

respondents  approached this  Court  by  way of  appeals  by  

special leave.  Those Civil  Appeals being Civil  Appeal Nos.  

940-941 of 2007 were disposed of by this Court remitting the  

matters back to the High Court for deciding the writ petitions  

on  merits.   The  said  order  is  reported  in  Popcorn  

Entertainment & Anr. vs. City Industrial Development  

Corpn. & Anr., (2007) 9 SCC 593. In the order of remand  

this Court made some observations with regard to the merits  

of the case.   For better appreciation,  para 41 and 47 are  

reproduced herein below:-

“41. At the time of hearing, it was suggested  by  the  learned  Senior  Counsel  for  the  respondent  that  the  allotment  was  made  without any justification and that there was a  huge demand for such plot, it is submitted by  learned  counsel  for  the  appellant  that  the  appellant has sought information from CIDCO  under  the  Right  to  Information  Act  as  to  whether there was no application pending with  them for allotment of the said plot prior in time  to  the  application  of  the  appellant.  CIDCO in  reply  has  clearly  stated  that  there  was  no  application  prior  to  the  application  of  the  appellant. Even the allotment in favour of the  appellant was a reasoned allotment taking into  consideration  the  lack  of  entertainment  facilities  in  the  area  and  the  said  issue  was  

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also discussed in the board meeting before the  allotment  and these facts  are clear  from the  information  provided  to  the  appellant  under  the Right to Information Act. Our attention was  also  drawn  to  the  noting  in  the  file  while  considering  the  case  of  the  appellant  and  before making the allotment that

(i)  “There  is  no  cinema/multiplex  facility  available  today  for  the  residents  of  CBD  Belapur, Kharghar and Kalamboli residents.

(ii)  From  accessibility  and  land  use  compatibility point of view, Plot No. 1, Sector 2,  Kharghar admeasuring about 8000 sq m is an  ideal location for multiplex.

(iii)  This  building  will  be  visible  from  highway and will add to the image of the city.

(iv) Adjoining Plot 1 of Sector 1 attached to  railway  station  admeasuring  5600  m2 (not  demanded yet) is earmarked for city mall.”

47. We have given our careful consideration to  the rival submissions made by the respective  counsel  appearing  on  either  side.  In  our  opinion, the High Court has committed a grave  mistake  by  relegating  the  appellant  to  the  alternative remedy when clearly in terms of the  law laid down by this Court, this was a fit case  in which the High Court should have exercised  its  jurisdiction  in order to consider and grant  relief to the respective parties. In our opinion,  in the instant case, 3 of the 4 grounds on which  writ petitions can be entertained in contractual  matter  were  made  out  and  hence  it  was  completely wrong of the High Court to dismiss  the  writ  petitions.  In  the  instant  case,  3  grounds  as  referred  to  in  Whirlpool  Corpn.  (1998)  8  SCC  1, have  been  made  out  and  accordingly  the  writ  petition  was  clearly  maintainable  and  the  High  Court  has  committed an error in relegating the appellant  to the civil court.”

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14. However,  this  Court  took  the  view  that  the  matter  

needs to be remanded back to the High Court, so that the  

High  Court  will  consider  all  the submissions  made by  the  

parties and dispose of the same afresh.

15. The  High  Court  on  receipt  of  the  remand  order  

proceeded with the hearing of the writ  petitions and after  

hearing  both  the  parties  allowed  the  writ  petitions  by  

passing the impugned order and quashed the orders passed  

by the appellant-CIDCO cancelling the allotment.  The High  

court while passing the impugned order has gone through  

the merits of the case of both the parties but held that the  

observations made by this Court in the remand order (41,  

43, 47, 48 and 49) relating to non-observations of rule and  

regulations causing substantial loss to the CIDCO operate as  

obiter  and is binding on the High Court and, therefore, the  

High Court has to fall in line with the view expressed by this  

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Court.   Para  97  of  the  impugned  order  is  quoted  

hereinbelow.

“97. As already stated hereinabove, so far as  categorical  and  unequivocal  observations  made by the Apex Court revolving around the  issues relating to non-observation of rule and  regulations  causing  substantial  loss  to  the  CIDCO  since  no  tenders  were  invited  and  interpretation of Section 23 of the contract Act  are concerned, they operate as obiter binding  on us as such we have to fall in line with the  view expressed by the Apex Court.”

16. We have heard learned counsel on either side at length.  

Mr. B.H. Marlapalli, learned senior counsel appearing for the  

appellant-CIDCO,  contended  that  the  High  Court  has  

misconstrued and misinterpreted order passed by this Court  

in  the  case  of  Popcorn  Entertainment  (supra)  in  the  first  

round of litigation whereunder the matter was remanded to  

the High Court for fresh consideration on merits keeping all  

contentions open.  However, the High Court chose to restrict  

itself  to  consider  only  the  ground  for  cancellation  of  the  

allotment taken in the final show cause notice and recorded  

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in the final order.  The High Court would have considered the  

matter on merits without being fettered or constrained by  

any  observation  of  the  Apex  Court.   It  has  been  further  

contended  on  behalf  of  the  appellant  that  this  Court  has  

declared the law that  the disposal  of  the  State owned or  

public  property  by  auction  or  tenders  is  a  rule  and  such  

disposal by private negotiation is an exception to be carved  

for cogent and compelling reasons to be recorded in writing  

at the time of disposal.  The law so declared is mandatory in  

its application, warranting absolute and implicit  adherence  

thereto  at  the  peril  of  any  act  or  commission  in  

contravention thereof being illegal and non est.  

17.  Mr.  B.H.  Marlapalli,  learned  senior  counsel  further  

submitted  that  in  order  to  find  out  whether  the  Board  of  

Directors of CIDCO disposed off its lands in Navi Mumbai in  

accordance with law, the State Government had directed the  

then Additional Chief Secretary - Dr. D.K. Shankaran to hold  

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a  discreet  enquiry  in  the  affairs  of  CIDCO.   The  CIDCO  

cancelled  the  allotments  due  to  the  arbitrary  manner  in  

which the plots were allotted and the loss caused to CIDCO,  

and the basis for computing the loss was the report of Dr.  

Shankaran, which has referred to several allotments in the  

vicinity and the offer made to BARC and as such, in the writ  

jurisdiction,  the  High  Court  cannot  decide  the  price  

prevailing in the area at the time of allotment.  It is further  

contended on behalf of the appellant that as per Shankaran  

Report it was necessary to allot the plots by inviting tenders  

and testing the market.  Had it been done so, these plots  

would have fetched at least five times greater value than the  

actual value received.  Further Mr. Nilesh Gala, who is the  

proprietor  of  M/s.  Platinum  Entertainment,  has  used  the  

same modus operandi  for  obtaining allotment  of  plots  for  

country  club  at  Kharghar  and  another  multiplex  plot  in  

Kharghar and the CIDCO was found to have suffered a loss of  

Rs.10 crores  in  this  case.   Show cause notice was issued  

mentioning three grounds,  viz.  favoritism,  non-issuance of  

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tender  and  loss  caused  to  the  Corporation.   It  is  further  

urged  that  the  order  of  cancellation  of  the  allotment  

specifically  states  that  the  Board  of  Directors  of  the  

Corporation found itself in substantial concurrence with the  

findings recorded by Dr. Shankaran.

18. Learned senior counsel sought to justify the action of  

CIDCO on the basis of Sections 154 and 118 of MRTP Act  

contending  that  the  purpose  of  constituting  CIDCO  is  to  

develop  a  town  by  making  allotment,  and  in  case  the  

allotments are allowed to be made in arbitrary manner and if  

such  allotments  are  sustained,  then  it  amounts  deviation  

from the purpose of the Act.  It is further urged that Section  

23  of  the  Contract  Act  also  envisages  cancellation  on  

account of the allotment/agreement, if it is opposed to public  

policy  and  this  Court  may  sustain  the  cancellation  being  

opposed  to  public  policy.   The  allotment  made  without  

inviting tenders leads to presumption of nepotism etc. and it  

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can only be justified by citing compelling reasons.  Whereas  

in  the  present  case,  no  reasons  were  mentioned  and  

allotments were made surreptitiously to one person.

19.  Rival submissions have been made by Mr. Vikas Singh  

and  Mr.  J.P.  Cama,  learned  senior  counsel  appearing  on  

behalf  of  contesting  respondents,  contending  that  the  

allotment  made  in  favour  of  these  respondents  was  

cancelled by the  appellant  by  issuing  show cause notices  

referring to Shankaran report and alleging that CIDCO had  

suffered losses  and mentioning the ground that there was  

non-issuance of tender before making allotment, the same  

being void under Section 23 of the Contract Act was opposed  

to  the public  policy.   According to  them,  the Apex Court,  

while remanding the matter in the first round of litigation, in  

para  48  of  the  judgment  reported  in  (2007)  9  SCC  593  

(supra) set aside the order of CIDCO seeking to resile from a  

concluded contract in favour of the contesting respondents.  

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It  is submitted on behalf of the respondents that the New  

Bombay Land Disposal Rules are the specific rules governing  

the disposal of land to be done by CIDCO.  Rule 4 of the said  

Rules  clearly  provided  that  CIDCO  has  the  authority  to  

dispose  plots  of  land  by  public  auction  or  tender  or  by  

considering  individual  application  as  the  Corporation  may  

determine from time to time.  Mr. Vikas Singh, learned senior  

counsel contended that once an allotment is made in favour  

of a party, CIDCO has no right to cancel the allotment on the  

ground that no tenders had been invited.  A development  

authority while allotting land can allot plot of land without  

calling for tender or without inviting offers from the general  

public if the statutory regulations regarding disposal of land  

by public authority permit the authority to do so.  It is further  

urged that CIDCO has been relying upon the aforesaid rule to  

justify,  in various cases, the allotments made in favour of  

commercial  complexes,  societies  as  well  as  sports  

complexes  saying  that  such  allotment  made  without  

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issuance of tender were justified as being within the power  

vested in CIDCO under Rule 4 of the aforesaid Rules.

20.  In support of his contention, Mr. Vikas Singh cited the  

portion  of  a  paragraph  of  the  decision  of  this  Court  in  

Kasturi  Lal  Laxmi  Reddy  vs.  State  of  Jammu  &  

Kashmir, 1980 (4) SCC 1, which is reproduced here:

“22.  …….We do not think the State is bound  to advertise and tell the people that it wants a  particular industry to be set up within the State  and  invite  those  interested  to  come up  with  proposals  for  the  purpose.  The  State  may  choose to do so, if it thinks fit and in a given  situation,  it  may  even  turn  out  to  be  advantageous for the State to do so, but if any  private party comes before the State and offers  to set up an industry, the State would not be  committing  breach  of  any  constitutional  or  legal obligation if it negotiates with such party  and  agrees  to  provide  resources  and  other  facilities  for  the  purpose  of  setting  up  the  industry. The State is not obliged to tell such  party:  “Please  wait  I  will  first  advertise,  see  whether any other offers are forthcoming and  then  after  considering  all  offers,  decide  whether I should let you set up the industry.”  

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21. Referring to the case of Chairman and MD, BPL Ltd.  

vs. S.P. Gururaja and others, 2003 (8) SCC 567, Mr. Singh  

contended  that  non-floating  of  tenders  or  not  holding  of  

public auction would not in all cases be deemed to be the  

result of the exercise of the executive power in an arbitrary  

manner.  The power of cancellation under Section 23 of the  

Contract  Act  is  only  available  to  the  Court  and  on  the  

concept  of  separation  of  power  the  said  power  is  not  

exercisable by executive unilaterally without referring to the  

Court.  It has been further contended that although through  

the  impugned  order  the  High  Court  had  quashed  the  

cancellation order, only CIDCO has preferred appeal whereas  

the State of Maharashtra accepted the impugned order and  

has no grievance with the quashing of the order cancelling  

the contesting respondents’ allotment.

22. It   has   further   been  contended  that   the   rules  

provide  for  three  methods  of  disposal  i.e.  by  tender,  by  

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public auction or by considering individual applications and  

CIDCO  vide  various  board  resolutions  have  specifically  

provided the exact method of disposal for various types of  

plots.  CIDCO has accordingly framed the Land Pricing and  

Land  Disposal  Policy  as  approved  by  various  board  

resolutions  wherein  various  categories  of  plots  are  

mentioned.  In the case of commercial plots where FSI 1.5 is  

permitted the land price rate determined under the policy is  

450% of the reserve price and the method of disposal is by  

tender  and  in  the  alternative  at  fixed  rate.   Similarly  for  

allotment of multiplex, the rate specified under the policy is  

at reserve price and the method of disposal is upon request  

at fixed rate or by competitive bidding.  The two different  

methods of  disposal  between a commercial  allotment and  

the allotment for multiplex is significant because in the case  

of  commercial  allotment,  by tender  is  the first  method of  

disposal  prescribed  and  at  fixed  rate  is  the  alternative  

method  of  disposal  prescribed  whereas  in  the  case  of  

allotment for multiplex/auditorium on request at fixed rate is  

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the  first  method  and  by  competitive  bidding  is  the  

alternative method of allotment.  Furthermore, allotment in  

the case of M/s. Platinum Square Trust the land price of open  

area/running track is specified to be 10% of the reserve price  

and of  area used for  construction is  to  be at  50% of  the  

reserve  price  and  the  method  of  disposal  is  only  upon  

request  at  fixed  rate  from  the  registered  trust/registered  

under  the  Public  Trust  Act.   Learned  senior  counsel  

contended that allotments in favour of the respondents were  

clearly in conformity with the rules and also in conformity  

with the Land Pricing and Land Disposal  Policy framed by  

CIDCO for  allotment  of  various  types  of  land  in  the  Navi  

Mumbai area.

23. It  has  been  submitted  that  in  a  similar  case  where  

allotment had also been cancelled on the only ground that  

the same had been made without inviting tenders, the Apex  

Court  in  Sunil  Pannalal  Banthia vs.  City & Industrial   

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Development  Corpn.  of  Maharashtra  Ltd., (2007)  10  

SCC 674, has held that once an allotment had been made in  

favour of a party, CIDCO has no right thereafter to cancel the  

allotment on the ground that no tenders had been invited.  

CIDCO  had  power  to  make  allotment  without  calling  for  

tender  under  Rule  4  and  it  could  not  be  said  that  the  

allotment  in  favour  of  Sunil  Pannalal  Banthia  was  in  any  

manner contrary to the rules for making such allotment.

24. It has also been contended on behalf of the contesting  

respondents that according to the information provided to  

the respondents under the Right to Information Act, a public  

utility plot has never been put to tender by CIDCO during the  

period when aforesaid allotments had been made in favour  

of the respondents.  According to the information provided,  

allotment to 56 allottees have been made without inviting  

tenders as per Land Pricing and Land Disposal Policy and the  

price  charged  is  as  per  the  policy  as  approved  by  Board  

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resolutions.   These allotments were not  scrutinized by Dr.  

Shankaran  and  not  formed  part  of  the  enquiry  report.  

Furthermore, Shankaran report had been prepared ex-parte  

i.e. without issuing notice to the respondents.  Copy of said  

report  was  not  furnished  to  the  respondents  either  along  

with  show  cause  notice  or  before  cancellation  order  was  

passed  although  demanded  by  the  respondents  in  their  

reply,  in which it  was specifically mentioned that the final  

reply could be given only after the entire report was given to  

them  along  with  the  methodology  used  by  Shankaran  to  

arrive  at  the  alleged  losses.   It  is  contended  that  the  

cancellation order is vitiated being in violation of principles  

of natural justice, for having been passed without giving a  

copy  of  the  Shankaran  report,  which  had  been  prepared  

behind the back of the contesting respondents.

25. Upon perusal of notice it is clear that its contents are  

similar in all these appeals.  The appellant CIDCO referred  

the  Shankaran  Report  in  which  it  was  observed  that  the  

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allotments were made in favour  of  the respondents in  an  

arbitrary manner without calling upon to show cause as to  

why such allotment should not be repudiated having become  

void on the thrust of Section 23 of the Indian Contract Act,  

1872.   For better appreciation para 14 of the show cause  

notice is reproduced hereinbelow:-

“The  Board  of  Directors  of  the  Corporation  at  its  meeting  held  on  6th June,  2005  considered  the  recommendations  of  Dr.  D.K.  Shankaran,  the  then  additional  Chief  Secretary  and  directions  of  the  State  government and as directed me to call upon you to show  cause why the Corporation should not rescind or repudiate  such  allotment  having  become  void  on  the  thrust  of  Section  23 of  Contract  Act  1872 which  declares  that  an  Agreement  having  its  object  or  consideration  to  defeat  provision of the law or opposed to public policy as declared  by the Hon’ble Supreme Court as aforesaid is vitiated by  illegality and is liable to be declared void”.

26. Section 23 of the Indian Contract Act,  1872 reads as  

under:-

“What  consideration  and  objects  are  lawful,  and what not.—The consideration or object  of  an  agreement is lawful, unless –

It is forbidden by law; or

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is  such of such a nature that, if  permitted,  it  would defeat the provisions  of  any law; or is  fraudulent; or

involves  or  implies,  injury  to  the  person  or  property of another; or  

the Court regards it as immoral, or opposed to  public policy.

In  each  of  these  cases,  the  consideration  or  object of an agreement is said to be unlawful.  Every  agreement  of  which  the  object  or  consideration  is  unlawful is void.”

27. Before  dealing  with  the  legality  and  validity  of  the  

notice aforesaid, we shall first wish to mention some of the  

relevant facts:-

A. Indisputably  applications  were  made  by  the  respondents to the then Chief Minister for allotment of  plots of land in question.

B. On  the  application  submitted  on  behalf  of  M/s.  Platinum Entertainment,  through  its  proprietor  Nilesh  Gala, for the allotment of plot for constructing multiplex  at Kharghar railway Station, the appellant was allotted  the plot at Kharghar Railway Station;

C. The said person Nilesh Gala as proprietor of M/s  Popcorn  Entertainment  Corporation  made  another  

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application for allotment of plot for the construction of  multiplex-cum-entertainment  centre  at  Airoli.   The  appellant CIDCO acceded to the request of Mr. Nilesh  Gala and allotted the plot followed by lease agreement;

D. The same person Nilesh Gala formed a Trust called  Platinum Square Trust through one of its Trustees Damji  Kunwarji  Gala  and  made  a  third  application  for  allotment of plot at Kharghar Hill for the construction of  country club and paid part of the amount fixed for such  allotment  and rest  of  the  amount  was  to  be  paid  in  instalments.   The  matter  is  pending  and  final  lease  deed has not been executed.

28. Now the important question that needs consideration is  

as to whether the allotments of valuable land by CIDCO to  

one  person in different capacity for the purposes mentioned  

above,  that  too  by  entertaining  private  applications,  are  

arbitrary, illegal and fraudulent and against the public policy  

as contemplated under Section 23 of the Indian Contract Act.

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29. In  the  course  of  argument,  Mr.  Vikas   

Singh, learned senior counsel appearing for the respondents  

in  all  the  three  appeals  filed  a  compilation  of  different  

documents including Rules and Regulations.

30. Regulation  4  lays  down  the  mode  and  manner  of  

disposal  of  land  by  the  Corporation.   The  said  provision  

empowers  the  Corporation  to  dispose  of  lands  by  public  

auction or tender  or  considering individual  applications as  

the  Corporation  may  determine  from  time  to  time.  

Regulation 4 reads as under:-

“Manner of disposal of land – The Corporation  may dispose plots of land by public auction or  tender or by considering individual applications  as the Corporation may determine from time.”

31. The  land  Pricing  and  Land  Disposal  Policy  of  CIDCO  

would show that the commercial plots with FSI 1.5, that is  

plots for offices, shop, restaurant, showrooms etc., is to be  

disposed  of  by  tender/at  fixed  price.   Similarly,  plots  for  

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auditorium,  multiplex,  theatre  complex  etc.,  shall  be  

disposed of on request at fixed rate/by competitive bidding.  

For  better  appreciation,  the  relevant  allotment  policy  of  

CIDCO is reproduced hereunder:-

“Commercial Plots (with FSI 1.5)

Plots for offices, Shop  +  Res.  and  pure  commercial  Show  Rooms/Show Windows  all types of Banks etc.  (FSI-1.5)

a. At 450% of RP in  Developed Nodes.

b. At 400% of RP in  Developing Nodes.

c. At 300% of RP in  New Nodes

By  tender/At  fixed price

Plots  for  Auditorium/  Multiplex  theatre  complex  to  be  developed  in  Private   Sector

At Reserve Price On  request  at  fixed  rate  By  competitive  bidding

32. From the compilation, it reveals that Respondent M/s.  

Popocorn  Entertainment  Corporation  sought  information  

under  the  Right  to  Information  Act,  by  mentioning  some  

queries.  One of the questions asked by the respondent was  

as to what is the method of disposal of plot for multiplex as  

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per Land Pricing and Disposal Policy during the said period.  

It was answered that methodology as per the current land  

pricing policy approved by the Board is on request at fixed  

rate/by competitive bidding.  In another query made by the  

proprietor of M/s. Platinum Entertainment was as to whether  

any other application has been made for  allotment of the  

said plot for the same purpose and the answer was that no  

other application prior to this allotment for the same purpose  

was pending.

33. It further appears that an audit objection was raised by  

the office of the Accountant General, Mumbai to the effect  

that there was lack of transparency in the allotment of plot  

to M/s. Platinum Entertainment as no tenders were called for  

the  sale  of  the  plot.   In  the  clarification  letter  dated  

21.4.2006 issued by the Managing Director of the Appellant-

CIDCO, it was admitted that no such tender was called for.  

In the explanation, it is stated that global tender/tender was  

called for allotment of plot near Vashi Station.  It was not  

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fruitful and, therefore, it was thought fit for allotting plot at  

Airoli to a competent and resourceful party on evaluation of  

the  project  report  for  multiplex  and  auditorium  and  

entertainment  centre.   Similar  explanation  was  given  as  

against the audit objection in respect of allotment of plot to  

M/s. Popcorn Entertainment Corporation.

34. On perusal of the aforesaid documents, it is manifest  

that although allotment of plot for the purposes mentioned  

above was either at a fixed price or by competitive bidding,  

but no procedure was adopted by the appellant for allotment  

of these plots either by tender or by competitive bidding.  It  

has also come on record that as against these plots allotted  

to the respondents, no other application was either invited or  

received  from  interested  persons.   Obviously,  when  the  

tender was not advertised or any notice inviting applications  

were made then there was no occasion for any person to  

apply for allotment of these plots.

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35. As noticed above, the main person viz. Nilesh Gala as  

proprietor  of  two  different  companies  viz.,  M/s  Platinum  

Entertainment and M/s Popcorn Entertainment Corporation,  

by making private applications to the then Chief Minister got  

allotment  of  two valuable  plots  in  two different  areas  for  

setting  up  multiplex-cum-auditorium-cum-entertainment  

centre and for multiplex theatre.  This is not the end of the  

matter.  The same proprietor formed a Trust consisting jof  

trustees in the name of M/s Platium Square Trust and filed  

application for allotment of another plot for the purpose of  

establishing country club.  These three applications filed by  

the  respondents  were  considered  by  the  appellant-CIDCO  

and the Board accorded sanction for  allotment of  plots  in  

these three places.

36. We,  therefore,  after  having  considered  facts  detailed  

hereinabove,  are  prima  facie  of  the  view  that  no  

transparency has been maintained by the appellant-CIDCO  

in making these allotments of Government land.

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37.   It is well settled that whenever the Government dealt  

with the public establishment in entering into a contract or  

issuance of licence, the Government could not act arbitrarily  

on its sweet will but must act in accordance with law and the  

action  of  the  Government  should  not  give  the  smack  of  

arbitrariness.  In the case of  Raman Dayaram Shetty vs.  

International Airport Authority of India & Ors., (1979)  

3 SCC 489, this Court observed as under:-

“11. Today  the  Government  in  a  welfare  State, is the regulator and dispenser of special  services  and  provider  of  a  large  number  of  benefits,  including  jobs,  contracts,  licences,  quotas,  mineral  rights,  etc.  The  Government  pours forth wealth, money, benefits, services,  contracts,  quotas and licences.  The valuables  dispensed  by  Government  take  many  forms,  but they all share one characteristic. They are  steadily taking the place of traditional forms of  wealth.  These  valuables  which  derive  from  relationships to Government are of many kinds.  They  comprise  social  security  benefits,  cash  grants  for  political  sufferers  and  the  whole  scheme of State and local welfare. Then again,  thousands of people are employed in the State  and  the  Central  Governments  and  local  authorities.  Licences  are  required  before  one  can  engage  in  many  kinds  of  businesses  or  work.  The  power  of  giving  licences  means  power to withhold them and this gives control  

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to  the  Government  or  to  the  agents  of  Government on the lives of many people. Many  individuals  and  many  more  businesses  enjoy  largesse in the form of Government contracts.  These contracts often resemble subsidies. It is  virtually impossible to lose money on them and  many  enterprises  are  set  up  primarily  to  do  business with Government.  Government owns  and controls hundreds of acres of public land  valuable for mining and other purposes. These  resources are available for utilisation by private  corporations and individuals by way of lease or  licence.  All  these  mean  growth  in  the  Government largesse and with the increasing  magnitude  and  range  of  governmental  functions as we move closer to a welfare State,  more and more of our wealth consists of these  new forms. Some of these forms of wealth may  be in the nature of legal rights but the large  majority of them are in the nature of privileges.  But on that account, can it be said that they do  not  enjoy  any  legal  protection?  Can  they  be  regarded as gratuity furnished by the State so  that the State may withhold, grant or revoke it  at its pleasure?”

“12. ………..It must, therefore, be taken to be  the law that where the Government is dealing  with the public, whether by way of giving jobs  or entering into contracts or issuing quotas or  licences  or  granting  other  forms  of  largesse,  the  Government  cannot  act  arbitrarily  at  its  sweet  will  and,  like a  private individual,  deal  with any person it pleases, but its action must  be in conformity with standard or norms which  is  not  arbitrary,  irrational  or  irrelevant.  The  power or discretion of the Government in the  matter of grant of largesse including award of  jobs, contracts, quotas, licences, etc. must be  confined  and  structured  by  rational,  relevant  and non-discriminatory standard or norm and if  the Government departs from such standard or  norm in any particular case or cases, the action  

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of the Government would be liable to be struck  down,  unless  it  can  be  shown  by  the  Government  that  the  departure  was  not  arbitrary,  but  was  based  on  some  valid  principle  which  in  itself  was  not  irrational,  unreasonable or discriminatory.”

38. In the case of  Akhil Bhartiya Upbhokta Congress  

vs. State of Madhya Pradesh & ors., (2011) 5 SCC 29,  

this  Court  while  considering  the  question  of  legality  of  

allotment of land by the State or its agencies on the basis of  

applications made by individual, observed as follows:-

“65. What needs to be emphasised is that the  State  and/or  its  agencies/instrumentalities  cannot give largesse to any person according  to  the  sweet  will  and  whims  of  the  political  entities  and/or  officers  of  the  State.  Every  action/decision  of  the  State  and/or  its  agencies/instrumentalities  to  give  largesse  or  confer  benefit  must  be  founded  on  a  sound,  transparent,  discernible  and  well-defined  policy,  which  shall  be  made  known  to  the  public by publication in the Official Gazette and  other recognised modes of publicity and such  policy  must  be  implemented/executed  by  adopting  a  non-discriminatory  and  non- arbitrary  method  irrespective  of  the  class  or  category of persons proposed to be benefited  by the policy. The distribution of largesse like  allotment  of  land,  grant  of  quota,  permit  licence,  etc.  by  the  State  and  its  agencies/instrumentalities  should  always  be  done in a fair  and equitable manner and the  

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element  of  favouritism or  nepotism shall  not  influence  the  exercise  of  discretion,  if  any,  conferred  upon  the  particular  functionary  or  officer of the State.

66.  We  may  add  that  there  cannot  be  any  policy, much less, a rational policy of allotting  land  on  the  basis  of  applications  made  by  individuals, bodies, organisations or institutions  dehors  an invitation  or  advertisement by the  State  or  its  agency/instrumentality.  By  entertaining applications made by individuals,  organisations  or  institutions  for  allotment  of  land or for grant of any other type of largesse  the State cannot exclude other eligible persons  from lodging competing claim. Any allotment of  land or grant of other form of largesse by the  State  or  its  agencies/instrumentalities  by  treating  the  exercise  as  a  private  venture  is  liable to be treated as arbitrary, discriminatory  and  an  act  of  favouritism  and/or  nepotism  violating  the  soul  of  the  equality  clause  embodied in Article 14 of the Constitution.

39. In the case of Kasturi Lal Lakshmi Reddy & Ors. vs.  

State of Jammu and Kashmir & Anr., (1980) 4 SCC 1, this  

Court observed as under:-

“14. Where any governmental action fails to  satisfy  the  test  of  reasonableness  and public  interest  discussed  above  and  is  found  to  be  wanting  in  the  quality  of  reasonableness  or  lacking  in  the  element  of  public  interest,  it  would be liable to be struck down as invalid. It  must follow as a necessary corollary from this  proposition that the Government cannot act in  a manner which would benefit a private party  at the cost of the State; such an action would  

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be  both  unreasonable  and contrary  to  public  interest.  The  Government,  therefore,  cannot,  for example, give a contract or sell or lease out  its  property for  a consideration less than the  highest that can be obtained for it,  unless of  course  there  are  other  considerations  which  render it reasonable and in public interest to do  so.  Such  considerations  may  be  that  some  directive principle is sought to be advanced or  implemented  or  that  the  contract  or  the  property  is  given not  with  a  view to  earning  revenue but for the purpose of carrying out a  welfare scheme for the benefit of a particular  group or section of people deserving it or that  the  person  who  has  offered  a  higher  consideration is not otherwise fit  to be given  the contract or the property. We have referred  to  these considerations  only  illustratively,  for  there  may  be  an  infinite  variety  of  considerations  which  may  have  to  be  taken  into account by the Government in formulating  its  policies  and it  is  on  a  total  evaluation  of  various  considerations  which  have  weighed  with  the  Government  in  taking  a  particular  action,  that  the  court  would  have  to  decide  whether  the  action  of  the  Government  is  reasonable and in public interest. But one basic  principle which must guide the court in arriving  at  its  determination  on  this  question  is  that  there  is  always  a  presumption  that  the  governmental  action  is  reasonable  and  in  public  interest  and  it  is  for  the  party  challenging  its  validity  to  show  that  it  is  wanting in reasonableness or is  not informed  with public interest. This burden is a heavy one  and it has to be discharged to the satisfaction  of the court by proper and adequate material.  The court cannot lightly assume that the action  taken by  the Government  is  unreasonable or  without  public  interest  because,  as  we  said  above,  there  are  a  large  number  of  policy  considerations  which  must  necessarily  weigh  with  the  Government  in  taking  action  and  

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therefore  the  court  would  not  strike  down  governmental action as invalid on this ground,  unless it  is  clearly satisfied that the action is  unreasonable  or  not  in  public  interest.  But  where it is so satisfied, it would be the plainest  duty  of  the  court  under  the  Constitution  to  invalidate the governmental action. This is one  of  the  most  important  functions  of  the  court  and  also  one  of  the  most  essential  for  preservation of the rule of law. It is imperative  in  a  democracy  governed  by the  rule  of  law  that governmental action must be kept within  the  limits  of  the  law  and  if  there  is  any  transgression,  the  court  must  be  ready  to  condemn  it.  It  is  a  matter  of  historical  experience that  there is  a tendency in  every  Government to assume more and more powers  and since it is not an uncommon phenomenon  in some countries that the legislative check is  getting diluted, it is left to the court as the only  other  reviewing  authority  under  the  Constitution  to  be  increasingly  vigilant  to  ensure observance with the rule of law and in  this task, the court must not flinch or falter. It  may  be  pointed  out  that  this  ground  of  invalidity,  namely,  that  the  governmental  action is unreasonable or lacking in the quality  of public interest, is different from that of mala  fides  though it  may,  in  a given case,  furnish  evidence of mala fides.

15. The second limitation on the discretion  of  the  Government  in  grant  of  largess  is  in  regard  to  the  persons  to  whom such largess  may  be  granted.  It  is  now  well  settled  as  a  result of the decision of this Court in  Ramana  D. Shetty v.  International  Airport  Authority  of  India that the Government is not free, like an  ordinary individual,  in selecting the recipients  for its largess and it cannot choose to deal with  any  person  it  pleases  in  its  absolute  and  unfettered  discretion.  The  law  is  now  well- established that the Government need not deal  

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with anyone, but if  it  does so,  it  must do so  fairly without discrimination and without unfair  procedure.  Where  the Government  is  dealing  with the public whether by way of giving jobs  or  entering  into  contracts  or  granting  other  forms of  largess,  the Government cannot  act  arbitrarily at its sweet will  and, like a private  individual, deal with any person it pleases, but  its  action  must  be  in  conformity  with  some  standard  or  norm  which  is  not  arbitrary,  irrational  or  irrelevant.  The  governmental  action must not be arbitrary or capricious, but  must be based on some principle which meets  the test of reason and relevance. This rule was  enunciated  by  the  court  as  a  rule  of  administrative law and it was also validated by  the court as an emanation flowing directly from  the doctrine of equality embodied in Article 14.  The court referred to the activist magnitude of  Article 14 as evolved in  E.P. Royappa v.  State  of Tamil Nadu and Maneka Gandhi case, (1978)  1 SCC 248 and observed that it must follow

as  a  necessary  corollary  from  the  principle of equality enshrined in Article  14  that  though  the  State  is  entitled  to  refuse  to  enter  into  relationship  with  anyone,  yet  if  it  does  so,  it  cannot  arbitrarily choose any person it likes for  entering  into  such  relationship  and  discriminate  between  persons  similarly  circumstanced,  but  it  must  act  in  conformity  with  some  standard  or  principle  which  meets  that  test  of  reasonableness  and  non-discrimination  and any departure from such standard or  principle would be invalid unless it can be  supported  or  justified  on  some  rational  and non-discriminatory ground.  

This decision has reaffirmed the principle of  reasonableness  and  non-arbitrariness  in  governmental action which lies at the core of  

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our  entire  constitutional  scheme  and  structure.”

40. In the case of State of Haryana vs. Jage Ram, (1983)  

4 SCC 556, the auction of liquor vends by excise department  

was challenged.  Deciding the question this Court in para 8  

held:-

“………….When a rule requires ‘publicity’ to be  given  to  an  auction-sale,  what  is  necessarily  implied is that due steps must be taken to give  sufficiently advance intimation of the intended  sale and its material terms to the members of  the public  or,  at  least,  to that  section of  the  public  which normally engages in the kind of  business  which  is  the  subject-matter  of  the  aution-sale.  Even  the  five  special  invitees  would have found it difficult to come prepared  to take part in the resale which was held on  May 23.  They were not  invited to a wedding  feast. They were invited to attend the resale of  a liquor vend and it is well known that a certain  amount has to be paid by the successful bidder  on the fall of the hammer. We are also unable  to appreciate that the Excise Authorities of the  Government  of  Haryana  should  have  picked  and  chosen  some  five  particular  persons  as  recipients of the notice of reauction. How their  names transpired and what is their particular  status, respectability and standing in the liquor  trade, are matters on which no light is thrown.  There  is  no  material  before  us  on  which  to  doubt the integrity of the authorities who were  connected  with  the  reauction.  But  their  conduct must be above suspicion.”

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41. In the case of Sachidanand Pandey  & Anr. vs. State  

of West Bengal & Ors., (1987) 2 SCC 295, this Court after  

considering  various  decisions  on  this  point  came  to  the  

following conclusion:-

“40. On a consideration of the relevant cases  cited at the Bar the following propositions may  be taken as well  established:  State-owned or  public-owned property is not to be dealt with at  the  absolute  discretion  of  the  executive.  Certain  precepts  and  principles  have  to  be  observed.  Public  interest  is  the  paramount  consideration. One of the methods of securing  the  public  interest,  when  it  is  considered  necessary to dispose of  a property,  is  to sell  the  property  by  public  auction  or  by  inviting  tenders. Though that is the ordinary rule, it is  not an invariable rule. There may be situations  where  there  are  compelling  reasons  necessitating departure from the rule but then  the reasons for the departure must be rational  and should not be suggestive of discrimination.  Appearance of public justice is as important as  doing  justice.  Nothing  should  be  done  which  gives  an  appearance  of  bias,  jobbery  or  nepotism.”

42.  In the case of  Padma vs. Hiralal Motilal Desarda,   

(2002) 7 SCC 564, the process adopted by the City Industrial  

Development Corporation for  disposal  of  land by bulk sell  

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came for consideration before this Court, when it held  as  

under:-

“34. There is yet another angle of looking at  the  propriety  of  the  questioned  bulk  sale  of  land by CIDCO and the manner in which it was  done.  The  land  acquired  and  entrusted  to  CIDCO cannot just  be permitted to be parted  with  guided  by  the  sole  consideration  of  money-making.  CIDCO  is  not  a  commercial  concern whose performance is to be assessed  by the amount it earns. Its performance would  be better assessed by finding out the number  of  needy  persons  who  have  been  able  to  secure  shelter  through  CIDCO  and  by  the  beauty of the township and the quality of life  for the people achieved by CIDCO through its  planned  development  schemes.  So  long  as  such objectives are fulfilled CIDCO’s operation  on  “no-profit-no  loss”  basis  cannot  be  found  fault with. There should have been no hurry on  the part of CIDCO in disposing of the balance  land  and  that  too  guided  by  the  sole  consideration  of  earning  more  money.  Even  that object CIDCO has not been able to achieve  for at the end it has parted with land at a price  less  than  Rs  1500  per  square  metre  —  the  reserved price. Even if a sale of leftover land  was a felt necessity it should have satisfied at  least  two  conditions:  (i)  a  well-considered  decision at the highest level; and (ii) a sale by  public auction or by tenders after giving more  wide  publicity  than  what  was  done  so  as  to  attract a larger number of bidders.”

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43. In the case of  Centre for Public Interest Litigation  

vs. Union of India, (2012) 3 SCC 1, this Court observed as  

under:-

“75.  The  State  is  empowered  to  distribute  natural resources. However, as they constitute  public  property/national  asset,  while  distributing  natural  resources  the  State  is  bound to act in consonance with the principles  of equality and public trust and ensure that no  action  is  taken which  may be detrimental  to  public  interest.  Like  any  other  State  action,  constitutionalism  must  be  reflected  at  every  stage of the distribution of natural resources. In  Article  39(b)  of  the  Constitution  it  has  been  provided that the ownership and control of the  material resources of the community should be  so  distributed  so  as  to  best  subserve  the  common  good,  but  no  comprehensive  legislation  has  been  enacted  to  generally  define natural resources and a framework for  their  protection.  Of  course,  environment  laws  enacted by Parliament and State Legislatures  deal with specific natural resources i.e. forest,  air, water, coastal zones, etc.

xxxxxxx

80.   In Jamshed Hormusji Wadia, (2004) 3 SCC  214  case,  this  Court  held  that  the  State’s  actions  and  the  actions  of  its  agencies/instrumentalities  must  be  for  the  public  good,  achieving  the  objects  for  which  they  exist  and  should  not  be  arbitrary  or  capricious. In the field of contracts, the State  and  its  instrumentalities  should  design  their  activities  in  a  manner  which  would  ensure  competition  and non-discrimination.  They can  augment their resources but the object should  be to serve the public cause and to do public  

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good  by  resorting  to  fair  and  reasonable  methods.”

44. The High Court in  the impugned order took notice,  in  

paragraph 85, that the appellant-CIDCO tried to justify their  

action of cancellation of allotment of plots on the following  

reasons.

“1.  Mr.  Nilesh  Gala,  the  proprietor  of  M/s.  Platinum entertainment has used same modus  operandi for obtaining allotment of plots meant  for country club and another plot for multiplex  in Kharghar.

2.   An application was made by the petitioners  to the Hon’ble Chief Minister and the same was  considered favourably by the Board of CIDCO.

3.   The undue haste is shown in allotment of  Plots resulting in illegal and arbitrary allotment  with malafide intention to cause wrongful gain  to  the  individual  person.   It  is  a  case  of  favouritism supported by the Report of Dr. D.K.  Shankaran.

4. The  agenda  note  and  the  resolutions  demonstrate no discussion about the individual  merits  of  the  allotters  except  need  for  multiplexes  sought  to  be  justified  during  the  case  of  discussion  without  indicating  any  reason  for  choosing  group  of  petitions   for  allotment of plots.

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5. Absence of official members in the Board  Meeting wherein the decisions of allotment of  plots to the petitioners were taken.

6. The  allotment  of  plots  of  land  are  factually for commercial purposes in the garb  of construction of multiplexes and country club  with a view to inure  profit to the allottees.

7. The multiplex policy whereby certain tax  benefits  were  granted  with  effect  from  year  2002 were ignored while making the allotment  of  plots  to  the  petitioners  overlooking  the  demand  for  multiplexes  due  to  concessions  granted by the government.

8. No  reasons  are  to  be  found  to  justify  allotment of three plots in favour of one group  of persons.

9. Refusal  on  the  part  of  comptroller  of  Auditor General to accept the reasons given by  CIDCO justifying  absence of  law suffered by  CIDCO by virtue  of  the  subject  allotments  of  plots to the petitioners.

10. Dr. D.K. Sankaran report is the basis for  calculation of loss suffered by CIDCO.

11. Justification  of  the  powers  of  the  state  government directing cancellation of allotment  of plots on the basis of sections 118 and 154 of  the M.R.T.P. Act.

12. Surreptitious  arbitrary  allotment  made  without  inviting  tenders  leads  to  the  presumption of nepotism and bias etc.

13. The  petitioners  M/s.  Platinum  Entertainment  were  not  registered  as  a  

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charitable  trust  yet  their  application  for  allotment was considered by CIDCO favourably.

14. Failure  on  the  part  of  the  petitioner  to  produce any valuation report to justify at which  rate the allotment was made by the CIDCO.”

45. The High Court instead of looking into these aspects of  

the matter, completely ignored the same on the ground that  

in the show cause notice none of the grounds were made  

basis  of  the  order  of  cancellation  of  allotment.   In  our  

considered opinion, the High Court while exercising power of  

judicial review is supposed to have gone into the question as  

to how the three plots were allotted in favour of one group of  

persons. The High Court has lost sight of the admitted fact  

that by entertaining private applications of the same person  

three different valuable plots have been allotted in different  

names.   The  High  Court  fell  in  error  in  holding  that  the  

allotment  of  plots  of  land to  the  same person but  in  the  

names of trust is also justified.

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46. Chapter 5 of New Bombay Road Disposal Rules, 1975  

provides  for  allotment  of  land  for  religious,  educational,  

charitable etc. purposes and though the allotment of plots of  

land for construction of multiplex are treated as allotment  

for public utility purposes, in substance, the allotment qua  

these allottees was for commercial  purpose.  The allotments  

which  are  made  for  the  social,  educational,  charitable  

purposes do not entail any profit to the allottees.  However,  

multiplex is for commercial exploitation, which ensures profit  

to  the  allottees  and  the  manner  of  disposal  of  lands  

enumerated in  the said policy by and large suggests that  

most of the allotments have to be made by inviting tenders  

or bids.

47. The  document  on  record  clearly  demonstrates  that  

there  was  no  discussion  about  individual  merits  of  the  

allottees and was only general consideration, which resulted  

in  making  arbitrary  allotment  without  going  through  the  

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tender process.  The report of the Comptroller and Auditor  

General would show that the reasons given by CIDCO are not  

acceptable and there is loss caused to the Corporation by  

virtue of the said allotment made to the respondents.

48. The High Court ought to have seen the action of the  

then Board of Directors of CIDCO demonstrating that in the  

first  meeting  of  the  Board  itself  they  cleared  the  special  

proposals without considering the individual merits.  In the  

meeting, hardly any official members were present when the  

allotments were made to the respondents.

49. State  and  its  agencies  and  instrumentalities  cannot  

give largesse to any person at sweet will and whims of the  

political entities or officers of the State.  However, decisions  

and  action  of  the  State  must  be  founded  on  a  sound,  

transparent  and  well  defined  policy  which  shall  be  made  

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known to the public.  The disposal of Government land by  

adopting a discriminatory and arbitrary method shall always  

be avoided and it  should  be done in  a fair  and equitable  

manner  as  the  allotment  on  favoritism  or  nepotism  

influences the exercises of discretion.  Even assuming that if  

the Rule or Regulation prescribes the mode of allotment by  

entertaining  individual  application  or  by  tenders  or  

competitive bidding, the Rule of Law requires publicity to be  

given  before  such  allotment  is  made.   CIDCO  authorities  

should not adopt pick and choose method while allotting the  

Government land.

50. Furthermore,  this  Court  has  already  stated  in  Akhil  

Bhartiya  Upbhokta  Congress  vs.  State  of  Madhya  

Pradesh & Ors.,  (2011)  5  SCC 29,  that  the  State  or  its  

agencies or instrumentalities must give largesse founded on  

a  sound,  transparent,  discernible  and  well-defined  policy,  

which  should  be  made  known  to  the  public  at  large  and  

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further  held  that  a rational  policy  of  allotting land on the  

basis of individual applications cannot de hors an invitation  

or advertisement by the State or its instrumentality, bringing  

it  to  the knowledge of  public  at  large so that  the eligible  

persons  should  not  be  excluded  from  lodging  their  

competitive claims.  

51. The action of cancellation of allotment of plots, as tried  

to be justified by CIDCO, would show that the High Court  

failed  to  appreciate  such  cogent  reasons  in  deciding  the  

matter while exercising the power of judicial  review.  It  is  

more evident and clear that arbitrariness had a role to play  

in the matter while allotting the three plots in favour of one  

group  of  persons  which  certainly  would  come  within  the  

meaning of arbitrariness on the part of CIDCO and against  

the public policy.  Such an action on the part of CIDCO, it  

appears  to  us,  is  nothing  but  a  favouritism  based  on  

nepotism  and  was  irrational  and  unreasonable  and  

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functioning  in  a  discriminatory  manner  as  voiced  by  this  

Court in the case of Raman Dayaram Shetty (supra).

52. Rule 4, to which our notice was drawn by the learned  

counsel  appearing on behalf  of  the respondents,  although  

provided an authority to dispose of plots of land by public  

auction or by tender or by considering individual applications  

as the Corporation would determine from time to time, but  

such action on the part of the Corporation should have been  

taken rationally and after applying the methods which are  

more rational and reflect non-arbitrariness and would not be  

smacked under the clout of favouritism and/or nepotism  or  

being influenced by political  personalities.   In our opinion,  

although CIDCO had the power to allot the land in any one of  

the manners stated in Rule 4 above, but the conduct of such  

allotment should have been more clear and transparent and  

without  presence  of  any  element  of  favouritism  and/or  

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nepotism and without being influenced by any such thing  in  

exercising the discretion conferred upon CIDCO.       

53. In the case of Humanity and Anr. vs. State of West   

Bengal and Ors.,  (2011) 6 SCC 125, this Court observed  

that in the matter of granting largesse, the Government has  

to  act  fairly  and  without  even  any  semblance  of  

discrimination.  It was held as under:

“It is axiomatic that in order to achieve a bona fide  end, the means must also justify the end. This Court  is  of  the  opinion  that  bona  fide  ends  cannot  be  achieved by questionable means, specially when the  State is involved. This Court has not been able to get  any answer from the State why on a request by the  allottee  to  the  Hon’ble  Minister  for  Urban  Development, the Government granted the allotment  with  remarkable speed and without  considering  all  aspects of the matter. This Court does not find any  legitimacy in  the action  of  the Government,  which  has to act within the discipline of the constitutional  law, explained by this Court in a catena of cases. We  are  sorry  to  hold  that  in  making  the  impugned  allotment in favour of the allottee, in the facts and  circumstances  of  the  case,  the  State  has  failed  to  discharge its constitutional role.”  

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54. We take serious note and express our anguish, the way  

the  authorities  of  CIDCO  showed  undue  favour  to  the  

respondents and managed to allot the Government land in  

favour of one person knowing fully well  that the aforesaid  

proprietor  of  the  Company,  in  different  capacity  and  in  

dummy names, sought allotments of plots.  The way CIDCO  

has been dealing with the Government property, it is high  

time,  we  observe,  that  notwithstanding  Regulation  4,  as  

contained in the Regulations, the appellant CIDCO may take  

all endeavour to make allotments of plots by open tender or  

competing bids and shall not take any decision for allotment  

of Government land at the instance of the Ministers and High  

Dignitaries for any purposes whatsoever.

55.   Taking into consideration the entire facts of the case  

and the law discussed hereinabove, we have no hesitation in  

holding  that  the  CIDCO was  justified  in  cancelling  all  the  

allotments made in favour of the respondents.

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56. For  the reasons aforesaid,  these appeals  are allowed  

and the judgment and order passed by the High Court in the  

writ  petitions are set aside.  Consequently, we uphold the  

order passed by the CIDCO cancelling the allotments made  

in favour of the respondents.

…………………………….J. (M.Y. Eqbal)

…………………………….J. (Pinaki Chandra Ghose)

New Delhi, September 26, 2014.

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