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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL Nos.7319­7320  OF 2019 (Arising out of S.L.P.(C) Nos. 172­173 of 2019)

MUNICIPAL COUNCIL NEEMUCH              .... APPELLANT(S)                             

VERSUS

MAHADEO REAL ESTATE AND ORS.       .... RESPONDENT(S)

J U D G M E N T   

B.R. GAVAI, J.

   Leave granted.

2.     The present appeals challenge the Judgment and Order

passed by the Division Bench of the Madhya Pradesh High

Court, Bench at Indore, dated 31.08.2017 thereby allowing the

writ petition filed by respondent No. 1 herein and the

subsequent Order dated 05.07.2018 thereby, rejecting the

Review Petition filed by the appellant.

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3. The factual background, in brief, giving rise to the

present appeals is as under.

     The appellant, which is a Municipal Council, duly

constituted under the Madhya Pradesh Municipality Act, 1961

(hereinafter referred to as the “said Act”) had invited tenders for

allotment of land on lease, for a period of 30 years. The land

was ad­measuring  163176 sq. ft. situated in Scheme  No.1A

(Commercial­cum­Residential Use), Neemuch. The Notice

Inviting  Tenders (“NIT” for short)  was  published in the  daily

newspapers, viz., Nai Duniya, Dainik Bhaskar, Free Press and

Dashpur Express.   Respondent No.1, which is a registered

partnership  firm along with other bidders  had submitted the

tender thereby giving an offer of Rs.5,81,00,106/­. It had  also

deposited the earnest money amounting to Rs. 47,00,000/­. The

bids of the participants were opened in presence of the

representatives of all the bidders. The bid of  respondent No. 1

herein was found to be highest.

4. The appellant issued a letter dated 27.09.2008 thereby

informing respondent No. 1 that its bid was accepted.

Respondent No.1 was directed to deposit an amount of

Rs.1,45,25,050/­, i.e., 25% of the bid amount within a period of

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seven days. Respondent no.1 in accordance therewith deposited

the aforesaid amount on 01.10.2008.

5.  It appears that an objection was raised by two members

of the Municipal Council under the provisions of Section 323 of

the said Act before the Collector with regard to the said tender

process. It further appears, that the Collector vide Order dated

18.07.2008 had stayed further proceedings of the tender

process. Vide Order dated 23.12.2008, the Collector disposed of

the proceeding observing therein, that the proposal be sent for

approval of the State Government in the Urban Administrative

and Development Department, respondent No. 2 herein, under

the provisions of Section 109 of the said Act.

6.  Thereafter, it appears that, there was certain

correspondence between the Urban Administrative and

Development Department, on one hand, and the Divisional

Revenue Commissioner of  Ujjain,  respondent No.3 herein,  on

the other hand. Finally, respondent No.3 passed an order dated

03.07.2010 observing therein that, the tenders invited in

connection with transfer of the said land were not competitive.

He further observed in the said Order, that the NIT was

published only  in Indore  edition of two Hindi  Newspapers  at

Indore and as such there was no wide circulation. As such, he

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rejected the proposal of the Municipal Council and returned the

same with the direction to invite the tenders again by publishing

the NIT in at least one National level English newspaper and one

State level reputed Hindi newspaper. Being aggrieved thereby,

respondent No. 1 herein approached the Madhya Pradesh High

Court in Writ Petition No.12204 of 2010. The Division Bench

vide Order dated 31.08.2017 allowed the writ petition thereby

quashing and setting aside the Order dated 03.07.2010 passed

by respondent No.3 and further directing him to grant approval

on behalf of the State Government for allotment of the land on

lease  in  favour of respondent no.1.  The appellant, thereafter,

preferred Review Petition No. 1072 of 2017. The same was

rejected. Hence, the present appeals challenging both the

Orders dated 31.08.2017 and 05.07.2018.

7. We have heard Mr. Harsh Parashar, learned counsel

appearing on behalf of the appellant and Mr. Kalyan Banerjee,

learned senior counsel appearing on behalf of the respondents.

8.  For appreciating the rival controversy, it will be relevant

to refer to the provisions of Section 109 of the said Act. Section

109 reads as follows.

“109.  Provisions governing the disposal of Municipal property vesting in or under the management of Council.­ No streets, land public

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places,  drains or irrigation channels  shall  be sold, leased or otherwise alienated, save in accordance with such rules as may be made in this behalf.­   (2)  Subject to the provisions of sub­section (1)­  

(a)  the Chief Municipal Officer may, in his discretion, grant a lease of any immovable property belonging to the Council, including any right of fishing or of gathering and taking fruits, flowers and then like, of which the premium or rent, or both, as the case may be, does not exceed two hundred and fifty rupees for any period not exceeding twelve months at a time:

Provided that every such lease granted by the Chief Municipal Officer, other than the lease of the class in respect of which the President­in­ Council  has by resolution exempted the Chief Municipal Officer from compliance with the requirements of this proviso, shall be reported by him to the President­in­Council within fifteen days after the same has been granted.  

(b)  with  the sanction of the President­in­Council, the Chief Municipal Officer may, by sale or otherwise grant a lease of immovable property including any such right  as  aforesaid  for  any period not  exceeding three years at  a  time of which the  premium,  or rent, or  both,  as the case may be, for any one year does not exceed one thousand five hundred rupees;

(c)  with the sanction of the Council, the Chief Municipal  Officer  may  lease,  sell  or  otherwise convey any immovable property belonging to the Council.  

(3)  The sanction of the President­in­Council  or of the Council under sub­section (2) may be given either generally for any class of cases or specially in any particular case:  

Provided that­

(i)   no property vesting in the Council in trust shall be leased, sold or otherwise conveyed in a

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manner that is likely to prejudicially effect the purpose of the trust subject to which such property is held;

(ii) no land exceeding fifty thousand rupees in value shall be sold or otherwise conveyed without the previous sanction of the State Government and every sale or other conveyance of property vesting in the Council shall be deemed to be subject to the conditions and limitations imposed by this Act or by any other enactment for the time being in force.”

9. It could thus be seen that, the aforesaid provision

governs the disposal of municipal property vesting in or under

the management of the Municipal Council.  Clause (ii)  of sub­

section (3)  of  Section 109 of  the said Act would be the most

relevant provision. It provides that, no land exceeding fifty

thousand rupees in value shall be sold or otherwise conveyed

without the previous sanction of the State Government. It

further provides that, every sale or other conveyance of property

vesting in the  Council shall  be  deemed  to  be  subject to the

conditions and limitations imposed by the said Act or by any

other enactment for the time being in force.

10. It will also be relevant to refer to Rule 3 of the Municipal

Corporation (Transfer of Immovable Property) Rules, 1994

(hereinafter referred to as the “said Rules”), which reads thus:

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“3.  No immovable property which yields or is capable of yielding an income shall be transferred by sale, or otherwise conveyed except to the highest bidder at a public auction or by inviting offers in a sealed cover:

Provided that if the Corporation is of the opinion that it is not desirable to hold a public auction or to invite offers in sealed covers the Corporation may, with the previous sanction of the State Government, effect such transfer without public auction or inviting offers in sealed covers:

Provided further that the Corporation may with the previous sanction of  the State Government and for the reasons to be recorded in writing, transfer any immovable property to a bidder other than the highest bidder:

Provided also that for any such transfer by lease a reasonable premium shall be payable at the time of granting the lease and annual rent shall also be payable in  addition  during the total period  of the lease.”

11. A perusal of the aforesaid Rule 3 of the said Rules would

reveal, that no immovable property which yields or is capable of

yielding an  income shall  be transferred by sale,  or otherwise

conveyed, except to the highest bidder at a public auction or by

inviting offers  in a sealed cover.  The proviso thereof  provides

that if the Corporation is of the opinion that it is not desirable to

hold a public auction or to invite offers in sealed covers,  the

Corporation may, with the previous sanction of the State

Government, effect such transfers  without public auction or

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inviting offers in sealed covers. The second proviso also provides

that the  Corporation  may,  with the  previous  sanction  of the

State Government and for the reasons to be recorded in writing,

transfer any immovable  property to  a  bidder other than the

highest bidder.

12. It is thus amply clear that, no land, exceeding fifty

thousand rupees in the value shall be sold or otherwise

conveyed without the previous sanction of the State

Government. The perusal of the aforesaid Rule further makes it

clear that the immovable property which yields or is capable of

yielding an income shall not be transferred by sale or otherwise

conveyed, except to the highest bidder at the public auction or

by inviting offers in a sealed cover. No doubt, with the previous

sanction of the State Government such a transfer could be

effected  without  public auction  or inviting  offers in  a sealed

cover. The second proviso further provides that, the Corporation

may, with the previous sanction of the State Government and

for the reasons to be recorded in writing, transfer any

immovable property to a bidder other than the highest bidder.

13. It is thus amply clear that, whenever any land which is

having a value exceeding fifty thousand rupees is to be sold the

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same cannot be done without the previous sanction of the State

Government.  

14. In the present case, the learned Judges of the Division

Bench have arrived at a finding that such a sanction was, in

fact, granted. We will examine the correctness of the said

finding  of fact  at  a  subsequent stage.  However,  before  doing

that, we propose to examine the scope of the powers of the High

Court  of judicial review of  an  administrative  action.  Though,

there are a catena of judgments of this Court on the said issue,

the law laid down by this Court in the case of Tata Cellular Vs.

Union of India reported in (1994) 6 SCC 651 lays down the basic

principles which still  hold the field. Paragraph 77 of the said

judgment reads thus:

“77.  The duty of the court is to confine itself to the question of legality. Its concern should be: 1. Whether a decision­making authority exceeded its

powers? 2.  Committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal

would have reached or, 5.  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

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which an administrative action is subject to control by judicial review can be classified as under: (i)      Illegality : This means the decision­maker must

understand correctly the law that regulates his decision­making power and must give effect to it.

(ii) Irrationality, 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, (1991)  1  AC 696, 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’”.

15.     It could thus be seen that the scope of judicial review of

an administrative action is very limited. Unless the Court comes

to a conclusion, that the decision maker has not understood the

law correctly that regulates his decision­making power or when

it is found that the decision of the decision maker is vitiated by

irrationality and that too on the principle of “Wednesbury

Unreasonableness” or unless it is found that there has been a

procedural impropriety in the decision­making process, it would

not be permissible for the High Court to interfere in the decision

making process. It is  also  equally  well settled, that it is  not

permissible for the Court to examine the validity of the decision

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but this Court can examine only the correctness of the decision­

making process.

16. This Court recently in the case of West Bengal Central

School Service Commission  vs.  Abdul Halim reported in 2019

SCC OnLine  SC 902  had  again  an  occasion to consider the

scope of interference  under  Article  226 in  an administrative

action.

 “31.    In exercise of its power of judicial review, the Court is to see whether the decision impugned is vitiated by an apparent error of law. The test to determine whether a decision is vitiated by error apparent on the face of the record is whether the error is self­evident on the face of the record or whether the error requires examination or argument to establish it. If an error has to be established by a process of reasoning,  on points where  there  may reasonably be two opinions, it cannot be said to be an error on the face of the record, as held by this Court in Satyanarayan v. Mallikarjuna reported in AIR 1960 SC 137. If the provision of a statutory rule is reasonably capable of two or more constructions and one construction has been adopted, the decision would not be open to interference by the writ Court. It is only an obvious misinterpretation of a relevant statutory provision, or ignorance or disregard thereof, or a decision founded on reasons which are clearly wrong in law, which can be corrected by the writ Court by issuance of writ of Certiorari.

32.  The sweep of power under Article 226 may be  wide enough to quash  unreasonable orders. If a decision is so arbitrary and capricious that no reasonable  person  could  have  ever  arrived  at it, the same is liable to be struck down by a writ Court. If the decision cannot rationally be supported by the

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materials on record, the same may be regarded as perverse.

33. However, the power of the Court to examine the reasonableness of an order of the authorities does not enable the Court to look into the sufficiency of the grounds in support of a decision to examine the merits of the decision, sitting as if in appeal over the decision. The test is not what the Court considers reasonable or unreasonable  but a decision which  the Court thinks that no reasonable person could have taken, which has led to manifest injustice. The writ Court does not interfere, because a decision is not perfect.  

17. It could thus be seen that an interference by the High

Court would be warranted only when the decision impugned is

vitiated  by  an apparent error of law, i.e.,  when the error is

apparent on the face of the record and is self evident. The High

Court would be empowered to exercise the powers when it finds

that the decision impugned is so arbitrary and capricious that

no reasonable person would have ever arrived at. It has been

reiterated that the test is not what the court considers

reasonable or unreasonable but a decision which the court

thinks that no reasonable person could have taken. Not only

this but such a decision must have led to manifest injustice.

18. In the light of the aforesaid principles, let us examine the

facts  of the  present  case.  Undisputedly, in the  present  case,

before inviting the bids, prior approval of the State Government

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as is required under Section 109 of the said Act was not taken.

It appears, that only after the tender process was finalized and

the Municipal Council had taken a decision to accept the bid of

Respondent  No.1, two  municipal counsellors raised  objection

under the provisions of Section 323 of the said Act, before the

Collector, Neemuch. The Collector, Neemuch on 18.07.2008 had

granted stay to the proceedings. Finally, the Collector, vide

Order dated 23.12.2008 held that for granting the said land on

lease for a period of 30 years, the approval of the State

Government is  necessary.  Pursuant to the  said  order  by the

Collector, the matter was sent to respondent No. 2­ State

Government. The Principal Secretary to the Government of

Madhya Pradesh addressed a communication to the

Commissioner, Ujjain Division, Ujjain (hereinafter referred to as

“the  Commissioner”) thereby  authorising  him to transfer the

land  in question.  While  doing so, the State  Government also

directed the Commissioner to inspect that the utilisation of the

land was for the purposes as provided under Neemuch

Development Plan 2011.

19. However, the Commissioner addressed a communication

dated 03.03.2010 to the State Government thereby, pointing out

that the rights for transferring the property having a value more

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than fifty thousand rupees  is with the State Government. He

has, therefore,  solicited  guidance from the  State  Government

seeking clear orders in view of the provisions of Section 109 of

the said Act and Rule 7 of the said Rules. He also pointed out to

the State Government that the Municipal Council had published

the NIT only in two daily newspapers of Hindi language and as

such there was no   sufficient competition. He also pointed out

that, as such tenders were filled up by only four bidders. He

specifically observed, that after noticing the rates offered, it

appears that there is cartel amongst the tenderers. He further

pointed out that, had the NIT been published in English and

Hindi newspapers at the National  and State  level, then there

would have been a wider competition and the higher rates could

have been offered. He, therefore, proposed that while rejecting

the proposal as submitted to the Council it will be appropriate

to direct the Municipal Council, Neemuch, to invite the tenders

again.

20. In response to the aforesaid communication dated

03.03.2010, respondent No. 2­State Government addressed

another communication dated 18.05.2010 to the Commissioner.

The  said  communication states that  after re­examination  the

State Government has authorised the Commissioner for

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transferring the land in question. The said communication

specifically states that if the proposal submitted by the

Municipal Council was not agreeable to the Commissioner then

while invalidating the  proposal  by the  Municipal  Council,  he

may give order for initiation of proceedings afresh. In pursuance

of the  aforesaid communication  dated  18.05.2010, the order

impugned herein is passed by the Commissioner dated

03.07.2010.

21. The  Commissioner in the  Order  dated  03.07.2010  has

found that the bids were not found to be competitive. He further

found that the NIT was published only in two Hindi newspapers

and as such there was no sufficient competition. He has,

therefore,  rejected the proposal  of  the Municipal  Council  and

while doing so, returned back the same with the direction to

invite the tenders again and get the NIT published in at least

one National level English newspaper and one State level Hindi

newspaper.

22. The situation that emerges is thus. Initially the Municipal

Council,  Neemuch, invited tenders for  allotment  of the  said

land on lease for 30 years. This was done without taking prior

approval of the State Government as in required under Section

109 of the said Act. Two municipal counsellors raised objections

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before the Collector under the provisions of Section 323 of the

said Act. The Collector, who initially granted stay on

18.07.2008, vide order dated 23.12.2008 directed the Municipal

Council to seek approval of the State Government to the said

proposal. Vide communication dated 21.12.2009, the State

Government directed respondent No. 3­Revenue Commissioner

to hand over the possession of the land to respondent   No. 1.

While doing so, the State Government directed the

Commissioner to inspect as to whether the land was being put

for use as per the development plan. On receipt of the

communication, the Divisional Commissioner addressed a

communication to the State Government on 03.03.2010

thereby, specifically pointing out that no proper   publicity was

given to the NIT and that the rates were not competitive as per

the market value.  It was specifically observed that there was a

cartel among the tenderers and, therefore, sought clear orders

of the State Government in view of Section 109 of the said Act.

He also proposed to reject the proposal with further direction to

invite fresh tenders by giving adequate publicity. In response to

the said communication, the State Government re­examined the

issue and by communication dated 18.05.2010 authorised the

Commissioner for transferring the land in question. It is further

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clear from the said communication that, the State Government

authorised the Commissioner to take necessary decision with

regard to grant of sanction under the provisions of Section 109

of the said  Act and  Rule  7  of the said  Rules. It specifically

observed that, if the  Commissioner does  not agree  with the

proposal of the Municipal Council he may while invalidating the

proposal of the Municipal Council give orders for initiation of

proceedings afresh. It is in view of this authorisation that the

Divisional Commissioner has passed the orders which were

impugned before the Madhya Pradesh High Court.

23. We are at pains to say, that the Division Bench of the

High Court by only referring to the communication dated

21.12.2009 came to the conclusion that the sanction

contemplated under Section 109 of the said Act was granted by

the State Government. However, the Division Bench has totally

ignored the subsequent correspondence between the State

Government and the Commissioner. Perusal of the subsequent

communication reveals that the Commissioner had pointed out

the infirmities in the  proposal of the  Municipal  Council and

advised the State Government to reject the said proposal with a

direction to the Municipal Council to invite fresh tenders. On

the objection of the Commissioner, the State Government     re­

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examined and reconsidered the issue and authorised the

Commissioner to exercise powers under Section 109 of the said

Act to take appropriate decision, including rejecting the

proposal and directing the process of re­tendering.

24. It could thus  be clearly seen that, the  Commissioner,

instead of blindly accepting the directions contained in the

communication  dated  21.12.2009,  has  acted in larger  public

interest so that the Municipal Council earns a higher revenue.

Not only this, but the State Government, after the

Commissioner pointing out anomalies to its notice, has re­

examined and reconsidered the issue and authorised the

Commissioner to pass appropriate orders including invalidating

the tender process and directing initiation of fresh tender

process. In the background of this factual situation, the finding

of the Division Bench of the High Court that the action of the

Commissioner  is  arbitrary and  illegal, in  our view,  is  neither

legally or factually correct. As discussed hereinabove, the High

Court, while exercising its powers of judicial review of

administrative action, could not have interfered with the

decision unless the decision suffers from the vice of illegality,

irrationality or procedural impropriety.

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25. In the present case, we find that the Commissioner had

acted rightly as a custodian of the public property by pointing

out the anomalies in the  proposal of the Municipal Council to

the State Government and the State Government has also

responded in the right perspective by authorising the

Commissioner to take an appropriate decision. We are of  the

considered view that,  both, the Commissioner as  well  as the

State Government,  have acted in the larger public interest. We

are unable to appreciate as to how the High Court, in the

present matter,  could have come to a conclusion that it  was

empowered to exercise the power of judicial review to prevent

arbitrariness or favouritism on the part of the State authorities,

as has been observed by it in paragraph 13. We are also unable

to appreciate the finding of the High Court in para 17 wherein it

has observed that the impugned decision of the authorities are

found not to be in the public interest. We ask the question to

us, as to whether directing re­tendering by inviting fresh

tenders after giving wide publicity at the National level so as to

obtain the best price for the public property, would be in the

public interest or as to whether awarding contract to a bidder in

the tender process where it is found that there was no adequate

publicity and also a possibility of there being a cartel of bidders,

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would be in the public interest. We are of the considered view

that the decision of the Commissioner which is set aside by the

High Court is undoubtedly in larger public interest, which

would ensure that the Municipal Council earns a higher

revenue by enlarging the scope of the competition. By no stretch

of imagination, the  decision  of the  State  Government or the

Commissioner could be termed as illegal, improper,

unreasonable or irrational,  which parameters only could have

permitted the High Court to interfere. Interference by the High

Court when none of  such parameters exist, in our view, was

totally improper. On the contrary, we find that it  is the High

Court, which has failed to take into consideration relevant

material.

26. In the result, the impugned Orders are not sustainable in

law. The appeals are,  accordingly,  allowed and the  impugned

orders dated 31.08.2017 and 05.07.2018 are quashed and set

aside. The petition of respondent  No. 1 stands dismissed.

27.  However, the Municipal Council is directed to refund the

amount deposited by respondent No. 1 herein along with

interest at the rate of 6% per annum forthwith.

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28. In the facts and circumstances of the case, there shall be

no order as to costs.

.....................J.                              [ARUN MISHRA]

.....................J.                              [M. R. SHAH]

.....................J.                  [B.R. GAVAI]

NEW DELHI; SEPTEMBER 17, 2019.