Punjab-Haryana High Court
Munish Manufacturing Corporation vs State Of Punjab And Ors. on 6 January, 2004
Equivalent citations: (2004)137PLR559
Author: Nirmal Singh
Bench: Nirmal Singh
JUDGMENT G.S. Singhvi, J.
1. In these petitioners, the petitioners have, prayed for quashing Letter Of Intent (for short, 'LOI') issued by Punjab Small Industries and Export Corporation Ltd. (for short 'the Corporation') for allotment of industrial plot No. C-208, Phase-V, Industrial Focal Point, Ludhiana to Punjab Electro Chemical Engineers Pvt. Ltd. (hereinafter described as 'the allottee') and for issuance of a mandamus of the official respondents to allot that plot to them.
2. For the sake of convenience, we may notice the facts from CWP No. 1473 of 2002 in some detail and briefly notice the facts from CWP No. 10593 of 2002.
3. Petitioner-Munish Manufacturing Corporation is a proprietorship concern engaged in the manufacture and export of forging goods. Its factory is situated at C-128, Focal Point, Phase-V, Ludhiana. Plot No. C-208, the allotment of which is under challenge in these petitions, is said to be near the factory of the petitioner. Initially, that plot was reserved for setting up an electric sub-station of the Punjab State Electricity Board but the latter did not utilise the same. In October, 1990, the petitioner applied for the allotment of the plot in question. In May, 1993, it deposited Rs. 4 lacs as earnest money. However, in its meeting held on 9.5.1994, the Allotment Committee of the Corporation allotted the plot in question to Sudarshan Tools Limited, Panchkula which was promoted by the son and wife of Shri B.K. Bassi, the then Chief Engineer of the Corporation. The petitioner challenged that allotment by filing CWP No. 7210 of 1994. During the pendency of the writ petition, the allottee voluntarily relinquished its claim over the plot. Consequently, the writ petition was disposed of on 11.1.1995 as infructuous with the direction to the official respondents to consider the petitioner's application in accordance with the rules and regulations in case it applies afresh for allotment of the plot.
4. In the purported compliance of the direction given by the High Court, the petitioner was called for interview before the Allotment Committee for consideration of its application for allotment of the plot under 'Off the Shelf Scheme'. The representative of the petitioner appeared before the Allotment Committee on 16.7.1996, but the plot was not allotted to it. After about 3 years, the petitioner was informed vide letter dated 11.3.1999 issued by the Estate Officer of the Corporation that it may submit fresh application for allotment of the plot in question for which advertisement had been published in The Tribune dated 23.2.1999. That advertisement was issued in terms of the new policy notified by the State Government vide notification No. 15/43/96-5-IB/7722 dated 10.12.1998 (Annexure P1). The petitioner's representative submitted application alongwith the bank guarantee of Rs. 3 lacs and also furnished a detailed project report for setting up forging unit. After about seven months, the Estate officer of the Corporation issued letter dated 27.10.1999 requiring the petitioner to attend the interview fixed for 10.11.1999. Accordingly, the petitioner's representative appeared before the Sub Group constituted in terms of notification dated 10.12.1998 and submitted the relevant information and other documents.
5. Petitioner-M/s Girnar Fabrics (India) Pvt. is a private limited company incorporated under the Companies Act, 1956 with the following main objects;-
"(A) To carry on the business of manufacturers, importers and exporters wholesale and retail dealers of cotton goods and in Hosiery goods of every kind, Embroidery and cloth of all kinds, nature and description, for men, women and children including vests, underwears, socks, panties, nighties, stockings, sweaters, shawls, brassieres, coats, costumes, gloves and laces.
(B) To carry on the business of manufactures, importers and exporters wholesale and retail dealers of cotton, rayon, nylon wool, silk, Acrylic, synthetic, fibres, staple fibres, yarns of all kinds, tops, noils and waste of all kinds.
(C) To carry on business of wholesalers, retailers, importers, exporters, processors, fabricators, bleachers, dyers and finishers of all kinds of cloth and Hosiery goods.
(D) To manufacture, bleach, dye, print and sell knit wears made from cotton, rayon, nylon, wool, silk, synthetic fibres and other materials and generally to carry on the business of knitting mill proprietors in all their branches."
6. The factory of the petitioner is situated at Guru Nanak Dev Nagar, Street No. 6, Basti Jodhewal, Ludhiana on a plot measuring 450 square yards and it has employed 60 workers. In pursuance of the advertisement issued by the Corporation inviting applications for allotment of the plots in different focal points including the plot in question situated at Focal Point, Dhandhari Kalan, the petitioner submitted application (marked as Annexure P3 with CWP No. 10593 of 2002) and deposited earnest money of Rs. 3 lacs. The representative of the petitioner was interviewed by the Sup Group on 10.11.1999.
7. The representatives of nine other companies/firms including the allottee, who had applied for allotment of the plot in question, were interviewed by the Sub Group on 10.11.1999. They also furnished the required information and documents. The Sub Group submitted its recommendations (Annexure P32 with CWP No. 1473 of 2002 and Annexure P5 with CWP No. 10593 of 2002) to the Allotment Committee constituted under paragraph 5 of notification dated 10.12.1998. The recommendations of the Sub Group were considered by the Allotment Committee in its meeting held on 26.10.2001 under the Chairmanship of Director of Industries and Commerce, Punjab and it was decided to allot the plot in question to the allottee. According, LOI dated 28.12.2001 (Annexure P30 with CWP No. 1473 of 2002) was issued in favour of the allottee.
8. The petitioners have challenged the decision of the Allotment Committee and the consequential action taken by the Corporation to issue LOI in favour of the allottee on the grounds of arbitrariness, mala fides and violation of their constitutional right to equality guaranteed under Article 14 of the Constitution of India by asserting that the Allotment Committee could not have chosen the allottee ignoring their better merit. They have pleaded that the decision to allot the plot to the allottee was taken due to extraneous reasons and the criteria contained in notification dated 10.12.1998 was given a complete go-by. Petitioner-Munish Manufacturing Corporation has also pleaded that action of the Corporation not to allot to it interims of order dated 11.1.1995 passed by this Court in CWP No. 7210 of 1994 is vitiated due to arbitrariness and mala fides,
9. In the identical written statements, filed on behalf of the Corporation in both the petitions, it has been averred that the applications made, by the petitioners for allotment of the plots were rejected by the Allotment Committee after thorough scrutiny and they have no right to seek a direction for allotment of the plot. According to the Corporation, applications received in pursuance of advertisement dated 23/24.2.1999 were scrutinised by the Sub Group keeping in view the factors enumerated in paragraph 4.2 of notification dated 10.12.1998 and the final decision was taken by the Allotment Committee after due consideration of the merits of all the applicants. The Corporation has also controverted the plea of the petitioner in CWP No. 1473 of 2002 that it is entitled to allotment of land in terms of order dated 11.1.1995 passed by the High Court in CWP No. 7210 of 1994 and averred that the Allotment Committee rejected its application after due consideration of the entire matter.
10. In separate but similar written statements filed on behalf of the allottee, it has been averred that the decision of the Allotment Committee is not arbitrary and the petitioners cannot seek a direction for annulment of the LOI.
11. We have heard learned counsel for the parties and perused the record. We have also gone through the file produced by Shri H.S. Dhindsa, counsel for the Corporation.
12. Notification dated 10.12.1998 issued by the State Government containing new policy for allotment of developed plots/land in the existing and coming up industrial focal points, growth centres, industrial estates etc. developed by any agency of the State Government envisages invitation of applications for allotment of plots except for allotments made under 'Off-the shelf'. Paragraph 2 which contains procedure for inviting applications, paragraph 3 which relates to earnest money, paragraph 4 which provides for constitution of Sub Groups for scrutiny of applications, paragraph 5 which provides for constitution of the Allotment Committee and consideration by it of the recommendations made by the Sub Groups and extracts of paragraph 6 which relates to the issuance of LOI of the notification issued by the Government, which have bearing on the decision of these petitions, read as under;-
"2. Procedure for inviting applications:-
Applications, except for the allotment under "Off-the-Shelf' Scheme, shall be invited by PSIEC/concerned developing Agency through Press Advertisement. The concerned developing agency shall undertake the entire secretarial work, such as Scrutiny of Applications, Placing proposals before respective sub-groups/committees. The concerned developing Agency shall as far as possible endeavour to finalise the process of allotment within 90 days of the closing date of receipt of applications.
3. Earnest Money Earnest money will be submitted alongwith applications @ 10% of the cost of plot.
4. Scrutiny of applications:
4.1 Following separate Sub-Groups shall scrutinise the received applications on behalf of the Allotment Committee;-
Nature of Industry Sub Group headed by
Light Engg. and other Industries Industrial Advisor-cum-Addl.
Director of Industries.
Electronic Industries including Managing Director,
information technology PSEDPCL
Textile and Hosiery Industries Addl. Managing Director, PSIDC.
Chemical & Pharmaceutical Addl. Director (Admn.)
Industries Directorate of Industries.
Ago Industries M.D., PAIC
The above sub-groups shall comprise of the
i) Representative of MD/PFC.
ii) Representative of MD/PSIDC.
iii) Representative of NITCON.
iv) Representative of PLPCB.
v) Representative of MD/PSIEC.
vi) Nominee of DI/GM DIC concerned.
vii) Estate officer of the concerned Convenor.
Developing Agencies.
4.2. The Sub Group/s shall examine the received applications, keeping in view the following parameters;-
a) Viability of Project.
b) Whether the project is in thrust areas.
c) Impact on environment.
d) Technology involved.
e) Export Obligation undertaken.
f) Value addition.
g) Scope of employment.
h) Import substitution
i) Financial resourcefulness.
j) Qualification, experience and general suitability.
4.3 The Sub-Group/s shall undertake preliminary scrutiny and make their recommendations to Allotment Committee having regard to requirement of land and eligibility of the applicants.
5. Allotment Committee:
5.1 Allotment of Plots upto 2 Acres, excepting under "Off the Shelf Scheme shall be made by the Allotment Committee consisting of the following;-
i) Director of Industries, Punjab Chairman ii) Managing Director/PSIEC iii) Managing Director/PSIDC iv) Managing Director/PFC v) Chairman/Member/Secretary/PPCB. vi) Heads of the Sub-Groups. vii) Industrial Advisor-cum-Additional Director of Industries. viii) Nominee of the developing Member Agency Secretary
5.2 The recommendations of the Sub-Group/s shall be placed before the Allotment Committee for consideration and making allotments.
5.3. The decision of the allotment Committee on applications for allotment of plots shall be final and no appeal shall lie against it. The Allotment Committee would meet as and when required and devise its own procedure for conducting the business.
6. Issuance of Letter of Intent
6.1 The development agency will issue Letter of Intent (LOI) to the allottee/s, incorporating therein among other conditions that the LOI holder will be required to get the project appraised regarding techno-econcmic feasibility from financial institution, scheduled commercial banks or the public sector consultants and submit the appraisal report to development agency within three months of issue of LOI".
A reading of the above reproduced paragraphs of the notification issued by the State Government shows that the Sub Group constituted in terms of paragraph 4.1 is required to scrutinise the applications keeping in view the factors enumerated in para 4.2 and submit its recommendations to the Allotment Committee having regard to the requirement of land and eligibility of the applicants. The Allotment Committee is to take final decision in terms of para 5.3 and LOI is to be issued to the successful applicant chosen by the Allotment Committee.
13. In the backdrop of the above, we shall determine whether the decision of the Allotment Committee and the consequential action taken by the Corporation to issue LOI in favour of the allottee is vitiated by arbitrariness and violation of Article 14 of the Constitution. A perusal of the recommendations made by the Sub Group (xerox copy of which is annexed with this order as Schedule 'A') shows that the applications of the petitioners; the allottee; Carona Knitwears, 2C 204, Focal Point Phase-7, Ludhiana; Aumra Trading Syndicate 20K, Sarabha Nagar, Ludhiana; Kissan Packaging Industries, House No. 1683, Sector 19, Chandigarh; Uppal Enterprises, 258, Model Town (Extension), Ludhiana; Amar Enterprises, C-194, Focal Point, Phase VII, Ludhiana; and Mechanical Works, Prop. S. Teja Singh, 1742, Jaimal Road, Janta Nagar, Ludhiana were favorably recommended. The matter was then considered in the meeting of the Allotment Committee held on 26.12.2001. The relevant extracts of the decision taken in that meeting are reproduced below;-
"After taking into consideration the recommendations of the Sub-Groups, which had conducted interviews of the applicants, the comparative viability of Project, thrust areas, impact on environment, technology involved, export obligation undertaken, value addition, scope of employment, import substitution, financial resourcefulness, qualification, experience, general suitability of the entrepreneurs etc., the Committee approved allotment of plots in favour of the following applicants in the size/category/project in different focal points mentioned here below;Item No. 1
TO CONSIDER TO APPROVE ALLOTMENT OF PLOTS IN FOCAL POINT, DHANDARI KALAN, PHASE V & VI S. No. Appl.Name No. of the Applicant Items Size in Category Plot Remarks S. Y. 1.1.
PunjabElectro Chemical Engineers Pvt. Ltd.
Triple ChainwheelCrank set EOU 5000 Allotted 2.3. Amco International i.e Free-wheels Bicycle parts MS EOU 10000 Not allotted as applicant has withdrawn the application 3000 Allotted" 3.8. Ido Fastners Industrial Fastners EOU
A bare perusal of the decision taken by the Allotment Committee shows that except making a bald reference to the factor enumerated in paragraph 4.3 of notification dated 10.12.1998, the Allotment Committee did not advert to the comparative merits of the applicants and arbitrarily selected the allottee. The arbitrariness of the decision taken by the Allotment Committee is demonstrated by the fact that it did not even refer to the applications made by other parties including the petitioners. Not only this, even in the written statement filed on behalf of the Corporation, it has not been explained as to why the allottee was selected from amongst eight applicants whose cases were recommended by the Sub Group. During the course of hearing, we repeatedly asked from learned counsel for the Corporation to show any material which could justify the selection of the allottee for the purpose of allotment of the plot in question but no such material was produced before us. In view of the this, it must be held that the decision of the Allotment Committee to select the allottee for the purpose of allotment of plot in question is vitiated by total arbitrariness and is violative of Article 14 of the Constitution.
14. In Ramana Dayaram Shetty v. International Airport Authority of India, A.I.R. 1979 S.C. 1628, their Lordships of the Supreme Court considered the issue relating to applicability of the doctrine of equality in matters relating to award of contracts, grant of licences etc. and approved the following observations made by K.K. Mathew, J. (as his Lordship then was) in V. Punnan Thomas v. State of Kerala, A.I.R. 1969 Kerala 81:
"The Government is not and should not be as free as an individual in selecting the recipients for its largess. Whatever its activity, the Government is still the Government and will be subject to restraints, inherent in its position in a democratic society. A democratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal."
Their Lordships then referred to the proposition laid down in Erusian Equipment and Chemicals Ltd. v. State of W.B., A.I.R. 1975 S.C. 266 and observed:
"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 largess, the Government cannot act arbitarily 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 norm which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largess 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 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."
In Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir and Ors., A.I.R. 1980 S.C. 1992, the Supreme Court reiterated the proposition of law laid down in Romana Dayaram Shetty v. The International Airport Authority of India and Ors. (supra) in the following words;-
"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. There are two limitations imposed by law which structure and control the discretion of the Government in this behalf. The first in regard to the terms on which largess may be granted and the other, in regard to the persons who may be recipients of such largess. Unlike a private individual, the State cannot act as it pleases in the matter of giving largess and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion.
Every activity of the Government has a public element in it and it must therefore, be informed with reason and guided by public interest. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid."
The law laid down in the above noted judgments has been followed in large number of cases including the often cited judgment in Kumari Shrilekha Vidyarthi etc. v. State of U.P., 1991 S.C. 537.
15. By applying the ratio of the above noted judgments to the facts of this case, we hold that the decision taken by he Allotment Committee in its meeting held on 26.12.2001 is vitiated by arbitrariness and violative of Article 14 of the Constitution.
16. Before concluding, we deem it proper to deal with the argument of Shri Rajiv Atma, which is based on the judgment of the Supreme Court in Harash Dhingra v. State of Haryana, (2002-1)130 P.L.R. 672 (S.C.). He argued that even if the decision of the Allotment Committee is held to be vitiated due to violation of Article 14 of the Constitution, the Court may not disturb the allotment made in favour of his client because it has already spent huge amount in raising construction. In our opinion, there is no merit in the submission of the learned counsel. In Harash Dhingra v. State of Haryana and Ors. (supra), their Lordships of the Supreme Court invoked the doctrine of prospective overruling in the backdrop of the fact that the allotment under discretionary quota of the Chief Minister had been made keeping in view an earlier decision of the Division Bench of the High Court in S.R. Dass v. State of Haryana, (1988-1)93 P.L.R. 430, which had approved the then existing policy of allotment of plots by the Chief Minister. In the present case, the allotment in question has not been made in pursuance of the policy approved by any Court of law. As a matter of fact, the allotment has been made in pursuance of the new policy notified by the government which as mentioned above, envisages consideration of competing claims of the applicants.
17. For the reasons mentioned above, the writ petitions are allowed. The LOI issued in favour of the allottee is quashed. The Allotment Committee is directed to reconsider the recommendations made by the Sub Group and decide afresh the issue relating to allotment of the plot in question after giving opportunity of hearing to the representatives of the parties whose applications were recommended by the Sub Group. The needful be done within 3 months from the date of receipt of copy of this order.
The Bench Secretary is directed to give copies of this order to the learned counsel for the parties.