Gujarat High Court
Jp Iscon Pvt Ltdthrough Jatin Madanlal ... vs State Of Gujarat on 18 October, 2021
Author: J. B. Pardiwala
Bench: J.B.Pardiwala, Vaibhavi D. Nanavati
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9151 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
==========================================================
1 Whether Reporters of Local Papers may be allowed to YES
see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy of NO
the judgment ?
4 Whether this case involves a substantial question of NO
law as to the interpretation of the Constitution of
India or any order made thereunder ?
==========================================================
JP ISCON PVT LTDTHROUGH JATIN MADANLAL GUPTA
Versus
STATE OF GUJARAT
==========================================================
Appearance:
MR MIHIR JOSHI SENIOR COUNSEL WITH MR RUTUL P DESAI(6498) for
the Petitioner(s) No. 1
MR CHINTAN DAVE, AGP for the Respondent(s) No. 1
MR DEVANG VYAS(2794) for the Respondent(s) No. 9
MR KAUSHAL D PANDYA(2905) for the Respondent(s) No. 2
MR MUKESH A PATEL(636) for the Respondent(s) No.
10,11,12,13,14,15,16,17,18
MR.NANDISH H THACKAR(7008) for the Respondent(s) No. 7
==========================================================
CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI
Page 1 of 96
Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
Date : 18/10/2021
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1 The tussle between the writ applicant and Surat Municipal Corporation leading to the present litigation has rendered 1,304 poor families homeless. These 1,304 families we are talking about hail from a very poor and downtrodden strata of society. These 1,304 families, as on date, are without any proper and adequate shelter. This litigation could have been easily avoided by the Surat Municipal Corporation (for short, "the Corporation") by taking a practical view of the entire dispute and adopting a pragmatic approach. The obstinate and adamant attitude on the part of the Corporation, not only has put the writ applicant in difficulty having already invested almost Rs.30 Crore by now in the project, but has also rendered the 1,304 families without any shelter. Over a period of time, we have gathered an impression that someone has an eye on the project in question, having noticed that the stage is set and the decks are cleared.
For the convenience of exposition, this judgement is divided into the following parts:
Sr. No. Description Paras 1 Prayers 2 2 Facts giving rise to this litigation 3 to 33 3 Submissions on behalf of the writ applicant 34 to 36 4 Submissions on behalf of the Corporation 37 to 39 5 Submissions on behalf of the National Monuments 40 Authority, Government of India 6 Submissions on behalf of the displaced families 41 to 43 Page 2 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 7 Analysis 44 to 47 8 Maintainability of the writ application under Article 48 to 53 226 of the Constitution 9 Blacklisting the writ applicant 54 to 63 10 Doctrine of proportionality 64 to 75 11 Meaning and true import of arbitrariness 76 to 82 12 Final analysis 83 to 103 2 By this writ application under Article 226 of the Constitution of
India, the writ applicant has prayed for the following reliefs:
"(a) This Honourable Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction quashing and setting aside the Standing Committee resolution no.510/2020 dated 30.7.2020 (received copy on 31.7.2020) (Annexure A coly), passed by the Standing Committee of the Respondent - Surat Municipal Corporation, being arbitrary illegal and violative of Article 14 & 19(1)
(g) of the Constitution of India;
(b) This Honourable Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction, quashing and setting aside the order passed by the Resp.-Corporation dated 31.7.2020 (Annexure A coly) pursuant to the show cause notice dated 17.7.2020 and 24.7.2020 (Annexure-AO & AQ), wherein the Resp.-Corporation has black listed the petitioner company for 3 years as well as terminated the work order and issued direction for forfeiting the Security Deposit of the petitioner company, being arbitrary, illegal and violative of Article 14 of the Constitution of India.
(c) This Honourable Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction, quashing and setting aside the communication dated 31.7.2020 (Annexure "AS"), sent by the Respondent - Corporation to the Resp.-SBI Bank, for invoking the Bank Guarantee/security deposit of Rs.6.30 Crores of the petitioner deposited with the Resp.-SBI Bank and further may be please to issue writ or mandamus restraining the respondent Corporation from invoking the Bank Guarantee / Security deposit of the petitioner - company being arbitrary, illegal and violative of Article 14 of the Constitution of India.
(d) Pending admission, hearing and final disposal of this petition, this Honourable Court may be pleased to stay the implementation, operation and execution of the Standing Committee resolution Page 3 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 No.310/2020, dated 30.7.2020 (received on 31.7.2020), as well as also stay the implementation, operation and execution of the order passed by respondent - Corporation dated 31.7.2020 pursuant to the show cause notice dated 17.7.2020 & 24.7.2020, in the interest of justice.
(e) Pending admission, hearing and final disposal of this petition, this Honourable Court may be pleased to stay the implementation, operation and execution of the letter dated 31.7.2020 (Annexure "AS") sent to the Resp. - SBI and thereby not to invoke the security deposit of the petitioner lying with the Resp.-SBI Bank in the form of the bank guarantee by the petitioner till the final disposal of this petition and further may be pleased to direct of the Resp.-SBI not to release the said security deposit / Bank Guarantee in favour of the Resp. - Surat Municipal Corporation;
(f) Grant such other and further ad-interim, ex-parte relief/s as may be deemed fit and proper in the interest of justice."
3 The facts giving rise to this writ application may be summarized as under:
4 The Corporation issued a Tender Notice dated 22 nd December 2017 inviting bids for the development of integrated group housing facility at the Gotalawadi Tenements on the final plot No.312/A paiki, TP Scheme No.3 (Katargam) on the Public Private Partnership (PPP) basis under the redevelopment of Public Housing Scheme, 2016 subject to various conditions including the condition of visiting and examining the site of the project, its surroundings, etc. with a deeming effect of its having full knowledge thereof whether physically inspected or not and obtaining of the approvals, clearances and permissions within a period of six months from the 10th day of the date of issue of Work Order and of completing the project work within three years from the 10 th day of the issue of the Work Order i.e. 10th May 2021.
5 In response to the aforesaid Tender Notice, the writ applicant submitted its bid on 29th January 2018 while accepting all the terms and Page 4 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 conditions contained in the Tender document and proposing to build 14 storey buildings i.e. 1304 PHCs, 96 AHCs (34 AHCs came to be added subsequently), G + 2 central library building, etc. and while showing the existence of the Dutch Cemetery in the layout plan.
6 On 5th April 2018, the Corporation accepted the bid submitted by the writ applicant.
7 On 1st May 2018, the Corporation issued a Work Order in favour of the writ applicant. While issuing the Work Order, the Corporation made itself clear that the writ applicant will have to obtain all the approvals, clearances within a period six months from the 10 th day of the issue date of Work Order i.e. 10th November 2018.
8 On 19th May 2018, the writ applicant furnished the requisite performance bank guarantee by way of security deposit. The details of the bank guarantee are as under:
Details of B.G. Sr. Name of Work Security Name of Bank Guarantee No. Valid upto No. Deposit Bank & Date (in Lakhs) 1 Development of 315.00 State Bank 0692618BG0000100 17/05/2021 integrated Group of India, Dt.18/05/2018 Housing Facilities at payable at Gotalwadi Tenements Surat on F.P. 2 315.00 State Bank 0692618BG0000101 17/05/2021 No.312/A/Paiki, T.P. of India, Dt.18/05/2018 Scheme No.03 payable at (Katargam) on PPP Surat basis under Redevelopment of Public Housing Scheme, 2016.Page 5 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 9 On 6th September 2018, a contract agreement came to be executed between the parties.
10 On 18th March 2019, the writ applicant preferred an application addressed to the National Monument Authority ("N.M.A." for short) seeking archaeological clearance for the proposed building to be constructed in accordance with the Tender. The writ applicant had to prefer such application as there is a Dutch Cemetery in the vicinity.
11 On 7th August 2019, the N.M.A., while considering the application filed by the writ applicant dated 18 th March 2019 referred to above, asked the writ applicant to submit a revised building plan with a total height not existing 22.80 meters.
12 In the meantime, the writ applicant managed to get the entire land vacated which at one point of time was occupied by 1,304 families. The 1,300 families came to be temporarily resettled at different places. The entire cost of this resettlement of the 1,304 families was borne by the writ applicant and this fact is not in dispute. For a particular period of time, the writ applicant paid the rent on behalf of the 1,304 families towards the resettlement.
13 As the project did not progress well, due to many hindrances, the writ applicant was left with no other option, but to stop making the payment of the transit rent to the 1,304 families.
14 It appears that the writ applicant forwarded three proposals dated 26th August 2019, 11th September 2019 and 14th October 2019 respectively containing the planning calculations to the Corporation. It is the case of the Corporation that the planning calculations forwarded by Page 6 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 the writ applicant were not supported by any building plan.
15 The Commissioner of the Corporation, while taking into consideration each of the proposals of the writ applicant, forwarded those with his detailed remarks to the Standing Committee of the Corporation dated 30th November 2019 with different alternatives.
16 On 22nd January 2020, the Corporation addressed a communication to the writ applicant inter alia requesting for its consent in respect of one of the aforesaid proposals inter alia giving three new alternatives while claiming exemption from the Tender conditions relating to the construction of the AHCs, construction of library building with G + 5 or 6 floor instead of G + 2 floor, etc. 17 As suggested by the Screening Committee in its meeting held on 4th February 2020, the N.M.A. was requested to review for reviewing its decision by permitting increase in the height of the building from 22.80 meters.
18 The N.M.A., vide its communication, permitted the height of construction upto 35 meters.
19 The writ applicant once again put forward its 5th and 6th proposal respectively dated 25th February 2020 and 2nd June 2020 to the Corporation. Here again, it is the case of the Corporation that such proposals were forwarded without any concrete building plan.
20 The Corporation, thereafter, issued three notices dated 3 rd June 2020, 5th June 2020 and 12th June 2020 respectively to the writ applicant.
Page 7 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 21 The writ applicant addressed a letter dated 2 nd July 2020 to the Commissioner inter alia conveying that in the meeting convened on 29 th June 2020, it was mutually agreed between all the stack holders that the writ applicant would be constructing only library + 1304 DUs at the existing side and 130 AHCs would be allowed to be constructed on another parcel of land that may be allotted by the Corporation to enable the writ applicant to use the remaining vacant land.
22 The case of the Corporation is that no such consensus was arrived at.
23 On 16th July 2020, the Commissioner drew its detailed proposal considering the entire matter including the aforesaid proposals dated 25th February 2020 and 2nd June 2020 respectively of the writ applicant while prima facie opining that the request of the writ applicant cannot be acceded to as contained in its proposals and that the writ applicant had failed to comply with the terms and conditions of the contract warranting the blacklisting whereof along with the forfeiture of the performance security.
24 A show cause notice dated 17th July 2020 came to be issued to the writ applicant calling upon it to show cause as to why it should not be blacklisted and why its performance bank guarantee should not be forfeited. Such show cause notice was issued in view of its alleged failure to comply with the basic conditions of the Tender contract arrived at between the parties.
25 On 30th July 2020, the writ applicant filed its reply in the form of a 7th proposal.
Page 8 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 26 On 30th July 2020, the Standing Committee authorized the Commissioner of the Corporation to proceed further with passing an appropriate order terminating the contract blacklisting the writ applicant and forfeiting the performance bank guarantee.
27 The Commissioner passed the impugned order dated 31 st July 2020 terminating the contract, blacklisting the writ applicant for a period of three months and forfeiting the performance bank guarantee to the tune of Rs.6 Crore.
28 In view of the aforesaid, the writ applicant was left with no other option, but to come before this Court by way of the present writ application.
29 This writ application came to be registered with the Registry of this High Court on 4th August 2020. We take notice of the fact that the matter was taken up for the first time for hearing by a Coordinate Bench of this Court on 6th August 2020. No notice was issued. Upto 10 th February 2021, this matter was just being adjourned on one ground or the other. For the first time, the matter was heard by this Bench (Coram : J. B. Pardiwala and V. D. Nanavati, JJ.) on 17 th June 2021. This Bench after hearing all the learned counsel appearing in the matter passed the following order on 17th June 2021:
"1. We have heard Mr. Mihir Joshi, the learned senior counsel assisted by Mr. Rutul Desai, the learned counsel appearing for the writ applicant, Mr. Kamal Trivedi, the learned advocate general assisted by Mr. Kaushal Pandya, the learned counsel appearing for the Surat Municipal Corporation, Mr. Jatin Gandhi, the learned counsel appearing with Mr. Nandish H. Thackar, the learned counsel for the respondent no.7- Gotalawadi Slum Dweller Association and Mr. Chintan Dave, the learned AGP appearing for the respondent no.1-State of Gujarat.Page 9 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
2. We have been given more than a fair idea by all the learned counsel appearing for the parties as regards the subject matter of this litigation and the disputes between the parties. We are of the view that the presence of the National Monuments Authority is very much necessary for effective adjudication of this writ application. In such circumstances, we implead the National Monuments Authority, Government of India, Ministry of Culture, 24,Tilak Marg, New Delhi - 110001 as the party respondent no.9 in this writ application. The cause title be amended accordingly forthwith.
3. Let a Notice be issued to the newly impleaded respondent, returnable on 01.07.2021. We expect the newly impleaded respondent to act promptly having regard to the peculiar facts and circumstances of the case. We request Mr. Devang Vyas, the learned Additional Solicitor General of India to accept one set of the entire paper book and look into the matter. We request Mr. Vyas to have a conference with the responsible officer of the newly impleaded respondent by next date of hearing and assist this Court. As on date, everything would depend upon the stance of the newly impleaded respondent.
4. According to the newly impleaded respondent, the height of the buildings should be restricted to 35 meters. According to the writ applicant, the project-in-question is viable only if the height is permitted to be up to 45 meters. We would like to understand from the newly impleaded respondent what has height of the building to do with the heritage site. We are saying so because the interest of 1304 hutmen dwellers is at stake. We are informed that for some period of time, the writ applicant did shoulder the financial burden of paying the rent etc. for the alternative accommodation obtained by the slum dwellers but later stopped paying. Since the project is at a standstill since 2018, it is not possible now for the writ applicant to shoulder this financial burden.
5. We are informed that as on date, the slum dwellers are being taken care of by the Corporation. This statement being made by the learned advocate general upon instructions has been seriously disputed. We are informed that the the slum dwellers are without any rent amount past 15 months.
6. In such circumstances referred to above, we request the newly impleaded respondent to look into the matter at the earliest and see to it that the controversy is resolved in the larger interest of the hutmen dwellers. We do not dispute or deny that there is a business interest involved of the writ applicant provided the project sails through successfully. It is but obvious that the writ applicant would be benefited but at the same time, this project is the brain child of the corporation.Page 10 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 The corporation wants the hutmen dwellers to be rehabilitated. The writ applicant has agreed to build 1304 plus 130 additional units.
7. We are of the view that the controversy should have been resolved long time back in the larger interest of the slum dwellers.
8. On the returnable date, notify this matter on top of the board. The civil application no.1 of 2021 for joining party stands disposed of accordingly."
30 Thereafter, on 2nd July 2021, this Bench passed the following order:
"1. Heard Mr. Mihir Joshi, the learned Senior counsel assisted by Mr. Rutul Desai, the learned advocate appearing for the writ applicants, Mr. Kaushal Pandya, the learned advocate appearing for the Surat Municipal Corporation, Mr. Devang Vyas, the learned Additional Solicitor General of India appearing for the Heritage authority and Mr. Nandish H. Thackar, the learned advocate appearing for respondent No.7.
2. Mr. Devang Vyas submits that he has already taken up the issue with the concerned authority and he would revert to this Court with some concrete proposal by the next date of hearing. We request Mr. Vyas to look into the issue and try to find out a viable solution, so that the entire project does not collapse for all times to come. We have, time and again, stated that the hutment-dwellers should not be left to rehabilitate themselves at some other slum in the city. The writ applicant has invested, by now, almost an amount of Rs.26 crore in shifting the slum dwellers. The entire project has come to standstill because of few technical issues like height of the buildings, heritage site nearby etc. We are surprised to learn that the Surat Municipal Corporation has blacklisted the writ applicant. We inquired with Mr. Joshi as to why his client has been blacklisted, to which, Mr. Joshi replied that his client has been blacklisted as he has not been able to commence with the project in time. According to Mr. Joshi everything has been thrown upon the head of his client. Mr. Joshi pointed out that the Corporation went to the extent of terminating the contract and issued a fresh tender notice twice to which, no one has respondend till date.
3. Mr. Kaushal Pandya, the learned counsel appearing for the Surat Municipal Corporation submitted that as per the provisions of the Redevelopment of Public Housing Scheme, 2016, more particularly, Clause No. 5.3(a), the total permissible FSI for the entire plot available Page 11 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 to the writ applicant is 3.00 FSI or as per the GDCR, whichever is higher. According to Mr. Pandya the same is suggestive of the fact that if the developer chooses to 3.00 FSI, the same would be freely available to him under the Scheme 2016. However, if the developer chooses to FSI as per the GDCR, in that case, the developer would be entitled for 1.8 free FSI and 2.2 paid FSI, as provided under Clause 6.3, read with Clause 6.8 of the prevailing GDCR. Mr. Pandya invited the Court's attention to the relevant clauses of GDCR which are at page 713 of the paper book. The same read thus;
"Floor Space Index (FSI) means Quotient of the ration of combined gross build up ara of all floors, to the total area of the building - unit (total plot area including Common plot) FSI = Total Built-up area of all floors Area of the Building-unit 3.1 Mr. Pandya submits that in view of the terms and conditions of the tender and having regard to the provisions of GDCR, the writ applicant is not entitled for free 4.00 FSI.
4. In the aforesaid context, Mr. Mihir Joshi would submit that his client had submitted his bid on the basis of the permissible height of the buildings at 45 mtrs. as per the bid documents. The writ applicant was unable to put up any construction as the subject plot falls within the "Regulated Zone" under Section 20(B) of the Ancient Monument and Archaeological Sites and Remains Act, 1958. According to Mr. Joshi, the fact of the plot falling within the "Regulated Zone" was never made known to his client at any point of time. The National Monument Authority restricted the height to the 35 mtrs. The entire substratum of the contract has changed and it has become impossible for his client to perform the contract. Mr. Joshi would submit that with a view to see that the project goes ahead, there should be a relaxation in so far as one of the conditions of the tender was concerned i.e. the library building which was ground + two floors may be relaxed to ground + seven floors, so that the writ applicant is able to utilize the available balance FSI after constructing 1304 PHC and 130 AHC for recovering its cost incurred. Mr. Joshi would submit that such proposal and in fact many other proposals put forwarded, never came to be responded by the Corporation and the Corporation proceeded to terminate the contract and blacklisted the writ applicant. The Corporation has gone to the extent of forfeiting the security deposit.
4.1 Mr. Joshi would submit that now when the matter is substantially heard, the Corporation has raised the issue as regards the free FSI as above. Mr. Joshi would submit that the stand of the Corporation as noted by this Court above is absolutely unreasonable and arbitrary, more particularly when the bid document itself prescribed free FSI of Page 12 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 3.0 and as the GDCR permitting the FSI of 4.0 in respect of the subject plot, only FSI of 1.0 would be the paid FSI.
5. Post this matter on 09.07.2021."
31 We tried our best to persuade the Corporation to arrive at some amicable settlement or understanding keeping one and only one thing in mind and that is the interest of the 1,304 poor families who have been displaced and are suffering on account of the present litigation. We tried out best to persuade the Corporation to take a pragmatic view of the matter, more particularly, when even the N.M.A. agreed to permit to raise the building upto the height of 45 meters. We were able to persuade the N.M.A. to grant such permission as a special case keeping in mind the interest of the 1,304 poor families. For this purpose, we solicited the help and intervention of Mr. Devang Vyas, the learned Additional Solicitor General of India appearing for the N.M.A. Upon our request, Mr. Vyas took up the matter on urgent basis with the N.M.A. and came back to us with a positive response.
32 We also brought to the notice of the Corporation that the writ applicant by now has already invested an amount of around Rs.30 Crore and to tell him now to walk out of the project and that too, with a certificate of being blacklisted would be too much on the part of the Corporation. The writ applicant undertook before us to start with the project, but, unfortunately, the Corporation was not prepared to budge an inch.
33 In such circumstances referred to above, We were left with no other option, but to hear the matter on its own merits.
SUBMISSIONS ON BEHALF OF THE WRIT APPLICANT: Page 13 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 34 Mr. Mihir Joshi, the learned Senior Counsel assisted by Mr. Rutul
Desai, the learned advocate appearing for the writ applicant vehemently submitted that the action on the part of the Corporation in terminating the contract, blacklisting his client and forfeiting the security deposit to the tune of Rs.6 Crore could be termed as a very arbitrary action. Many other submissions were canvassed by Mr. Joshi on various relevant aspect of the matter. The gist of his submissions placed in writing is as under:
"3. While conceiving the project and taking steps to undertake the same, the respondent Corporation completely overlooked a vital factor that the entire area in question was a Regulated Area under S. 20 B of The Ancient Monuments and Archaeological Sites and Remains Act, 1958 and no construction, reconstruction, repair or renovation of any building or structure falling within the area could be undertaken unless permission had been granted by the National Monuments Authority (NMA) constituted under the said Act. The entire project was thus a non-starter in the absence of prior permission from the Authority under the Act, more so since the Act contemplated even complete refusal of such permission in a given case. Moreover, this vital aspect was not even disclosed in the Tender documents. On the contrary the respondent Corporation assured the applicability and entitlement under the 2016 Scheme (which contemplated a height of 70 m. under cl 5.3
(f) at p. 272H) and the General Development Control Regulations (45/70 m.). Even the Model Plans with the Tender showed structures up to 20 floors. (p.270-272)
4. Completely unaware of the restriction, the petitioner submitted its bid for the construction of 1304 PHC units and 96 AHC units which was negotiated to 130 units (p. 277). The petitioner had proposed in the bid (p. 273) and the plans attached thereto (p. 275) to construct structures of 14 floors (approx. 45 m. height) which would leave it with FSC of 13,896 square metres, which came to be accepted by the respondent Corporation and a Work Order was issued on 1/5/2018 (p. 280).
5. When the petitioner, having complied with the requirements of submitting the requisite security deposit, entering into an agreement with the current occupants for alternative accommodation and transit rent, and having commenced demolition of the existing structure, applied on 26/10/2018 for approval of the building plans to put up the construction as agreed, it was completely taken aback to learn for the first time that the plans could not be sanctioned in the absence of Page 14 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 permission from the NMA. The petitioner therefore applied for such permission on 18/3/2019 (p. 301) but strongly objected to the non-
disclosure of this fact at the time of the Tender and conveyed that it was for the respondent Corporation to have obtained such permission before inviting bids (p. 306, 308,312, 314, 575 etc.) and that in the absence of such permission no work could be undertaken. (p. 316, 352,
354). After substantial and completely unforeseen delay, involving preparation of a Heritage Impact Assessment Report (p. 317) the NMA called for revised plans up to a height of 22.80 m. in its meeting of 7/8/2019 (p. 350) which was conveyed to the petitioner later. In view of this, the petitioner gave revised proposals since the fundamental aspect of the bargain stood altered (p. 357, 657, 661, 363A). It needs to be noted that the Municipal Commissioner was authorised to make modifications as required for the execution and implementation of the project (p. 544, 278). However, no decision was taken by the respondent Corporation at all and the petitioner was compelled to convey that though it had paid an amount of Rs. 11.91 crores as transit rent from August 2018 to October 2019, in the absence of any response from the respondent Corporation, it would be unable to continue paying the transit rent when the project itself was at such an uncertain stage (p. 360 r/w 299). The petitioner continuously reminded the respondent Corporation to approve the revised proposal (p. 360, 362, 364, 380, 383). In the meantime, it appears that the Municipal Commissioner recommended seeking approval/directions of Screening Committee of the State for due implementation of the project (p. 366) and thereafter forwarded counter proposals to the petitioner for the first time on 22/1/2020 (p. 601) to which the petitioner responded with a revised offer on 23/1/2020 (p. 387) and thereafter the Standing Committee decided to place the matter before the Screening Committee (p.392). It is therefore fairly apparent that both parties were aware at this stage that the fundamental bargain had been altered and were therefore exchanging revised offers for the implementation of the project.
6. The respondent Corporation then appears to have applied for review of the height restriction imposed by the NMA, supported by recommendations of the Municipal Commissioner (p. 608), the Hon'ble Mayor (p. 396) and the Hon'ble Member of Parliament (p. 397) for increasing the permissible height to 45 m. in view of the public purpose of the project. Quite inexplicably, during the hearing before the NMA the respondent Corporation on its own agreed to accept a revised height restriction of 35 m. (p.398). Pursuant to discussions with the respondent Corporation, the petitioner submitted revised proposals in view of the changed height restriction (p. 421, 424) and on the assurance of the respondent Corporation of due consideration of its proposals, also paid transit rent for the month of March 2020 (p. 19,20). However, the respondent Corporation did not consider the revised proposals submitted by the petitioner and on the contrary Page 15 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 undertook a facade of negotiation to create an impression that the petitioner was not interested in the discussions, which is far from the truth. (para 3.33 to para 3.37 p. 20-23).
7. Finally a meeting was held on 29/06/2020 were a consensus was arrived at regarding the revised proposal that the library and 1304 PHC units would be constructed on the existing site and 130 AHC units would be constructed on another land to be provided by the respondent Corporation. (p. 23). This was duly recorded by the petitioner in its letter dated 02/07/2020 in which it requested for grant of formal approval of the agreed revised proposal. (p. 431). The fact of this agreement has not been denied by the respondent Corporation. Quite surprisingly it appears that on 16/07/2020 (p. 624) the Municipal Commissioner suddenly moved a proposal for blacklisting the petitioner, forfeiting the security deposit and terminating the Work Order on the ground that the proposals of the petitioner could not be accepted for various reasons set out in the note, which fact had at no time been communicated to the petitioner. Promptly thereafter on 16/07/2020 (p. 433) a show cause notice came to be issued to the petitioner for blacklisting it and forfeiture of security deposit on the sole purported ground that the petitioner had failed to comply with certain fundamental conditions of the Tender contract, without specifying either the conditions or the breach. The petitioner responded to the notice by written submissions at the hearing on 30/07/2020 (p.438, Undertaking p. 447) raising various grounds including the vagueness of the notice and the unreasonableness of the proposed action and also submitted a revised proposal seeking relaxation only regarding the library floors and proposing to construct it in G+7 instead of G+2. P.
447). On 31/07/2020 the petitioner submitted an undertaking to clear the outstanding transit rent in instalments (p. 451) and on the same day the PHC unit holders submitted a representation supporting the petitioner (p. 508). Thereafter four instalments of transit rent amounting to Rs. 3.66 crores has been paid by the petitioner.
8. However, it transpires that on the very date of the hearing and submission of the representation of the petitioner on 30/07/2020, the Standing Committee, obviously without due consideration of the representation of the petitioner, passed a resolution for blacklisting the petitioner, forfeiting the security deposit, and terminating the contract (p.37). On 31/07/2020 the bank guarantee in respect of the security deposit of Rs. 6.30 crores was encashed (p. 449) and the decision of the respondent Corporation was communicated to the petitioner vide letter dated 31/07/2020 (p. 39) containing an additional reason of non- payment of transit rent which was not part of the notice. The apparent predetermination of the respondent Corporation is further evident from the fact that even pending the petition, in a hot haste fresh Tender notices were issued twice by the respondent Corporation (p. 472, 507). Most tellingly, the respondent Corporation has now specifically Page 16 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 disclosed in the new Tenders that there is a height restriction of 35 m. thus accepting that this was a vital fact which ought to have been disclosed in the first Tender itself. Additionally, the petitioner has at every stage and even during the hearing of this petition proposed a fair resolution of the impasse looking to the nature of the project and pursuant to observations of the Court in this behalf had even appeared before the Corporation on 11/08/2020 but it's representations were once again mechanically rejected on 08/09/2020 (p. 639)
9. The principal submission of the petitioner is that this is not a case of blacklisting and forfeiture of security deposit at all. The present state of affairs is entirely on account of the respondent Corporation not having taken permission for the project under the NMA and in any case not even disclosing such a restriction in the Tender documents. The contention of the Corporation that it was not obliged to do so, that it was the bidder's lookout as per the terms of the Tender, that even suppression of this fact would not give any right to the bidder to not comply with the contract, is quite audacious and contrary to law. Firstly, in the absence of prior permission from the NMA, the project itself was in violation of the law and could not have been initiated by the Corporation. Secondly, such a restriction was a vital fact within the knowledge of the Corporation, which ought to have been disclosed in the Tender document and cannot be equated with general conditions regarding development. Thirdly, this ought to have been disclosed by the Corporation because of the very nature and peculiar terms of the Tender, where the construction is put up free of cost by the successful bidder, which is cross subsidised by the FSC and there is no monetary consideration at all. If the availability of the FSC is itself uncertain (dependent upon the permission granted by the NMA on a case-to-case basis), it is obvious that the petitioner would not have submitted its offer at all. Fourthly, not only was this vital fact not disclosed but on the contrary a representation was made to the bidders that GDCR would be applicable (45/70 m. height as per Regulation 8.3.1), that planning norms as per 2016 Scheme would apply (70 m.) and even the Model Plans with the Tender indicated buildings of 20 floors and the petitioner was led into submitting its bid due to such representations.
10. The respondent Corporation has conveniently swept under the carpet, the number of representations made by the petitioner, the various meetings held between it and the Corporation, assurances of the Corporation of considering the revised proposals and the continuous positive approach of the petitioner to find a resolution and ensure implementation of the scheme as narrated in detail in the petition. What renders the decision invalid as having been taken on extraneous consideration and factors, is the fact that on 29th June 2020 there was a consensus between parties on the revised proposal, which was recorded by the petitioner in its letter of 02/07/2020 and instead of responding to the same, the Municipal Commissioner moved a proposal Page 17 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 to blacklist the petitioner without any intervening circumstance at all!
11. Even otherwise, no case of blacklisting of the petitioner or forfeiture of its security deposit is made out. The show cause notice does not specify any breach by the petitioner at all. There is a vague reference to breach of fundamental conditions of contract which does not satisfy the requirements of a proper show cause notice. The impugned order records findings that the petitioner has stopped paying transit rent since many months, that the petitioner has shown laxity in getting plans sanctioned and commencing construction, that the petitioner had not shown a positive attitude and had therefore continuously failed to discharge its obligations under the contract. These findings are palpably erroneous and contrary to facts which is evident from the chronology of events. In the first place the petitioner submits that the height restriction imposed by the NMA results in a fundamentally different situation which has unexpectedly emerged. The nature of the Tender conditions being the invitation to offer, the offer by the petitioner and acceptance thereof by the Corporation clearly envisage a binding contract only in the circumstances where the composite contract could be duly carried out. The said contract cannot be held binding in the current situation and therefore there could be no question of any breach by the petitioner. Secondly neither the letters referred to in the order or the allegations were part of the show cause notice issued to the petitioner. Thirdly, the obligation to pay transit rent could not have been viewed in isolation as imposing the same on the petitioner to indefinitely pay the same irrespective of the uncertainty of the project itself brought about due to factors beyond the control of the petitioner. In any case substantial amount of transit rent was paid and the unit holders were supporting the petitioner. Various proposals by the petitioner which were not even responded to by the Corporation and the revised proposal as agreed between the parties on 29/06/2020 was also not formally sanctioned at all for reasons unknown, so the laxity is clearly on the part of the Corporation. The delay and purported default has occurred due to the inaction of the Corporation and nondisclosure of vital facts affecting the very project, within its own knowledge, and it cannot seek to derive advantage of its own wrong. In any case, the delay has been occasioned due to the time taken for obtaining the permission from NMA and the revision of proposal necessitated thereby and it is not on account of any default attributable to the petitioner at all.
12. In any case, every breach of the contract does not visit a party with a penalty of blacklisting and forfeiture of security deposit and in the absence of any element of criminality, wrongful gain or deliberate default in the present case, the impugned order is wholly unjustified. In fact it is the petitioner who has lost more than Rs. 21 crores in the project in its effort to implement the same, without any corresponding benefit at all.
Page 18 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
13. During the course of arguments, the Corporation has sought to support the impugned order on additional grounds. Firstly, that the requisite approvals were not obtained within 6 months as required under the contract and that the application before NMA was after the said period, that the revised proposal regarding construction of library as per G+7 instead of G+2 as stipulated in the contract was invalid since the same was an essential condition of the contract, that the proposals given by the petitioner from time to time could not be considered since they were not accompanied with plans, and that in any case the same had been considered by the Municipal Commissioner. In the first place, the impugned order cannot be supported on additional grounds. Secondly, the requirement of an application to NMA was made known to the petitioner for the first time by the Corporation itself after a period of 6 months so no default can be attributed to the petitioner. Thirdly, that in the project of redevelopment of public housing and construction of additional affordable housing units, it is absurd to suggest that construction of library of a particular height is an essential condition. Fourthly, the rejection of the proposals of the petitioner due to want of plans has never been communicated to the petitioner and the consideration by the Municipal Commissioner is also an internal exercise at a belated stage.
14. The contention of the Corporation that there cannot be any injunction against encashment of a bank guarantee, overlooks the fact that what is challenged in the petition is it's decision of forfeiture of security which is based on unsustainable grounds and if that decision is found invalid, the encashment of the bank guarantee would consequentially be illegal for which there is no impediment.
15. The petitioner has also challenged the termination of the contract principally on the ground that the action is unreasonable, arbitrary and unfair. Such termination is also contrary to the express terms of the contract. (p. 204, 206, 207, 208). But more importantly the termination is against public interest and amounts to failure to exercise the discretion available with the Municipal Commissioner under various resolutions on record to modify the conditions as may be required during the course of implementation of the project. The Corporation ought to have considered the relevant facts that the petitioner was the sole bidder and there has been no response to the 2 notices issued by the respondent inviting bids for the project, even during the pendency of the petition and the action of the Corporation is likely to result in delay in implementing a project which is in the public interest and also cause hardship to the beneficiaries. In fact, it was incumbent on the Corporation especially in these facts, to consult with the State Government before taking such a drastic step since even the State Government has been vested with powers under the 2016 Resolution to modify or relax conditions to ensure proper implementation of the project which is in the public interest.
Page 19 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
16. In the above circumstances the petitioner submits that the impugned order of blacklisting the petitioner, forfeiting the security deposit and terminating the contract be quashed and set aside with consequential reliefs and further that insofar as termination of the contract is concerned, the matter be remanded for reconsideration by the appropriate authority."
35 Mr. Joshi, in support of his aforesaid submissions, has placed reliance on the following case law:
Sr Citation Proposition of law 1 (2016) 13 SCC 561 To obtain permission from the Ridge (Kenneth Builders) Management Board was the Obligation of the DDA for commencement of Construction.
The term "as is where is basis" as explained do not extend to the commencement of construction activity prohibited by law except after obtaining permission and it was the obligation of the Authority to ensure that the initial path for commencement of construction was clear. The contract stood frustrated.
2 (2004) 2 SCC 130 Applicability of the principle of Teri Oat Estates) proportionality.
3 (2010) 1 SCC 655 Action of forfeiting the amount deposited Haryana Financial by petitioner was wholly arbitrary and Corporation unfair.
Corporation is trying to take advantage of its own wrong.
Corporation failed to perform its obligations in giving a fair disclosure of the site within the regulated area of NMA.
4 (2014) 9 SCC 105 Proper show cause notice and contents of the show cause notice 5 2016 SCC Online Mere existence of power cannot be Bom 5233 justification of its exercise.
(Sarku Engineering Services) There have to be strong independent and Page 20 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 overwhelming materials to resort to the power given the drastic consequences that an order of blacklisting has.
Power of blacklisting cannot be resorted when the grounds for the same are only breach or violation of a term, when legal redress is available to both the parties.
6 (1998) 3 SCC 471 The words "discovered to be void"
therefore comprehends a situation in which the parties were suffering from a mistake of fact from the very beginning but had not realized, and acted bonafide on such agreement. The agreement in such case would be void from its inception though discovered to be more at a later stage.
7 AIR 1960 SC 588 No matter that a contract is framed of (Alopi Parshad) words which taken literally or absolutely, covered what has happened, nevertheless, if the ensuing turn of events was so completely outside the contemplation of the parties, then the Court will read the words of the contract in a qualified sense and will not apply to the contemplated turn of events, but will do therein what is just and reasonable.
8 AIR 1968 SC 522 Impossibility of performance would be inferred by the Courts from the nature of the contract and the surrounding circumstances in which it was made that the parties must have made their bargain upon the basis that a particular thing or state of things would continue to exist and because of the altered circumstances the bargain should no longer be held binding.
9 (2011) 5 SCC 697 Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution.
36 In such circumstances referred to above, Mr. Joshi prayed that there being merit in his writ application, the same may be allowed and the relief prayed for may be granted.
Page 21 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 SUBMISSIONS ON BEHALF OF THE CORPORATION: 37 Mr. Kaushal Pandya, the learned counsel appearing for the
Corporation has filed his written submissions. Mr. Pandya first brought the following terms and conditions of the contract to the notice of this Court:
"A few essential Terms & Conditions of Contract:
1. Sub-Clause 5 (pg.51) of Part I of the 'Project Information Memorandum' of the tender document reads as under:
"Moreover Developer has to construct Central Library in such a manner that number of floors, built up area of different floors should be same as that of existing central library. In no case floor wise built up area or numbers of floors can be increased or decreased."
2. Sub-Clause 13 (pg.59) of Part I of the 'Project Information Memorandum' of the tender document reads as under:
"Complete all approval, clearance process within 6 months from the 10th day of the issue date of Work Order.
Complete the Project and obtain completion certificate from the competent authority within 3 (Three) years from the 10 th day of the issue date of Work Order."
3. Sub-Clause 7 (pg.53) of Part I of the Tender Document reads as under:
"7. Transit Accommodation Cost: Transit accommodation facility till the completion and handling over of new units after obtaining building use permission from local authority, will be provided by the selected developer to the existing inhabitants - beneficiaries at free of cost.
The cost of transit accommodation will be borne by the developer.
Transit accommodation can also be provide through rental accommodation by the private developer.
The carpet area for the transit accommodation unit should be Page 22 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 minimum 20 sq.m.
Demolishing and vacating Scheme units shall be the responsibility of selected bidder. However, Surat Municipal Corporation may extend its support to selected bidder in demolition and clearing of existing Scheme.
All the Consent required from the beneficiaries as per the tender terms and conditions shall be sole responsibility of the selected bidder. Further necessary administrative assistance by SURAT MUNICIPAL CORPORATION may be provided."
4. Clause 1.8 (pg.80) of Part II of the 'Instructions to Bidders' of the tender document reads as under:
"The Bidder is advised to carry out necessary technical surveys, field investigations, market & demand assessment, etc. at its own cost and risk, before submitting the Technical and Financial Bid."
5. Clause 1.13 (pg.81) of Part II of the 'Instructions to Bidders' of the tender document reads as under:
"Bidders may, prior to submitting their Bid for the Project, visit and examine the Site of the Project and its surroundings at their own expense and obtain and ascertain for themselves, all technical data, demand and other information necessary for preparing their Bids."
6. Clause 1.15 (pg.81) of Part II of the 'Instructions to Bidders' of the tender document reads as under:
"The Bidders shall be deemed to have full knowledge of the site, whether physically inspected or not and any objection / allegation of inadequate / nor availability / suppression of information either before or after submission of bid shall not be entertained irrespective of its consequences."
7. Sub-Clause 7 of Clause 4 relating to 'Scope of Work' (pg.97) of Part II of the 'Instructions to Bidders' of the tender document reads as under:
"Selected bidder will get the all the statutory clearance from the Prescribed Authority as and where required. Planning norms as mentioned in Redevelopment of Public Housing Scheme shall be applicable.""
38 SUBMISSIONS ON BEHALF OF THE CORPORATION:
Page 23 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 "(A) Those who contract with open eyes, must accept the burdens of the contract along with its benefits. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract, since by such a taste, no contract could ever have a binding force. Further, the conditions incorporated in Tender Document, cannot be ignored or treated as redundant or superfluous and the Constitutional Courts must defer the understanding of the said conditions to the author thereof i.e. Corporation in the present case.
(1975) 1 SCC 737 - rel. paras. 16 & 21
(2016) 16 SCC 818 - rel. paras. 14 & 15
(B) When Petitioner's bid for construction of 14 floors came to be accepted by the Corporation on 05.04.2018, it was on the basis of the assumption that prior to submission of bid, Petitioner must have examined the site and ascertained all technical data and other necessary information and obtained all the requisite approvals and clearances for preparing the bid as required by Clause 1.13 (pg.81) of the Tender Document, giving rise to an irrebuttable presumption that Petitioner was deemed to have full knowledge about the same, irrespective of its consequences. This assumption was further based on aspect that Petitioner had acquired all requisite approvals, clearance process, etc. as per condition incorporated in sub-Clause 13 (pg.59), read with sub-Clause 7 (pg.97).
In view of the above, if the Petitioner is unable to provide a building with 14 floors because of the regulated height of 35 mtrs. at the behest of NMA, the same will result into breach of the contract between the parties, being directly attributable to the Petitioner, inviting consequences like termination of contract, forfeiture of security deposit and blacklisting.
Thus, the initial bargain based on the aforesaid assumptions, if not fulfilled, then in that case, as per Clause 1.15 of the Tender Document, it is for the Petitioner to take the blame thereof, which cannot be allowed to be shifted upon the Corporation.
(C) No deviation in essential tender conditions after the execution of a concluded contract can be permitted inasmuch as the same would not only amount to re-writing the contract, but also to halt others, who could also have become successful to participate in the bidding process, had the deviation been the part of the original tender conditions.
(2016) 8 SCC 622 - rel. paras. 4, 16 to 19, 44, 47 to 49 Page 24 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Judgment dated 04.10.2019 of the Hon'ble Supreme Court in case of Durgavati Devi vs. Union of India (D) As per Clauses 1.8 (pg.80), 1.13 (pg.81), 1.15 (pg.81) and sub- Clause 7 of Clause 4 (pg.97) of the Tender Document, it was the responsibility of the Petitioner to carry out necessary technical surveys, field investigations etc before submitting the bid by visiting and examining the site of the project and its surroundings and ascertaining all the information necessary for submitting the bid and that it shall be deemed that Petitioner had full knowledge of the site, whether physically inspected or not. It is further provided that any objection or allegation of inadequate information or non-availability or suppression of information either before or after the submission of the bid, shall not be entertained, irrespective of its consequences.
In view of the above, the Petitioner, before submission of its bid, having failed to apply for permission to NMA, despite being aware about the existence of Dutch Cemetery in the vicinity of its proposed construction as per the Tender Document, cannot now find fault with the Corporation on the ground that doctrine of fairness and public interest demanded that the Corporation ought to have ascertained and disclosed the said fact. While dealing with similar issue as regards High Tension Line Clearance and CRZ Clearance, the Constitutional Courts have not accepted such an argument in the following cases and that therefore, the same logic applies in case of obtainment of Archaeologic Clearance in the present case.
2015 SCC OnLine Bom 2941 - rel. paras. 3, 13, 16 & 17
(2012) 8 SCC 197 - rel. para. 14
(2016) 10 SCC 46 - rel. paras. 1 to 7 and 9 to 13
(2013) 5 SCC 470 - rel. paras. 4 to 10, 30 & 34
(E) As against the above judgments, the judgment in case of Delhi
Development Authority vs. Kenneth Builders & Developers Pvt. Ltd. reported in (2016) 13 SCC 561 and realised upon on behalf of the Petitioner, cannot be applied to the facts of the preent case owing to the following distinguishing features.
(i) In Kenneth Builders case, there was a discrepancy even between the authorities with regard to whether the project land fell within the boundaries of a ridge or not (para 26). In the present case, there is no dispute with respect to the subject land being within the protected area. The NMA, as per the relevant provisions of the Archaeological Act, has already given permission to build up to 35 mtrs., as per the Minutes of the Meeting dated 12.02.2020.
Page 25 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
(ii) In Kenneth Builders case, the ambiguity of the project land allotted in the year 2006, being part of a ridge or not, remained till the time matter was disposed of by the Hon'ble Supreme Court, i.e. till 29.06.2016, during which time, Government of Delhi, Delhi Pollution Control Committee as well as MOEF had refused consent for construction. In the case at hand, there is no ambiguity at present. The Work Order was executed on 01.05.2018, NMA had granted permission up to 22.8 Mtr. on 07.08.2019, which was revised to 35 mtrs. On 12.02.2020.
Therefore, the Petitioner cannot claim that the contract has become impractical to pursue and therefore, has led to Frustration of Contract as per Section 56 of the Contract Act. Due to this reason, the project in Kenneth Builders case could have been called a 'Non-Starter'. However, in the present case, the project is not a 'Non-Starter' one, as merely one of the factors, i.e. height of the building, which has changed, due to which the financial prospect of the Petitioner might have been changed.
(iii) In Kenneth Builders case, there was a total frustration of contract, as the project had become impossible to be performed, as there was no clarity even between the authorities with regard to whether the project land fell within the boundaries of a ridge or not. As mentioned in para 28 of the aforesaid judgment, due to impasse created by the governmental agencies, Kenneth Builders could not proceed in the development activity, and for that, the provisions of Section 56 of the Contract Act, 1872 were attracted. However, in the present case, there is no gridlock between multiple authorities. The NMA has given its permission and in fact, the Corporation has assisted the Petitioner in getting the said permission revised up to 35 mtrs.. The sole reason of dispute is the Petitioner's obstinacy to not abide by the terms of the Tender.
(iv) In Kenneth Builders case, the impracticability of undertaking the project was leading to impossibility, with no clarity on the issue of whether the project land fell within the boundaries of a ridge or not, there was no way, the Developer could have undertaken the project. However, in the present case, the factum of Petitioner getting lesser Free Sale Component, cannot be termed as 'impermissibility', or even 'impracticability'.
(v) In Kenneth Builders case, the construction activity was prohibited by law (para 34), which is a vital factor in declaring the project work as impossible. In the present case, the construction activity is merely regulated and restricted to 35 Page 26 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 mtrs. height, which cannot be termed as either impossible or impracticable act within the meaning of 'impossible or unlawful' under Section 56 of the Contract Act.
(F) It would not be legally permissible to absolve the Petitioner from its obligation to perform its part of the contract and to re-write a new contract, merely because on account of an uncontemplated turn of events, the performance of the contract has become onerous. In the present case, it is not legally permissible for the Petitioner to contend that in view of restriction of height of 35 mtrs. Which came to be imposed at the behest of NMA subsequent to the submission of its bid, its project has become nonstarter, because it would not get original Free Sale Component.
AIR 1960 SC 588 - rel. paras. 3, 4, & 14
(2004) 13 SCC 44 - rel. paras. 12 & 13
(G) The above referred concluded contract between the parties which was ultimately terminated on 30.07.2020 (pg.38/A), cannot be said to have been frustrated, merely because the performance thereof became onerous for the Petitioner inasmuch as, non-performance of the contract is directly attributable to the Petitioner. Thus, the doctrine of frustration of contract is not applicable in the present case, and hence, the Petitioner cannot make grievance to the effect that the contract in question was a non-starter, and that there was no fault of whatsoever nature on the part of the Petitioner.
(H) As per Section 20B of the Ancient Monuments and Archaeological Sites and Remains Act, 1958, ("the Archaeological Act" for short), a distance of 200 mtrs. extending in all the directions from archaeological site etc. is called the regulated area, in respect of which a person desiring to carry out any construction etc., is to make an application to the competent authority i.e. NMA in the present case, as provided under Section 20C(2) of the Archaeological Act. Petitioner contends that such an application ought to have been made by the Corporation before issuing NIT, in the absence whereof the very basis on which Petitioner submitted its offer, has been impacted, making the whole project a non- starter. Pertinently, there is no such requirement for the Corporation to make such an application in the Tender Document. Even otherwise, Section 20C(2) of the Archaeological Act permits such an application to be made even by the possessor.
In the instant case, after the acceptance of Petitioner's bid on 05.04.2018, followed by the issuance of Work Order dated 01.05.2018, it was the Petitioner who was in charge of the whole project, which had initially engaged in the process of demolition, was duty bound to make such an application seeking archaeological clearance / permission from Page 27 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 NMA, as clearly provided under the terms and conditions of the Tender Document.
(I) The Petitioner has failed to comply with various conditions of Tender Document and has thereby not honoured the obligations arising from a concluded contract between the parties, as summarised hereinbelow.
(i) As per sub-Clause 13 (pg.29) of Part I read with sub-Clause 7 (pg.97) of Clause 4 of Part II of the Tender Document, the Petitioner was to obtain all the approvals and clearances within 6 months from 10 th date of issuance of work order dated 01.05.2018 i.e. by 10.11.2018, but the Petitioner admittedly failed to do so, more particularly in the matter of obtaining archaeological clearance from NMA.
(ii) As per sub-Clause 7 (pg.53) of Part I of the Tender Document, it was incumbent for the Petitioner to bear the cost of transit accommodation rent of existing inhabitants / beneficiaries till the completion and handing over of the dwelling units after obtaining BU Permission within the time limit prescribed under contract i.e. from 10.05.2018 to 10.05.2021.
However, admittedly, the Petitioner stopped making payment of the transit accommodation rent to the beneficiaries since September, 2019, till termination of contract on 30.07.2020.
(iii) Petitioner failed to provide revised building plan with the height restriction of 35 mtrs. As required by NMA in its minutes dated 12.02.2020 (@ pg.419).
(iv) Similarly, as per Clauses 1.8, 1.13 to 1.15 and sub-Clause 7 of Clause 4 of Part II of the Tender Document, it was for the Petitioner to make all required inquiries, whereas, Clause 1.15 clearly provides that the bidder shall be deemed to have every knowledge of the site, whether physically inspected or not and any objection / allegation of inadequacy / non-availability / supersession of information either before or after submission shall not be entertained, irrespective of its consequences.
(v) Petitioner failed to provide any building plan in furtherance of any of its different proposals dated 26.08.2019 (pg.357), 11.09.2019 (pg.657), 14.10.2019 (pg.661), 23.01.2020 (pg.603), 25.02.2020 (pg.421), 02.06.2020 (pg.424) and 30.07.2020 (pg.438).
Page 28 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
(vi) Petitioner failed to carry out any construction of whatsoever nature despite of completion of 27 months out of limit of 36 months, expiring on 10.05.2021.
(J) In view of the above, the decision of SMC in - (i) terminating the said contract, (ii) encashing the performance bank guarantee given by the Petitioner and, (iii) blacklisting the Petitioner for a period of three years is absolutely in proportion to the nature of the contravention by the Petitioner in breaching various conditions of the contract between the parties, as discussed hereinabove.
(K) Clause 3(iv) (pg.205) of Part IV of the Contract authorises the Corporation to terminate the contract, if the developer has persistently neglected to carry out its obligation under the contract or commits default in complying with the terms and conditions and does not remedy the same within 7 days after notice.
Such a notice was in fact given on 05.06.2020 (pg.622) followed by further notice dated 12.06.2020 (pg.623).
In view of the above, there is nothing objectionable against the termination of the contract in question.
(L) It is grievance of the Petitioner that its reply dated 30.07.2020 (pg.438) is not considered, as a result, the aspect relating to the work being not done in view of the Corporation not responding to its proposals, has not been considered in the consequential order dated 31.07.2020 (pg.39) of the Commissioner of the Corporation.
The aforesaid grievance is factually incorrect because the contents of the Petitioner's reply dated 30.07.2020 (pg.438) have been considered by the Commissioner while referring to its own exhaustive proposal dated 16.07.2020 (pg.624), mentioned at Sr.No.25 of the subject matter of the said proposal. Whereas, the said proposal dated 16.07.2020 has considered all the proposals of the Petitioner in extenso.
(M) Petitioner contends that the actions of blacklisting and foreclosing the security deposit are illegal and unreasonable because -
(i) Show cause notice dated 17.07.2020 (pg.433) issued in this behalf is vague.
(ii) It does not give any reason as to why such drastic steps are being taken.
Page 29 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
(iii) It does not state as to which fundamental conditions of contract are violated.
(iv) It does not specify the allegations.
In support of the above, the Petitioner relies upon the judgment of the Apex Court in case of Gurkha Security Services, reported in (2014) 9 SCC 105 - rel. para. 21 to contend that show cause notice must state all the aforesaid things.
In fact, the show cause notice dated 17.07.2020 (pg.433) issued by the Corporation to the Petitioner in the present case is very much in tune with the observations of the Apex Court in para 27 of the aforesaid judgment, inasmuch as, it has clearly stated as to the actions proposed to be taken i.e. blacklisting and encashing the performance bank guarantee, which is the sufficient compliance.
In view of this, as held by the Hon'ble Bombay High Court in its judgment reported in 2015 SCC OnLine Bom 2941, "in administrative matters, the authorities cannot be expected to pass elaborate judgment like the courts. The only requirement would be that the decision of the authorities should be rational and arrived at in a fair and transparent manner".
Further, there is no need to supply material on the basis of which the charges against the Petitioner are based and the same is not the requirement of the principle of audi alteram partem, in the matter of taking action for blacklisting.
(2001) 8 SCC 604 - rel. paras. 2 to 4
(N) Tender Document is not a statutory instrument, and therefore, the failure to mention blacklisting to be one of the probable actions that would be taken against the delinquent bidder, does not, by itself, disable the Corporation from blacklisting a delinquent bidder and such power is inherent in every person legally capable of entering into contracts.
(2012) 11 SCC 257 - rel. paras. 8 to 11, 15, 25 to 38 (O) It is contended that there is no breach committed by the Petitioner, justifying its blacklisting, more particularly when, -
(i) Petitioner had undertaken demolition.
Page 30 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
(ii) Petitioner had made the payment of rent up to August, 2019, and thereafter for four months on 04.08.2020, totalling up to December, 2019, (It subsequently on 04.12.2020 paid four months rent).
(iii) Petitioner had applied for permission before NMA.
However, while so contending, it should not have overloaded the following facts, which undoubtedly justify the action of blacklisting:
(i) Petitioner failed to obtain the requisite approvals and clearances before 10.11.2018 as required by sub-Clause 13 (pg.59) and sub-Clause 7 (pg.97), within the prescribed time limit.
(ii) Petitioner failed to comply with the condition of payment of transit rent after August, 2019, as required by sub-Clause 7 (pg.53).
(iii) Petitioner failed to start even a brick of construction from 01.10.2018 till termination of contract on 31.07.2020, when the contract work was to be over by 10.05.2021.
(iv) Petitioner failed to abide by the condition relating to library building for G+2 floors.
(v) Petitioner failed to provide any building plans of construction pursuant to NMA's permission dated 12.02.2020 for 35 mtrs. to explain it's all the subsequent proposals, dated 25.02.2020 (pg.421), 02.06.2020 (pg.424) and 30.07.2020 (pg.438), which were merely on paper.
(P) Petitioner further contends that one cannot blacklist unless there is an intent to cheat or take undue advantage, which is not there in the present case and that Petitioner has not deliberately defaulted, and that therefore it should not have been blacklisted.
The action of blacklisting does not depend upon as to whether default of the Petitioner is deliberate or not or there was intention to take undue advantage or to cheat or not. It depends upon the contravention of the contract and damage caused to the Corporation. The dereliction, such as the one indulged in by the Petitioners, if not handled firmly, is likely to result in recurrence of such activity not only on the part of the Petitioner, but others also, who deal with public bodies. In fact Clause 35 (pg.72) of Part I of the Tender Document authorises the Corporation to blacklist for any default of the Petitioner - Developer.
Page 31 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 (2012) 11 SCC 257 - rel. para. 36 (2014) 14 SCC 731 - rel. paras. 16, 17 & 25
Petitioner's reliance in this behalf on the judgment of the Hon'ble Bombay High Court in case of Sarku Engineering Services SDN BHD vs. Union of India reported in 2016 SCC OnLine Bom 5233 is totally misplaced, inasmuch as, in the said case, despite the contract between the parties was not terminated and the work thereunder was in fact completed, but the contractor was not paid anything, for which it had to invoke arbitration, the Contractor was blacklisted during the pendency of arbitration proceedings, wherein, it was yet to be determined as to whether the cause of the delay was attributable to the Contractor alone. So are not the facts obtaining in the instant matter.
(Q) Failure of the Petitioner to conclude the contract in time has admittedly resulted in a legal wrong, causing harm to the public interest as well as financial liability on the Corporation, for which whether the Corporation should have been satisfied with the forfeiture of the bid security amount or should have gone further to also blacklist the Petitioner after forfeiting the bid security, is a matter of discretion to be exercised by the Corporation, fairly and rationally. However, forfeiture of bid security is a matter of one another independent contract between the Bank and the Corporation, whereunder because of specific condition incorporated in the bank guarantee, decision of the Corporation as to the breach of the contract by the Petitioner is binding on the Bank and the justifiability of the decision is a different matter between the Corporation and the Petitioner and this Hon'ble Court would not like to enter into the said question in a proceeding under Article 226 of the Constitution, since several disputed questions of fact are involved.
(2016) 10 SCC 46 - rel. para. 9 In this behalf, the Petitioner's reliance on the judgment of the Apex Court in case of Teri Oat Estates (P) Ltd. vs. U.T. Chandigarh, reported in (2004) 2 SCC 130 - rel. paras 41 & 42, is totally misplaced, since that was not the case of forfeiture of bid security, but the forfeiture of the whole of the land allotted to the Appellant, though it had paid a substantial amount by way of price thereof together interest @ 12% p.a. as enhanced from time to time. In view of this, it was ruled that resumption of entire land was not justified only for the reason of non- payment of some unpaid amount with penal rate of interest, because the default was not absolutely wilful or dishonest.
Similarly Petitioner's reliance of the judgment of the Apex Court in case Page 32 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 of Haryana Financial Corporation vs. Rajesh Gupta, reported in (2010) 1 SCC 655 - rel. paras. 23 to 25 is also misplaced, since the same was a case of forfeiture of EMD by the Appellant Corporation, wherein, it was held that the said forfeiture was not justified, because the Respondent being the successful tenderer and though paid the substantial amount of sale consideration, did not pay the balance amount since there was no existence of an independent passage road directly connected to the plot, though repeatedly requested for from time to time. Despite this, EMD was forfeited by the Appellant while putting the land for sale by inviting fresh tenders. It was under these circumstances that it was held to the effect that the sale of plot of land in question was not on "as is where is basis" and that therefore, the Appellant Corporation being an instrumentality State cannot act unfairly and take advantage of its wrong. Pertinently, in this case, the conditions of sale did not contain the provisions like the one contained in Clauses 1.8, 1.13, 1.18 and sub- Clause 7 of Clause 4 of the Tender Document in the present case."
39 In such circumstances referred to above, Mr. Pandya prayed that there being no merit in the present writ applicant, the same may be rejected. Mr. Pandya submitted that the Corporation wants to issue a fresh Tender Notice and undertake a fresh exercise.
SUBMISSIONS ON BEHALF OF THE NATIONAL MONUMENTS AUTHORITY, GOVERNMENT OF INDIA:
40 Mr. Devang Vyas, the learned Additional Solicitor General of India submitted that in due deference to the order passed by this Court dated 17th June 2021, he took up the issue with the N.M.A. keeping in mind the interest of the 1,304 poor families who have been displaced. The authority has agreed to grant the permission to raise the height of the buildings upto 45 meters. Mr. Vyas would submit that his role is limited to the extent of grant of the requisite permission by the N.M.A. and there should not any difficulty now for the writ applicant as well as for the Corporation to obtain the permission from the N.M.A. as the N.M.A. has agreed to grant the permission.
Page 33 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 SUBMISSIONS ON BEHALF OF THE GATALAWADI SLUM
DWELLER ASSOCIATION AND OTHER DISPLACED FAMILIES:
41 Mr. Mukesh Patel and Mr. Nandish Thackar, the learned counsel appearing for the displaced persons vehemently submitted that in the dispute between the writ applicant and Corporation, the 1,304 poor families are suffering past almost more than three years. The learned counsel would submit that they all vacated the land pursuant to the efforts put in by the writ applicant. Initially, the writ applicant also paid the rent for their shelter at different places, but after some period of time, the writ applicant stopped paying the rent as the project got into trouble. Mr. Patel as well as Mr. Thackar would submit that their clients earnestly requested the Corporation to do the needful in the matter, but there was no response at the end of the Corporation at any point of time. Today, the Corporation is also not ready to pay anything to the displaced families for their shelter.
42 Our attention was drawn to the affidavit-in-reply filed on behalf of the 1,300 families. The same reads thus:
"1 I say that the Gotalawadi Tenament housing colony consisting of the 1304 Dwelling units, located over F.P. No.312/A Paikki of T.P. Scheme no.3 (Katargam) was laid by the respondent no.2 Surat Municipal Corporation for redevelopment under the redevelopment of Public Housing Scheme 2016 on public private partnership (PPP) basis. I say that as transpires from the record of the petition at later stage after eviction and demolition of dwelling units, the issue of restrictions of height appears to have taken place between the parties to PPP. It is unbelievable that the Surat Municipal Corporation authorities may not be aware of existence of Dutch Cemetery in near by vicinity, more particularly when in nearby area other buildings are allowed and the over bridge has been constructed by Municipal Corporation itself which is adjacent and within 100 mtr from Dutch Cemetery. Both involved in redevelopment on PPP base and more particularly the respondent corporation authorities were bound to take precautions on such issues before taking possession and even before demolishing the dwelling units under the name of implementing the redevelopment scheme in Page 34 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 the present case. But for the reasons best known to them they hurriedly proceeded irresponsibly and after making the dwelling unit holders shelter less the issue is given birth, placing the 1304 dwelling units holders/beneficiaries in miserable condition. And now the petitioner and the respondent No.2 Municipal corporation are fighting present litigation making it as ego issues making the dwelling unit holders sufferer, rather then exercising the discretion vested with them at highest level and adopting objective approach to save the interest of the dwelling unit holders. I say that as such it appears and gives feeling that the litigation is given birth with oblique motive and it has become a matter of ego between the contesting parties to the petition i.e. respondents authorities and petitioner, leaving behind the due considerations of the adversity caused to and suffering of the beneficiary dwelling unit holders of the redevelopment scheme 2016 and more particularly without considering the victimisation took place with the present respondents dwelling unit holders.
2 I say that the respondents No. 10 to 18 hereof are the owners, beneficiaries, stack holders, occupiers of slum dwelling unit amongst the 1304 dwelling unit holders, of Gotalawadi Tenement. The possession of their dwelling unit had been forcefully taken over jointly by the petitioner and the respondent No,2 Surat Municipal Corporation under the name of redevelopment Scheme 2016, of Gotalawadi Tenement floated on PPP basis irrespective of caring out required repairs of dwelling units owned and held by present respondents on spending huge amount, and the present respondents were impressed and assured that all the dwelling units holders including the present respondents will be taken care of and extended all benefit of the redevelopment scheme 2016 floated on PPP base by the Respondent Municipal Corporation and petitioner and the paper work of the present respondents would be completed and all will be provided the redeveloped area and the rent for the period from taking possession till handing over the new dwelling unit as per the redevelopment scheme. I say that after taking over the possession jointly by the Respondent Municipal corporation and the petitioner, all the 1304 dwelling units have been demolished by the petitioner as redevelopment implementing entity. Though the present respondents are arbitrarily made shelter less by them accordingly, under the name of redevelopment scheme floated on PPP base, the present respondents are not paid single panny of rent as per the redeployment scheme and the petitioners had been made running pillar to post for paper work, details as well the rent amount and the present respondents left without rent & other matters after taking over the possession of their dwelling unit.
3 I say that undisputedly and rather admittedly redevelopment scheme venture in question was started on Public Private Partnership (PPP) between the petitioner and the respondent No.2 Surat Municipal Corporation. The basic concept of PPP is that when government feels Page 35 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 short of mechanism to carry out it's obligation/work, the government authority may join hands to execute such work through private body having capacity to carry out such work and in that case the government remains principal and the joining body acts as executor of such work. In PPP project it being joint venture the government/ Corporation also gets benefited from the scheme, gets it's work done and at same time equally liable and answerable to third party - 1304 dwelling unit holders, to extend benefit and pay rent as per the redevelopment scheme-project in question started on PPP base. And the respondent corporation can't escape from such liability towards dwelling unit holders merely alleging on the name of the petitioner. At the most it may be matter of inter se contract between them and the corporation may take steps to recover loss from the petitioner, but the dwelling unit holders who are affected and lead to adversities due to PPP venture, none either petitioner or the respondent corporation can deny the discharge of their liability on ground of inter-se dispute between them.
4 I say that the present respondents No. 10 to 18 are the owners of the premises / Dwelling units no. C-1/16, C-2/24, C1/25, C-2/1, C-
1/24, C-2/7, A-6/9, A-7/10, C-2/23 respectively, which had been assessed by the municipal corporation laving commercial tax, which have been regularly paid by the present respondents and had been forcefully dispossessed by the respondent No.1 exercising their powers and after taking the possession of all the said premises the structure thereof had been demolished by the petitioner. Thus the present respondents have been placed on the road losing their premises and the whole family of the present respondents are suffering. Neither the compensation nor the rent as per the redevelopment scheme have been paid, either by the present petitioner or the respondent corporation. I say that though it was brought to the notice of the respondent Corporation authorities about non execution of document and non payment of rent, they had not taken any steps to see that the even equal treatment is given to the present respondents as likewise given to/ done with other dwelling unit holders. Not only that as per information after forfeiture of the amount of security deposit of petitioner, the respondent corporation had disbursed the rent amount of rent to some of the selected dwelling units holders but the respondent corporation has avoided to make the payment of the outstanding rent to the present respondents though the present respondents are the owners and beneficiary of the redevelopment scheme who are not paid rent from the date of taking away the possession of their dwelling units. So far as respondent no. 18 is concern the petitioner has paid some amount towards the rent but not paid up the complete rent and after getting the documents signed for compensation neither paid the compensation nor the rent. And thus the present respondents are victimised.
5 I say that the present respondents had already presented the documents of ownership from the day one, as desire by the respondent Page 36 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 corporation, before the respondent corporation authorities. Thereafter the corporation again asked to resubmit the details twice and immediately responding it the present respondents have re submitted the details. But nothing has been heard thereafter and though repeatedly requested to provide details as well payment of the rent and no response is given by the respondent corporation and the applicants are made running pillar to post. At same time the details demanded are being denied by the respondent corporation authorities stating that the petition is pending before the Hon'ble High Court and thus the present respondents are being deprived from making effective representation. Thus both, the petitioner and the respondent corporation authorities have treated the present respondents indifferently, discriminated and kept away from the benefits to follow as per the redevelopment of public housing scheme 2016.
6 I say that in the given circumstances the present respondents had been constrained to complaint in Swagat Fariyad Nivaran programme and the district collector upon hearing, in meeting dt.27/2/2020, instructed to the respondent corporation authorities to pay rent urgently and the reference thereof has been made by the Dy. Commissioner in his communication. Still however the respondent corporation authorities did not took cogent steps to comply the said order and started giving reply and writing letters throwing responsibility on different authorities each other viz. Municipal Commissioner, Addl. Municipal commissioner and executive engineer, Slum Up gradation Gotalawadi, Katargam etc and the present respondents are made running pillar to post between them. Hence the present respondents had been constrained to represent in writing before them and report the collector about non compliance of instruction, by the Municipal corporation authorities and the collector had issued instructions to arrange for the payment of the rent to the present respondents and still however the respondent Municipal corporation has not taken steps to make payment of outstanding rent of the present respondents. No doubt the respective authorities have during physical meeting orally accepted and admitted our entitlement of benefit and then made excuse that since litigation of present petition is pending it is not releasable. The persons of the petitioner says contract is terminated and hence they cant' do anything.
7 I say that in the petition the petitioner has alleged that after demolition the dwelling unit holders are paid rent by It and rent is being paid to the beneficiaries. The said statement o the petitioner is not correct as stated above. Similarly the attempt was made impress by corporation making statement before this Hon'ble Court that the rent is paid to all dwelling unit holders/beneficiaries. The said statement also is factually incorrect and misguiding one. As narrated above the respondents herein are not paid rent from day one by any one of them, that too even after instruction from the collector. The petitioner has not Page 37 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 paid the amount of compensation to respondent No.18 even after getting the papers signed and corporation uses fund of forfeited SD of petitioner and paid rent to some DU holders but did not cleared out standing rent of the present respondents. Cry of the present DU holder have turned deaf eared to them and the present respondents have been put in to the worst situation.
8 I say that the fact remains that the petitioner and respondent corporation are equally responsible and liable for the present situation but both of them have remained silent qua the position of the dwelling unit holder which has taken place due to their joint venture. In the circumstances before any order is passed the petitioner and/or the respondent corporation are required to be directed to complete their obligation towards the dwelling unit holders including the present respondents and to take care of and giving equal treatment to all dwelling units holders -- beneficiary including the present respondents, and the bonafide of petitioner and the respondent corporation needs to be tested by appropriate directions examining their willingness to take care of affected 1304 dwelling unit holders including the present respondents. It is therefore and accordingly prayed that the petitioner and /or the corporation who ever may succeed in present petition may kindly be further directed to pay/ reimburse all the outstanding amount of rent to all the 1304 dwelling unit holders, in the interest of justice, as it was their joint venture of redevelopment on PPP basis.
9 I crave leave to refer, rely upon and produce the details of the present respondents dwelling unit holders in case of necessity so arises and the representations, collector's order, and corporation's letter etc are annexed herewith and marked as Annexure R-I collectively to this reply."
43 In such circumstances referred to above, the learned counsel appearing for the displaced families earnestly prayed before this Court to pass an appropriate order protecting the interest of the poor families.
ANALYSIS: 44 Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the only question that falls for our consideration is whether the action on the part of the Corporation in terminating the contract, blacklisting the writ applicant and forfeiting the security deposit is arbitrary or unfair and in Page 38 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 consequence of violation of Article 14 of the Constitution?
45 Before we proceed further it would not be out of place to state at this stage that at one point of time, in the course of the hearing of this litigation, we could see a ray of hope of an amicable settlement of the dispute. When practically everything was resolved, all of a sudden, at the last minute, the Corporation raised an issue regarding the free FSI. The note filed by the Corporation on this issue of FSI reads thus:
"1. Respondent SME states that as per the provision of the Redevelopment of Public Housing Scheme-2016 ("the Scheme - 2016"
for short) (pg. 537), particularly Clause No.5.3(a), the total permissible FSI for the entire plot will be 3.00 FSI or as per the GDCR, whichever is higher. This means that if the Developer chooses to accept 3.00 FSI, the same FSI shall be freely available to the Developer under the Scheme- 2016. However, if the Developer chooses to accept FSI as per the GDCR, then in that case, the Developer shall be entitled for 1.8 free FSI and 2.2 paid FSI as provided under Clause 6.3 r/w Clause 6.8 of the prevalent GDCR. Relevant Clauses of GDCR are produced at pg.713.
{Ftoor Space Index (FSI) Means Quotient of the ratio of combined gross built up area of all floors, to the total area of the building-unit (total plot area including Common plot)} FSI = Total Built-up area of all floors Area of the Building-unit Therefore, in view of the tender terms and conditions and provisions of the GDCR, the Petitioner is not entitled for free 4.00 FSI."
46 To the aforesaid, the writ applicant responded as under:
"The Petitioner states that the bid was submitted on the basis of the permissible height of the buildings at 45 meters as per the bid document. Since the petitioner was unable to put up any construction, as the subject plot fell within "REGULATED ZONE" under Sec. 20(B) of the Ancient Monument and Archaeological Sites and Remains Act, 1958, which fact was never made known to the petitioner at any point of time and subsequently the National Monument Authority restricted Page 39 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 the height to 35 meters, the substratum of the contract changed and became impossible of performance. The petitioner however proposed that in case the project had to go ahead there should be a relaxation in so far as one of the condition of the tender was concerned, i.e the library building which was Ground + 2 Floors, should be relaxed to G+7 Floors, so that the petitioner could utilize the available balance FSI after constructing 1304 PHC and 130 AHC for recovering its cost incurred. This proposal as well as number of earlier proposals was never responded to, by the respondent corporation, which in fact proceeded to terminate the contract, blacklist the petitioner, and forfeit the Security Deposit, which was clearly unjustified in these facts. After the matter was substantially heard and a number of Affidavits in reply were filed, the Resp. - Corporation raised another issue for the first time, that the petitioner would be entitled to Free FSI of 1.8 and paid FSI of 2.2, as per the provisions of the GDCR, completely overlooking the fact that the bid document prescribed Free FSI of 3.0 (Clause 9 at Pg. 54) and since the GDCR permitted the FSI of 4.0 in respect of subject plot, only the additional FSI of 1.0 would be the paid FSI."
47 In view of the aforesaid, once again, the problems cropped up.
MAINTAINABILITY OF THE WRIT APPLICATION UNDER
ARTICLE 226 OF THE CONSTITUTION:
48 As regards the issue of maintainability, we can do no better than
refer to a recent pronouncement of the Supreme Court in the case of Unitech Limited and others vs. Telangana State Industrial Infrastructure Corporation (TSIIC) and others reported in 2021 SCC Online 99, wherein, His Lordship Honourable Dr. Justice Dhananjaya Y. Chandrachud speaking for the Bench, has observed as under:
"...However, to clear the ground, it is necessary to postulate that recourse to the jurisdiction under Article 226 of the Constitution is not excluded altogether in a contractual matter. A public law remedy is available for enforcing legal rights subject to well-settled parameters.
39 A two judge Bench of this Court in ABL International Ltd. v. Export Credit Guarantee Corporation of India (2004) 3 SCC 553 [ABL International] analyzed a long line of precedent of this Court [K.N. Page 40 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Guruswamy v. State of Mysore, AIR 1954 SC 592; Gujarat State Financial Corporation v. Lotus Hotels (P) Ltd. (1983) 3 SCC 379; Gunwant Kaur v. Municipal Committee, Bhatinda, (1969) 3 SCC 769] to conclude that writs under Article 226 are maintainable for asserting contractual rights against the state, or its instrumentalities, as defined under Article 12 of the Indian Constitution. Speaking through Justice N Santosh Hegde, the Court held:
"27. ...the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable."
40 This exposition has been followed by this Court, and has been adopted by three- judge Bench decisions of this Court in State of UP v. Sudhir Kumar [2020 SCC Online SC 847] and Popatrao Vynkatrao Patil v. State of Maharashtra1 [Civil Appeal 1600 of 2000 (Supreme Court of India)]. The decision in ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters. Article 23.1 of the Development Agreement in the present case mandates the parties to resolve their disputes through an arbitration. However, the presence of an arbitration clause within a contract between a state instrumentality and a private party has not acted as an absolute bar to availing remedies under Article 226 [Harbanslal Sahnia v. Indian Oil Corporation Ltd (2003) 2 SCC 107; Ram Baral Singh & Co. v. State of Bihar, (2015) 13 SCC 592]. If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie. This principle was recognized in ABL International:
"28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to Page 41 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] .) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction." (emphasis supplied) 41 Therefore, while exercising its jurisdiction under Article 226, the Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a misuse of authority. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract. Similarly, the presence of an arbitration clause does oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked. The jurisdiction under Article 226 was rightly invoked by the Single Judge and the Division Bench of the Andhra Pradesh in this case, when the foundational representation of the contract has failed.."
49 The principle enunciated in the ABL International (supra) has been consistently upheld by the Supreme Court in Noble Resources v. State of Orissa and Anr. (2006) 10 SCC 236 (at paragraph 15); Food Corp. of India and Anr. v. SEIL Ltd. and Ors. (2008) 3 SCC 440 (at paragraph 16); Central Bank of India v. Devi Ispat Ltd. and Ors. (2010) 11 SCC 186 (at paragraph 28); and Surya Constructions v. State of U.P. and Ors. (2019) 16 SCC 794 (at paragraph 3).
Page 42 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 50 The judgement of the Supreme Court in the case of Radhakrishna Agarwal and Ors. v. State of Bihar and Ors. (1977) 3 SCC 457 was also discussed. It was a judgment in which a writ petition against the State Government's revision of the rates of royalty payable to it under a lease, and the cancellation of the said lease, was held to be governed by contract between the parties, no unreasonableness being made out by way of State action so as to attract the provisions of Article 14 of the Constitution of India. The broad proposition that all such questions are to be settled by civil courts, and not by writ petitions, has been expressly dissented from, as "much water has floated" since this judgment, which was delivered during the emergency when the fundamental rights of persons were suspended. Thus, in Verigamto Naveen v. Govt. of A.P. and Ors. (2001) 8 SCC 344, the Supreme Court stated:
"21. On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court ought not to have exercised its power under Article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P. Mining Corpn. Ltd. [(1988) 2 An LT 722] and the decisions of this Court in Har Shankar v. Dy. Excise & Taxation Commr. [(1975) 1 SCC 737], Radhakrishna Agarwal v. State of Bihar [(1977) 3 SCC 457], Ramlal & Sons v. State of Rajasthan [(1976) 1 SCC 112], Shiv Shankar Dal Mills v. State of Haryana [(1980) 2 SCC 437], Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 SCC 489] and Basheshar Nath v. CIT [AIR 1959 SC 149]. Though there is one set of cases rendered by this Court of the type arising in Radhakrishna Agarwal case [(1977) 3 SCC 457] much water has flown in the stream of judicial review in contractual field. In cases where the decision- making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay [(1989) 3 SCC 293], Mahabir Auto Stores v. Indian Oil Corpn. [(1990) 3 SCC 752] and Shrilekha Vidyarthi (Kumari) v. State of U.P. [(1991) 1 SCC 212]. Where the breach of contract involves breach of statutory obligation when the order complained of was made Page 43 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings it within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference under Article 226 of the Constitution is not called for. This contention also stands rejected." (emphasis supplied)
51 In Rishi Kiran Logistics v. Board of Trustees of Kandla Port and Ors. (2015) 13 SCC 233, the Supreme Court held that a writ petition under Article 226, being a public law remedy, a "public law element"
should be present on facts before Article 226 can be invoked - see paragraphs 37 and 38. The law on this subject has been laid down exhaustively in Joshi Technologies International Inc. v. Union of India and Ors. (2015) 7 SCC 728, the Supreme Court stating:
"69. The position thus summarised in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, it can refuse to exercise. It also follows that under the following circumstances, "normally", the Court would not exercise such a discretion:
69.1. The Court may not examine the issue unless the action has some public law character attached to it.
69.2. Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said mode of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration.
69.3. If there are very serious disputed questions of fact which are of Page 44 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 complex nature and require oral evidence for their determination.
69.4. Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances.
70. Further, the legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to contracts entered into by the State/public authority with private parties, can be summarised as under:
70.1. At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness.
70.2. State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practise some discriminations.
70.3. Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 of the Constitution could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases the Court can direct the aggrieved party to resort to alternate remedy of civil suit, etc. 70.4. Writ jurisdiction of the High Court under Article 226 of the Constitution was not intended to facilitate avoidance of obligation voluntarily incurred. 70.5. Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the licence if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.
70.6. Ordinarily, where a breach of contract is complained of, the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed. Otherwise, the party may sue for damages.
70.7. Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if it can be shown that action of the Page 45 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.
70.8. If the contract between private party and the State/instrumentality and/or agency of the State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitution of India and invoking its extraordinary jurisdiction.
70.9. The distinction between public law and private law element in the contract with the State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract, this Court has maintained the position that writ petition is not maintainable. The dichotomy between public law and private law rights and remedies would depend on the factual matrix of each case and the distinction between the public law remedies and private law field, cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision- making process or that the decision is not arbitrary.
70.10. Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non- arbitrariness.
70.11. The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes."
52 It may be added that every case in which a citizen/person knocks at the doors of the writ court for breach of his or its fundamental rights is a matter which contains a "public law element", as opposed to a case Page 46 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 which is concerned only with breach of contract and damages flowing therefrom. Whenever a plea of breach of natural justice is made against the State, the said plea, if found sustainable, sounds in constitutional law as arbitrary State action, which attracts the provisions of Article 14 of the Constitution of India - see Nawabkhan Abbaskhan v. State of Gujarat (1974) 2 SCC 121 at paragraph 7.
53 The case on hand is, therefore, a case which involves a "public law element". The writ applicant has alleged that the action on the part of the Corporation, leading to the termination of the contract, blacklisting the writ applicant and forfeiting the entire amount towards the security deposit without taking into consideration any of the aspects pointed out by the writ applicant, could be termed as a very arbitrary action.
BLACKLISTING THE WRIT APPLICANT: 54 In Black's Law Dictionary, the meaning of the term "blacklist" is given as follows:
"Blacklist: A list of persons marked out for special avoidance, antagonism, or enmity on the part of those who prepare the list or those among whom it is intended to circulate;
Blacklist is a list of people, who are considered by a particular authority or group to be unacceptable and who should be avoided and not trusted. 'Blacklisting' has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist."
55 We must first look into the position of law on the subject. The law on the subject has been succinctly explained by the Supreme Court in the Page 47 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 case of M/s. Kulja Industries Limited Vs. Chief General Manager, W. T. Proj., BSNL and others. reported in AIR 2014 SC 9. The Supreme Court in the said case first considered Paras-31 and 32 of the bid document, which provided the power to blacklist a defaulting contractor. In the case on hand, it is Clause- 33.0 of the bid document referred to above. In this regard, we first quote the Paras-14 and 15 respectively of the judgment:
"14. We may at the outset deal with the contention whether paras 31 and 32 of the bid document to which Mr. Rohtagi has made reference is the only source of the power to blacklist a defaulting contractor. These paras are as under:
"31. Purchaser reserves the right to disqualify the supplier for a suitable period who habitually failed to supply the equipment in time. Further, the suppliers whose equipment do not perform satisfactory in the field in accordance with the specifications may also be disqualified for a suitable period as decided by the purchaser.
32. Purchaser reserves the right to blacklist a bidder for a suitable period in case he fails to honour his bid without sufficient grounds."
15. A plain reading of the above would show that BSNL, the purchaser has reserved the right to disqualify any supplier who
(a) habitually fails to supply the equipment in time or
(b) the equipment supplied by the supplier does not perform satisfactory in the field in accordance with the specifications or
(c) fails to honour his bid without sufficient grounds."
56 From the aforesaid, it is evident that the B.S.N.L. had reserved its right to blacklist a bidder for a suitable period only in three situations as referred to in Para-14. In the case on hand, such power under Clause- 33.0 could be exercised in two contingencies - (1) in case of cancellation of the purchase order on account of delay in execution of the order or Page 48 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 non-execution of the order and/or annulment of the award due to non- submission of the performance security; and (2) failure to honour the commitments under "warantee and guarantee" requirements. The Supreme Court, thereafter, proceeded to explain in Para-17 how the power to blacklist the contractor should be exercised. The Supreme Court has observed that such power is inherent in the party allotting the contract. There need not to be any specific conferment of such power by statute or reserved by contractor. We quote Para-17 which reads as under:
"17. That apart the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because 'blacklisting' simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential pre-condition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ Court. The legal position on the subject is settled by a long line of decisions rendered by this Court starting with Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Anr. (1975) 1 SCC 70 where this Court declared that blacklisting has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and that the Authority passing any such order was required to give a fair hearing before passing an order blacklisting a certain entity. This Court observed:
"20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability Page 49 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist."
57 In Paras-18, 19 and 20 respectively, the Supreme Court considered few of its earlier decisions and also, the legal position governing blacklisting of the suppliers in the U.S.A. and U.K. We quote the same as under:-
"18. Subsequent decisions of this Court in M/s Southern Painters v. Fertilizers & Chemicals Travancore Ltd. and Anr. AIR 1994 SC 1277; Patel Engineering Ltd. Union of India (2012) 11 SCC 257; B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. & Ors. (2006) 11 SCC 548; Joseph Vilangandan v. The Executive Engineer, (PWD) Ernakulam & Ors. (1978) 3 SCC 36 among others have followed the ratio of that decision and applied the principle of audi alteram partem to the process that may eventually culminate in the blacklisting of a contractor.
19. Even the second facet of the scrutiny which the blacklisting order must suffer is no longer res integra. The decisions of this Court in Radha krishna Agarwal and Ors. v. State of Bihar & Ors. (1977) 3 SCC 457; E.P. Royappa v. State of Tamil Nadu and Anr. (1974) 4 SCC 3; Maneka Gandhi v. Union of India and Anr. (1978) 1 SCC 248; Ajay Hasia and Ors. v. Khalid Mujib Sehravardi and Ors., (1981) 1 SCC 722; R.D. Shetty v. International Airport Authority of India and Ors., (1979) 3 SCC 489 and Dwarkadas Marfatia and sons v. Board of Trustees of the Port of Bombay (1989) 3 SCC 751 have ruled against arbitrariness and discrimination in every matter that is subject to judicial review before a Writ Court exercising powers under Article 226 or Article 32 of the Constitution. It is also well settled that even though the right of the writ petitioner is in the nature of a contractual right, the manner, the method and the motive behind the decision of the authority whether or not to enter into a contract is subject to judicial review on the touchstone of fairness, relevance, natural justice, non-discrimination, equality and proportionality. All these considerations that go to determine whether the action is sustainable in law have been sanctified by judicial pronouncements of this Court and are of seminal importance in a system that is committed to the rule of law. We do not consider it necessary to burden this judgment by a copious reference to the decisions on the subject. A reference to the following passage from the decision of this Court in M/s Mahabir Auto Stores & Ors. v. Indian Oil Corporation Ltd., (1990) 3 SCC 752 should, in our view, suffice:Page 50 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 "11. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution.
Reliance in this connection may be placed on the observations of this Court in Miss Radha Krishna Agarwal and Ors. v. State of Bihar and Ors., [1977] 3 SCR 249 ...... In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable....... It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case."
20. The legal position governing blacklisting of suppliers in USA and UK is no different. In USA instead of using the expression 'Blacklisting' the term "debarring" is used by the Statutes and the Courts. The Federal Government considers 'suspension and debarment' as a powerful tool for protecting taxpayer resources and maintaining integrity of the processes for federal acquisitions. Comprehensive guidelines are, therefore, issued by the government for protecting public interest from those contractors and recipients who are non-responsible, lack business integrity or engage in dishonest or illegal conduct or are otherwise unable to perform satisfactorily. These guidelines prescribe the following among other grounds for debarment:
a) Conviction of or civil judgment for --Page 51 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 (1) Commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public or private agreement or transaction;
(2) Violation of Federal or State antitrust statutes, including those proscribing price fixing between competitors, allocation of customers between competitors, and bid rigging; (3) Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, receiving stolen property, making false claims, or obstruction of justice; or (4) Commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects your present responsibility;
(b) Violation of the terms of a public agreement or transaction so serious as to affect the integrity of an agency program, such as--
(1) A willful failure to perform in accordance with the terms of one or more public agreements or transactions; (2) A history of failure to perform or of unsatisfactory performance of one or more public agreements or transactions; or (3) A willful violation of a statutory or regulatory provision or requirement applicable to a public agreement or transaction;
(c) xxxx
(d) Any other cause of so serious or compelling a nature that it affects your present responsibility."
58 In Para-21, the Supreme Court has provided guidelines that may influence the decision of the authority concerned. We quote Para-21 as under:
"21. The guidelines also stipulate the factors that may influence the debarring official's decision which include the following:
a) The actual or potential harm or impact that results or may result from the wrongdoing.
b) The frequency of incidents and/or duration of the wrongdoing.
c) Whether there is a pattern or prior history of wrongdoing.
d) Whether contractor has been excluded or disqualified by an agency of the Federal Government or have not been allowed to participate in State or local contracts or assistance agreements on a basis of conduct Page 52 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 similar to one or more of the causes for debarment specified in this part.
(e) Whether and to what extent did the contractor plan, initiate or carry out the wrongdoing.
(f) Whether the contractor has accepted responsibility for the wrongdoing and recognized the seriousness of the misconduct.
(g) Whether the contractor has paid or agreed to pay all criminal, civil and administrative liabilities for the improper activity, including any investigative or administrative costs incurred by the government, and have made or agreed to make full restitution.
((h) Whether contractor has cooperated fully with the government agencies during the investigation and any court or administrative action.
(i) Whether the wrongdoing was pervasive within the contractor's organization.
(j) The kind of positions held by the individuals involved in the wrongdoing.
(k) Whether the contractor has taken appropriate corrective action or remedial measures, such as establishing ethics training and implementing programs to prevent recurrence.
(l) Whether the contractor fully investigated the circumstances surrounding the cause for debarment and, if so, made the result of the investigation available to the debarring official."
59 The Supreme Court in the case of VET India Pharamaceuticals Limited Vs. State of Uttar Pradesh & Another reported in (2021) 1 SCC 804 observed that an order of blacklisting operates to the prejudice of a commercial person not only "in praesenti", but also puts a taint, which attaches far beyond and may well spell the death knell of the organisation/institution for all times to come described as a civil death.
60 Such observations of the Supreme Court would fairly describe the effect of the impugned order on the writ-applicant. The Supreme Court in M/s. Kulja Industries Limited (Supra) has made it explicitly clear that Page 53 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 although the authority to blacklist the contractor or the power to blacklist the contractor is inherent in the party allotting the contract, yet such decision is subject to the judicial review when the same is taken by the State or any of its instrumentalities. It necessarily implies that any such decision would be open to scrutiny not only on the touchstone of the principles of natural justice, but also on the doctrine of proportionality.
61 The concept of Blacklisting has also been explained by the Supreme Court in M/s. Erusian Equipment & Chemicals Limited v. Union of India and others,(1975) 1 SCC 70, as under:
"Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains."
62 We may also look into an order passed by the Supreme Court in the case of M/s. Patel Engineering Limited Vs. Union of India & Anr.; Special Leave Petition (C) No.23059 of 2011; decided on 11 th May 2012. We quote relevant observations:-
"The nature of the authority of State to blacklist persons was considered by this Court in the abovementioned case and took note of the constitutional provision (Article 298), which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right either to enter or not to enter into a contract with any person is subject to a constitutional obligation to obey the command of Article 14. Though nobody has any right to compel State to enter into a contract, everybody has a right to be treated equally when State seeks to establish contractual relationships. The effect of excluding a person from entering into a contractual relationship with State would be to deprive such person to be treated equally with those, who are also Page 54 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 engaged in similar activity.
It follows from the above Judgment that the decision of State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into contractual relationship with such persons is called blacklisting. State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that State is to act fairly and rationally without in any way being arbitrary - thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors."
63 It has been argued on behalf of the Corporation that the principles of natural justice have been fully complied with as a show cause notice was issued to the writ applicant and therefore an opportunity could be said to have been given to the writ applicant to put forward their case before the final decision was taken. However, we need to address ourselves on the doctrine of proportionality as also the contents of the show cause notice. In other words, whether the facts and circumstances of the present case warranted the action on the part of the Corporation in blacklisting the writ applicant for all times to come and what exactly has been imputed in the show cause notice.
DOCTRINE OF PROPORTIONALITY: 64 The question whether a punitive measure is disproportionate must
also be viewed in the context of the standards set by the Corporation themselves. It is well settled that the High Court while exercising power of judicial review would be reluctant to substitute its own opinion on the quantum of penalty or punishment imposed. However, if the High Court finds the punishment as imposed shockingly disproportionate the interference with the same would be warranted. The Supreme Court in Page 55 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 M/s. Kulja Industries Limited (Supra) considered a situation where a contractor had fradulently withdrawn a large sums of money in collusion with the officials of the B.S.N.L. On the same being discovered the Contractor had been blacklisted. Such are not the nature of the allegations in the present case.
65 Having regard to the quick development of administrative law and the need to control the misuse of discretion granted to the exercising authority, the courts have evolved various doctrines and principles that enable them to interfere in an administrative discretion when it is found or noticed to be irrational, unreasonable or entails abuse of power. One such principle is the "Doctrine of proportionality". The doctrine of proportionality entails that an administrative decision, which is taken through the exercise of discretionary powers, must be in the extent to the consequences that follow from implementing such decisions.
66 The "Doctrine of proportionality" is a European origin. It is imbibed in the "European Droit Administratif" and is one of the most important legal principles in the "European Administrative Law". In Britain, the "Principle of Proportionality" has, for so long, been treated as a part of the Wednesbury's principle 2 of unreasonableness which postulated the basic standard of reasonableness that ought to be followed by a public body in its decisions. It stated that if a choice is so unreasonable to the point that no sensible expert could ever take those actions or employ the methods adopted, then such activities are subject to be liable and quashed through judicial review.
67 Although the "Doctrine of Proportionality" has been dealt with as a part of the Wednesbury's principle, the Courts have adopted a different position when it comes to the judicial intervention in terms of judicial Page 56 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 review. It has been held that the principle entails the reasonableness test with a heightened scrutiny. In other words, to apply this doctrine, not only the decisions have to be within the limits of reasonableness, but only, there has to be a balance between the advantage and disadvantage in the outcome that has been achieved through the administrative action. Therefore, the extent of judicial review is more intense and greater on account of "proportionality" test than the 'reasonableness' test. Furthermore, the court while applying the rule of proportionality will think about the public and individual interest in the matter which is not done while applying the Wednesbury's principle of unreasonableness.
68 In Gohil Vishvaraj Hanubhai and Ors. v. State of Gujarat and Ors [(2017)13 SCC 621], it is held in paragraphs 24 to 27 thus:
"24. We are left with the third question--whether the magnitude of the impugned action is so disproportionate to the mischief sought to be addressed by the respondents that the cancellation of the entire examination process affecting lakhs of candidates cannot be justified on the basis of the doctrine of proportionality.
25. The doctrine of proportionality, its origin and its application both in the context of legislative and administrative action was considered in some detail by this Court in Om Kumar and Ors. v. Union of India, (2001) 2 SCC 386 : 2001 SCC (L&S) 1039]. This Court drew a distinction between administrative action which affects fundamental freedoms [See: Om Kumar v. Union of India, (2001) 2 SCC 386 at pp.
407-08, paras 52 to 54 : 2001 SCC (L&S) 1039] under Articles 19(1) and 21 and administrative action which is violative of Article 14 of the Constitution of India. This Court held that in the context of the violation of fundamental freedoms: (Om Kumar case [See: Om Kumar v. Union of India, (2001) 2 SCC 386 at pp. 407-08, paras 52 to 54 :
2001 SCC (L&S) 1039] , SCC p. 408, para 54) "54. ... the proportionality of administrative action affecting the freedoms under Article 19(1) or Article 21 has been tested by the courts as a primary reviewing authority and not on the basis of Wednesbury [Associated Provincial Picture Houses Ltd. v.
Wednesbury Corpn., (1948) 1 KB 223 (CA)] principles. It may be Page 57 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 that the courts did not call this proportionality but it really was."
This Court, thereafter took note of the fact that the Supreme Court of Israel recognised proportionality as a separate ground in administrative law to be different from unreasonableness.
26. It is nobody's case before us that the impugned action is violative of any of the fundamental freedoms of the appellants. We are called upon to examine the proportionality of the administrative action only on the ground of violation of Article 14. It is therefore necessary to examine the principles laid down by this Court in this regard.
27. This Court posed the question in Om Kumar case [Om Kumar v. Union of India, (2001) 2 SCC 386 : 2001 SCC (L&S) 1039] : (SCC p. 409, para 61) "61. When does the court apply, under Article 14, the proportionality test as a primary reviewing authority and when does the court apply the Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] rule as a secondary reviewing authority? From the earlier review of basic principles, the answer becomes simple. In fact, we have further guidance in this behalf."
and concluded: (SCC pp. 410-11, paras 66-68) "66. It is clear from the above discussion that in India where administrative action is challenged under Article 14 as being discriminatory, equals are treated unequally or unequals are treated equally, the question is for the constitutional courts as primary reviewing courts to consider correctness of the level of discrimination applied and whether it is excessive and whether it has a nexus with the objective intended to be achieved by the administrator. Here the court deals with the merits of the balancing action of the administrator and is, in essence, applying "proportionality" and is a primary reviewing authority.
67. But where an administrative action is challenged as "arbitrary" under Article 14 on the basis of E.P. Royappa v. State of T.N. [E.P. Royappa v. State of T.N., (1974) 4 SCC 3 : 1974 SCC (L&S) 165] (as in cases where punishments in disciplinary cases are challenged), the question will be whether the administrative order is "rational" or "reasonable" and the test then is the Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] test. The courts would then be confined only to a secondary role and will only have to see whether the administrator has done well in his primary role, whether he has acted illegally or has omitted Page 58 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 relevant factors from consideration or has taken irrelevant factors into consideration or whether his view is one which no reasonable person could have taken. If his action does not satisfy these rules, it is to be treated as arbitrary. [In G.B. Mahajan v. Jalgaon Municipal Council [G.B. Mahajan v. Jalgaon Municipal Council, (1991) 3 SCC 91] (SCC at p. 111).] Venkatachaliah, J. (as he then was) pointed out that "reasonableness" of the administrator under Article 14 in the context of administrative law has to be judged from the standpoint of Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] rules.
In Tata Cellular v. Union of India [Tata Cellular v. Union of India, (1994) 6 SCC 651] (SCC at pp. 679-80), Indian Express Newspapers (Bombay) (P) Ltd. v. Union of India [Indian Express Newspapers (Bombay) (P) Ltd.v.Union of India, (1985) 1 SCC 641 : 1985 SCC (Tax) 121] (SCC at pp. 691), Supreme Court Employees' Welfare Assn. v. Union of India [Supreme Court Employees' Welfare Assn. v. Union of India, (1989) 4 SCC 187 :
1989 SCC (L&S) 569] (SCC at p. 241) and U.P. Financial Corpn. v. Gem Cap (India) (P) Ltd. [U.P. Financial Corpn. v. Gem Cap (India) (P) Ltd., (1993) 2 SCC 299] (SCC at p. 307), while judging whether the administrative action is "arbitrary" under Article 14 (i.e. otherwise then being discriminatory), this Court has confined itself to a Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] review always.
68. Thus, when administrative action is attacked as discriminatory under Article 14, the principle of primary review is for the courts by applying proportionality. However, where administrative action is questioned as "arbitrary" under Article 14, the principle of secondary review based on Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] principles applies."
69 In Modern Dental College and Research Centre vs. State of M.P [(2016)7 SCC 353], it is held in paragraphs 63 to 65 thus:
"63. In this direction, the next question that arises is as to what criteria is to be adopted for a proper balance between the two facets viz. the rights and limitations imposed upon it by a statute. Here comes the concept of "proportionality", which is a proper criterion. To put it pithily, when a law limits a constitutional right, such a limitation is Page 59 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 constitutional if it is proportional. The law imposing restrictions will be treated as proportional if it is meant to achieve a proper purpose, and if the measures taken to achieve such a purpose are rationally connected to the purpose, and such measures are necessary. This essence of doctrine of proportionality is beautifully captured by Dickson, C.J. of Canada in R. v. Oakes [R. v. Oakes, (1986) 1 SCR 103 (Can SC)] , in the following words (at p. 138):
"To establish that a limit is reasonable and demonstrably justified in a free and democratic society, two central criteria must be satisfied. First, the objective, which the measures, responsible for a limit on a Charter right or freedom are designed to serve, must be "of" sufficient importance to warrant overriding a constitutional protected right or freedom ... Second... the party invoking Section 1 must show that the means chosen are reasonable and demonstrably justified. This involves "a form of proportionality test..." Although the nature of the proportionality test will vary depending on the circumstances, in each case courts will be required to balance the interests of society with those of individuals and groups. There are, in my view, three important components of a proportionality test. First, the measures adopted must be.... rationally connected to the objective. Second, the means ... should impair "as little as possible" the right or freedom in question ... Third, there must be a proportionality between the effects of the measures which are responsible for limiting the Charter right or freedom, and the objective which has been identified as of "sufficient importance". The more severe the deleterious effects of a measure, the more important the objective must be if the measure is to be reasonable and demonstrably justified in a free and democratic society."
64. The exercise which, therefore, is to be taken is to find out as to whether the limitation of constitutional rights is for a purpose that is reasonable and necessary in a democratic society and such an exercise involves the weighing up of competitive values, and ultimately an assessment based on proportionality i.e. balancing of different interests.
65. We may unhesitatingly remark that this doctrine of proportionality, explained hereinabove in brief, is enshrined in Article 19 itself when we read clause (1) along with clause (6) thereof. While defining as to what constitutes a reasonable restriction, this Court in a plethora of judgments has held that the expression "reasonable restriction" seeks to strike a balance between the freedom guaranteed by any of the sub- clauses of clause (1) of Article 19 and the social control permitted by any of the clauses (2) to (6). It is held that the expression "reasonable" connotes that the limitation imposed on a person in the enjoyment of the right should not be arbitrary or of an excessive nature beyond what is required in the interests of public. Further, in order to be reasonable, the restriction must have a reasonable relation to the object which the legislation seeks to achieve, and must not go in excess of that object Page 60 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 (see P. P. Enterprises v. Union of India [P. P. Enterprises v. Union of India, (1982) 2 SCC 33 : 1982 SCC (Cri) 341]). At the same time, reasonableness of a restriction has to be determined in an objective manner and from the standpoint of the interests of the general public and not from the point of view of the persons upon whom the restrictions are imposed or upon abstract considerations (see Mohd. Hanif Quareshi v. State of Bihar [Mohd. Hanif Quareshi v. State of Bihar, AIR 1958 SC 731 : 1959 SCR 629]). In M.R.F. Ltd. v. State of Kerala[ M.R.F. Ltd. v. State of Kerala, (1998) 8 SCC 227 : 1999 SCC (L&S) 1] , this Court held that in examining the reasonableness of a statutory provision one has to keep in mind the following factors:
(1) The directive principles of State policy.
(2) Restrictions must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interest of the general public.
(3) In order to judge the reasonableness of the restrictions, no abstract or general pattern or a fixed principle can be laid down so as to be of universal application and the same will vary from case to case as also with regard to changing conditions, values of human life, social philosophy of the Constitution, prevailing conditions and the surrounding circumstances.
(4) A just balance has to be struck between the restrictions imposed and the social control envisaged by Article 19(6).
(5) Prevailing social values as also social needs which are intended to be satisfied by the restrictions. (6) There must be a direct and proximate nexus or reasonable connection between the restrictions imposed and the object sought to be achieved. If there is a direct nexus between the restrictions, and the object of the Act, then a strong presumption in favour of the constitutionality of the Act will naturally arise."
70 So much so, the principle was considered by the House of Lords in R v Secretary of State for the Home Department, ex parte Daly [(2001) 3 All ER 433]. Paragraphs 26 to 28 reads thus:
26. The explanation of the Master of the Rolls in the first sentence of the cited passage requires clarification. It is couched in language reminiscent of the traditional Wednesbury ground of review (Associated Provincial Picture Houses Ltd v Wednesbury Corporation[1948] 1 KB
223), and in particular the adaptation of that test in terms of Page 61 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 heightened scrutiny in cases involving fundamental rights as formulated in R v Ministry of Defence, Ex p Smith [1996] QB 517, 554E-G per Sir Thomas Bingham MR. There is a material difference between the Wednesbury and Smith grounds of review and the approach of proportionality applicable in respect of review where convention rights are at stake.
27. The contours of the principle of proportionality are familiar. In de Freitas v. Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 the Privy Council adopted a three stage test. Lord Clyde observed, at p 80, that in determining whether a limitation (by an act, rule or decision) is arbitrary or excessive the court should ask itself:
"whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective."
Clearly, these criteria are more precise and more sophisticated than the traditional grounds of review. What is the difference for the disposal of concrete cases? Academic public lawyers have in remarkably similar terms elucidated the difference between the traditional grounds of review and the proportionality approach: see Professor Jeffrey Jowell QC, "Beyond the Rule of Law: Towards Constitutional Judicial Review"
[2000] PL 671; Craig, Administrative Law, 4th ed (1999), 561-563; Professor David Feldman, "Proportionality and the Human Rights Act 1998", essay in The Principle of Proportionality in the Laws of Europe (1999), pp 117, 127 et seq. The starting point is that there is an overlap between the traditional grounds of review and the approach of proportionality. Most cases would be decided in the same way whichever approach is adopted. But the intensity of review is somewhat greater under the proportionality approach. Making due allowance for important structural differences between various convention rights, which I do not propose to discuss, a few generalisations are perhaps permissible. I would mention three concrete differences without suggesting that my statement is exhaustive. First, the doctrine of proportionality may require the reviewing court to assess the balance which the decision maker has struck, not merely whether it is within the range of rational or reasonable decisions. Secondly, the proportionality test may go further than the traditional grounds of review inasmuch as it may require attention to be directed to the relative weight accorded to interests and considerations. Thirdly, even the heightened scrutiny test developed in R v Ministry of Defence, Ex p Smith [1996] QB 517, 554 is not necessarily appropriate to the protection of human rights. It will be recalled that in Smith the Court of Appeal reluctantly felt compelled to reject a limitation on homosexuals Page 62 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 in the army. The challenge based on article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms (the right to respect for private and family life) foundered on the threshold required even by the anxious scrutiny test. The European Court of Human Rights came to the opposite conclusion: Smith and Grady v United Kingdom (1999) 29 EHRR 493. The court concluded, at p 543, para 138:
"the threshold at which the High Court and the Court of Appeal could find the Ministry of Defence policy irrational was placed so high that it effectively excluded any consideration by the domestic courts of the question of whether the interference with the applicants' rights answered a pressing social need or was proportionate to the national security and public order aims pursued, principles which lie at the heart of the court's analysis of complaints under article 8 of the Convention." In other words, the intensity of the review, in similar cases, is guaranteed by the twin requirements that the limitation of the right was necessary in a democratic society, in the sense of meeting a pressing social need, and the question whether the interference was really proportionate to the legitimate aim being pursued.
28. The differences in approach between the traditional grounds of review and the proportionality approach may therefore sometimes yield different results. It is therefore important that cases involving convention rights must be analysed in the correct way. This does not mean that there has been a shift to merits review. On the contrary, as Professor Jowell [2000] PL 671, 681 has pointed out the respective roles of judges and administrators are fundamentally distinct and will remain so. To this extent the general tenor of the observations in Mahmood [2001] 1 WLR 840 are correct. And Laws LJ rightly emphasised in Mahmood, at p 847, para 18, "that the intensity of review in a public law case will depend on the subject matter in hand".
That is so even in cases involving Convention rights. In law context is everything."
71 In Kumari Shrilekha Vidyarthi and others vs. State of Uttar Pradesh and others [AIR 1991 SC 537 : (1991) 1 SCC 212], the Supreme Court has held that the appointment and its concomitants viewed as purely contractual matters after the appointment is made, also attract Article 14 and exclude arbitrariness permitting judicial review of the impugned State action. The personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely Page 63 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co-exist. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern trend is also to examine the unreasonableness of term in such contracts where the bargaining power is the unequal so that these are not negotiated contracts but standard form contracts between unequals. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. The State cannot be attributed the split personality of in the contractual field so as to impress on it all the characteristics of the State at the threshold while making a contract requiring it to fulfill the obligation of Article 14 of the Constitution and thereafter permitting it to cast off its garb of State to adorn the new robe of a private body during the subsistence of the contract enabling it to act arbitrarily subject only to the contractual obligations and remedies flowing from it.
As such, all powers so vested in the State are meant to be exercised for the public good and promoting the public interest. This is equally true of all actions even in the field of contract. Thus every holder of a public office is a trustee whose highest duty is to the people of the country and, therefore, every act of the holder of a public office, irrespective of the label classifying that act, is in discharge of public duty meant ultimately for public good.
Page 64 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 72 The Supreme Court in the case of Air India Limited vs. Cochin International Airport Limited and others [AIR 2000 SC 801 : (2000)2 SCC 617] held, the award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision the considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. The price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its Corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its Corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defeat is found in the decision making process the Court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should intervene.
73 The propositions of law laid down in the aforesaid cases must be read in the context of facts established in each case. A decision is only an Page 65 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made therein. Apart from Article 141 of the Constitution of India, the policy of Courts is to stand by the precedent and not to disturb a settled point. When Court has once laid down a principle of law as applicable to certain state of facts, it will adhere to that principle, and apply it to all future cases where facts are substantially the same. A deliberate and solemn decision of Court made after argument on question of law fairly arising in the case, and necessary to its determination, is an authority, or binding precedent in the same Court, or in other Courts of equal or lower rank in subsequent cases where the very point is again in controversy unless there are occasion when departure is rendered necessary to vindicate plain, obvious principles of law and remedy continued injustice. The only thing in a Judge's decision binding as an authority upon a subsequent Judges is the principle upon which the case was decided. It is unsafe to extract sentence here and there from a judgment and to build upon it. Those words in the said judgments cannot be interpreted as the wordings of the statute. The observations in a judgment have to be understood in the context in which they are made, the subject-matter of the proceedings and what exactly the learned Judges intended in making those observations. The generality of the expressions which are found there are not intended to be expositions of the whole law but governed and qualified by the particular facts of the case in which such expressions are to be found.
74 From the aforesaid catena of case-law it is clear that judicial review would apply to the exercise of contractual powers by Government and public authorities in order to prevent arbitrariness or favoritism. It must be remembered that the power of the High Court under Article 226 of the Constitution is plenary in nature. No limitations on the exercise of Page 66 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 such power is permissible. The limitation is only by way of self restraint. Judicial review is a great weapon in the hands of the Judges, but the Judges must observe the constitutional limits set up by our parliamentary system upon the exercise of this plenary power. Judicial review is not an appeal from a decision but a review of the manner in which the decision was made. The Courts do not review the merits of the decision in support of which the application for judicial review is made but, decision making process itself. Judicial review is a protection and not a weapon. Fair-play in action is an essential requirement. Similarly, free play in the joints is also a necessary concomitant for an administrative body functioning in an administrative sphere or quasi- administrative sphere. The doctrine that powers must be exercised reasonably has to be reconciled with no less important doctrine that the Court must not usurp the discretion of the public authority which the Parliament appointed to take the decision. If the decision is within the confines of reasonableness, it is no part of the Court's function to look further into its merits.
75 As already noticed, colourable exercise of power and arbitrary action of the State, while offending the principle of equality, is an exception to the rule of superior domain of the State in contractual matters. Wherever these ingredients exist, the Court would be doubly cautious in approving the State action in exercise of its powers of judicial review. Judicial review of administrative actions, examined in its correct perspective, would cause a logical impediment in the implementation of such decisions and would have the effect of directing the State to act fairly. Arbitrariness in State action in commercial/contractual transactions with private parties hurts the spirit of Article 14 of the Constitution and would be open to judicial chastizm.
Page 67 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 MEANING AND TRUE IMPORT OF ARBITRARINESS: 76 In Ramana Dayaram Shetty vs. The International Airport Authority
of India and others [AIR 1979 SC 1628], the Supreme Court held:
"This rule also flows directly from the doctrine of equality embodied in Article 14. It is now well settled as a result of the decisions of this Court in E.P. Royappa v. State of Tamil Nadu, A.I.R. 1974 S.C. 555 and Maneka Gandhi v. Union of India, A.I.R. 1978 S.C. 597 that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non- discriminatory; it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law- The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory."
77 In Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay [A.I.R. 1989 SC 1642], the matter was re-examined in relation to an instrumentality of the State for applicability of Article 14 to all its actions. Referring to the earlier decisions of this Court and examining the arguments for applicability of Article 14, even in contractual matters, Sabyasachi Mukherji, J. (as the learned Chief Justice then was), speaking for himself and Kama, J., reiterated that every action of the State or an instrumentality of the State must be informed by reason......actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution.
78 In Kumari Shrilekha Vidyarthi etc. etc. v. State of U.P. and others [A.I.R. 1991 S.C. 537], a two Judges Bench of the Supreme Court made Page 68 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 an extensive and in depth analysis of the scope of equality clause and laid down the following propositions:
"It can no longer be doubted at this point of time that Act. 14 of the Constitution of India applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. (See Ramana Dayaram Shetty v. The International Airport Authority of India, A.I.R. 1979 S.C. 1628 and Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir, A.I.R. 1980 S.C. 1982). In Col. A.S. Sangwan v. Union of India, A.I.R. 1981 S.C. 1545, while the discretion to change the policy in exercise of the executive power, when not trammelled by the statute or rule, was held to be wide, it was emphasised as imperative and implicit in Article 14 of the Constitution that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touch-stone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenet and it would be sufficient to refer only to two recent decisions of this Court for this purpose.
It is now too well settled that every State action, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux* of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract."
79 The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action Page 69 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that be you ever so high, the laws are above you.
80 In S.G. Jaisinghani v. Union of India [A.I.R. 1967 S.C. 1427 at p. 1434], the Court indicated the test of arbitrariness and the pitfalls to be avoided in all State actions to prevent that vice, in a passage as under:-
"In this context it is important to emphasize that the absence of arbitrary power is the first essential of the rule of law upon which our whole constitutional system is based. In a system governed by rule of law, discretion, when conferred upon executive authorities, must be confined within clearly defined limits. The rule of law from this point of view means that decisions should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizens should know where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis of a decision taken in accordance with the rule of law. (See Dicey - "Law of the Constitution" - Tenth Edn., Introduction ex). "Law has reached its finest moments", stated Douglas, J. in United States v. Wunderlick, (1951-342 US 98 : 96 Law Ed
113),"When it has freed man from the unlimited discretion of some ruler .....where discretion is absolute, man has always suffered". It is in this sense that the rule of law may be said to be the sworn enemy of caprice. Discretion, as Lord Mansfield stated it in classic terms in the case of John Wilkes (1770-98 E.R. 327), "means should discretion guided by law. It must be governed by rule, not humour: it must not be arbitrary, vague and fanciful."
81 In Liberty Oil Mills v. Union of India, A.I.R. 1984 S.C. 1271, the Supreme Court held that the expression 'without assigning any reason' implied that the decision has to be communicated but reason for the decision has to be stated; but the reason must exist, otherwise the decision would be arbitrary. This decision was relied upon in Shrilekha Page 70 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Vidyarath's case (supra) to reject the argument made on behalf of the State of Uttar Pradesh that in term of Clause 3 of para 7.06 the services of the Government Pleaders could be terminated at any time without assigning any cause as would appear from the following extract of the decision of Apex Court:
"The other part of Clause 3 which enables the Government to terminate the appointment at any time without assigning any cause can also not be considered in the manner, suggested by the learned Additional Advocate General. The termination may be made even during the subsistence of the term of appointment and without assigning any cause means without communicating any cause to the appointee whose appointment is terminated. However, without assigning any cause is not to be equated with without existence of any cause. It merely means that the reason for which the termination is made need not to be assigned or communicated to the appointee. It was held in Liberty Oil Mills v. Union of India, A.I.R. 1984 S.C. 1271 that the expression without assigning any reason implies that the decision has to be communicated, but reasons for the decision have not to be stated; but the reasons must exist, otherwise, the decision would be arbitrary. The non-assigning of reasons or the non-communication thereof may be based on public policy, but termination of an appointment without the existence of any cogent reason in furtherance of the object for which the power is given would be arbitrary and, therefore, against public policy. Clause 3 of para 7.06 must, therefore, be understood to mean that the appointment of a District Government Counsel is not to be equated with appointment to a post under the Government in the strict sense, which does not necessarily mean that it results in denuding the office of its public character; and that the appointment may be terminated even during currency of the term by only communicating the decision of termination without communicating the reasons which led to the termination. It does not mean that the appointment is at the sweet will of the Government which can be terminated at any time, even without the existence of any cogent reasons during the subsistence of the term.........................In our opinion, the wide sweep of Article 14 undoubtedly takes within its fold the impugned circular issued by the State of U.P. in exercise of its executive power, irrespective of the precise nature of appointment of the Government counsel in the districts and the other rights, contractual or statutory, which the appointees may have. It is for this reason that we base our decision on the ground that independent of any statutory right, available to the appointees, and assuming for the purpose of this case that the rights flow only from the contract of appointment, the impugned circular, issued in exercise of the executive power of the State, must satisfy Article 14 of the Constitution and if it is shown to be arbitrary, it must Page 71 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 be struck down."
82 In Dwarkadas Marfatia's case (supra), Sabyasachi Mukharji, J. (as he then was), indicated the extent of the power of judicial review by observing as under:
"......Where there is arbitrariness in State action, Article 14 springs in and judicial review strikes such an action down. Every action of the executive authority must be subject to rule of law and must be informed by reason. So, whatever, be the activity of the public authority, it should meet the test of Article 14......"
FINAL ANALYSIS: 83 Bearing in mind the aforesaid principles of law, we now proceed
to consider whether the decision on the part of the Corporation to terminate the contract and blacklist the writ applicant and further, forfeit the entire amount towards security deposit could be said to be to be just, proper and reasonable?
84 We must take note of the following:
(a) As recorded in the earlier part of the judgement, the contract in question was for redevelopment of public housing under the Public Private Partnership (PPP) mode, in accordance with the redevelopment of Public Housing Scheme, 2016.
(b) Under the Tender document, the bids were invited for the construction of 1,304 dwelling units being the existing Public Housing Component (PHC) and additional Affordable Housing Component (AHC) to be offered by the bidder as a consideration for award of the contract.Page 72 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021
(c) It appears that there is one Library building at the place in question. The existing Library building was to be relocated and reconstructed by the bidder. All these components were to be constructed free of cost and the same was to be cross subsidized by the Free Sale Component (FSC) of the open land available to the writ applicant after the redevelopment of the existing PHC and creation of the AHC and also by the grant of Transferable Development Rights (TDR) to the successful bidder upon completion of the project.
(d) It is not in dispute that the writ applicant herein was the sole bidder. His bid came to be accepted by the Corporation. The writ applicant agreed to pay the transit rent to the occupants of the dwelling units whose accommodation was to be demolished for the purpose of creation of the PHC.
(e) It is not in dispute that the writ applicant paid an amount of Rs.11.91 Crore to the occupants towards the transit rent for the period between August, 2018 and October, 2019. It is also not in dispute that the writ applicant paid an amount of Rs.6.30 Crore towards security deposit by way of a bank guarantee, which, later, came to be encashed by the Corporation. It has been pointed out by the writ applicant from the materials on record that by the time, the contract came to be terminated, he had already invested an amount of Rs.30 Crore in the project.
(f) It is not in dispute that the contract contemplated under the Tender document had a unique set of reciprocal obligations and entitlements which were intrinsically interwoven with each other Page 73 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 to form a complete bargain. The contract was not like any other contract of construction. One should not forget that the mode of contract is Public Private Partnership.
(g) The Corporation has conceded that while conceiving the project and taking appropriate steps to undertake the same, it completely overlooked a vital factor that the entire area in question is a regulated area under Section 20B of the Act, 1958 and no reconstruction, repair or renovation in any building or structure falling within the said area can be undertaken without the prior permission of the National Monuments Authority (N.M.A.) constituted under the said Act. This aspect of the matter was not even disclosed in the Tender document. On the contrary, the Corporation assured the applicability and entitlement under the 2016 Scheme (which contemplated a height of 70 mtrs.). It is not in dispute that even the model plans with the Tender showed the structure upto 20 floors.
(h) The writ applicant, being absolutely unaware of the aforesaid restriction, relied upon the representation and assurance given by the Corporation of permitting 70 mtrs. Height and 4.0 FSI, and accordingly, submitted its bid for the relocation of the existing Library (G + 2), construction of 1,304 PHC units and 96 AHC units which was later negotiated upto 130 units.
(i) The Work Order was issued on 1st May 2018 and the contract agreement came to be executed on 6th September 2018.
(j) In accordance with the terms of the agreement, the writ applicant was permitted to put up construction of 40 floors and Page 74 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 the FSC to the extent of 13216 sq. mtrs.
(k) It is not in dispute that the writ applicant started working upon the project and the first thing he did was to get the entire land vacated by providing alternative accommodation and transit rent to the 1,304 families. Upon the land getting vacant, the existing structures came to be demolished. On 26 th October 2018, the writ applicant put forward the building plan before the Corporation for approval. The writ applicant also applied before the Airport Authority of India for N.O.C., which came to be granted on 29th March 2019 and also started demolishing the DUs.
(l) In February - March, 2019, the writ applicant was told by the Corporation that the plans cannot be sanctioned in the absence of permission from the N.M.A. as there is a Christian (Dutch Cemetery) nearby the site in question falling within the ambit of a protected monument under the Act, 1958.
(m) Again, the writ applicant applied for the grant of permission with the N.M.A. on 18th March 2019. The application filed by the writ applicant addressed to the N.M.A. on behalf of the Surat Municipal Corporation was to seek the necessary permission for construction of 14 floors (45 mtrs. height).
(n) It appears that the N.M.A. called for the revised plans upto a height of 22.80 mtrs. and not 45 mtrs.
(o) In view of the aforesaid, the writ applicant furnished a revised proposal as the fundamental aspect of the bargain stood altered. It is not in dispute that the Municipal Commissioner was Page 75 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 authorized to undertake the necessary modifications as required for the execution and implementation of the project.
(p) It appears that the Municipal Commissioner, after seeking approval of the Screening Committee of the State for the due implementation of the project, forwarded a counter proposal to the writ applicant for the first time on 22nd January 2020. It is also not in dispute that the writ applicant responded to the same with a revised offer on 23rd January 2020. It is also not in dispute that the Standing Committee of the Corporation decided to place the matter before the Screening Committee with the offers / suggestions made by the writ applicant.
(q) It is also not in dispute that the Corporation applied for review of the height restriction imposed by the N.M.A. on the strength of the recommendations of the Municipal Commissioner, Mayor and the Member of the Parliament of that constituency for the increase of the permissible height to 45 mtrs. in view of the public purpose of the project.
(r) It appears that in the course of the hearing before the N.M.A., the Corporation on its own agreed to accept the height restriction of 35 mtrs., and in such circumstances, the N.M.A. passed an order 12nd February 2020 granting permission of 35 mtrs. height.
(s) The writ applicant explained to the Corporation that the project was not financially viable in view of the shortfall of 10 mtrs. height. The writ applicant once again submitted a revised proposal in view of the height restriction. Upon assurance given by Page 76 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 the Corporation, the writ applicant paid the transit rent for the month of March, 2020. It appears that the Corporation, however, did not consider the revised proposal submitted by the writ applicant.
(t) Everything came to standstill thereafter i.e. from March, 2020 due to the COVID pandemic lock down.
(u) Ultimately, a meeting was convened on 29 th June 2020 wherein a consensus was arrived at regarding the revised proposal. The revised proposal was that the Library (G + 2) and 1,304 PHC units would be constructed on the existing site and 130 AHC units would be constructed on any other parcel of land that may be granted by the Corporation. This fact has been recorded by the writ applicant in its letter dated 2 nd July 2020, which is on record. By way of this letter, the writ applicant requested the Corporation for grant of formal approval to the agreed revised proposal. This fact has not been disputed or denied by the Corporation.
(v) On 16th July 2020, the Municipal Commissioner, all of a sudden, moved a proposal to terminate the contract, blacklist the writ applicant and forfeit the security deposit.
85 When we are talking about the element of arbitrariness in the action of the Corporation and the test of reasonableness, could it be said from the aforesaid facts that the writ applicant is solely responsible for the delay? After investing an amount of Rs.30 Crore and odd, would the writ applicant ever think of delaying the project as a prudent businessman? The problems cropped up only because of Section 20B of Page 77 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 the Act, 1958. This problem, as on date, has also been taken care of as the N.M.A. has agreed to permit the increase of the height upto 45 mtrs. The N.M.A. so agreed keeping in mind the public interest i.e. the interest of the 1,304 poor families.
86 All through out the course of the hearing of this litigation, the Corporation went on accusing the writ applicant of having put the 1,304 poor families in dire straits by leaving them in a lurch. We fail to understand why the Corporation is not ready to share the burden of such accusation levelled against the writ applicant. What steps the Corporation took as a civic body to take care of these 1,304 poor families? When confronted, the learned counsel appearing for the Corporation was not even in a position to answer where these 1,304 families have settled as on date. Having got the entire land cleared, having also obtained a nod from the N.M.A. to increase the height upto 45 mtrs., the Corporation is now asking the writ applicant to walk out so that they can issue a fresh Tender Notice and award the contract to any other party. It would not be out of place to state at this stage that in the past, two times such Tender Notices were issued and no one came forward to submit any bid.
87 Having regard to the aforesaid, could it be said that the conduct of the writ applicant was lacking transparency and discipline, leading to suppression of a material aspect and thereby indulging himself in some immoral activities disabling the authority to take a decision applying the principles of fair play and justice?
88 There may be circumstances in which one of the contracting parties may be justified in backing out the other. There could be Page 78 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 unforeseen circumstances/Supervening circumstances/several other situations, which the contracting parties may not be able to comprehend and the ground realities may be found otherwise than what was meant and understood by the contracting parties. There may be a mutual mistake or mistake on the side of one party on the basis of some wrong understanding of the ground realities. In our opinion, no such circumstances as stated in para 87 above exists in the case on hand justifying an order of blacklisting.
89 We are of the view that mere delay in execution of the order or non-execution of the order without anything more, by itself, may not be sufficient to entail the consequences of being blacklisted and that too, for all times to come. Even in a case of delay in execution of the order or non-execution of the order or failure to honour the commitments, the Corporation as a State within Article 12 of the Constitution is obliged to consider the circumstances that might have led to such delay or failure. We do not say for a moment that the Corporation cannot be said to have been prejudiced in any manner, but, at the same time, without considering the explanation offered, it was not proper on the part of the Corporation to straightway blacklist a Contractor for a period of three years.
90 There is one more aspect of the matter we need to highlight and consider. We take notice of the show cause issued by the Corporation to the writ applicant dated 17th July 2020. The same reads thus:
"BY R.P.A.D. No.Stha.S./88 Page 79 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Secretary Office, Surat Municipal Corporation, Surat, Date 17/07/2020.
To, J.P. Iscon Pvt. Ltd., Iscon house, Opposite Associated Petrol Pump, C.G. Road, Ahmedabad.
Pin Code No.-380009.
Phone No.+91 7926464457, 26464472 / 73, Subject:-Regarding the redevelopment work of 1304 Tenements of the Gotalvadi Tenement situated at FA.Plot No.312/A/paiki, T.P. Scheme No.3 (Katargaam), in the Surat Municipal Corporation area, under Public Private Partnership (PPP) as a part of implementation of Redevelopment of Public Housing Scheme 2016 of the Government.
In connection with the aforesaid subject, the work sanctioned vide resolution No.435/2020 of the Standing Committee, dated 05/04/2018 was assigned to you the Developers J.P. Iscon Pvt. Ltd. Ahmedabad vide work order No.SUC/OUT/No.-1, dated 01/05/2018. You the Developers have completely failed to comply with the basic conditions of the sanctioned contract of this tender. Therefore, as per the principle of the natural justice, before taking the decision regarding black listing you and seizing the security deposit of this work, you the Director of the Developers or any of your Authorized Representative are informed to remain personally present before the Standing Committee meeting to be held at the conference room (old standing committee meeting-room) of the Municipal Corporation at 4-00 hours on 24/07/2020, along with the necessary written evidences for your defence in this matter.
Sd/- Illegible Assistant Secretary, Surat Municipal Corporation.Page 80 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Note: Kindly note that, if your representative is to remain present before the Standing Committee, the representative will be allowed to remain present at the Standing Committee meeting only if he produces your authority letter."
91 It is evident on plain reading of the above quoted show cause notice that it was just a formality which the Corporation wanted to complete. The Corporation had already taken the decision to blacklist the writ applicant and forfeit the security deposit. It is pertinent to note that in the show cause notice, nowhere it has been stated that the Corporation proposes to terminate the contract. To the above referred show cause, the writ applicant first prayed for time on 23 rd July 2020 of 15 days, and thereafter, gave a very exhaustive reply dated 30 th July 2020 highlighting the following:
"Date : 30/07/2020 To,
1. Mayor, Surat (Dr. Jagdishbhai Patel), Surat Municipal Corporation, Gordhandas Chokhawala Road, Muglisrai, Surat : 395003.
2. Standing Committee Chairman, Surat Municipal Corporation Gordhandas Chokhawala Road, Muglisrai, Surat : 395003.
3. Commissioner, Surat Municipal Corporation Surat Municipal Corporation, Gordhandas Chokhawala Road, Muglisrai, Surat : 395003.
4. Deputy Commissioner (Slum Up-gradation) Surat Municipal Corporation, Gordhandas Chokhawala Road, Page 81 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Muglisrai, Surat : 395003.
Subject : About the re-development works of 1304 tenements of the Gotalawadi Tenements located on T.P. Scheme No - 3 (Katargaam) F. Plot No - 312/A/Paiki under area of the Surat Municipal Corporation on the basis of Public Private Partnership (PPP) as a part of the implementation of the Re-Development of Public Housing Scheme, 2016 of the State Government.
Reference : Our reply to the notice of the Surat Municipal Corporation dated 17/07/2020 and 24/07/2020.
Respected Sir, With respect to the above mentioned subject, it is to state that, the State Government has declared the Re-development of Public Housing Scheme, 2016 with the objective of re-development of the old and dilapidated public houses. Under the said scheme, the private developers were encouraged by informing that, the developer can utilise the remaining space after development of the houses for the commercial purpose for their profit against all the expenditure done by the developers for the construction of houses of the Scheme and the T.D.R. is admissible as per the provisions of many tenders for the admissible F.S.I., which cannot be utilised. In this manner, entire expenditure of the re-development can be done by the developer from the profit earned by utilising the remaining space and the admissible T.D.R. for commercial purpose. Further, it is to state that the remaining space can be granted on lease for 99 years.
Considering the above objective, the Surat Municipal Corporation had published a public tender for the re-development of 1304 houses of Gotalawadi Tenements of T.P. Scheme No - 3 (Katargaam), Final Plot No - 312/A/Paiki under the re-development Page 82 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 scheme. As mentioned in the said tender, the total estimated expenditure of the said project was shown as Rs. 126 crore. It has been mentioned in it that, as per the prevailing G.D.C.R., 3 (three) permissible F.S.I., whichever is higher in the existing F.S.I. base, is admissible. Further, the tender was divided in three parts. Among them, in Parcel - A, 1304 houses are to be re-developed after demolishing them and the library building situated there shall be relocated and reconstructed after its demolition. In the same manner, in Parcel - B, additional affordable houses were to be constructed and in Parcel - C, free-sale component (A-B).
Thus, Surat Municipal Corporation had uploaded online a plan with such strategy through its techno-consultant. On the basis of the same, all the developers interested in the said project, had applied for the tenders convenient to them after studying all the matters of Parcel - A to C. It is noteworthy that, by this tentative plan, it was indicated that the permission to construct around 14 to 20 floors is admissible. Considering this, all the interested developers had submitted their tenders as per their capacity to make a bid.
Considering the said tentative plan, we, the applicant J.P. Iscon Pvt. Ltd., had also submitted our estimated cost and one of the best offers and we had submitted the said tender in the manner that we could earn least profit after deducting all the expenditure of the said project. Since ours was the best strategy among all the tenders, Surat Municipal Corporation had granted the said tender to us. As per the said tender, we had to re-develop the library and 1304 houses as per the Parcel - A, and further, 96 additional houses were to be constructed. Under this project, we were not entrusted only the re- development works but also to migrate the tenants living in the houses to other places after paying them rent amount, and the works of demolition. After completing all these works, the remaining 13896 Page 83 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 square meter space was available as per the plan. After deducting all the expenditures of construction and other works from them, we could get from the remaining space and if the admissible F.S.I. cannot be used from the said space, T.D.R. was admissible as per the condition of the tender in order to bear the expenditure of our project and we would not have to face loss.
Thereafter, we were called for the meeting by the Surat Municipal Corporation, and the Municipal Corporation had insisted to build more 34 houses. In this regard, considering the public interest and public welfare, we had shown our willingness to build more 34 houses. Considering this, the space to be utilised by the applicant was decreased in Parcel - C. Deducting the said space, 13216 square meter space was available. In this manner, we had bear the loss of around 680 square meter space. In this regard, the applicant has never raised any objection till date and the applicant borne the said loss considering the public interest and welfare. Further, it is to state that, at the time of applying for the said tender, we gave our acceptance to the Municipal Corporation after calculating 14 floors (45 meters) height, our estimated cost, the remaining space and the admissible T.D.R. It had been accepted by the Standing Committee vide its Resolution No - 435/2018 dated 05/04/2018 and accordingly, Surat Municipal Corporation had issued a work order on 01/05/2018. As per the conditions of the project, we had deposited total Rs. 7,87,50,000/- (Seven Crore Eighty Seven Lakh and Fifty Thousands only) for both, the security deposit and the project development fee to the Surat Municipal Corporation.
You are well-acquaint with the fact that pursuant to the said tender, we had paid the amount of Rs.11,00,23,500/- (Rupees Eleven Crore Twenty Three Thousand Five Hundred only) to the residents towards rent as per prevailing norms by executing Memorandum of Page 84 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Understanding.
The applicants state that we came to know one very important thing at the time of the demolition of the old and dilapidated houses that the heritage monument is situated nearby the said housing and therefore, it was required to obtain No Objection Certificate (NOC) from the National Monument Authority in the said project. Subsequently, an application was made to the National Monument Authority for the same, but restriction of height was imposed by them and therefore, the totally reverse condition arose to the calculation made while filling up the tender. We have made several communications also and therefore, We clearly believe that the issue is required to be redressed with the mutual understanding of both the parties.
You are well-acquaint that the applicant had obtained NOC from the Airport Authority on 29/03/2019 and thereafter, we had applied to the National Monument Authority on 18/03/2019 for the NOC. The National Monument Authority had asked for the Heritage Impact Assessment Report first, which was submitted by us on 10/7/2019 and the expense thereof was solely borne by us. Thereafter, the National Monument Authority informed us by Letter dated 07/08/2019 that permissible height for the construction is restricted to 22.80 Meters. We had communicated the same to the Surat Mahanagarpalika on 26/08/2019, 15/10/2019 and 16/10/2019 and thereby, we had informed by the above-referred letters that the applicant would face the loss of about 40 to 50 Crore and also pointed out suggestions to redress the said issues by the Surat Nagarpalika. However, Surat Nagarpalika had not taken any firm decision over it.
Thereafter, we had visited the Municipal Commissioner, Surat Mahanagarpalika in person on 18/11/2019 and at the end of the said visit and with consent of both the parties, it was suggested to Page 85 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 submit new building plans and the Municipal Commissioner had issued Letter to the Standing Committee on 30/11/2019 for the same. In the said letter also, it was mentioned to give option to us as we were facing the loss and losing the space and the Standing Committee passed resolution on 30/01/2002 to place the same before the Screening Committee, Gandhinagar.
Moreover, we submit that by our letter dated 04/12/2019, 18/12/2019, 24/12/2019 and 23/01/2020, we had made frequent submissions to the Surat Mahanagarpalika to take some decision and to redress the issue, but no decision or procedure for the same were undertaken.
In addition, we had visited the Municipal Commissioner, Surat Mahanagarpalika in the February-2020 in person and at that time also, the Municipal Commissioner informed us that the issue wll be resolved shortly. Considering the same, as per our positive approach, we had paid one month's rent to the residents of the housing, which is accumulated to around One Crore. Thereafter, we came to know that the Surat Mahanagarpalik preferred Review Application in the National Monument Authority and the National Monument Authority granted permission for height upto 35 Meters. It is pertinent to note here that we made new submissions to the Surat Mahanagarpalika according to the new circumstances arisen in order to resolve the issue as early as possible and we can undertake the procedure for construction of 1304 housing at the earliest in order to provide the house to the residents, who stay in rented property despite having own house and to bring the difficulties to the end they are facing in the rented premises. Taking the same things into consideration, we had made submissions but no action was taken thereto.
Thereafter, we had visited the Municipal Commissioner, Page 86 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Surat Mahanagarpalika in person on 29/06/2020 and in the said meeting, it was decided with the mutual consent of both the parties that we shall construct the library and 1304 houses on the existing site and remaining 130 additional houses shall be constructed at another site separately allotted by the Surat Mahanagarpalika and all the stake- holders had given their consent unanimously and in accordnace with the said consents, we had requested the Surat Mahanagarpalika on 02/07/2020 to take further action.
Thus, during the ongoing deliberation and submissions between us and the Surat Mahanagarpalika, the Surat Mahanagarpalika issued notice on 07/07/2020 whereby we were directed to remain present on 24/07/2020 in person to show the cause as to why we should not be placed in black-list and why no further action should not be taken to forfeit our security deposit. Thereafter, we were given further 7 days and we were directed to remain present on 30/07/2020 for hearing in-person and our explanations on the same are as under:
We have always adopted positive approach for the said tender and informed the Surat Mahanagarpalika by various communications that we will be in loss due to height restriction by the National Monument Authority and also requested frequently in-person as well as by letter to resolve the issue of loss, but no decision or action was taken against the same.
During the work as per the tender, an unexpected situation arose because of the restrictions imposed by the National Monument Authority regarding height of a construction. We were required to obtain an N.O.C. of the National Monument Authority. It may cause us a huge financial loss. We clearly believe that both the parties should get together to work out a solution in this context which can end all the difficulties faced by everyone.Page 87 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Our commitment is clearly evident from the fact that we have paid total Rs.11 crores as rent to the house owners in this project. We are fully desirous to complete this work-order without any dispute.
No valid reason has been stated for black-listing us. In the notice dated 17/07/2020, it has not been stated as to which provision of the tender has been violated. Your notice is illegal and baseless.
It cannot be attributed to our fault, if any restriction is imposed by the National Monument Authority and because of such restriction, the project has become financially nonviable. It does not seem appropriate to black-list us because of such reasons.
When the tenders were invited by the Surat Municipal Corporation, our tender was accepted. As per the tender, we were entitled to receive 13216 sq. meter space which has been hugely reduced by the restriction imposed by the National Monument Authority. It is in knowledge of all of you that if a developer goes ahead with the project, the developer may suffer a loss of Rs.40-50 crores. Despite that, we show our willingness to compete the project. Therefore, we have accepted the alternative decided with the consent of both the parties in the meeting dated 29/06/2020 with the Surat Municipal Corporation and accordingly, we are willing to undertake further process in this context.
Further, we state that we are ready to construct (G + 7 Floor) a library, 1304 (PHC) residential houses and remaining 130 (AHC) additional houses at the present location. Under the circumstances as stated above, the plot which is being given to us measures at 10900 square meter. You are also requested to do necessary procedure for issuing us the TDR certificate of balance F.S.I. as per the provisions of law.Page 88 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 Further, if this problem is solved, we state our willingness to pay the rent immediately and begin the work as early as possible so that the work of public interest can be completed expeditiously and end the suffering of house owners. Therefore, we request you to take into consideration the above mentioned reasons and withdraw the notices dated 07/07/2020 and 24/07/2020 issued to us. We the applicant humbly request you to do further procedure in this regard.
Yours faithfully For, J P ISCON PVT. LTD.
SD/- (illegible) Authorised Signatory/ Director"
92 We take notice of the fact that on 30th July 2020 itself, the Corporation proceeded to pass the resolution authorizing the Municipal Corporation to terminate the contract, blacklist the writ applicant and forfeit the security deposit. The resolution dated 30 th July 2020 reads thus:
"The resolution passed in the meeting of the standing committee of Surat Municipal Corporation held on 30/07/2020 is as follows:-
As per the details contained in letter No. Stha.Sa./101 dated 16/07/2020 of the Municipal Commissioner, as a part of implementation of Redevelopment of Public Housing Scheme - 2016 of the State Government, a work of redevelopment of 1304 tenements of Gotalawadi Tenement located at T.P. Scheme No.3 (Katargam) - Final Plot No.312/A/Paiki situated in the limits of Surat Municipal Corporation was sanctioned to be assigned to developers Shri J. P. Iscon Pvt. Ltd., Ahmedabad under Public Private Partnership (PPP) mode vide Page 89 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 standing committee resolution No.435/2018 dated 05/04/2018 and the above work was allotted to them vide work-order No.SUC/OU1/No.1 dated 01/05/2018. Developers Shri J. P. Iscon Pvt. Ltd., Ahmedabad have completely failed in complying with the basic conditions of the contract of tender sanctioned vide standing committed resolution No.435/2018 dated 05/04/2018. As per the principles of natural justice, before taking decision with respect to putting them in a blacklist and forfeiting the security deposit, the director of developers Shri J. P. Iscon Pvt. Ltd., Ahmedabad or his authorised representative was called upon to appear before the committee with the necessary material and evidence in writing in support of their defence vide the committee resolution No.483/2020 dated 17/07/2020, to which, they sought time limit of 15 days to appear before the committee vide their letter dated 23/07/2020. But, as the work pertains to the public at large and developers Shri J. P. Iscon Pvt. Ltd., Ahmedabad have completely failed in completing the work within the time limit and a decision with respect to this work is required to be taken urgently considering the interest of the city and Surat Municipal Corporation, the letter dated 23/07/2020 of developers Shri J. P. Iscon Pvt. Ltd. was taken into consideration in the meeting dated 24/07/2020 of the standing committee and the director of developers Shri J. P. Iscon Pvt. Ltd., Ahmedabad or his authorised representative was called upon to appear before the committee with necessary material and evidence in writing for making their representation vide the committee resolution No.501/2020 dated 24/07/2020 in the interest of justice. Considering the written/oral representations and undertaking in writing submitted by (1) Shri Jatin Gupta - Director, (2) Shri Manoj Vadodariya - Partner and (3) Shri Rutul Desai - Legal Advisor appeared before the committee on behalf of developers Shri J. P. Iscon Pvt. Ltd., Ahmedabad and the opinion given by Shri Kirti Dave, Technolegal Consultant, Pro-Care, Mumbai and Shri Kaushal D. Pandya, Advocate, Ahmedabad in this regard by remaining present in today's meeting through video conferencing; it appears that, Page 90 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 developers Shri J. P. Iscon Pvt. Ltd., Ahmedabad have totally failed in complying with the basic conditions of the contract and though they have taken possession of the land under a condition to pay the rents to the 1304 authorized beneficiaries after demolishing the constructions of the buildings, they have deprived the authorized beneficiaries of the rents and with their irresponsible conduct towards the work and failure in timely payment of the rent, they have put the 1304 families in a sorry plight. Though a time of 27 months elapsed now and the time limit of the work is 36 months, no construction work has been initiated at the site. Therefore, considering the interest of the city and Surat Municipal Corporation, it is resolved after a detailed discussion and consideration in today's meeting of the committee to terminate the contract of this work assigned to developers Shri J. P. Iscon Pvt. Ltd., Ahmedabad and to put them in a blacklist for 3 years and to forfeit the security deposit in custody of Surat Municipal Corporation in the form of bank guarantee. Further, it is resolved that the rent shall be paid to the authorized beneficiaries from the amount of the security deposit submitted by the developers in Surat Municipal Corporation in the form of bank guarantee by the Account Department in consultation with the Asst. Commissioner/Competent Authority, North Zone and the Municipal Commissioner shall be authorized to carry out further proceedings in this regard and tenders shall be re-invited publishing short time tender notice.
Resolution No.510/2020 - Passed unanimously.
Copy forwarded to - Municipal Commissioner Sd/- (Illegible) Secretary, Surat Municipal Corporation Date: 30/07/2020."Page 91 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 93 It is evident from the above that not a single aspect highlighted by the writ applicant in its exhaustive reply dated 30th July 2020 came to be considered. As stated above, the Corporation had predetermined to terminate the contract and blacklist the writ applicant. Even if the hearing stood concluded on 24th July 2020, still, before taking the final decision, the explanation offered by the writ applicant on 30 th July 2020 along with the undertaking could have been looked into.
94 What has been highlighted by us above is also a part of the principles of natural justice. One of the facets of the principles of natural justice is fairness. The Rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory framework whereunder the jurisdiction has been conferred on the administrative authority. What is disturbing is that till the last, the Corporation gave an impression to the writ applicant that it was open to consider the proposal put forward by the writ applicant, but, in the end, took the extreme step of terminating the contract and blacklisting the writ applicant.
95 As observed by the Supreme Court in Erusian Equipment & Chemicals Ltd. (supra), an order of blacklisting casts a slur on the party being blacklisted and is stigmatic. Given the nature of such an order and the import thereof, it would be unreasonable and arbitrary to visit every contractor who is in breach of his contractual obligations with such consequences.
96 In Sarku Engineering Services SDN BHD vs. Union of India and another [2016 SCC OnLine Bom 5233], a Division Bench of the Bombay High Court considered the case of a contractor (the petitioner therein) Page 92 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021 C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 who had been blacklisted on the allegation that it was responsible for major delay in execution of a contract entered into with the Oil and Natural Gas Corporation Limited (respondent no. 2 therein). The contractor disputed the allegation that it was in breach of its obligations; however, the Oil and Natural Gas Corporation Limited found the performance of the petitioner therein to be unsatisfactory and, therefore, decided to avoid future dealings with the said petitioner. The question whether the petitioner therein was, in fact, responsible for the delay was a disputed question that was pending adjudication by an arbitral Tribunal. In the aforesaid context, the Bombay High Court had observed as under:
"58. We hasten to add that there could be a situation wherein the inherent power of blacklisting or placing the contractor on Holiday-list can be exercised and the stipulations or the terms of the contract may not restrict or fetter exercise of such power. Equally, the mere pendency of legal proceedings cannot be a absolute bar for invoking this inherent power or exercising it. However, there have to be strong, independent and overwhelming materials to resort to this power given the drastic consequences that an order of blacklisting has on a contractor. The power to blacklist cannot be resorted to when the grounds for the same are only breach or violation of a term or condition of a particular contract and when legal redress is available to both parties. Else, for every breach or violation, though there are legal modes of redress and which compensate the party like respondent No. 2, it would resort to blacklisting and by sometimes abandoning or scuttling the pending legal proceedings."
97 Plainly, if a contractor is to be visited with the punitive measure of blacklisting on account of an allegation that he has committed a breach of a contract, the nature of his conduct must be so deviant or aberrant so as to warrant such a punitive measure. A mere allegation of breach of contractual obligations that is disputed, per se, does not invite any such punitive action.
Page 93 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 98 In M/s. Johnson and Johnson (supra), the Court observed in para 38 as under:
"Essentially, what makes a decision to blacklist serious are the consequences that are borne from it, for the person in respect of whom it is passed. Not only does such a blacklisting order significantly dent the reputation and goodwill that the company enjoys in the market and may have spent years cultivating, it also deprives them from a level playing field in respect of future business opportunities. As was aptly put by the Supreme Court in Erusian Equipment & Chemicals Ltd. Vs. State of W.B. (1975) 1 SCC 70, blacklisting is an 'instrument of coercion' which has the effect of creating a disability. Usually, when participating in a tender, the bidder is required to furnish a statement undertaking that it has not been blacklisted by any institution so far and, if that is not the case, provide information of such blacklisting. This serves as a record of the bidder's previous experience which gives the purchaser a fair picture of the bidder and the conduct expected from it. Therefore, while the debarment itself may not be permanent and may only remain effective for a limited, pre-determined period, its negative effect continues to plague the business of the debarred entity for a long period of time. As a result, it is viewed as a punishment so grave, that it must follow in the wake of an action that is equally grave."
99 Thus, having regard to the aforesaid discussion, we have reached to the conclusion that the decision of the Corporation to blacklist the writ applicant does not appear to be just, proper or reasonable, more particularly, applying the doctrine of proportionality, as discussed above.
100 We are also of the view that the action on the part of the Corporation to terminate the contract and forfeit the entire security deposit could also be said to be arbitrary and unfair having regard to the materials on record.
101 For all the foregoing reasons, this petition succeeds and is hereby allowed. The impugned order passed by the Corporation terminating the contract, blacklisting the writ applicant and forfeiting the security deposit is hereby quashed and set aside.
Page 94 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 102 We take notice of the undertaking which was filed by the writ applicant on oath and tendered to the Corporation on 30 th July 2020 i.e. the date on which the impugned order of termination of contract came to be passed. The undertaking reads thus:
"I, the undersigned, solemnly declare on oath that, the Surat Municipal Corporation had invited a public Tender under the scheme for the construction of 1304 houses at the Gotalawadi Tenement situated at the Final Plot No.312/A/Paiki in T. P. Scheme No.3 (Katargam). The Tender has been divided in three parts, in which Parcel - A includes the work of demolition and redevelopment of 1304 houses, and the work of demolition, relocation and reconstruction of the existing Library building. Likewise, Parcel - B includes the work of construction of the additional affordable houses and in the same way, Parcel - C includes Free Share Component (A-B). We started the work according to the Tender allotted to us. But during the work, a situation arose to obtain permission from the National Monument Authority. The National Monument Authority has imposed height restriction. However, we are ready and agreeable to construct the Library (G+7 floors), 1304 houses and 130 additional houses on the existing site in accordance with the Tender document. Hence, I hereby give this undertaking and declare that we are also ready to start the regular payment of rent.
I hereby declare by giving this undertaking that the aforesaid facts are true to the best of my knowledge and belief and I understand that submission of false undertaking is a punishable offence.
Sd/- (Illegible) Jatin M. Gupta Authorized Person for J. P. Iscon Pvt. Ltd.
Date: 30/07/2020 Place: Surat"Page 95 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021
C/SCA/9151/2020 CAV JUDGMENT DATED: 18/10/2021 103 We direct the Corporation to proceed further with the project and at the same time, direct the writ applicant also to abide by the aforesaid undertaking. The construction shall commence at the earliest keeping in mind the plight of 1,304 poor families. The writ applicant is also directed to start paying rent to all the 1,304 families from next month onwards. If any further or other modalities are to be worked out for the effective execution of the project, the parties shall sit together and work it out.
(J. B. PARDIWALA, J) (VAIBHAVI D. NANAVATI,J) FURTHER ORDER After the judgement was pronounced in the open Court, Mr. Kaushal Pandya, the learned counsel appearing for the Surat Municipal Corporation made a request to stay the judgement from its operation for a period of six weeks. For the reasons recorded above, we decline the request. We are declining keeping in mind the plight of the 1,304 families, as discussed in the judgement.
(J. B. PARDIWALA, J) (VAIBHAVI D. NANAVATI,J) CHANDRESH Page 96 of 96 Downloaded on : Wed Oct 20 23:59:35 IST 2021