Gujarat High Court
Pathan Mohammed Suleman Rehmatkhan vs State Of Gujarat - Through Principal ... on 12 September, 2014
Author: Akil Kureshi
Bench: Akil Kureshi
C/WPPIL/98/2013 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
WRIT PETITION (PIL) NO. 98 of 2013
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE J.B.PARDIWALA
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1 Whether Reporters of Local Papers may be allowed to see
the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
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PATHAN MOHAMMED SULEMAN REHMATKHAN....Applicant(s)
Versus
STATE OF GUJARAT - THROUGH PRINCIPAL SECRETARY &
2....Opponent(s)
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Appearance:
MS SRUSHTI A THULA, ADVOCATE for the Applicant(s) No. 1
MS SANGITA K. VISHEN, AGP for the Opponent(s) No. 1
MR RD DAVE, ADVOCATE for the Opponent(s) No. 2
MR SUDHIR NANAVATI FOR MRS VD NANAVATI, ADVOCATE for the
Opponent(s) No. 3
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
Page 1 of 41
C/WPPIL/98/2013 JUDGMENT
HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 12/09/2014
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The petitioner has challenged the allotment of land by the State Government to the respondent No.3company which, according to the petitioner, was done at an extremely low price. It is undisputed that the State Government allotted various parcels of land at Hazari, Tal.Choryasi, Dist. Surat, to the respondent No.3Larsen & Tubro Company from time to time. Some 80 hectors of land were allotted in the year 1983 at the rate of Rs. 1 per sq.mtr. Between the year 2008 and 2010, further lands were alloted at the rate of Rs. 700/ per sq.mtrs. A total of approximately 160 acres land was, thus, allotted by the State Government to the respondent No.3company at the said site. The petitioner seriously questions the rate, at which, the State Government recovered the value of the land so allotted to the company. The petitioner Page 2 of 41 C/WPPIL/98/2013 JUDGMENT has placed heavy reliance on the report of Controller and Auditor General ('CAG' for short), extracts of which were presented before the Legislative Assembly of the State in response to the questions raised by some of the members of the assembly. From such extract of the report of CAG, counsel would contend that the petitioner's contention of the State suffered heavy loss of public exchequer on account of allotment of land at concessional rates stands fully fortified.
2.Learned counsel Ms. Srushti Thula for the petitioner raised the following contentions in support of the challenge:
(i) That the land allotted in the year 1983 at Rs. 1 per sq.mtr was not at a market rate. No assessment was made.
Valuable land of the Government was, thus, allotted to the private company at a throw away price;
(ii) The subsequent allotments were not at market rate. The valuations were not done by the State level valuation committee, Page 3 of 41 C/WPPIL/98/2013 JUDGMENT though so required. In any case, Rs. 700/ per sq.mtr, which was charged to the company, was lesser than the valuation adopted by the District Revenue/Valuation Committee also.
(iii) Factum of charging the company much lesser than the market rate resulting into heavy loss to the public exchequer stands established through the report of CAG also.
3.On the other hand, the learned counsel for the Government drew our attention to the affidavitinreply dated 05.09.2013 filed by Mr. Jayesh Mishan, Under Secretary, Revenue Department, Government of Gujarat, to support the Government's decision of allotment of land to the respondent company from time to time. On the basis of such affidavit, Ms. Vishen would contend that the land was allotted to the company bearing in mind the market rate which was arrived at by the valuation committee. However, considering the importance of the project being undertaken/expanded by the Company which was of national importance, Page 4 of 41 C/WPPIL/98/2013 JUDGMENT the State Government decided to give 30% deduction in the market price so estimated.
4. Learned senior advocate, Mr. Sudhir Nanavati for the company opposed the petition contending that all these issues were presented before this Court earlier in other public interest petitions. These petitions were dismissed. A fresh public interest petition for the same cause would not be maintainable. In this respect, he relied on the decision of Apex Court in case of State of Karnataka and anr. vs. All India Manufacturers Organization and ors. reported in (2006) 4 SCC 683.
4.1 He further submitted that the allotment of land to the respondent No.3 company was done in different phases beginning w.e.f. 1983. Questioning such allotment at this distinct point of time is otherwise also not permissible. The company has invested more than 4000 crores of rupees in setting up the plants and machinery. Only on the ground of delay and laches on the part of the petitioner, this petition should be dismissed.
Page 5 of 41C/WPPIL/98/2013 JUDGMENT 4.2 Counsel further submitted that
because of the importance of the project proposed by the company, the land was alloted in the year 1983 at a time when the area was completely under developed and had no industrialization. Subsequently, when the company needed further land for expansion, had applied to the Government and also purchased the land of the private ownership through negotiations. At that point of time, resorting to the public auction was neither needed nor would serve the public purpose. The company was implementing projects of national importance and of general public interest. The land allotments were done by the Government following proper procedure.
4.3 Counsel relied on two recent decisions of Division Bench of this Court in case of Bhanubhai Nagabhai Odedara vs. State of Gujarat and ors. in Writ Petition (PIL) No. 2 of 2012 dated 22.01.2014 and in case of Pathan Mohammed Suleman Rehmatkhan vs. State of GujaratThrough Page 6 of 41 C/WPPIL/98/2013 JUDGMENT Principal Secretary & ors in Writ Petition (PIL) No. 97 of 2013 dated 04.10.2013. In case of Bhanubhai Nagabhai Odedara vs. State of Gujarat and ors. (supra), the Division Bench observed asunder:
"57.We are of the view that these are purely policy decisions taken by the State Government and, while doing so, it has examined the benefits the project would bring into the State and to the people of the State. It is well settled that nonfloating of tenders or absence of public auction or invitation alone is not a sufficient reason to characterize the action of a public authority as either arbitrary or unreasonable or amounted to mala fide or improper exercise of power. The Courts have always held that it is open to the State and the authorities to take economic and management decision depending upon the exigencies of a situation guided by appropriate financial policy notified in public interest.
58. In this connection, we may also quote with profit the following observations of the Supreme Court in the case of Kasturilal Laxmi Reddy v. State of Jammu and Kashmir reported in (1980) 4 SCC 21.
"........ It is true that no advertisements were issued by the State inviting tenders for award of tapping contract in respect of these blazes; or Page 7 of 41 C/WPPIL/98/2013 JUDGMENT stating that tapping contract would be given to any party who is prepared to put up a factory for manufacture of resin, turpentine oil and other derivatives within the State, but it must be remembered that it was not tapping contract simpliciter which was being given by the State. The tapping contract was being given by way of allocation of raw material for feeding the factory to be set up by the 2nd respondents. The predominant purpose of the transaction was to ensure setting up of a factory by the 2nd respondents as part of the process of industrialization of the State and since the 2nd respondents wanted assurance of a definite supply of resin as a condition of putting up the factory, the State awarded the tapping contract to the 2nd respondents for that purpose. If the State were giving tapping contract simpliciter there can be no doubt that the State would have to auction or invite tenders for securing the highest price, subject, of course,to any of the relevant overriding considerations of public weal or interest, but in a case like this where the State is allocating resources such as water, power, raw materials etc. for the purpose of encouraging setting up of industries within the State, we do not think the State is bound to advertise and tell the people that it wants a particular industry to be set up within the State and invite those interested to come up with proposals for the purpose. The State may choose to do so, if it thinks fit and in a given situation, it may even turn to be advantageous for the State to do so, but if any private party comes before the Page 8 of 41 C/WPPIL/98/2013 JUDGMENT State and offers to set up an industry, the State would not be committing breach of any constitutional or legal obligation if it negotiates with such party and agrees to provide resources and other facilities for the purpose of setting up the industry. The State is not obliged to tell such party; "Please wait. I will first advertise, see whether any other offers are forthcoming and then after considering all offers, decide whether I should let you set up the industry." It would be most unrealistic to insist on such a procedure particularly in an area like Jammu and Kashmir which on account of historical, political and other reasons, is not yet industrially developed and where entrepreneurs have to be offered attractive terms in order to persuade them to set up an industry. The State must be free in such a case to negotiate with a private entrepreneur with a view to inducing him to set up an industry within the State and if the State enters into a contract with such entrepreneur for providing resources and other facilities for setting up an industry, the contract cannot be assailed as invalid so long as the State had acted bona fide, reasonably and in public interest. If the terms and conditions of the contract or the surrounding circumstances show that the State has acted mala fide or out of improper or corrupt motive or in order to promote the private interests of someone at the cost of the State, the Court will undoubtedly interfere and strike down State action as arbitrary, unreasonable or contrary to public interest. But so long as the State action is bona fide and Page 9 of 41 C/WPPIL/98/2013 JUDGMENT reasonable, the Court will not interfere merely on the ground that no advertisement was given or publicity or made or tenders invited."
5. We may also profitably refer to a five Judge Bench decision of the Supreme Court in case of Natural Resources Allocation, in Re, Special Reference No. 1 of 2012 reported in (2012) 10 SCC page 1.
6.The presidential reference was made in the backdrop of the decision rendered by the Supreme Court in Center for Public Interest Litigation, (2012) 3 SCC 1 (2G Spectrum case), wherein the Court had found irregularities in the allocation of 2G radio spectrum, and directed the cancellation of licences of several telecom service providers and a reauction of the misallocated spectrum. Five questions were answered by the Supreme Court which were as follows:
"(i)Whether the only permissible method for disposal of all natural resources across all sectors and in all circumstances is by the conduct of auctions?Page 10 of 41
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(ii)Whether a broad proposition of law that only the route of auctions can be resorted to for disposal of natural resources does not run contrary to several judgments of the Supreme Court including those of Larger Benches?
(iii) Whether the enunciation of a broad principle, even though expressed as a matter of constitutional law, does not really amount to formulation of a policy and has the effect of unsettling policy decisions formulated and approaches taken by various successive governments over the years for valid considerations, including lack of public resources and the need to resort to innovative and different approaches for the development of various sectors of the economy?
(iv)What is the permissible scope for interference by courts with policy making by the Government including methods for disposal of natural resources?
(v) Whether, if the Court holds, within the permissible scope of judicial review, that a policy is flawed, is the Court not obliged to take into account investments made under the said policy including investments made by foreign investors under multilateral/bilateral agreements?"
1.The Bench answered the questions as under:
Page 11 of 41C/WPPIL/98/2013 JUDGMENT "WHETHER "auction" a Constitutional mandate:
"106.Such being the constitutional intent and effect of Article 14, the question arises can auction as a method of disposal of natural resources be declared a constitutional mandate under Article 14 of the Constitution of India? We would unhesitatingly answer it in the negative since any other answer would be completely contrary to the scheme of Article 14. Firstly, Article 14 may imply positive and negative rights for an individual, but with respect to the State, it is only couched in negative terms; like an admonition against the State which prohibits the State from taking up actions that may be arbitrary, unreasonable, capricious or discriminatory. Article 14, therefore, is an injunction to the State against taking certain type of actions rather than commanding it to take particular steps. Reading the mandate of auction into its scheme would thus, be completely contrary to the intent of the Article apparent from its plain language.
107.Secondly, a constitutional mandate is an absolute principle that has to be applied in all situations; it cannot be applied in some and not tested in others. The absolute principle is then applied on a case by case basis to see which actions fulfill the requirements of the constitutional principle and which do not.
108.Justice K. Subba Rao in his lectures compiled in a book titled "Some Constitutional Problems", critically analyzing the trends of Indian constitutional development,stated as follows:Page 12 of 41
C/WPPIL/98/2013 JUDGMENT "If the Courts, instead of limiting the scope of the articles by construction, exercise their jurisdiction in appropriate cases, I have no doubt that the arbitrariness of the authorities will be minimised. If these authorities entrusted with the discretionary powers, realize that their illegal orders infringing the rights of the people would be quashed by the appropriate authority, they would rarely pass orders in excess of their powers. If they knew that not only the form but the substance of the orders would be scrutinized in open court, they would try to keep within their bounds. The fear of ventilation of grievance in public has always been an effective deterrent. The apprehension that the High Courts would be swamped with writs has no basis."
109.Similar sentiments were expressed by Justice K. K. Mathew in series of lectures incorporated in the form of a book titled "Democracy, Equality and Freedom" in which it is stated that "the strength of judicial review lies in case to case adjudication." This is precisely why this Court in His Holiness Kesavananda Bharti Sripadagalvaru Vs. State of Kerala & Anr.46 quoting from an American decision, observed as follows:
"1695...The reason why the expression "due process" has never been defined is that it embodies a concept of fairness which has to be decided with reference to the facts and circumstances of each case and also according to the mores for the time being in force in a society to which the concept has to be applied. As Justice Frankfurter said, "due process" is not a technical conception with a fixed content unrelated to time, place and circumstances [See Joint Anti Page 13 of 41 C/WPPIL/98/2013 JUDGMENT Fascist Refugee Committee v. McGrath 341 U.S. 123]".
110. Equality, therefore, cannot be limited to mean only auction, without testing it in every scenario. In The State of West Bengal Vs. Anwar Ali Sarkar47, this Court, quoting from Kotch Vs. Pilot Comm'rs48 , had held that:
"10. ... ...The constitutional command for a State to afford equal protection of the laws sets a goal not attainable by the invention and application of a precise formula. This Court has never attempted that impossible task".
One cannot test the validity of a law with reference to the essential elements of ideal democracy, actually incorporated in the Constitution. (See: Indira Nehru Gandhi Vs. Raj Narain49). The Courts are not at liberty to declare a statute void, because in their opinion it is opposed to the spirit of the Constitution. Courts cannot declare a limitation or constitutional requirement under the notion of having discovered some ideal norm. Further, a constitutional principle must not be limited to a precise formula but ought to be an abstract principle applied to precise situations. The repercussion of holding auction as a constitutional mandate would be the voiding of every action that deviates from it, including social endeavours, welfare schemes and promotional policies, even though CPIL itself has argued against the same, and asked for making auction mandatory only in the alienation of scarce natural resources meant for private and commercial business ventures. It would be odd to derive auction as a constitutional principle only for a limited set of situations from the wide and Page 14 of 41 C/WPPIL/98/2013 JUDGMENT generic declaration of Article 14. The strength of constitutional adjudication lies in case to case adjudication and therefore auction cannot be elevated to a constitutional mandate.
111.Finally, reading auction as a constitutional mandate would be impermissible because such an approach may distort another constitutional principle embodied in Article 39(b). The said article enumerating certain principles of policy, to be followed by the State, reads as follows:
"39. Certain principles of policy to be followed by the State.
"The State shall, in particular, direct its policy towards securing -
(a) ... ... ...
(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good;
" The disposal of natural resources is a facet of the use and distribution of such resources. Article 39(b) mandates that the ownership and control of natural resources should be so distributed so as to best subserve the common good. Article 37 provides that the provisions of Part IV shall not be enforceable by any Court, but the principles laid down therein are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws..Therefore, this Article, in a sense, is a restriction on 'distribution' built into the Constitution. But the restriction is imposed on the object and not the means. The overarching and underlying Page 15 of 41 C/WPPIL/98/2013 JUDGMENT principle governing 'distribution' is furtherance of common good. But for the achievement of that objective, the Constitution uses the generic word 'distribution'. Distribution has broad contours and cannot be limited to meaning only one method i.e. auction. It envisages all such methods available for distribution/allocation of natural resources which ultimately subserve the "common good".
113.In State of Tamil Nadu & Ors. Vs. L. Abu Kavur Bai & Ors.50, this Court explained the broadbased concept of 'distribution' as follows:
"89. ...The word 'distribution' used in Article 39(b) must be broadly construed so that a court may give full and comprehensive effect to the statutory intent contained in Article 39 (b). A narrow construction of the word 'distribution' might defeat or frustrate the very object which the Article seeks to subserve..."
114.After noting definitions of 'distribution' from different dictionaries, this Court held:
"92. It is obvious, therefore, that in view of the vast range of transactions contemplated by the word 'distribution' as mentioned in the dictionaries referred to above, it will not be correct to construe the word 'distribution' in a purely literal sense so as to mean only division of a particular kind or to particular persons. The words, apportionment, allotment, allocation, classification, clearly fall within the broad sweep of the word 'distribution'. So construed, the word 'distribution' as used in Article 39(b) will include various facets, aspects, methods and Page 16 of 41 C/WPPIL/98/2013 JUDGMENT terminology of a broadbased concept of distribution..."
115.It can thus, be seen from the afore quoted paragraphs that the term "distribute" undoubtedly, has wide amplitude and encompasses all manners and methods of distribution,which would include classes, industries, regions, private and public sections, etc. Having regard to the basic nature of Article 39(b), a narrower concept of equality under Article 14 than that discussed above, may frustrate the broader concept of distribution, as conceived in Article 39(b). There cannot, therefore, be a cavil that "common good' and "larger public interests" have to be regarded as constitutional reality deserving actualization.
116.The learned counsel for CPIL argued that revenue maximization during the sale or alienation of a natural resource for commercial exploitation is the only way of achieving public good since the revenue collected can be channelized to welfare policies and controlling the burgeoning deficit. According to the learned counsel, since the best way to maximize revenue is through the route of auction, it becomes a constitutional principle even under Article 39(b). However, we are not persuaded to hold so. Auctions may be the best way of maximizing revenue but revenue maximization may not always be the best way to subserve public good. "Common good" is the sole guiding factor under Article 39(b) for distribution of natural resources. It is the touchstone of testing whether any policy subserves the "common good" and if it does, irrespective of the means adopted, it is clearly in accordance with the principle enshrined in Article 39(b).
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117.In The State of Karnataka and Anr. Vs. Shri Ranganatha Reddy and Anr.51, Justice Krishna Iyer observed that keeping in mind the purpose of an Article like 39(b), a broad rather than a narrow meaning should be given to the words of that Article. In his inimitable style, his Lordship opined thus:
"83. Two conclusions strike us as quintessential. Part IV, especially Article 39(b) and (c), is a futuristic mandate to the state with a message of transformation of the economic and social order. Firstly, such change calls for collaborative effort from all the legal institutions of the system: the legislature, the judiciary and the administrative machinery. Secondly and consequentially, loyalty to the high purpose of the Constitution, viz., social and economic justice in the context of material want and utter inequalities on a massive scale, compels the court to ascribe expansive meaning to the pregnant words used with hopeful foresight, not to circumscribe their connotation into contradiction of the objectives inspiring the provision. To be Pharisaic towards the Constitution through ritualistic construction is to weaken the socialspiritual thrust of the founding fathers' dynamic faith."
118.In the case of Bennett Coleman & Co. and Ors. Vs. Union of India and Ors., it has been held by this Court that:
"162. The only norm which the Constitution furnishes for distribution of material resources of the community is elastic norm of common good."Page 18 of 41
C/WPPIL/98/2013 JUDGMENT Thus "common good" is a norm in Article 39(b) whose applicability was considered by this Court on the facts of the case. Even in that case, this Court did not evolve economic criteria of its own to achieve the goal of "common good" in Article 39(b), which is part of the Directive Principles.
119.The norm of "common good" has to be understood and appreciated in a holistic manner. It is obvious that the manner in which the common good is best subserved is not a matter that can be measured by any constitutional yardstick it would depend on the economic and political philosophy of the government. Revenue maximization is not the only way in which the common good can be subserved. Where revenue maximization is the object of a policy, being considered qua that resource at that point of time to be the best way to subserve the common good, auction would be one of the preferable methods, though not the only method. Where revenue maximization is not the object of a policy of distribution, the question of auction would not arise. Revenue considerations may assume secondary consideration to developmental considerations.
120.Therefore, in conclusion, the submission that the mandate of Article 14 is that any disposal of a natural resource for commercial use must be for revenue maximization, and thus by auction, is based neither on law nor on logic. There is no constitutional imperative in the matter of economic policies Article 14 does not pre define any economic policy as a constitutional mandate. Even the mandate of 39(b) imposes no restrictions on the means adopted to subserve the public good and uses the broad term 'distribution', suggesting Page 19 of 41 C/WPPIL/98/2013 JUDGMENT that the methodology of distribution is not fixed. Economic logic establishes that alienation/allocation of natural resources to the highest bidder may not necessarily be the only way to subserve the common good, and at times, may run counter to public good. Hence, it needs little emphasis that disposal of all natural resources through auctions is clearly not a constitutional mandate.
LEGITIMATE DEVIATIONS FROM AUCTION
121.As a result, this Court has, on a number of occasions, delivered judgments directing means for disposal of natural resources other than auction for different resources in different circumstances. It would be profitable to refer to a few cases and appreciate the reasons this Court has adopted for deviating from the method of auction.
122. In M/s Kasturi Lal Lakshmi Reddy Vs. State of Jammu & Kashmir & Anr.53, while comparing the efficacy of auction in promoting a domestic industry, P.N. Bhagwati, J. observed: "22. ...If the State were giving tapping contract simpliciter there can be no doubt that the State would have to auction or invite tenders for securing the highest price, subject, of course, to any other relevant overriding considerations of public weal or interest, but in a case like this where the State is allocating resources such as water, power, raw materials etc. for the purpose of encouraging setting up of industries within the State, we do not think the State is bound to advertise and tell the people that it wants a particular industry to be set up within the State and invite Page 20 of 41 C/WPPIL/98/2013 JUDGMENT those interested to come up with proposals for the purpose. The State may choose to do so, if it thinks fit and in a given situation, it may even turn out to be advantageous for the State to do so, but if any private party comes before the State and offers to set up an industry, the State would not be committing breach of any constitutional or legal obligation if it negotiates with such party and agrees to provide resources and other facilities for the purpose of setting up the industry. The State is not obliged to tell such party:
"Please wait I will first advertise, wee whether any other offers are forthcoming and then after considering all offers, decide whether I should let you set up the industry"...The State must be free in such a case to negotiate with a private entrepreneur with a view to inducing him to set up an industry within the State and if the State enters into a contract with such entrepreneur for providing resources and other facilities for setting up an industry, the contract cannot be assailed as invalid so long as the State has acted bona fide, reasonably and in public interest. If the terms and conditions of the contract or the surrounding circumstances show that the State has acted mala fide or out of improper or corrupt motive or in order to promote the private interests of someone at the cost of the State, the court will undoubtedly interfere and strike down State action as arbitrary, unreasonable or contrary to public interest. But so long as the State action is bona fide and reasonable, the court will not interfere merely on the ground that no advertisement was given or publicity made or tenders invited."Page 21 of 41
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123.In Sachidanand Pandey (supra) after noticing Kasturi Lal's case (supra), it was concluded as under:
"40. On a consideration of the relevant cases cited at the Bar the following propositions may be taken as well established: Stateowned or publicowned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to be observed. Public interest is the paramount consideration. One of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. Though that is the ordinary rule, it is not an invariable rule. There may be situations where there are compelling reasons necessitating the departure must be rational and should not be suggestive of discrimination. Appearance of public justice is as important as doing justice. Nothing should be done which gives an appearance of bias, jobbery or nepotism."
124.In Haji T.M. Hassan Rawther Vs. Kerala Financial Corpn.54, after an exhaustive review of the law including the decisions in Kasturi Lal (supra) and Sachidanand Pandey (supra), it was held that public disposal of State owned properties is not the only rule. It was, interalia, observed that:
"14. The public property owned by the State or by any instrumentality of the State should be generally sold by public auction or by inviting tenders. This Court has been insisting upon that rule, not only to get the highest price for the property but also to ensure fairness in the activities of the State and public authorities. They should Page 22 of 41 C/WPPIL/98/2013 JUDGMENT undoubtedly act fairly. Their actions should be legitimate. Their dealings should be aboveboard. Their transactions should be without aversion or affection. Nothing should be suggestive of discrimination. Nothing should be done by them which gives an impression of bias, favouritism or nepotism. Ordinarily these factors would be absent if the matter is brought to public auction or sale by tenders. That is why the court repeatedly stated and reiterated that the Stateowned properties are required to be disposed of publicly. But that is not the only rule. As O. Chinnappa Reddy, J. observed "that though that is the ordinary rule, it is not an invariable rule". There may be situations necessitating departure from the rule, but then such instances must be justified by compulsions and not by and not by just convenience."
Here, the Court added to the previous decisions and said that a blithe deviation from public disposal of resources would not be tolerable; such a deviation must be justified by compelling reasons and not by just convenience.
125.In M.P. Oil Extraction and Anr. Vs. State of M.P. & Ors.55, this Court held as follows:
"45. Although to ensure fair play and transparency in State action, distribution of largesse by inviting open tenders or by public auction is desirable, it cannot be held that in no case distribution of such largesse by negotiation is permissible. In the instant case, as a policy decision protective measure by entering into agreements with selected industrial units for assured supply of sal seeds at concessional rate has been taken by the Page 23 of 41 C/WPPIL/98/2013 JUDGMENT Government. The rate of royalty has also been fixed on some accepted principle of pricing formula as will be indicated hereafter. Hence, distribution or allotment of sal seeds at the determined royalty to the respondents and other units covered by the agreements cannot be assailed. It is to be appreciated that in this case, distribution by public auction or by open tender may not achieve the purpose of the policy of protective measure by way of supply of sal seeds at concessional rate of royalty to the industrial units covered by the agreements on being selected on valid and objective considerations."
126.In Netai Bag & Ors. Vs. State of W.B. & Ors.56, this Court observed that non floating of tenders or not holding of public auction would, not in all cases, be deemed to be the result of the exercise of the executive power in an arbitrary manner. It was stated:
"19. ...There cannot be any dispute with the proposition that generally when any State land is intended to be transferred or the State largesse decided to be conferred, resort should be had to public auction or transfer by way of inviting tenders from the people. That would be a sure method of guaranteeing compliance with the mandate of Article 14 of the Constitution. Nonfloating of tenders or not holding of public auction would not in all cases be deemed to be the result of the exercise of the executive power in an arbitrary manner. Making an exception to the general rule could be justified by the State executive, if challenged in appropriate proceedings. The constitutional courts cannot be expected to presume the alleged irregularities, illegalities or unconstitutionality nor the Page 24 of 41 C/WPPIL/98/2013 JUDGMENT courts can substitute their opinion for the bona fide opinion of the State executive. The courts are not concerned with the ultimate decision but only with the fairness of the decisionmaking process."
This Court once again pointed out that there can be exceptions from auction; the ultimate test is only that of fairness of the decision making process and compliance with Article 14 of the Constitution.
127.In M & T Consultants, Secunderabad Vs. S.Y. Nawab57, this Court again reiterated that non floating of tenders does not always lead to the conclusion that the exercise of the power is arbitrary:
"17. A careful and dispassionate assessment and consideration of the materials placed on record does not leave any reasonable impression, on the peculiar facts and circumstances of this case, that anything obnoxious which requires either public criticism or condemnation by courts of law had taken place. It is by now well settled that nonfloating of tenders or absence of public auction or invitation alone is no sufficient reason to castigate the move or an action of a public authority as either arbitrary or unreasonable or amounting to mala fide or improper exercise or improper abuse of power by the authority concerned. Courts have always leaned in favour of sufficient latitude being left with the authorities to adopt their own techniques of management of projects with the exigencies of a situation guided by appropriate financial policy in the best interests of the authority motivated by public interest as well in undertaking such ventures."Page 25 of 41
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128.In Villianur Iyarkkai Padukappu Maiyam Vs. Union of India & Ors.58, a three Judge Bench of this Court was concerned with the development of the Port of Pondicherry where a contractor had been selected without floating a tender or holding public auction. It was held as under:
"164. The plea raised by the learned counsel for the appellants that the Government of Pondicherry was arbitrary and unreasonable in switching the whole public tender process into a system of personal selection and, therefore, the appeals should be accepted, is devoid of merits. It is well settled that nonfloating of tenders or not holding of public auction would not in all cases be deemed to be the result of the exercise of the executive power in an arbitrary manner.
171. In a case like this where the State is allocating resources such as water, power, raw materials, etc. for the purpose of encouraging development of the port, this Court does not think that the State is bound to advertise and tell the people that it wants development of the port in a particular manner and invite those interested to come up with proposals for the purpose. The State may choose to do so if it thinks fit and in a given situation it may turn out to be advantageous for the State to do so, but if any private party comes before the State and offers to develop the port, the State would not be committing breach of any constitutional obligation if it negotiates with such a party and agrees to provide resources and other facilities for the purpose of development of the port."
129.Hence, it is manifest that there is no constitutional mandate in favour of auction Page 26 of 41 C/WPPIL/98/2013 JUDGMENT under Article 14. The Government has repeatedly deviated from the course of auction and this Court has repeatedly upheld such actions. The judiciary tests such deviations on the limited scope of arbitrariness and fairness under Article 14 and its role is limited to that extent. Essentially whenever the object of policy is anything but revenue maximization, the Executive is seen to adopt methods other than auction.
130. A fortiori, besides legal logic, mandatory auction may be contrary to economic logic as well. Different resources may require different treatment. Very often, exploration and exploitation contracts are bundled together due to the requirement of heavy capital in the discovery of natural resources. A concern would risk undertaking such exploration and incur heavy costs only if it was assured utilization of the resource discovered; a prudent business venture, would not like to incur the high costs involved in exploration activities and then compete for that resource in an open auction. The logic is similar to that applied in patents. Firms are given incentives to invest in research and development with the promise of exclusive access to the market for the sale of that invention. Such an approach is economically and legally sound and sometimes necessary to spur research and development. Similarly, bundling exploration and exploitation contracts may be necessary to spur growth in a specific industry.
131.Similar deviation from auction cannot be ruled out when the object of a State policy is to promote domestic development of an industry, like in Kasturi Lal's case, discussed above. However, these examples are Page 27 of 41 C/WPPIL/98/2013 JUDGMENT purely illustrative in order to demonstrate that auction cannot be the sole criteria for alienation of all natural resources."
2. It is pointed out that the decision of this Court in case of Pathan Mohammed Suleman Rehmatkhan vs. State of Gujarat Through Principal Secretary & ors (supra) has been confirmed by a detailed judgement of the Supreme Court in case of Pathan Mohammed Suleman Rehmatkhan vs. State of Gujarat and ors. reported in (2014) 4 SCC
156.
3. From the record, it emerges that different parcels of land were allotted to the respondent No.3company from time to time. First of such allotment was made in the year 1983 of 80 hectors of land at Hazari. As pointed out by the respondent No.3 in its affidavitinreply at that time there was hardly any industrialization in the area and respondent No.3 was one of the first companies, who setup its project. It is true that subsequently, the entire area got highly industrialized. We can take judicial notice of the fact that Page 28 of 41 C/WPPIL/98/2013 JUDGMENT currently the area has large number of heavy industries of prime companies. However, this was not the situation in the year 1983. It is further pointed out in the affidavitinreply of the respondent No.3 that except Kribhco there is no other industry which was established in the said area. The land was also uneven and needed considerable expenditure for putting it to industrial use. The plant to be setup by the company was for manufacture of critical equipment for defense i.e. nuclear and air space. Accordingly, the respondent No.3 set up its facilities for manufacturing such equipments to be used for the plants manufacturing fertilizer, nuclear power plant, refinery, petro chemicals etc.
4. Considering such factors namely that the area at the relevant time in the year 1983 was highly underdeveloped, the land allotted required considerable expenditure before being put to industrial use and the importance of the project of the company which had relevance to the national interest, if the State Government alloted Page 29 of 41 C/WPPIL/98/2013 JUDGMENT the land which was otherwise fallow, at a rate which may currently seem inadequate, in our opinion, no illegality can be stated to have been committed. In any case, in the year 2014, on a petition filed in the year 2013 it would be highly inequitable for us to examine the reasons for preferential allotment of land to the respondent no.3 by the State Government. This Court in case of Pathan Mohammed Suleman Rehmatkhan vs. State of Gujarat Through Principal Secretary & ors(supra) in this context held and observed as under:
"31.It is wellsettled that this sacrosanct jurisdiction of public interest litigation should be invoked very sparingly and in favour of a vigilant litigant. The power of the High Court to be exercised under Article 226 of the Constitution, being discretionary, its exercise must be judicious and reasonable. The persons seeking relief against the State under Article 226 of the Constitution, be they citizens or otherwise, cannot get discretionary relief, obtainable thereunder unless they fully satisfy the Court that the facts and circumstances of the case clearly justify the laches or undue delay on their part in approaching the Court for grant of such discretionary relief.Page 30 of 41
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32. Where the High Court grants relief to a citizen or any other person under Article 226 of the Constitution of India against any person including the State without considering his blameworthy conduct, such as laches or undue delay, acquiescence or waiver, the relief, so granted, becomes unsustainable, even if, the relief was granted in support of the alleged deprivation of his legitimate right by the State. Delay is a very important factor while exercising extraordinary jurisdiction under Article 226 of the Constitution, and the third party interest created on account of delay, should not be disturbed.
33. Reference could also be made to the observations passed by the Supreme Court in the case of Delhi Development Authority Vs. Rajendra Singh and others, (2009) 8 SCC 582, made in para Nos.52 and 53, which are as under:
"52. In Narmada Bachao Andolan v. Union of India, SCC para 229, this Court has held that PIL should be thrown out at the threshold if it is challenged after the commencement of execution of the project. It was also held that no relief should be given to persons who approach the Court without reasonable explanation under Articles 226 and 32 after inordinate delay.
53. We reiterate that the delay rules apply to PILs also and if there is no Page 31 of 41 C/WPPIL/98/2013 JUDGMENT proper explanation for the delay, PILs are liable to be summarily dismissed on account of delay. In the case on hand, it is not in dispute that both the petitioners though claiming that they are very much conversant with environment and ecology, approached the High Court only in the middle of 2007, hence on the ground of delay and laches, the writ petitions were liable to be dismissed."
34. Bearing the aforesaid principles in mind, we have no doubt in our mind that this petition also deserves to be dismissed also on the ground of delay. We have taken note of the developments which have taken place so far as the project is concerned. The following aspects need to be considered."
5.With respect to the subsequent allotments, we must bear in mind certain peculiar factors namely:
(i) That the company was engaged in the manufacturing of special equipments which had considerable national importance;
(ii)That it had already set up plant in the region. The expansion therefore would require further allotment of land. If the land adjacent to the expanded plant was put to auction by the Government, there was a better imminent possibility of the Page 32 of 41 C/WPPIL/98/2013 JUDGMENT expansion of the company and the market value assessment was made by th valuation committee ofcourse certain concessions were granted for the reasons stated by the State Government in its affidavit.
6. These factors must also be considered in light of the fact that earlier two public interest petitions were filed questioning the rate of the land allotment and the decision for allotment of the land itself. Both these petitions being Special Civil Application No. 10850 of 2009 filed by one Sukhabhai Bhikhabhai Aahir and Special Civil Application No. 12530 of 2010 filed by Shri Amit B. Jethava were dismissed by Division Bench of this Court. In case of Sukhabhai Bhikhabhai Aahir (supra), the Court held and observed as under:
"6. We have heard learned counsel for the parties and perused the record.
7. In the present case, as we find no case made out to interfere with the valuation of the land fixed by the State, we are not inclined to grant the relief so sought for in the writ petition. So far as Page 33 of 41 C/WPPIL/98/2013 JUDGMENT the prayer for providing space surrounding the periphery of the block of Revenue Survey Nos. 445 to 497 is concerned, taking into consideration the stand taken by the 4th respondent, we direct the 4th respondent to construct the proposed road stated in its affidavit and shown in the enclosure annexed to the affidavit, at an early date, preferably within six months. In the meantime, if the 4th respondent raises level of its land before construction of road and drainage, it must ensure that some space is left for drainage of storm water of the land of Revenue Survey Nos. 445 to 497. To ensure that road and drainage are properly constructed, we are imposing the map of the proposed road and proposed drainage plan as submitted by the 4th respondent as part of this judgment at Annexures "A" and "B".
8. It will be open to the 4th respondent to make some variation with regard to storm water drainage inlet and the culvert as shown in the map in rounds at six places.
9. The writ petition stands disposed of with the aforesaid observations and directions. There should be no order as to costs."
7.In case of Shri Amit B Jethava, the Division Bench in judgement dated 22.11.2010 observed asunder:
Page 34 of 41C/WPPIL/98/2013 JUDGMENT "Having heard learned counsel for the parties and taking into consideration the facts and circumstances of the case and the fact that this Court by Order dated 23rd February 2010 has already granted certain benefits in favour of the public and thereby, otherwise upheld the order of allotment of land, no further order is required to be passed in this case. However, this order shall not stand in the way of the District Collector to act in accordance with law. Writ petition stands disposed of. No costs."
8. With respect to the petitioner's contention that CAG in its report pointed out loss of Government revenue, we may profitably refere to the observations of this Court in case of Pathan Mohammed Suleman Rehmatkhan vs. State of Gujarat Through Principal Secretary & ors(supra) as under:
"11.Undoubtedly, the CAG is a key figure in a system of parliamentary control of finance. The CAG is empowered to carry out examination (known as "value for money audit") into the economy, efficiency and effectiveness with which the departmental authorities or other bodies had used their resources in discharging their functions. There is no dispute that CAG is the final audit authority and is a part of the machinery through which the legislator Page 35 of 41 C/WPPIL/98/2013 JUDGMENT enforces regularity and economy in the administration of public finance. However, in our opinion, having regard to the powers conferred on CAG, he is not entitled to question the merit of the policy objectives of the State Government.
12. The reports of the CAG are subject to annual debate in the Legislative Assembly. The report of the CAG would be submitted to the Governor of the State. Article 151, Clause (2) of the Constitution of India requires the Governor to cause the report to be laid down before the Legislature of the State. According to the Rules of procedure and conduct of business of Gujarat Legislative Assembly, aforenoted report submitted by the CAG is to be placed before the Public Accounts Committee. Such Committee would scrutinize the report of the CAG as it deems necessary and then present its report to the Legislative Assembly. The Assembly would then discuss the report and the Minister concerned would explain the Government's point of view as well as action which the Government may propose to take under the Rules.
13. The procedure aforenoted is yet to be undertaken and, therefore, in such circumstances, Mr.Trivedi, the learned Advocate General appearing for the State is justified in submitting that this petition should not be entertained which is based solely on the report of the CAG, which has commented upon the policy decision taken by the State Government in formulating the project of GIFT City. We Page 36 of 41 C/WPPIL/98/2013 JUDGMENT are, therefore, of the opinion that we should not refer to the findings and conclusions contained in the report of CAG or express any opinion on the same [See Centre for Public Interest Litigation and Others v. Union of India (AIR 2012 SC 3725) para 61], and make it the sole basis for grant of reliefs as prayed for by the petitioner in this petition.
14. We may profitably refer to a decision of the Supreme Court in the case of Arun Kumar Agrawal v. Union of India and Others reported in 2013 (7) SCALE 333. The petition before the Supreme Court was in the nature of a public interest litigation challenging the approval granted by the Government of India for the acquisition of majority stake in Cairn India Limited (CIL) for US $8.48 billion and also for a direction to the Oil and Natural Gas Corporation of India to exercise its right of preemption over sale of shares of CIL on the same terms without causing loss or profit to the Cairn Energy and also for a direction to CBI to investigate the reasons for ONGC, a Government of India undertaking, in not exercising their legal rights under the right of first refusal and giving clearance to CAIRNVedanta deal on the basis of the existing right to share the royalty and cess on prorata basis. The petitioner had placed considerable reliance on the report of the CAG. It was submitted before the Supreme Court relying on the report of the CAG that the declaration of fresh discoveries during appraisal/development phases within de alienated discovery development areas amounted to irregular expansion of Page 37 of 41 C/WPPIL/98/2013 JUDGMENT exploration activities, which was not in consonance with the terms of PSC.
14.1 The Supreme Court made the following observations in paragraph nos.46 and 47.
"46. CAG may be right in pointing out that public monies are to be applied for the purposes prescribed by Parliament and that extravagance and waste are minimized and that sound financial practices are encouraged in estimating and contracting, and in administration generally.
47. We have come across several instances where considerable reliance has been placed on the CAG Report and projecting it as gospel truth. Let us examine the role of the CAG under our Constitutional scheme."
14.2 After examining the role of the CAG under the constitutional scheme, the Supreme Court made the following observations in para 50, which are quoted hereunder:
"50. The Reports of the CAG are required to be submitted to the President, who shall cause them to be laid before each House of Parliament, as provided under Article 151(1). In relation to the States, reports are submitted to the Governor, who shall cause them to be laid before the Legislature of the State, as per Article 151(2) of the Constitution. When reports are received in the Parliament, they are scrutinized by Page 38 of 41 C/WPPIL/98/2013 JUDGMENT the Public Accounts Committee ("PAC"). The PAC is established in accordance with Rule 308 of the Rules of Procedure and Conduct of Business in Lok Sabha. The function of the PAC is to examine the accounts of the Union and the report of the CAG. The PAC shall be principally concerned whether the policy is carried out efficiently, effectively and economically, rather than with the merits of government policy. Its main functions are to see that public monies are applied for the purposes prescribed by the Parliament, that extravagance and waste are minimized and that sound financial practices are encouraged in estimating and contracting, and in administration generally. The PAC also has the power to receive evidence, the power to send for persons, papers and record and can receive oral evidence on solemn affirmation. Once the report is prepared, the report of the PAC is presented to the House."
14.3The Supreme Court, thereafter, proceeded to observe in paragraph 54 that it referred to the report of the CAG, the role of the PAC and the procedure followed in the House, only to indicate that the CAG report is always subject to scrutiny by the Parliament and the Government can always offer its views on the report of the CAG.
14.4 The Supreme Court thereafter posed a question whether it could grant reliefs Page 39 of 41 C/WPPIL/98/2013 JUDGMENT merely placing reliance on the CAG's report. The following observations of the Supreme Court made in paragraph nos.55 and 56 clinches the issue so far as the present petition is concerned.
"55. The question that is germane for consideration in this case is whether this Court can grant reliefs merely placing reliance on the CAG's report. The CAG's report is always subject to parliamentary debates and it is possible that PAC can accept the ministry's objection to the CAG report or reject the report of the CAG. The CAG, indisputably is an independent constitutional functionary, however, it is for the Parliament to decide whether after receiving the report i.e. PAC to make its comments on the CAG's report.
56. We may, however, point out that since the report is from a constitutional functionary, it commands respect and cannot be brushed aside as such, but it is equally important to examine the comments what respective ministries have to offer on the CAG's report. The ministry can always point out, if there is any mistake in the CAG's report or the CAG has inappropriately appreciated the various issues. For instance, we cannot as such accept the CAG report in the instance case.""
15. In the result, we do not find any Page 40 of 41 C/WPPIL/98/2013 JUDGMENT reason to interfere in this public interest petition. The same is, therefore, dismissed.
(AKIL KURESHI, J.) (J.B.PARDIWALA, J.) Jyoti Page 41 of 41