AJN 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN ITS ORDINARY ORIGINAL CIVIL JURISDICTION IN ITS JURISDICTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA WRIT PETITION NO.2275 OF 1993 1 S.K. Agarwal ) 2 P.S. Kotwal ) 3 Narendrakant G. Gite ) 4 P.K. Ramchandran ) 5 Hira P. Advani ) 6 Deepak Tyagi ) 7 M.A. Zakee ) 8 S. Biswas ) 9 N.K. Mehta ) 10 U.K. Chandra ) 11 S.N. Kalra ) 12 S. Gopalakrishna ) 13 S. Sivaswamy ) 14 Vinay Khosla ) 15 A.K. Varma ) 16 A. Dikshit ) 17 P.T. Palani ) 18 A.S. Sharma ) 19 V. Satyanarayanan ) 20 D.K. Ghatak ) 21 R.V. Sundram ) AJN 2 22 Manmohan Sarpal, all citizens of ndia, working in the office of the Steel Authority of India Limited, amongst others having its Regional Office at, Express Towers, 9th floor, Nariman Point, Bombay – 400 021. ) ) ) ) ) ) ) ... Petitioners Versus 1. City & Industrial Development Corporation of Maharashtra Limited, having its Registered Office at “Nirmal”, 2nd floor, Nariman Point, Bombay – 400 021. ) ) ) ) ) ) 2. R.C. Sinha, Managing Director of CIDCO Limited, having its Registered Office at “Nirmal”, 2nd floor, Nariman Point, Bombay – 400 021. ) ) ) ) ) ) 3 State of Maharashtra. ) ... Respondents Mr. D.H. Mehta with Mr. Jaydeep Raut i/b M/s. Meharia & Co. for the petitioners. Mr. Rajiv Mane, AGP for the State. Mr. G.S. Hegde with Mr. C.M. Lokesh i/b M/s. Hegde & Associates for CIDCO. CORAM : SWATANTER KUMAR, C.J. & AJN 3 SMT. RANJANA DESAI, JJ. DATE ON WHICH THE JUDGMENT RESERVED : 14TH MARCH, 2008. DATE ON WHICH THE JUDGMENT PRONOUNCED : 2ND MAY, 2008. JUDGMENT : (Per Smt. Ranjana Desai, J.) 1. Rule. Respondents waive service. By consent of the parites, taken up for final hearing forthwith. 2. The petitioners are employed in the office of the Steel Authority of India Limited (for convenience “SAIL”), having its office at Express Towers, 9th floor, Nariman Point, Bombay – 400 021. Respondent 1 is the City & Industrial Development Corporation of Maharashtra Limited nominated as the New Town Development Authority for the new town of New Bombay (for short, “CIDCO”). Respondent 2 is the Managing Director of respondent 1. Respondent 3 is the State of Maharashtra, who is having the ultimate authority and power to control and regulate the activities of planning and development under the Maharashtra Regional & Town Planning Act, 1966 (for short, “the MRTP Act”). AJN 4 3. In exercise of powers conferred by sub-clause (a) of clause (1) of section 159 of the MRTP Act, CIDCO being the New Town Development Authority for the area comprised in the site of New Bombay under sub-section (3A) of section 113 of the said Act, has with the previous approval of the State Government published in the Maharashtra Government Gazette Part IV-C on 26/7/1979 the New Bombay Disposal of Lands Regulations, 1975 (for short, “the said Regulations”.) The said Regulations, inter alia, provide for the demarcation of plots vested in the Government by CIDCO into disposable plots having regard to their size and use. The said Regulations also make provisions for conditions of lease, mode of disposal and for grant of land for religious, educational, charitable and public purposes. For the present purpose, Regulation 4 of Chapter IV which provides for mode of disposal is material. We may quote the same. “4. Manner of disposal of land: The Corporation may dispose of plots of land by public auction or tender or by considering individual applications as AJN 5 the Corporation may determined from time to time.” 4. It is the case of the petitioners that because of the decision of the State Government to shift the Steel Market from Bombay to Kalamboli in New Bombay, it became difficult and uneconomical for them to attend to their work at the newly shifted steel market at Kalamboli from Bombay, since they were residing at Bombay. They were unable to perform their duties effectively from Bombay on account of absence of regular communication and transportation facilities, considerable cost of transportation and distance. 5. To overcome these difficulties, the petitioners requested the management of CIDCO to allot amongst others about 25 bungalow plots for construction of bungalows. CIDCO allotted 25 bungalow plots for executives who were willing to construct residential bungalows. 6. It is the case of the petitioners that in respect of the above, letter dated 2/4/1986 was written on behalf of the petitioners to respondent 1 - CIDCO requesting for allotment of bungalow plots AJN 6 to the 25 officers of SAIL. CIDCO replied to the said letter by its letter dated 8/5/1986 stating that CIDCO intended to offer 25 bungalow plots at a premium rate of Rs.150/- per sq. mtr. with FSI- 1 on sixty years lease basis. Further, CIDCO requested that the same may be confirmed by the petitioners. 7. CIDCO vide its letter dated 29/7/1986 informed the petitioners their decision of allotment of 25 bungalow plots to the petitioners. In the said letter, CIDCO mentioned the rates of the said bungalow plots besides certain terms and conditions upon which the intended allotment was to be made. In response to the said letter, the petitioners conveyed their willingness to accept the allotment of bungalow plots upon terms and conditions stated by CIDCO in its letter dated 29/7/1986. 8. It is the case of the petitioners that CIDCO sent individual, however, similar allotment letters to the petitioners allotting to them individual bungalow plots at New Panvel, New Bombay. In the said allotment letters addressed to the petitioners, CIDCO stated that the plots were to be allotted for a period of sixty years lease and the lease premium was to be Rs.150/- per sq. meter. Clause 3 AJN 7 of the said allotment letters, also stated that the maximum permissible FSI in respect of the plot allotted will be “1”. 9. According to the petitioners, in response to the allotment letters sent by CIDCO as required under the terms of payment, the petitioners made full payment to CIDCO by September/October, 1986. However, since the possession of the plots was not given by CIDCO, by their letter dated 4/2/1987, the petitioners requested CIDCO to give possession of the plots so that they can send construction plans for approval to CIDCO. 10. On 10/2/1987, the petitioners were surprised to receive letter dated 2/2/1987 from CIDCO whereby CIDCO informed the petitioners that the FSI in respect of the said 25 bungalow plots be read as “0.5” instead of “1”. It was further stated that in terms of clause 3 of the said allotment letter, FSI originally allotted was “1”. 11. The petitioners by their letter dated 14/2/1987 replied to the said letter of CIDCO. The petitioners stated that the full payment in respect of the allotment of the said bungalow plots was made on the basis of FSI-”1” and for the reasons stated in the letter of the AJN 8 petitioners, it was requested that the correction be incorporated and no such change be made. 12. According to the petitioners, thereafter, the petitioners had personal meetings and discussions with the then Managing Director and other concerned officers of CIDCO. The petitioners contend that during the said discussions, CIDCO reassured the petitioners that FSI-”1” will be restored as per the original letter of allotment. According to the petitioners, under the circumstances, pending the withdrawal of the said letter dated 2/2/1987, CIDCO on or about 5/3/1987 gave possession of 25 bungalow plots to the petitioners. Individual possession receipts were signed on behalf of the petitioners and CIDCO. 13. Further case of the petitioners is that simultaneously along with the possession of the bungalow plots, the individual agreements to lease were also executed on or about 5/3/1987 by and between individual petitioners and CIDCO. According to the petitioners, petitioners 10 and 11 were not given the said agreements to lease by CIDCO though possession of the said plots was formally obtained and, hence, they could not execute the AJN 9 agreements to lease. 14. The petitioners' case is that on receipt of agreements to lease with reduced FSI, the petitioners met the Managing Director of CIDCO and having obtained an assurance that FSI-”1” will be restored, the petitioners agreed to execute the lease deeds. Besides, this question was discussed in the meeting held on 25/3/1987 when officials of CIDCO, representatives of various Government and Semi-Government Departments were present and in that meeting the then Managing Director of CIDCO decided that FSI-”1” would be restored provided the petitioners are willing to adhere to the existing rule that the initial construction should not be less than 0.5 FSI. The discussions held in the said meeting were reduced to writing in the form of minutes of the meeting. A copy of the same is annexed to the petition. The petitioners then addressed letter dated 27/3/1987 to CIDCO requesting that in terms of the said minutes of the meeting, amendment in respect of FSI-”1” be confirmed so that the lease agreements could be delivered to CIDCO. According to the petitioners, CIDCO did not confirm the allotment and/or correction of FSI-”1”. The petitioners, therefore, again by letter dated 15/4/1987 requested CIDCO to AJN 10 restore FSI-”1”. According to the petitioners, in the minutes of the meeting dated 25/3/1987, it has been clearly stated that the permission for construction would be granted to the petitioners on the basis of FSI-”1”. In the circumstances, the petitioners took all necessary steps to complete the formalities required by respondent 1 for granting permission for construction and restoration of FSI-”1”. The petitioners had several meetings with the Managing Director and concerned officers of CIDCO. However, CIDCO did not restore FSI-”1” and, therefore, the petitioners could not send their construction plans for approval. It is the case of the petitioners that in the circumstances, the petitioners had no option but to send a notice to CIDCO. The petitioners, therefore, through their advocates sent notice dated 25/4/1988 to CIDCO. 15. To the petitioners' surprise, all the petitioners received letters from CIDCO dated 19/10/1988 informing them that the management of CIDCO had cancelled the allotment of bungalow plots to the petitioners and, therefore, the petitioners are no more licensees in respect of the said bungalow plots. CIDCO further informed the petitioners that the development permission is refused under section 45 of the MRTP Act. A copy of one such letter is AJN 11 annexed to the petition as Ex-N. 16. Being aggrieved by the said action of CIDCO, the petitioners had filed writ petitions in this court. The said writ petitions were finally disposed of by the Division Bench of this court. The Division Bench set aside the order of cancellation of allotment and the order in respect of reduction of FSI passed by CIDCO upon a statement made by learned AGP that hearing will be given to the petitioners. One such order is annexed to the petition at Exhibit-'O'. 17. In terms of the said order dated 25/2/1993 of this court, CIDCO served upon the petitioners show cause notice dated 3/5/1993 calling upon them to say why the letters of allotment in respect of the said bungalow plots should not be declared as void under section 23 of the Contract Act, 1872 or in the alternative why FSI-”1” should not be reduced to 0.5 having regard to the low rate of premium charged. The said show cause notice contains following three grounds : “(a) that the allotment of the subject plots was done without inviting public tenders. AJN 12 (b) that the rate of premium charged by the respondent at Rs.150/- per sq. mtr. was lower than the market rate. (c) the petitioners being in a transferable service such allotment of residential plots is incorrect.” 18. The petitioners replied to the said show cause notice by advocates' letter dated 10/6/1993. The petitioners' advocate was accorded personal hearing by respondent 2 on 24/8/1998. Respondent 2, thereafter, passed order dated 22/9/1993, inter alia, declaring the allotment of bungalow plots as void and of no effect. In this petition filed under Article 226 of the Constitution of India, the petitioners have impugned the said order. The petitioners have also prayed that CIDCO may be directed to permit the petitioners to develop/construct the bungalow plots allotted as per the plans to be submitted through the architects of the petitioners on the basis of FSI-”1”. It is further prayed that respondents 1 and 2 be directed to execute the lease deeds in respect of the petitioners on the basis of FSI-”1” in terms of original agreements to lease. 19. We have heard Mr. Mehta, learned counsel appearing for the AJN 13 petitioners, at some length. He submitted that the action of cancellation of allotment by the respondents is arbitrary, perverse and mala fide. Learned counsel contended that the reasons given for cancellation are non-existent and unjustified as the allotments were made in favour of the petitioners consciously at the then prevailing market rate and after due consideration at the highest level by CIDCO. He submitted that Regulation 4 of the said Regulations specifically provides that the Corporation may dispose of the land by public auction or by tender or by considering individual applications as the Corporation may determine from time to time. Learned counsel submitted that the sale of property by public auction is not absolute rule, particularly in view of the fact that Regulation 4 of the said Regulations itself confers discretion on CIDCO as is evident from the language of the said Regulation which uses the word “may” therein. Learned counsel contended that by reason of doctrine of estoppel / promissory estoppel, CIDCO is estopped from cancelling the said allotment and reducing the FSI from “1” to “0.5”. He submitted that the petitioners have paid entire amount by raising the funds from different sources in 1986. They have acted upon the allotments. Plans for construction have been prepared. By application of doctrine of AJN 14 legitimate expectation, CIDCO is not justified in cancelling the allotments. Learned counsel submitted that the respondents being the State within the meaning of Article 12 of the Constitution of India were and are bound to act reasonably and bona fide. He submitted that the unilateral actions taken by the respondents are unreasonable, mala fide, perverse and arbitrary. Learned counsel submitted that it is well established that even in the matter of contract, public authorities are bound to act reasonably and bona fide. 20. Learned counsel heavily relied on the judgment of the Supreme Court in Sunil Pannalal Banthia & Ors. v. CIDCO & Anr., in Civil Application No.1219 of 2007 delivered on 8/3/2007. He submitted that the only question of law involved in the present petition is as to whether CIDCO has acted in excess of its jurisdiction and authority in cancelling the allotments made in favour of the petitioners on a unilateral decision that the allotment had been made in contravention of its rules and regulations and was thereby opposed to public policy and was void in terms of the provisions of section 23 of the Contract Act. Drawing our attention to the observations of the Supreme Court in Sunil Banthia's case (supra) that the stand taken by CIDCO is opposed to public policy as CIDCO was not entitled to take any unilateral decision to cancel AJN 15 the allotments, learned counsel submitted that in view of the said observations, the issue relating to allotments being void in terms of section 23 of the Contract Act no longer survives. 21. Learned counsel submitted that in the impugned order, the Managing Director has recorded a finding that there is no infringement of FSI Regulations and the premium paid by the petitioners is not less than the market rate. He submitted that, therefore, the petitioners are entitled to FSI “1” and for the lease of the said lands in their favour at the rates originally agreed. He submitted that the rate of Rs.150/- per sq. mtr. has been approved by the Board of Directors of CIDCO. Pursuant to the said confirmed allotments, all the petitioners have paid the amount. FSI which was originally sanctioned at “1” has been reduced to “0.5” by letter dated 2/2/1987 which has now been set aside by the impugned order. Thus the petitioners are entitled to the construction of FSI “1”. Learned counsel submitted that in the circumstances, the cancellation of allotment deserves to be set aside. Learned counsel submitted that the issue regarding CIDCO having suffered any loss by reason of the allotment having been AJN 16 made at the rate of Rs.150/- per sq. meter cannot be agitated in view of the categorical finding recorded in the impugned order that there is no undervaluation. 22. Learned counsel submitted that the action of CIDCO is violative of the fundamental rights of the petitioners under Articles 14, 19(1)(g), 21 and 300A of the Constitution of India. He submitted that the petitioners have acquired vested rights in respect of the said lands in view of the valid and legal allotment made in their favour and they cannot be now divested of their vested rights. He submitted that the petitioners have suffered sufficiently having been deprived of the rights to develop the said plots of land at the then prevailing rates. Learned counsel submitted that in the circumstances, the cancellation of allotment deserves to be set aside. 23. As against this, Mr. Hegde, learned counsel appearing for CIDCO took us through the written submissions filed on behalf of CIDCO and submitted that the petitioners are, in effect, seeking specific performance of the agreement to allot the lands. He submitted that such a relief cannot be claimed in a writ petition and, AJN 17 hence, on that ground alone, this petition ought to be dismissed. It is the case of CIDCO as stated in the written submissions that CIDCO has obligation to develop Navi Mumbai and in this regard it has earmarked various plots for various purposes. In this case, the petitioners have been granted a plot of land for residential purpose without inviting any tender. It is submitted that though Regulation 4 of the said Regulations envisages disposal of plots of land, even on the basis of individual application, Regulation 4 can be resorted to only in cases where there is no demand for the plot of land. Ideally tenders have to be invited or auction has to be held for sale of plots as they can fetch higher price and, there will be participation by persons from different classes of the society. It is further submitted that in this case, there is a demand for plots of land. By allotting lands on the basis of individual applications, persons from different cross sections of the society are not allowed to participate in the process of purchase of plots. Further case of CIDCO as appearing in the written submissions is that market rate was not charged and only the rate fixed by CIDCO was charged. It is submitted that a higher rate could have been fetched if tenders were invited. It is further submitted that the judgment of the Supreme Court in Sunil AJN 18 Pannalal Banthia's case (supra) can be distinguished from the facts of this case as in that case, one of the factors considered by the Supreme Court was that there was some construction carried out on the plot of land by the Banthias. However, in the present case, there is no such construction. Reliance is placed on the judgment of the Supreme Court in Haji T.M. Hassan vs. Kerala State Financial Corporation, AIR 1988 SC 157, where the Supreme Court has held that granting land is not a largess and it is desirable to invite tenders. Reliance is also placed on the judgment of the Supreme Court in Padma v. Hiralal Motilal Desarda & Ors., AIR 2002 SC 3252. It is submitted that if the present case is considered in the light of observations made by the Supreme Court in Haji T.M. Hassan's case (supra), and several other cases where the Supreme Court has taken similar view, no fault could be found with the action of the CIDCO and the petition will have to be, therefore, dismissed. 24. Since heavy reliance is placed on Sunil Pannalal Banthia's case (supra), it is necessary to refer to that judgment at the outset. In that case, CIDCO had issued a letter of allotment of a AJN 19 commercial plot measuring 1453.75 sq. mtrs. on lease in Plot No.1 in Section 9, Panvel, Navi Mumbai for a period of 60 years for a premium of Rs.2,12,24,750/- in favour of Mrs. Meera Balkrishna Dhumale and Mrs. Neeta Hemant Patankar jointly. The original allottees applied for transfer of the said plot to the appellants- Banthias. Upon accepting the transfer charges of Rs.2 lacs, CIDCO issued a corrigendum to the original allotment letter dated 5/2/2004 and executed a deed of lease in favour of the appellants on receipt of full lease premium. CIDCO also executed a deed of confirmation in favour of the appellants and issued the development permission and commencement certificate in terms of section 45 of the MRTP Act. On the basis of the above, the appellants commenced the construction work and proceeded upto first floor and also completed the construction of the underground water tank. On 19/7/2005, CIDCO issued a show cause notice to the appellants to show cause why the agreement to lease should not be terminated as being void under section 23 of the Contract Act. The appellants replied to the show cause notice. Despite the same, on 29/3/2006, CIDCO passed an order terminating the agreement of lease and demanded return of possession of the allotted plot. AJN 20 25. The appellants filed a writ petition in this court against CIDCO challenging the show cause notice dated 19/7/2005 and the order dated 29/3/2006 terminating the agreement of lease. This court dismissed the writ petition on the ground that alternative remedy was available to the petitioners. A special leave petition was filed in the Supreme Court challenging the said order. 26. Upon consideration of rival contentions, the Supreme Court observed that the legal position is quite obvious that having acted and held out the assurances to the appellants, which caused the appellants to alter their position to their prejudice, it was not open to CIDCO to take a unilateral decision to cancel the allotment on the ground that it had acted without jurisdiction and/or in excess of jurisdiction and in violation of its rules and regulations. The Supreme Court further observed that the argument advanced on behalf of CIDCO even as regards its decision to cancel the allotment, it being in violation of section 23 of the Contract Act is unacceptable having regard to Regulation 4 of the said Regulations which empowered CIDCO to dispose of plots of land even on the basis of individual applications. The argument that the decision to AJN 21 cancel the allotment was taken because the allotment was opposed to public policy was rejected by the Supreme Court by observing that in fact the stand taken by CIDCO is opposed to public policy since CIDCO was not entitled to take unilateral decision to cancel the allotment after the appellants had acted on the basis thereof and had expended large sums of money towards the construction which had progressed to some extent. The Supreme Court observed that the said Regulations allowed CIDCO to entertain individual applications for allotment. The Supreme Court rejected the argument that the allotment was contrary to public policy on a fresh consideration made by the Board of Directors of CIDCO upon considering the recommendations made by Dr. D.K. Shankaran, the then Additional Secretary (Planning) of the State of Maharashtra. The Supreme Court observed that Dr. Shankaran had been appointed by the State Government in January, 2005 to conduct a discreet inquiry into the allotments of certain