1 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 07.03.2011 CORAM: THE HON'BLE MS. JUSTICE K. SUGUNA AND THE HON'BLE MR. JUSTICE A. ARUMUGHASWAMY W.A. (MD) No.271 of 2011 & MD (MD) No.1 of 2011 R. Banuraman Appellant/Petitioner vs. 1 The State of Tamil Nadu represented by Secretary to Government Revenue Department Fort St. George Chennai 600 009 2 The Special Commissioner and Commissioner of Land Administration Chepauk Chennai 600 005 3 The District Collector Pudukkottai District Pudukkottai 4 The District Revenue Officer Pudukkottai Pudukkottai Respondents/Respondents Writ Appeal filed under Clause 15 of the Letters Patent as against the order dated 16.09.2010 passed in W.P. (MD) No.7022 of 2005. W.P.(MD) No.7022/2005 : Petition under Article 226 of the constitution of India for the issuance of a writ of certiorarified mandamus to call for the records in connection with the impugned order passed by the first respondent vide G.O.MS.No.328 (Revenue Department), dated 26.05.2005, quash the same and direct the first respondent to grant/Extend lease in respect of an extent of 20.5 cents S.No.40/2 Rathinakottai Village, Aranthangi Taluk, Pudukkottai District, by reclassifying the Land as per the usage or by relaxing the temporary ban or the general prohibition if necessary regarding the assignment or grant of lease. For appellant Mr. S.S. Sundar For respondents Mr. M. Rajarajan, Govt.Advocate JUDGMENT (Judgment of the Court was delivered by K. SUGUNA, J.) This writ appeal is filed as against the order dated 16.09.2010 passed by a learned Single Judge of this Court in W.P. No.7022 of 2005. 2. The above said writ petition was filed challenging G.O. Ms.No.328, Revenue Department dated 26.05.2005 whereby the writ petitioner's request for extension of lease was rejected. https://hcservices.ecourts.gov.in/hcservices/ 2 3. The case of the appellant/writ petitioner is that she was granted lease of the land comprised in S. No. 40/2 in Rathinakottai Village, Aranthangi Taluk, Pudukkottai District and the said land was classified as Nedunkulam Poramboke land; as per the lease agreement entered into, the lease was over by 08.06.2000; subsequently, the lease was not extended and the petitioner's request to extend the lease also was rejected by the above said Government Order. 4. According to the learned counsel for the appellant/writ petitioner, the rejection order is prima facie illegal. In support of this contention, the learned counsel for the appellant/writ petitioner has submitted that as far as the other tank is concerned, extension of lease has been granted, whereas, as far as Nedunkulam Poramboke land is concerned, extension of lease has been refused, consequently, this is in violation of Article 14 of the Constitution of India. The other submission of the learned counsel for the appellant/writ petitioner is that even in this particular survey number also, there are a number of individuals who are encroachers of a portion of the said survey number and they are allowed to continue, whereas, the appellant/writ petitioner's request for extension of lease has been rejected by the Government Order impugned in the writ petition; besides, when encroachers have been allowed to continue, the appellant/writ petitioner should not be subjected to a different treatment. The learned counsel for the appellant/writ petitioner has further submitted that the order impugned in the writ petition is not supported by a proper reason and any order which does not contain a proper reason is prima facie illegal. In support of this contention, the learned counsel for the appellant/writ petitioner has relied on paragraph no.12 of the judgment reported in AIR 1990 SC 1031, Mahabir Auto Stores and Others vs. Indian Oil Corporation and Others which reads as follows: "12. 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 Radha Krishna Agarwal v. State of Bihar. It appears to us, at the outset, that in the facts and circumstances of the case, the respondent company IOC is an organ of the State or an instrumentality of the State as contemplated under Article 12 of the Constitution. The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under Article 14 can be checked. See Radha Krishna Agarwal v. State of Bihar at p. 462, but Article 14 of the Constitution cannot and has not been construed as a charter for judicial review of State action after the contract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. In a situation of this nature certain activities of the respondent company which constituted State under Article 12 of the Constitution may be in certain circumstances subject to https://hcservices.ecourts.gov.in/hcservices/ 3 Article 14 of the Constitution in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration; it depends upon facts and circumstances of a particular transaction whether hearing is necessary and reasons have to be stated. 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. In this connection reference may be made to E.P. Royappa v. State of Tamil Nadu, Maneka Gandhi v. Union of India, Ajay Hasia v. Khalid Mujib Sehravardi, R.D. Shetty v. International Airport Authority of India and also Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay. 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." Apart from this, the learned counsel for the appellant/writ petitioner has submitted that the decision-making process should be proper and there should not be any arbitrariness in the process of decision-making. In support of this contention, the learned counsel for the appellant/writ petitioner has relied on paragraph nos.7 and 8 of the judgment reported in AIR 1993 SC 1601, Food Corporation of India vs. Kamadhenu Cattle Feed Industries which read as follows: "7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is ‘fairplay in action’. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, https://hcservices.ecourts.gov.in/hcservices/ 4 therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review. 8. The 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 requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant’s perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent." With regard to his other submission in relation to the doctrine of legitimate expectation, the learned counsel for the appellant/writ petitioner has relied on paragraph nos. 17, 18, 20 and 28 of the judgment reported in (1993) 1 SCC 445, Sterling Computers Limited vs. M & N Publications Limited and Others which read as under: "17. It is true that by way of judicial review the Court is not expected to act as a court of appeal while examining an administrative decision and to record a finding whether such decision could have been taken otherwise in the facts and circumstances of the case. In the book Administrative Law, Prof. Wade has said: “The doctrine that powers must be exercised reasonably has to be reconciled with the no less important doctrine that the court must not usurp the discretion of the public authority which Parliament appointed to take the decision. Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion. If it passes those bounds, it acts ultra vires. The court must therefore resist the temptation to draw the bounds too tightly, merely according to its own opinion. It must strive to apply an objective standard which leaves to the deciding authority the full range of choices which legislature is presumed https://hcservices.ecourts.gov.in/hcservices/ 5 to have intended. The decisions which are extravagant or capricious cannot be legitimate. But if the decision is within the confines of reasonableness, it is no part of the court’s function to look further into its merits. ‘With the question whether a particular policy is wise or foolish the court is not concerned; it can only interfere if to pursue it is beyond the powers of the authority.” But in the same book Prof. Wade has also said: “The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his dependants, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things unless it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. There are many cases in which a public authority has been held to have acted from improper motives or upon irrelevant considerations, or to have failed to take account of relevant considerations, so that its action is ultra vires and void.” 18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the “decision making process”. In this connection reference may be made to the case of Chief Constable of the North Wales Police v. Evans8 where it was said that: (p. 144a) “The purpose of judicial review is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorised or enjoined by law to decide for itself a conclusion which is correct in the eyes of the court.” By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans the courts can certainly examine whether “decision-making process” was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution. 20. In support of the stand that it was open to the MTNL to negotiate with the UIP/UDI/Sterling for purpose of publication of the directories for Delhi and Bombay without inviting tenders, reliance was placed on behalf of the appellants on the https://hcservices.ecourts.gov.in/hcservices/ 6 judgments of this Court in the cases of Kasturi Lal Lakshmi Reddy v. State of J & K; State of M.P. v. Nandlal Jaiswal; Sachidanand Pandey v. State of W.B. and G.B. Mahajan v. Jalgaon Municipal Council. 28. Philanthropy is no part of the management of an undertaking, while dealing with a contractor entrusted with the execution of a contract. The supply of the directories to public in time, was a public service which was being affected by the liberal attitude of the MTNL and due to the condonation of delay on the part of the UIP/UDI. There was no justification on the part of the MTNL to become benevolent by entering into the supplemental agreement with no apparent benefit to the MTNL, without inviting fresh tenders from intending persons to perform the same job for the next five years. Public authorities are essentially different from those of private persons. Even while taking decision in respect of commercial transactions a public authority must be guided by relevant considerations and not by irrelevant ones. If such decision is influenced by extraneous considerations which it ought not to have taken into account the ultimate decision is bound to be vitiated, even if it is established that such decision had been taken without bias. The contract awarded for the publication of the directories had not only a commercial object but had a public element at the same time i.e. to supply the directories to lakhs of subscribers of telephones in Delhi and Bombay, every year within the stipulated time free of cost. In such a situation MTNL could not exercise an unfettered discretion after the repeated breaches committed by UIP/UDI, by entering into a supplemental agreement with the Sterling for a fresh period of more than five years on terms which were only beneficial to UIP/UDI/Sterling with corresponding no benefit to MTNL, which they have realised only after the High Court went into the matter in detail in its judgment under appeal." and based on the portion extracted above, the learned counsel for the appellant/writ petitioner has submitted that a public authority, while taking a decision, must act reasonably and when the decision is not supported by a proper reason, the order is subject to judicial review. Besides, relying on paragraph no. 27 of the judgment reported in (1995) 5 SCC 482, LIC of India and another vs. Consumer Education and Research Centre and others which reads as under: "27. In the sphere of contractual relations the State, its instrumentality, public authorities or those whose acts bear insignia of public element, action to public duty or obligation are enjoined to act in a manner i.e. fair, just and equitable, after taking objectively all the relevant options into consideration and in a manner that is reasonable, relevant and germane to effectuate the purpose for public good and in general public interest and it must not take any irrelevant or irrational factors into consideration or appear arbitrary in its decision. Duty to act fairly is part of fair procedure envisaged under Articles 14 and 21. Every activity of the public authority or those under public duty or obligation must be informed by reason and guided by the public interest." https://hcservices.ecourts.gov.in/hcservices/ 7 it is the stand of the learned counsel for the appellant/writ petitioner that the State, its instrumentality and public authorities have to take into consideration, all the relevant options into consideration for public good and in public interest. Further, relying on paragraph no.23 of the judgment reported in (1989) 3 SCC 293, Dwarkadas Marfatia and Sons vs. Board of Trustees of the Port of Bombay which reads as under: "23. The contractual privileges are made immune from the protection of the Rent Act for the respondent because of the public position occupied by the respondent authority. Hence, its actions are amenable to judicial review only to the extent that the State must act validly for a discernible reason not whimsically for any ulterior purpose. Where any special right or privilege is granted to any public or statutory body on the presumption that it must act in certain manner, such bodies must make good such presumption while acting by virtue of such privileges. Judicial review to oversee if such bodies are so acting is permissible." the learned counsel for the appellant/writ petitioner has submitted that the public decision should not be arbitrary and if it is arbitrary, the same can be subject to judicial review and as far as the case in hand is concerned, no action has been taken as against the encroachers and if the appellant/writ petitioner's request for extension of lease is rejected based on the orders passed by this Court where this Court has given a direction to restore the water source area, though as per the classification of land, this land is a water source area, actually, it is not so and it is only commercial in nature, consequently, the reason based on which the impugned order is passed is arbitrary; any action which is not in accordance with the rules and which involves violation of equity, certainly, the same can be agitated. In support of this contention, the learned counsel for the appellant/writ petitioner has relied on paragraph no.41 of the judgment reported in (1995) 2 SCC 326, U.P. Awas Evam Vikas Parishad vs. Gyan Devi and Others which reads as under: "41. Coming back to the issue, what flows from the entitlement to lead evidence? The principle of natural justice, as a part of procedural law, developed by this Court and English courts has been applied and extended to quasi-judicial proceedings and administrative matters to ensure that no one is adversely affected without reasonable opportunity and fair hearing. No order can be passed without hearing a person if it entails civil consequences. But what about those situations where, as in the present case, the legislature stops short by providing an option to appear only. The local body cannot claim to be impleaded as a matter of right. Nor can it invoke the principle of natural justice. Yet it is entitled to lead evidence. It may or may not. The latter does not present any difficulty. But if it intends to lead evidence then no mechanism has been provided to enable it to exercise its option. In situations where even though a person has no enforceable right yet he is affected or likely to be affected by the order passed by a public authority the courts have evolved the principle of legitimate expectation. The expression which is said to have https://hcservices.ecourts.gov.in/hcservices/ 8 originated from the judgment of Lord Denning in Schmidt v. Secy. of State for Home Affairs is now well established in public law. In Attorney General of Hong Kong v. Ng Yuen Shiu Privy Council applied this principle where expectations were “based upon some statement or undertaking by or on behalf of, the public authority” and observed: “Accordingly ‘legitimate expectations’ in this context are capable of including expectations which go beyond enforceable legal rights, provided they have some reasonable basis. A person may have a legitimate expectation of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment.” Fair procedure and just treatment is the core of our jurisprudence. No one should suffer for omission in law or technicalities in rules. Therefore when the law permits the local body to lead evidence then it is implicit in it that the local authority can legitimately expect to be informed or intimated of the proceedings. It would be in consonance with principle of fairness. Otherwise the right to lead evidence shall hang on the oft-chance of the authority having come to know of the proceedings. In English cases referred to earlier inference was drawn on existence of such right as it would have otherwise worked harshly against the person who was affected even though there were no legal provisions or rules permitting any hearing. Sub-section (2) of Section 50 stands on a higher footing. It entitles the local body to lead evidence. This furnishes reasonable basis to infer that the local body legitimately expects to be informed or intimated of the proceedings. It is an assurance in law of intimation about pendency of the proceedings. How else it is going to exercise the right of assisting in determination of compensation. The entitlement to lead evidence in the absence of intimation may, at times, turn out to be an empty formality. Consequently the Collector and the court are impliedly obliged to intimate the local authority about the pendency of the proceedings and its right to lead evidence. The expression “may appear and adduce evidence” can be effective and meaningful, only, if the person who is entitled to lead evidence is either aware or made aware of it. If such a person is aware and does not choose to appear then it may be said that it cannot at a subsequent stage claim that even though it was aware and did not appear yet the order against it may be set aside as it should have been made aware. But if he is not aware and if he would have been made aware then he would have led evidence which would have assisted the authority in determination of compensation which could be possible only if such person is informed or intimated of the proceedings. Therefore, to obviate any dispute in future proceedings it appears appropriate to hold that even though the language of the section does not provide for issuance of any notice it is incumbent on the Collector or the court while determining compensation to