SCA/12312/2007 1/65 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 12312 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE M.S.SHAH HONOURABLE MR.JUSTICE K.A.PUJ ================================================= 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 ? ================================================= SACHIN WATER SUPPLY COMPANY PVT. LTD. - Petitioner(s) Versus G.I.D.C. & 3 - Respondent(s) ================================================= Appearance : MR ND NANAVATI with MR PR NANAVATI for Petitioner(s) : 1, MR SN SHELAT with MR MITUL K SHELAT for Respondent(s) : 1, 4, NOTICE SERVED BY DS for Respondent(s) : 2, MRS KETTY A MEHTA for Respondent(s) : 3, ================================================= CORAM : HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE K.A.PUJ Date : 20 /12/2007 C.A.V. JUDGMENT (Per : HONOURABLE MR.JUSTICE K.A.PUJ) 1. The petitioner, namely, M/s. Sachin Water Supply Company Ltd., has filed this petition under Article 226 of the Constitution of SCA/12312/2007 2/65 JUDGMENT India challenging the communication dated 3.8.2006 received from the respondent No.1 i.e. Gujarat Industrial Development Corporation reducing the period of contract entered into by and between the petitioner and the respondent No.1 from 5 years to 3 months and further challenging the communication dated Nil directing the petitioner to stop the work of water supply in the Sachin Industrial Estate with effect from 4.5.2007 alleging that the same are arbitrary, illegal, against the public policy, violative of principle of natural justice and, therefore, violative of Articles 14 and 19(i)(g) of the Constitution of India. The petitioner has also challenged the action of the respondent No.1 to give away the contract in question to the respondent No.3 i.e. M/s. Sachin Infra Management Ltd., on the same grounds as the said action of the respondent No.1 is also arbitrary violative of Articles 14 and 19(i)(g) of the SCA/12312/2007 3/65 JUDGMENT Constitution of India. 2. The brief facts giving rise to the present petition are that the petitioner is engaged in the business of running, maintaining and providing water supply in Sachin industrial estate of GIDC and as such the petitioner is engaged in the said business since 1990-2000. The Chairman of the petitioner company is also Chairman and Managing Director of one M/s. Suman Silk Mills Pvt. Ltd., and has been carrying on business of producing man made and synthetic textile materials since 1984. 3. It is the case of the petitioner that Sachin GIDC is a water scarcity area and earlier there was no proper permanent arrangement made by respondent No.1 Corporation for supply of water to the industrial units situated in Sachin Industrial Estate. When the canal supplying water to Sachin GIDC was required to be SCA/12312/2007 4/65 JUDGMENT closed the office bearers of the Association started discussions to find out an alternative for supply of water to which the petitioner had shown its willingness to supply water to Sachin industrial area. The said offer of the petitioner was accepted. Though it was not given a shape of formal contract, the petitioner was allowed to take steps in the direction of supplying water in the Sachin industrial estate. No sooner the petitioner started the said work, the said decision of the office bearers of association as well as respondent No.1 Corporation was not acceptable to all the members and hence some trouble makers/individual members had approached this Court by preferring various petitions being Special Civil Application Nos. 9407/2000, 10382/2000 and 12310/2000 inter alia challenging the Resolution passed by respondent No.1 giving work of water supply to the petitioner. Ultimately all these petitions were disposed of by this SCA/12312/2007 5/65 JUDGMENT Court and interim relief granted earlier came to be vacated. Subsequently a written contract was entered into by and between the respondent No.1 Corporation and the petitioner on 24.4.2001 for five years period. The tenure of the said contract came to an end on 31.3.2006. The question, therefore, again arose. A Water committee was formed in the Sachin GIDC for smooth supply of water to the units. In the meeting held on 12.6.2006 of Water Committee a decision was taken to continue the petitioner for operation, supply and maintenance of water supply of Sachin GIDC for a period of 5 years with effect from 1.7.2006 on certain terms and conditions. 4. It is the case of the petitioner that the petitioner continued its job and discharged its duties with utmost sincerity. However, to the shock and surprise of the petitioner and for the reasons best known to the SCA/12312/2007 6/65 JUDGMENT respondent No.1 Corporation, a letter dated 3.8.2006 was issued terminating the services of the petitioner and informing that the period mentioned in the earlier letter dated 30.6.2006 of 5 years should be read as 3 months instead of 5 years. The respondent Corporation has, thus taken unilateral decision without even affording formal opportunity of being heard to the petitioner and without disclosing any reason for the said decision. On receipt of this communication the petitioner inquired into the matter as to what was the reason for revising the decision by the respondent No.1 Corporation for reducing work contract from a period of 5 years to 3 months. Initially, the petitioner was given to understand that since the extension of contract for a period of 5 years was given without inviting offer and the decision of the respondent No.1 Corporation might be considered as contrary to public policy. Subsequently the petitioner SCA/12312/2007 7/65 JUDGMENT came to know that it was done by the respondent No.2 i.e. Executive Engineer of the respondent No.1 Corporation at the instance of one Mr. Maganbhai Patel who is also President of Sachin Industrial Estate and the Chairman of respondent No.3, who managed to see that the work of petitioner was disturbed by using his influence at the highest level and because of his intervention, the decision taken for awarding contract by extending it for further period of 5 years was changed over night. 5. It is also the case of of the petitioner that one fine morning a decision was taken to give away contract to respondent No.3, without following due process at the behest of Mr. Maganbhai Patel and the petitioner was served with a communication dated Nil to stop work with effect from 4.5.2007. The petitioner was very much shocked and surprised as despite the fact that the SCA/12312/2007 8/65 JUDGMENT decision was taken by the respondent No.1 Corporation at the highest level of inviting bids and despite the further fact that once the contract having been given to the petitioner for further period of 5 years, in an absolutely surreptitious manner, the decision was taken to give away contract, without inviting tenders, in favour of respondent No.3. It is this action of respondent No.1 Corporation which is challenged in the present petition. 6. Mr. N.D. Nanavati, learned Senior Counsel appearing with Mr. P.R. Nanavati, learned advocate for the petitioner has submitted that the impugned action of the respondent No.1 Corporation is wholly arbitrary, illegal, void ab initio and has been taken without affording any opportunity of hearing to the petitioner and, therefore, the said action is violative of principle of natural justice and is also violative of Articles 14 SCA/12312/2007 9/65 JUDGMENT and 19(i)(g) of the Constitution of India and, therefore, the said decision deserves to be quashed and set aside. He has further submitted that the petitioner has been given extension of contract for a further period of 5 years with effect from 1.7.2006, and hence the respondent No.1 Corporation is estopped from reducing the same for a period of 3 months. The principle of estoppal will apply to the Government authorities with full force. He has further submitted that the very first order dated 3.8.2006 is arbitrary and the respondent Nos.1 and 2 are estopped from passing such order reducing the period of contract from 5 years to 3 months. He has, therefore, submitted that all the subsequent decisions of the respondents will ipso facto be required to be quashed and set aside. He has further submitted that impugned decision of the respondent is also bad inasmuch as the petitioner is under the legitimate expectation to have the contract SCA/12312/2007 10/65 JUDGMENT period extended for a further period of 5 years, once the decision having been taken after lot of discussion and deliberations by the Water Committee consisting of major water consumers in the Sachin Industrial Area. He has further submitted that though the tenure of earlier contract came to an end on 31.3.2006 the petitioner, without any expectation of claiming price escalation and revision in terms of contract, continued water supplying to the Sachin GIDC without interruption and without entering into formal agreement. Ultimately looking to the good past record of the petitioner a conscious decision was taken to extend contract for further period of 5 years, whereby the petitioner had changed its position and under the anticipation of renewal of contract for a further period of 5 years the petitioner further invested a sum of Rs.80 lacs to meet with future requirements by purchasing gas generator, repairing and maintaining the SCA/12312/2007 11/65 JUDGMENT pipelines for water supply during intervening period just prior to the date when contract was formally extended for a further period of 5 years after receiving clear indication from Water Committee that they in principle have taken decision to extend period of contract for further period of 5 years. He has, therefore, submitted that in view of these circumstances, it is not open for the respondents to discontinue contract all of a sudden. Apart from this looking to all the accounts and other terms and contracts, the petitioner has been put to lurch where petitioner will have a great adverse financial impact because at the time when the petitioner was informed to stop work with effect from 4.5.2007 no decision was taken as to what would happen to the security deposit of Rs.3 crores lying with respondent No.1 Corporation, what would happen to recovery of amount from various industrial units for water supplied to them during continuance of SCA/12312/2007 12/65 JUDGMENT contract period which comes to about Rs.1.30 crores. No decision was also taken as to what will happen to the outstanding amount of the petitioner from GIDC – respondent No.1 and what will happen to the inventories covering items worth Rs.20 lacs. 7. Mr. Nanavati has further submitted that one Mr. Pandol, who is the Chairman of the Area Development Authority has represented before the respondent No.1 Corporation and has taken very strong objection against giving away a contract in favour of respondent No.3 as it is not a bonafide and genuine party according to him. It is alleged that several discrepancies were found in the name as different names exist, one as per GIDC record and another as per the Registrar of Companies. When the search was carried out on the respondent No.3 Company all these facts have come to surface. The name, share capital, name of Board Directors did not SCA/12312/2007 13/65 JUDGMENT tally. The petitioner also got search in the office of Registrar of companies and it was found that the anxiety shown by Mr. Pandol was fully justified. The genuineness of the respondent No.3 Company is very much doubtful and, therefore the decision to hand over the contract to the respondent No.3 should not be implemented unless and until all these clouds are removed. Mr. Nanavati further submitted that in fact, the petitioner was not served with any letter and his contract came to be terminated and in his place respondent No.3 was inducted. Except the fact that on 5.5.2007 representative of respondent No.3 alongwith respondent No.2 came at the site to take possession and though the petitioner demanded letter giving away contract in favour of respondent No.3 on 4.5.2007 onwards, the same was not given to the petitioner and the petitioner was kept absolutely in dark by the respondents. He has, therefore, submitted that the whole SCA/12312/2007 14/65 JUDGMENT exercise is completely unjustified and contrary to the law of estoppal and principle of equity and justice. 8. This Court issued notice on 8.5.2007 and observed that on the returnable date the Court would consider the petitioner's prayer for mandatory relief in view of the decision of the Hon'ble Supreme Court in the case of Deoraj Vs. State of Maharashtra and others, (2004) 4 SCC 697. 9. On service of notice Mr. S.N. Shelat, learned Senior Counsel with Mr. Mitul Shelat appeared on behalf of respondent Nos.1 and 4 and Mrs. Ketty A. Mehta, learned advocate appeared on behalf of respondent No.3. The first affidavit-in-reply was filed on behalf of respondent No.2 on 8.6.2007. A preliminary objection was raised against the maintainability of the petition. It is stated therein that the agreement with the SCA/12312/2007 15/65 JUDGMENT petitioner has come to an end and the respondent No.3 has taken over the management and supply of water in the area and, therefore, petition deserves to be dismissed in limine. It is further stated that the respondent No.1 Corporation has to ensure the allottees of Sachin Industrial Estate regular supply of water at economical rate without interruption. The water supply scheme has to be maintained and run in efficient manner, so that the water rate can properly be framed. It is further submitted that out of all industrial units, a few processing units consume bulk of the water supply. The rest of the industrial units which constitute the majority consume limited quantity of water. There is, therefore, a conflict of interest between various units. The major water consumers would desire to have water at the cheapest possible rate which may not be a major concern for the rest of the majority of units. The operation and maintenance of SCA/12312/2007 16/65 JUDGMENT Sachin Water Supply Scheme was given to the petitioner Company from 31.3.2001 for a period of 5 years. The Board of GIDC resolved to extend the period for 3 months vide its resolution dated 13.4.2007 i.e. upto 30.6.2006. The Board also resolved to form a Water Committee. The Water Committee was to take decision for maintenance and operation of the water supply scheme. On 12.6.2006, the Committee resolved to extend the agreement with the petitioner for a period of 5 years from 1.7.2006. The Corporation also resolved that the water supply scheme be transferred to the Sachin Notified Area Authority with effect from 1.7.2006. There were representations from the recognised Industrial Association of Sachin Industrial Estate, namely, Sachin Industrial Cooperative Society, against maintenance of the scheme by the petitioner. A decision therefore, was taken that open offers should be invited from the interested eligible parties and SCA/12312/2007 17/65 JUDGMENT thereafter, the selection be made. A bid document accordingly was prepared by the respondent No.1 Corporation and was sent to Sachin Notified Area Authority to be approved and bids to be invited by Sachin Notified Area Authority. However, there were representations again by the Association, namely, Sachin Industrial Cooperative Society against the open bidding procedure. As a consequence, the bid document could not be approved by the Sachin Notified Area Authority and bids were not invited. In the meanwhile, there was a demand from the Association to hand over the scheme to the respondent No.3 – Company incorporated under Section 25 of the Companies Act promoted by the Association. A meeting was held under the Chairmanship of the Principal Secretary (Industries) on 22.2.2007 and at the said meeting it was decided that in the light of resistance by the Association to invite open offer, the scheme be handed over to SCA/12312/2007 18/65 JUDGMENT respondent No.3 on fulfillment of certain conditions. A draft agreement was also prepared in the meanwhile and draft agreement was circulated to respondent No.3 on 27.4.2007. The draft agreement was approved on 3.5.2007. The agreement was duly executed by and between all the parties for handing over the contract to the respondent No.3 and the possession was handed over to the respondent No.3 on 5.5.2007. 10. Affidavit-in-reply was filed by one Shri R.B.Gohil - Notified Area Officer, GIDC on behalf of respondent No.4. It is more or less on the same line on which the affidavit- in-reply was filed on behalf of respondent No.2. It is also confirmed in the said affidavit-in-reply that the agreement was executed between the parties and thereupon the respondent No.3 took over the possession, operation and management of water supply scheme on 5.5.2007. SCA/12312/2007 19/65 JUDGMENT 11. Affidavit-in-reply is filed by Shri Maganlal Patel – President of M/s. Sachin Infra Management Company Ltd – respondent No.3. Mrs. Ketty A. Mehta, learned advocate appearing for respondent No.3 has vehemently opposed the petition and submitted that it is not at all maintainable as it is relating to specific performance of a contract between the petitioner and respondent No.1 Corporation. The agreement on water supply has already been entered into between respondent No.3 and respondent No.1 on 4.5.2007 and in view of the said agreement possession of the infrastructure and work of water supply was also handed over to respondent No.3 Company. She has further submitted that several disputed questions of facts pertaining to termination of contract between the petitioner and respondent No.1 Corporation and also pertaining to the other disputes about handing over possession are SCA/12312/2007 20/65 JUDGMENT raised by the petitioner. She has, therefore, submitted that the petition raises disputed questions of fact which cannot be decided in a writ petition. 12. Mrs. Mehta has further submitted that the respondent No.1 Corporation has entered into contract for supply of water with petitioner Company which was contrary to the policy of the respondent No.1 Corporation as decided with the approval of the Industrial Department of the State of Gujarat in July, 2004. A communication addressed to the Federation of the Industrial Associations, Gujarat by the GIDC clearly states that on 29.5.2004 in a joint meeting of the Hon'ble Minister for Industries and the representatives of the Federation of Industrial Associations and the Officers of the GIDC, it was decided that the work of water supply to various industrial associations should be entrusted to the SCA/12312/2007 21/65 JUDGMENT Municipality / notified area authority / industrial associations. The same should be handed over in accordance with priority. It is, therefore, clear that it was decided to hand over the work of water supply to the industrial unit in GIDC Estate, firstly to the Municipality, failing which the notified area authority and failing which to the industrial association. She has, therefore, submitted that the private party was not to be given any contract for supply of water. She has further submitted that there are 38 industrial estates in the State of Gujarat and except Sachin Industrial Estate in no other industrial estate of GIDC water supply was given to a private Company. She has, therefore, submitted that for the reasons best known to the technical staff of GIDC at Sachin the contract for water supply to a private Company like the petitioner was continued. SCA/12312/2007 22/65 JUDGMENT 13. Mrs. Mehta further submitted that as far as Sachin Industrial Estate is concerned, several complaints were made by the industrial units against the petitioner company in relation to supply of water as well as connections given by them. The complaints were made since 2003 by various units. It was also pointed out in the said complaint that some of the industrial units were made to pay extra deposits of lacs of rupees for higher volume of water. It was also alleged that the Chairman of the petitioner Company has been acting as per his own whims and the industries are kept under pressure by him. She has further submitted that because of various complaints and because of giving contract to a private Company contrary to the policy of the Corporation, the association of units decided to register a company incorporated under Section 25 of the Companies Act for the purpose of supplying water at a reasonable SCA/12312/2007 23/65 JUDGMENT rate and consistently and regularly and applying profit, if any, for promoting its object and to give any dividend to its members. The respondent No.3 Company, namely, Sachin Infra Management Ltd., was incorporated on 14.6.2006. The main object of the Company is to undertake, promote, encourage, aid organize, assist, plan, design and develop all the service areas for development of Sachin GIDC Industrial Estate including providing water and other basic facilities and infrastructure. After incorporation of respondent No.3 Company representing industrial units in Sachin Estate it was incumbent on the part of the GIDC to immediately allow them to start working. However, the technical staff of the Corporation at the local level not only strongly resisted but all efforts are made not to discontinue the services of private company like the petitioner and not to allow the respondent No.3 Company to start its work SCA/12312/2007 24/65 JUDGMENT of water supply. 14. She has further submitted that on 22.2.2007 a joint meeting was held in the chamber of the Principal Secretary (Industries) with the officers of the Corporation, representatives of the Sachin Industrial Cooperative Society and also the representatives of Sachin Textile Processing Industries Welfare Association and the members of the major water consumption committee. In the said meeting after discussion as to whether bids should be called for from private companies for water supply to Sachin Industrial Unit or work should be handed over to the respondent No.3 Company, a final and conclusive decision was taken to hand over work of water supply to respondent No.3 Company. She has further submitted that despite the fact that the decision was taken on 22.2.2007 to hand over the work of water supply to respondent No.3 SCA/12312/2007 25/65 JUDGMENT no action was taken by the technical staff. At the local level a letter was addressed on 4.5.2007 by the Executive Engineer to the petitioner Company stating therein that on 11.4.2007 inventory / verification was done as far as the petitioner Company is concerned and according to the decision taken with immediate effect water supply scheme is taken over from the petitioner on 4.5.2005. 15. Mrs. Mehta has further submitted that a misleading statement is made before this Court by the petitioner as well as Executive Engineer that possession was not taken over from the petitioner. She has further submitted that another misleading statement made in the petition is that respondent No.3 took possession by any coersion or by threatening the Notified Area Authority. The true facts are that after the agreement was entered into between the Corporation and respondent No.3 Company representatives of SCA/12312/2007 26/65 JUDGMENT the respondent No.3 Company had gone to the place from where water supply was to be made so that the infrastructure can be taken over and improved. In fact, as far as the petitioner is concerned it had already removed the necessary equipment and stopped water supply from where the petitioner was getting water supply. The Notified Area Officer was reluctant to give possession to respondent No.3 Company and was again trying to see that there ware obstructions against respondent No.3 in starting water supply. The workers of the petitioner were allowed to remain in the area where infrastructure of water supply was in force and were almost instigated to create law and order situation by some one. The Office bearers of respondent No.3 company realised that there may be breach of peace and, therefore, they called the police. When the police arrived, the officers of respondent No.3 showed the valid and legal contract entered in their SCA/12312/2007 27/65 JUDGMENT favour by the Corporation. The police, therefore, asked the workers of the petitioner not to create any obstructions and not to create any law and order situation or breach of peace. Therefore, the workers of the petitioner Company left the area