IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 22.06.2009 CORAM: THE HONOURABLE MRS. JUSTICE PRABHA SRIDEVAN and THE HONOURABLE MR. JUSTICE C.T.SELVAM Writ Appeal Nos.1757 & 1758 of 2004 & WAMP.Nos.3287 and 3288 of 2004 1. The Tamil Nadu Housing Board rep. by its Chairman, Nandanam Chennai 600035. 2. The Executive Engineer and Administrative Officer Erode Housing Unit T.N.H.B., Erode – 1. .. Appellants in both Appeals/ Respondent 1 & 2 vs. A.Madudhachalam ..Respondent in both appeals/ Writ Petitioner Writ Appeals against the common order dated 02.12.2002 passed in Writ Petition Nos.672 and 6396 of 1999 on the file of this Court. W.P.No.672/99: This W.P.filed under Article 226 of the Constitution of India praying to issue a 'writ of Certiorarified Mandamus' calling for the records of the 2nd respondent comprised in his proceedings No.R4/2928A/85 dated 13.11.98 and quash the same so far it relates to fixing the value of the house site in L.181 in periyar Nagar, Erode Town, Erode District and consequently direct the respondents to refix the land price at the prevailing market price as in the year'95. W.P.No.6396/99: to issue a 'Writ of Certiorari' Calling for the records of the 2nd Respondent comprised in and by his proceedings in Lr.No.R4/2928A/85 dated 19.1.99 quash the same. For Appellants : Mr.P.Wilson Additional Advocate General for Mr.D.Veerasekaran For Respondent : Mrs.G.Devi. --- https://hcservices.ecourts.gov.in/hcservices/ Common Judgment (Judgment of the Court was delivered by PRABHA SRIDEVAN,J.) Problems will arise, if, under Article 226 of the Constitution of India, we enter into areas that are purely governed by contract. In this case, the Housing Board has come up in appeal complaining that the learned single Judge has virtually re-written the terms of the contract. 2. The respondent is an Ex-Service Man. Therefore, he is entitled to a house site under the Ex-Service Men Category. About six house sites were to be put up for sale by auction under the Erode Housing Unit of the Tamil Nadu Housing Board. He felt that he could not participate along with others in the public auction and come out successfully. Therefore, he prayed for a Mandamus to allot a house site. During the pendency of the writ petition, he obtained an interim order by which one site was kept out of allotment and L.181 was reserved as per the orders of this Court. When the matter came up for final disposal, he filed an affidavit stating that L.181 shall be allotted to him subject to the condition that he will pay a reasonable price fixed by the Housing Board and this Court passed an order dated 04.08.1995 as follows:- "The respondent shall allot to the petitioner the site No.L.181 measuring 161 sq.ft. in the housing unit at Periyar Nagar, Erode at the prevailing price as fixed by the Housing Board for the year 1995 in respect of the said area, within a period of 3 months to the date of the order." 3. The Housing Board was aggrieved, but reacted belatedly with an appeal. The delay was not condoned by this Court. Thereafter, only on 13.11.1998, three years after the order dated 04.08.1995, the Housing Board passed an order in Lr.No.R4/2928A/85, fixing Rs.5,84,280/- towards the cost of the land for an extent of 661 sq.ft. and further directed to pay the initial deposit of Rs.1,75,280/- and pay the remaining amounts in 13 monthly instalment of Rs.6,828/- with interest @ 18% p.a. The petitioner was not satisfied with this order. Therefore, he disputed the amount fixed by the Housing Board and sent telegrams for extension of time and attacked the order as arbitrary and then filed a writ petition. According to him, the market value of the land in 1995 was much less than Rs.885/- sq.ft., which is the price fixed by the Housing Board. 4. The Housing Board filed its counter in which, it has given the details of the rate at which all other plots, which were auctioned at the same time, were proposed to be sold for. In https://hcservices.ecourts.gov.in/hcservices/ paragraph 8, they have also given the basis on which the price was fixed and when the sites were auctioned on 11.04.1985, the price was Rs.91/- per sq.ft. They had capitalised the interest on that and they had arrived at Rs.5,84,280/-. In paragraph 14, it is stated that in 1995 the price was Rs.474/- per sq.ft. and then in 1998 adding 18% interest, arrived at the figure of Rs.5,84,280/-. The learned Judge was not impressed by the objections of the Housing Board and taking the accepted market value of Rs.91/- per sq.ft. for the year 1985, the Court felt 9% p.a. simple interest will be a reasonable rate of interest and thus fixed the final cost of plot at Rs.1,75,000/-, which included the interest and initial cost and the following order was passed: "14. The order of cancellation impugned in W.P.No.6396 of 1999 is quashed and the cost of allotment as fixed in the allotment letter is quashed and there will be a direction to the respondents to allot the plot L.181 measuring 669 sq.ft. at a fixed cost of Rs.1,75,000/- as on 1.12.2002 and in other respects the petitioner shall comply with the usual conditions, namely the proportionate rate of security deposit or advance and the petitioner shall pay the balance within a period of six months from the date of allotment. 15. On payment of advance sum of Rs.75,000/- out of Rs.1,75,000/- within three months from today, the respondents shall hand over the the said plot and the balance sum of Rs.1,00,000/- shall be paid by the petitioner within a period of six months from the date of handing over possession or the petitioner may approach the respondents to pay the said amount in easy instalments with usual rate of interest and it is for the respondents to pass appropriate orders permitting the petitioner to pay the sum of Rs.1,00,000/- in equal monthly instalments taking into consideration of the entire facts. In the event of the petitioner failing to remit Rs.75,000/- within three months from this date, the petitioner shall forfeit all his rights to the plot and the writ petitions will stand dismissed." 5. We are now informed that the Housing Board had also cancelled the allotment for non-payment of the security deposit as per the allotment order. 6. Against the common order of the learned single Judge, two writ appeals have been filed. Mr.P.Wilson, learned Additional Advocate General, submitted that when the State or other Authority enters into an ordinary contract with private persons, the parties are governed by the terms of the contract. It is apt to refer to the decision of this Court in Bareilly Development Authority and Another vs. Ajai Pal Singh and Others (1989 2 Supreme Court Cases https://hcservices.ecourts.gov.in/hcservices/ 116). There Bareilly Development Authority had allotted houses/sites and they had also revised certain terms. This was challenged on the ground that unilateral enhancement of cost was arbitrary. The High Court accepted it and directed to re-determine the cost. The Supreme Court allowed the appeal filed by the BDA holding as follows: "19. The respondents were under no obligation to seek allotment of houses/flats even after they had registered themselves. Notwithstanding, they voluntarily registered themselves as applicants, only after fully understanding the terms and conditions of the brochure inclusive of clauses 12 and 13 and Notes 1 and 2 of the General Information Table which we have reproduced above, they are now trying to obtain the houses/flats at the price indicated in the brochure at the initial stage conveniently ignoring the other express conditions by and under which the BDA has reserved its right to change the terms and conditions as and when felt necessary, evidently depending upon the escalation of the prices. One should not lose sight of the fact that the BDA did not compel anyone of the applicants to purchase the flat at the rates subsequently fixed by it and pay the increased monthly instalments. On the contrary, the option was left over only to the allottees. In fact, the respondents in Civil Appeal No.2809 of 1986 except the four above mentioned have unconditionally accepted the changed terms and conditions. 20. Thus the factual position in this case clearly and unambiguously reveals that the respondents after voluntarily accepting the conditions imposed by the BDA have entered into the realm of concluded contract pure and simple with the BDA and hence the respondents can only claim the right conferred upon them by the said contract and are bound by the terms of the contract unless some statue steps in and confers some special obligations on the part of the BDA in the contractual field. In the case before us, the contract between the respondents and the BDA does not contain any statutory terms and/or conditions. When the factual position is so, the High Court placing reliance on the decision in Ramana Dayaram Shetty case has erroneously held: It has not been disputed that the contesting opposite party is included within the term 'other authority' mentioned under Article 12 of the Constitution. Therefore, the contesting opposite parties cannot be permitted to act arbitrarily with the principle which meets the test of reason and relevance. Where an authority appears acting https://hcservices.ecourts.gov.in/hcservices/ unreasonably this Court is not powerless and a writ of mandamus can be issued for performing its duty free from arbitrariness or unreasonableness. 21. This finding, in our view, is not correct in the light of the facts and circumstances of this case because in Ramana Dayaram Shetty case, there was no concluded contract as in this case. Even conceding that the BDA has the trappings of a State or would be comprehended in 'other authority' for the purpose of Article 12 of the Constitution, while determining price of the houses/flats constructed by it and the rate of monthly instalments to be paid, the 'authority' or its agent after entering into the field of ordinary contract acts purely in its executive capacity. Thereafter the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter se. In this sphere, they can only claim rights conferred upon them by the contract in the absence of any statutory obligations on the part of the authority (i.e. BDA in this case) in the said contractual field." 7. Exercising the power under Article 226, we can check perverse orders or arbitrary orders or illegal orders, but, we cannot and should not re-work the terms of the contract. Does the petitioner stand as a class by himself that unique conditions are applied to him for allotment of a flat? We will be exceeding our jurisdiction, if we single out one person for giving a public favour. 8. In this regard, it is apt to refer the decision of the Supreme Court in State of NCT of Delhi vs. Sanjeev [2005 (5) SCC 181] and the relevant paragraphs are extracted hereunder: "15. One of the points that falls for determination is the scope for judicial interference in matters of administrative decisions. Administrative action is stated to be referable to broad area of governmental activities in which the repositories of power may exercise every class of statutory function of executive, quasi- legislative and quasi-judicial nature. It is trite law that exercise of power, whether legislative or administrative, will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary (see State of U.P. v. Renusagar Power Co.). At one time, the traditional view in England was that the executive was not answerable where its action was attributable to the exercise of prerogative power. Professor de Smith in his classical https://hcservices.ecourts.gov.in/hcservices/ work Judicial Review of Administrative Action, 4th Edn. at pp. 285-87 states the legal position in his own terse language that the relevant principles formulated by the courts may be broadly summarised as follows: The authority in which discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it; it must not act under the dictates of another body or disable itself from exercising discretion in each individual case. In the purported exercise of its discretion, it must not do what it has been forbidden to do, nor must it do what it has not been authorised to do. It must act in good faith, must have regard to all relevant considerations and must not be influenced by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. These several principles can conveniently be grouped in two main categories: (i) failure to exercise a discretion, and (ii) excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account, and where an authority hands over its discretion to another body it acts ultra vires. 16. The present trend of judicial opinion is to restrict the doctrine of immunity from judicial review to those classes of cases which relate to deployment of troupes, entering into international treaties, etc. The distinctive features of some of these recent cases signify the willingness of the courts to assert their power to scrutinise the factual basis upon which discretionary powers have been exercised. One can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground is “illegality”, the second “irrationality”, and the third “procedural impropriety”. These principles were highlighted by Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service6 (commonly known as CCSU case). If the power has been exercised on a non-consideration or non-application of mind to relevant factors, the exercise of power will be regarded as manifestly erroneous. If a power (whether legislative or administrative) is https://hcservices.ecourts.gov.in/hcservices/ exercised on the basis of facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated. (See CIT v. Mahindra and Mahindra Ltd.7) The effect of several decisions on the question of jurisdiction has been summed up by Grahame Aldous and John Alder in their book Applications for Judicial Review, Law and Practice thus: “There is a general presumption against ousting the jurisdiction of the courts, so that statutory provisions which purport to exclude judicial review are construed restrictively. There are, however, certain areas of governmental activity, national security being the paradigm, which the courts regard themselves as incompetent to investigate, beyond an initial decision as to whether the government’s claim is bona fide. In this kind of non-justiciable area judicial review is not entirely excluded, but very limited. It has also been said that powers conferred by the Royal Prerogative are inherently unreviewable but since the speeches of the House of Lords in Council of Civil Service Unions v. Minister for the Civil Service6 this is doubtful. Lords Diplock, Scarman and Roskill appeared to agree that there is no general distinction between powers, based upon whether their source is statutory or prerogative but that judicial review can be limited by the subject-matter of a particular power, in that case national security. Many prerogative powers are in fact concerned with sensitive, non-justiciable areas, for example, foreign affairs, but some are reviewable in principle, including the prerogatives relating to the civil service where national security is not involved. Another non- justiciable power is the Attorney General’s prerogative to decide whether to institute legal proceedings on behalf of the public interest.” (Also see Padfield v. Minister of Agriculture, Fisheries and Food8.) 17. The court will be slow to interfere in such matters relating to administrative functions unless decision is tainted by any vulnerability enumerated above; like illegality, irrationality and procedural impropriety. Whether action falls within any of the categories has to be established. Mere assertion in that regard would not be sufficient. https://hcservices.ecourts.gov.in/hcservices/ 18. The famous case commonly known as “the Wednesbury case9” is treated as the landmark so far as laying down various basic principles relating to judicial review of administrative or statutory direction. 19. Before summarising the substance of the principles laid down therein we shall refer to the passage from the judgment of Lord Greene in Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn.9 (KB at p. 229 : All ER pp. 682 H-683 A). It reads as follows: “… It is true that discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology used in relation to exercise of statutory discretions often use the word ‘unreasonable’ in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting ‘unreasonably’. Similarly, there may be something so absurd that no sensible person could even dream that it lay within the powers of the authority. … In another, it is taking into consideration extraneous matters. It is unreasonable that it might almost be described as being done in bad faith; and in fact, all these things run into one another.” Lord Greene also observed (KB p. 230 : All ER p. 683 F-G) “… it must be proved to be unreasonable in the sense that the court considers it to be a decision that no reasonable body can come to. It is not what the court considers unreasonable. … The effect of the legislation is not to set up the court as an arbiter of the correctness of one view over another.” (emphasis supplied) Therefore, to arrive at a decision on “reasonableness” the court has to find out if the administrator has left out relevant factors or taken into account irrelevant https://hcservices.ecourts.gov.in/hcservices/ factors. The decision of the administrator must have been within the four corners of the law, and not one which no sensible person could have reasonably arrived at, having regard to the above principles, and must have been a bona fide one. The decision could be one of many choices open to the authority but it was for that authority to decide upon the choice and not for the court to substitute its view. 20. The principles of judicial review of administrative action were further summarised in 1985 by Lord Diplock in CCSU case6 as illegality, procedural impropriety and irrationality. He said more grounds could in future become available, including the doctrine of proportionality which was a principle followed by certain other members of the European Economic Community. Lord Diplock observed in that case as follows: (All ER p.950h-j) “Judicial review has I think developed to a stage today when, without reiterating any analysis of the steps by which the development has come about, one can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground I would call ‘illegality’, the second ‘irrationality’ and the third ‘procedural impropriety’. That is not to say that further development on a case-by-case basis may not in course of time add further grounds. I have in mind particularly the possible adoption in the future of the principle of ‘proportionality’ which is recognised in the administrative law of several of our fellow members of the European Economic Community;” Lord Diplock explained “irrationality” as follows: (All ER p. 951a-b) “By ‘irrationality’ I mean what can by now be succinctly referred to as ‘Wednesbury unreasonableness’. It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it.” 21. In other words, to characterise a decision of the administrator as “irrational” the court has to hold, on material, that it is a decision “so outrageous” as to https://hcservices.ecourts.gov.in/hcservices/ be in total defiance of logic or moral standards. Adoption of “proportionality” into administrative law was left for the future. 22. These principles have been noted in the aforesaid terms in Union of India v. G. Ganayutham10. In essence, the test is to see whether there is any infirmity in the decision-making process and not in the decision itself. (See Indian Rly. Construction Co. Ltd. v. Ajay Kumar11.) 23. Though Section 52 limits the scope of consideration by the courts, the scope for judicial review in writ jurisdiction is not restricted, subject of course to the parameters indicated supra. 24. It is true that some material must exist but what is required is not an elaborate decision akin to a judgment. On the contrary the order directing externment should show existence of some material warranting an order of externment. While dealing with the question mere repetition of the provision would not be sufficient. Reference is to be made to some material on record and if that is done, the requirements of law are met. As noted above, it is not the sufficiency of material but the existence of material which is sine qua non 25. As observed in Gazi Saduddin case3 satisfaction of the authority can be interfered with if the satisfaction recorded is demonstratively perverse based on no evidence, misreading of evidence or which a reasonable man could not form or that the person concerned was not given due opportunity resulting in prejudice. To that extent, objectivity is inbuilt in the subjective satisfaction of the authority. 26. The material justifying externment can also throw light on options to be exercised. If referring to the materials, the authority directing externment also indicates the option it thinks to be proper and appropriate, it cannot be said to be vitiated even though there is no specific reference to the other options. It is a matter of legitimate inference that when considering materials to adjudicate on the question of desirability for externment, options are also considered and one of the three options can be adopted. There cannot be any https://hcservices.ecourts.gov.in/hcservices/ hair-splitting in such matters. A little play in the joints is certainly permissible while dealing with such matters. 9. In fact, when the petitioner earlier came to Court for a mandamus to allot Plot L.181, this Court had passed a favourable order on 04.08.1995. The present order amounts to setting aside the 1995 order and giving directions, which are even more advantageous to the writ petitioner. The Housing Board has given reasons for fixing Rs.5,84,280/-. We have extracted earlier the order and it refers to the prevailing price fixed by the Housing Board in 1995. That may correspond to the market value or may not and the Housing Board has given its reasons for fixing the said sum. According to the petitioner, Rs.300/- was the market value. Even if we fix the cost of plot of 669 sq.ft. at this rate, it is more than what the learned single Judge has fixed. But, we do not want to go into this, since the order of the learned single Judge has worked itself out, as the petitioner failed to remit Rs.75,000/- within three months. 10. Learned counsel for the petitioner submitted that actually the petitioner went to the authority and they said that only after getting orders from the Chairman, they would pass orders. There is nothing on record to indicate that this letter has been received by the Housing Board or that in fact it was handed over in person by the petitioner. The petitioner could have sent