Case: PUNJAB STATE POWER CORPORATION LIMITED AND ANOTHER Vs. EMTA COAL LIMITED AND OTHERS

referred to as Wednesbury unreasonableness. (Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. [(1948) 1 KB 223 : (1947) 2 All ER 680]) 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. 80. At this stage, The Supreme Court Practice, 1993, Vol. 1, pp. 849-850, may be quoted: 4. Wednesbury principle.— A decision of a public authority will be liable to be quashed or otherwise dealt with by an appropriate order in judicial review proceedings where the court concludes that the decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it. (Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. [(1948) 1 KB 223 : (1947) 2 All ER 680] , per Lord Greene, M.R.) 81. Two other facets of irrationality may be mentioned. (1) It is open to the court to review the decision-makers evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of State for Environment [(1980) 41 P & CR 255] , the Secretary of State referred to a number of factors which led him to the conclusion that a non-residents bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he could not see on what basis the Secretary of State had reached his conclusion. (2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R. v. Barnet London Borough Council, ex p Johnson [(1989) 88 LGR 73] the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authoritys parks was struck down. 31. It could thus be seen that while exercising powers of judicial review, the Court is not concerned with the ultimate decision but the decision-making process. The limited areas in which the court can enquire are as to whether a decision- making authority has exceeded its powers, committed an error of law or committed breach of principle of natural justice. It can examine as to whether an authority has reached a decision which no reasonable Tribunal would have reached or has abused its powers. It is not for the court to determine whether a particular policy or a particular decision taken in the fulfilment of that policy is fair. The court will examine as to whether the decision of an authority is vitiated by illegality, irrationality or procedural impropriety. While examining the question of irrationality, the court will be guided by the principle of Wednesbury. While applying the Wednesbury principle, the court will examine as to whether the decision of an authority is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it. 32. Applying the aforesaid principle, it can clearly be seen that the decision of PSPCL dated 6th April 2018, cannot be questioned on the ground of illegality or procedural impropriety. The decision is taken in accordance with Section 11 of the said Act and after following the principle of Natural Justice. The limited area that would be available for attack is as to whether the decision is hit by the Wednesbury principle. Can it be said that the decision taken by the authority is such that no reasonable person would have taken it? No doubt, that the authority has also relied on Clause 12.4.1 of the Allotment Agreement, however, that is not the only ground on which the representation of EMTA is rejected. No doubt, that while considering EMTAs representation, PSPCL has referred to Clause 12.4.1 of the Allotment Agreement which requires the coal mines to be developed through contractors who were selected through a competitive bidding process, however, that is not the only ground on which the representation of EMTA is rejected. It will be relevant to refer to the following observations in the order passed by PSPCL dated 6th April 2018:- Moreover, there is no reason why competitive bidding process for the purposes of eliciting the best operator be not preferred. Needless to mention that as the composition with respect to capital/revenue investment is altogether different, hence the bidding parameters have entirely changed. 33. It could thus be seen that PSPCL has decided to go in for competitive bidding process for the purpose of eliciting the best operator. It has further noticed that the composition with respect to capital/revenue investment is altogether different. Hence, the bidding parameters have entirely changed. It has further referred to the decision of this Court wherein it has been held that the allotment should be through competitive bidding process. We ask a question to ourselves, as to whether the said reasoning can be said to be irrational or arbitrary. A policy decision to get the best operator at the best price, cannot be said to be a decision which no reasonable person would take in his affairs. In that view of the matter, the attack on the order/letter dated 6th April 2018, is without merit. 34. Insofar as the contention of Shri Rohatgi with regard to the huge investment being made by EMTA is concerned, the said Act itself provides remedy for seeking compensation apart from the other remedies that are available in law. In that view of the matter, we are not impressed with the arguments advanced in that behalf.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Though there are various authorities on the said subject, we do not wish to burden the present judgment by reproducing those. In our considered view, if the words used in Section 11 of the said Act are construed in plain and literal term, they do not lead to an absurdity and as such, the rule of plain and literal interpretation will have to be followed. We find that in case the interpretation as sought to be placed by Shri Rohatgi is to be accepted, it will do complete violence to the language of Section 11 of the said Act. If it is held that under Section 11 of the said Act, a prior contractor is entitled to continue if his performance is found to be satisfactory and if there is nothing against him, then it will be providing something in Section 11 of the said Act which the Statute has not provided for. It will also lead to making the words may elect, to adopt and continue redundant and otiose. It is a settled principle of law that when, upon a plain and literal interpretation of the words used in a Statute, the legislative intent could be gathered, it is not permissible to add words to the Statute. Equally, such an interpretation which would make some terms used in a Statute otiose or meaningless, has to be avoided. We therefore find that if an interpretation as sought to be placed by EMTA is to be accepted, the same would be wholly contrary to the principle of literal interpretation. There are number of authorities in support of the said proposition. However, we refrain from referring to them in view of the following observations made by this Court in a recent judgment in the case of Ajit Mohan and Others v. Legislative Assembly National Capital Territory of Delhi and Others 2021 SCC OnLine SC 456:-239. …..In our view if the proposition of law is not doubted by the Court, it does not need a precedent unless asked for. If a question is raised about a legal proposition, the judgment must be relatable to that proposition - and not multiple judgments…..As such, the contention in that regard is found to be without merit.23. We find that the High Court has also clearly understood the said legal position with regard to language used in Section 11 of the said Act. When considering Section 62 of the Contract Act, 1872 read with Section 11 of the said Act, it has observed that the parties to a contract may willingly agree to substitute a new contract or to rescind it or alter it. Having observed this, the High Court has, however, erred in observing that EMTA had a legitimate expectation. The High Court has observed thus:-It could not therefore, have been left in the lurch particularly when the same mine was re-allocated to the Corporation suggestive of continuity. Indeed, the respondents were very well within their rights to reject the arrangement while granting a consideration under Section 11 if the performance of the petitioner was unsatisfactory or if there was any other factor which the Corporation found relevant enough to discard the arrangement altogether.24. We find that the reasoning adopted by the High Court is totally wrong. Merely because the Coal Mine Block was allotted to PSPCL, the same could not give any vested right in favour of EMTA, particularly in view of the language used in Section 11 of the said Act. The reasoning given by the High Court that PSPCL was within its right to reject the arrangement if the performance of EMTA was unsatisfactory or if there was any other factor which the Corporation found relevant enough to discard the arrangement altogether, in our view, are totally erroneous.25. Having observed in earlier para that in view of Section 11 of the said Act read with Section 62 of the Contract Act, 1872, the parties to a contract may willingly agree to substitute a new contract or to rescind it or alter it, the High Court has erred in forcing PSPCL to continue with the contract with EMTA, though it was not willing to do so.26. The issue with regard to legitimate expectation has been recently considered by a bench of this Court to which one of us (L. Nageswara Rao, J.) was a member. After considering various authorities on the issue, in the case of Kerala State Beverages (M and M) Corporation Limtied (supra), it was observed thus:-20. The decision-makers freedom to change the policy in public interest cannot be fettered by applying the principle of substantive legitimate expectation. [Findlay, In re, 1985 AC 318 : (1984) 3 WLR 1159 : (1984) 3 All ER 801 (HL)] So long as the Government does not act in an arbitrary or in an unreasonable manner, the change in policy does not call for interference by judicial review on the ground of a legitimate expectation of an individual or a group of individuals being defeated.We do not desire to go into the issue of correctness of either of the judgments inasmuch as we are independently considering the issue and examining the correctness of the judgment impugned before us.28. Insofar as the reliance placed by Shri Rohatgi on the letter of Union of India dated 9th January 2020 is concerned, there can be no doubt that between Section 11 of the said Act and Clause 12.4.1 of the Allotment Agreement, Section 11 of the said Act would prevail. The question is, whether, Section 11 of the said Act mandates the successful allottee to continue with the existing contract. The answer, obviously, is no. In any case, the claim of EMTA is not rejected by PSPCL solely on the ground of Clause 12.4.1 of the Allotment Agreement.30. The order passed by PSPCL dated 6th April 2018, is an order passed by an authority of the State in exercise of its executive functions. The scope of judicial review of administrative action has been well crystalised by this Court in the judgment of Tata Cellular v. Union of India (1994) 6 SCC 651 .  The judgment in the case of Tata Cellular (supra), has been subsequently followed in a number of judgments of this Court. This Court in the case of Rashmi Metaliks Limited and Another v. Kolkata Metropolitan Development Authority and Others (2013) 10 SCC 95 ,  has observed that the decision which holds the field with regard to issue of judicial review of an administrative action, is the judgment in the case of Tata Cellular (supra), by a three-Judge Bench. The Court has held that the rule of precedent mandates that this exposition of law be followed and applied by coordinate or co-equal Benches and certainly by all smaller Benches and subordinate courts. This Court has further deprecated the practice of referring to catena of judgments following the said pronouncement of law. We therefore refrain from referring to the subsequent judgment, and reproduce the relevant observations in Tata Cellular (supra), which read thus:-70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.71. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justiciable and the need to remedy any unfairness. Such an unfairness is set right by judicial review.72. Lord Scarman in Nottinghamshire County Council v. Secretary of State for the Environment [1986 AC 240, 251 : (1986) 1 All ER 199] proclaimed:Judicial review is a great weapon in the hands of the judges; but the judges must observe the constitutional limits set by our parliamentary system upon the exercise of this beneficial power.Commenting upon this Michael Supperstone and James Goudie in their work Judicial Review (1992 Edn.) at p. 16 say:If anyone were prompted to dismiss this sage warning as a mere obiter dictum from the most radical member of the higher judiciary of recent times, and therefore to be treated as an idiosyncratic aberration, it has received the endorsement of the Law Lords generally. The words of Lord Scarman were echoed by Lord Bridge of Harwich, speaking on behalf of the Board when reversing an interventionist decision of the New Zealand Court of Appeal in Butcher v. Petrocorp Exploration Ltd. 18-3- 1991.73. Observance of judicial restraint is currently the mood in England. The judicial power of review is exercised to rein in any unbridled executive functioning. The restraint has two contemporary manifestations. One is the ambit of judicial intervention; the other covers the scope of the courts ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action.74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself.75. In Chief Constable of the North Wales Police v. Evans [(1982) 3 All ER 141, 154] Lord Brightman said:Judicial review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made.Judicial review is concerned, not with the decision, but with the decision-making process. Unless that restriction on the power of the court is observed, the court will in my view, under the guise of preventing the abuse of power, be itself guilty of usurping power.In the same case Lord Hailsham commented on the purpose of the remedy by way of judicial review under RSC, Ord. 53 in the following terms:This remedy, vastly increased in extent, and rendered, over a long period in recent years, of infinitely more convenient access than that provided by the old prerogative writs and actions for a declaration, is intended to protect the individual against the abuse of power by a wide range of authorities, judicial, quasi- judicial, and, as would originally have been thought when I first practised at the Bar, administrative. It is not intended to take away from those authorities the powers and discretions properly vested in them by law and to substitute the courts as the bodies making the decisions. It is intended to see that the relevant authorities use their powers in a proper manner (p. 1160).In R. v. Panel on Take-overs and Mergers, ex p Datafin plc [(1987) 1 All ER 564] , Sir John Donaldson, M.R. commented:An application for judicial review is not an appeal.In Lonrho plc v. Secretary of State for Trade and Industry [(1989) 2 All ER 609], Lord Keith said:Judicial review is a protection and not a weapon.It is thus different from an appeal. When hearing an appeal the Court is concerned with the merits of the decision under appeal. In Amin, Re [Amin v. Entry Clearance Officer, (1983) 2 All ER 864] , Lord Fraser observed that:Judicial review is concerned not with the merits of a decision but with the manner in which the decision was made…. Judicial review is entirely different from an ordinary appeal. It is made effective by the court quashing the administrative decision without substituting its own decision, and is to be contrasted with an appeal where the appellate tribunal substitutes its own decision on the merits for that of the administrative officer.76. In R. v. Panel on Take-overs and Mergers, ex p in Guinness plc [(1990) 1 QB 146 : (1989) 1 All ER 509], Lord Donaldson, M.R. referred to the judicial review jurisdiction as being supervisory or longstop jurisdiction. Unless that restriction on the power of the court is observed, the court will, under the guise of preventing the abuse of power, be itself guilty of usurping power.77. The duty of the court is to confine itself to the question of legality. Its concern should be:1. Whether a decision-making authority exceeded its powers?2. Committed an error of law,3. committed a breach of the rules of natural justice,4. reached a decision which no reasonable tribunal would have reached or,5. abused its powers.Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:(i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it.(ii) Irrationality, namely, Wednesbury unreasonableness.(iii) Procedural impropriety.The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind [(1991) 1 AC 696], Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, consider whether something has gone wrong of a nature and degree which requires its intervention.78. What is this charming principle of Wednesbury unreasonableness? Is it a magical formula? In R. v. Askew [(1768) 4 Burr 2186 : 98 ER 139] , Lord Mansfield considered the question whether mandamus should be granted against the College of Physicians. He expressed the relevant principles in two eloquent sentences. They gained greater value two centuries later:It is true, that the judgment and discretion of determining upon this skill, ability, learning and sufficiency to exercise and practise this profession is trusted to the College of Physicians and this Court will not take it from them, nor interrupt them in the due and proper exercise of it. But their conduct in the exercise of this trust thus committed to them ought to be fair, candid and unprejudiced; not arbitrary, capricious, or biased; much less, warped by resentment, or personal dislike.79. To quote again, Michael Supperstone and James Goudie; in their work Judicial Review (1992 Edn.) it is observed at pp. 119 to 121 as under:The assertion of a claim to examine the reasonableness been done by a public authority inevitably led to differences of judicial opinion as to the circumstances in which the court should intervene. These differences of opinion were resolved in two landmark cases which confined the circumstances for intervention to narrow limits. In Kruse v. Johnson [(1898) 2 QB 91 : (1895-9) All ER Rep 105] a specially constituted divisional court had to consider the validity of a bye-law made by a local authority. In the leading judgment of Lord Russell of Killowen, C.J., the approach to be adopted by the court was set out. Such bye- laws ought to be benevolently interpreted, and credit ought to be given to those who have to administer them that they would be reasonably administered. They could be held invalid if unreasonable : Where for instance bye-laws were found to be partial and unequal in their operation as between different classes, if they were manifestly unjust, if they disclosed bad faith, or if they involved such oppressive or gratuitous interference with the rights of citizens as could find no justification in the minds of reasonable men. Lord Russell emphasised that a bye-law is not unreasonable just because particular judges might think it went further than was prudent or necessary or convenient.In 1947 the Court of Appeal confirmed a similar approach for the review of executive discretion generally in Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn [(1948) 1 KB 223 : (1947) 2 All ER 680] . This case was concerned with a complaint by the owners of a cinema in Wednesbury that it was unreasonable of the local authority to licence performances on Sunday only subject to a condition that no children under the age of 15 years shall be admitted to any entertainment whether accompanied by an adult or not. In an extempore judgment, Lord Greene, M.R. drew attention to the fact that the word unreasonable had often been used in a sense which comprehended different grounds of review. (At p. 229, where it was said that the dismissal of a teacher for having red hair (cited by Warrington, L.J. in Short v. Poole Corpn. [(1926) 1 Ch 66, 91 : 1925 All ER Rep 74] , as an example of a frivolous and foolish reason) was, in another sense, taking into consideration extraneous matters, and might be so unreasonable that it could almost be described as being done in bad faith; see also R. v. Tower Hamlets London Borough Council, ex p Chetnik Developments Ltd. [1988 AC 858, 873 : (1988) 2 WLR 654 : (1988) 1 All ER 961] (Chapter 4, p. 73, supra). He summarised the principles as follows:The Court is entitled to investigate the action of the local authority with a view to seeing whether or not they have taken into account matters which they ought not to have taken into account, or, conversely, have refused to take into account or neglected to take into account matter which they ought to take into account. Once that question is answered in favour of the local authority, it may still be possible to say that, although the local authority had kept within the four corners of the matters which they ought to consider, they have nevertheless come to a conclusion so unreasonable that no reasonable authority could ever have come to it. In such a case, again, I think the court can interfere. The power of the court to interfere in each case is not as an appellate authority to override a decision of the local authority, but as a judicial authority which is concerned, and concerned only, to see whether the local authority has contravened the law by acting in excess of the power which Parliament has confided in them.This summary by Lord Greene has been applied in countless subsequent cases.The modern statement of the principle is found in a passage in the speech of Lord Diplock in Council of Civil Service Unions v. Minister for Civil Service [(1985) 1 AC 374 : (1984) 3 All ER 935 : (1984) 3 WLR 1174] :By irrationality I mean what can now be succinctly referred to as Wednesbury unreasonableness. (Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. [(1948) 1 KB 223 : (1947) 2 All ER 680]) 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.80. At this stage, The Supreme Court Practice, 1993, Vol. 1, pp. 849-850, may be quoted:4. Wednesbury principle.— A decision of a public authority will be liable to be quashed or otherwise dealt with by an appropriate order in judicial review proceedings where the court concludes that the decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it. (Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. [(1948) 1 KB 223 : (1947) 2 All ER 680] , per Lord Greene, M.R.)81. Two other facets of irrationality may be mentioned.(1) It is open to the court to review the decision-makers evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of State for Environment [(1980) 41 P & CR 255] , the Secretary of State referred to a number of factors which led him to the conclusion that a non-residents bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he could not see on what basis the Secretary of State had reached his conclusion.(2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R. v. Barnet London Borough Council, ex p Johnson [(1989) 88 LGR 73] the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authoritys parks was struck down.31. It could thus be seen that while exercising powers of judicial review, the Court is not concerned with the ultimate decision but the decision-making process. The limited areas in which the court can enquire are as to whether a decision- making authority has exceeded its powers, committed an error of law or committed breach of principle of natural justice. It can examine as to whether an authority has reached a decision which no reasonable Tribunal would have reached or has abused its powers. It is not for the court to determine whether a particular policy or a particular decision taken in the fulfilment of that policy is fair. The court will examine as to whether the decision of an authority is vitiated by illegality, irrationality or procedural impropriety. While examining the question of irrationality, the court will be guided by the principle of Wednesbury. While applying the Wednesbury principle, the court will examine as to whether the decision of an authority is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it.32. Applying the aforesaid principle, it can clearly be seen that the decision of PSPCL dated 6th April 2018, cannot be questioned on the ground of illegality or procedural impropriety. The decision is taken in accordance with Section 11 of the said Act and after following the principle of Natural Justice. The limited area that would be available for attack is as to whether the decision is hit by the Wednesbury principle. Can it be said that the decision taken by the authority is such that no reasonable person would have taken it? No doubt, that the authority has also relied on Clause 12.4.1 of the Allotment Agreement, however, that is not the only ground on which the representation of EMTA is rejected. No doubt, that while considering EMTAs representation, PSPCL has referred to Clause 12.4.1 of the Allotment Agreement which requires the coal mines to be developed through contractors who were selected through a competitive bidding process, however, that is not the only ground on which the representation of EMTA is rejected.33. It could thus be seen that PSPCL has decided to go in for competitive bidding process for the purpose of eliciting the best operator. It has further noticed that the composition with respect to capital/revenue investment is altogether different. Hence, the bidding parameters have entirely changed. It has further referred to the decision of this Court wherein it has been held that the allotment should be through competitive bidding process. We ask a question to ourselves, as to whether the said reasoning can be said to be irrational or arbitrary. A policy decision to get the best operator at the best price, cannot be said to be a decision which no reasonable person would take in his affairs. In that view of the matter, the attack on the order/letter dated 6th April 2018, is without merit.34. Insofar as the contention of Shri Rohatgi with regard to the huge investment being made by EMTA is concerned, the said Act itself provides remedy for seeking compensation apart from the other remedies that are available in law. In that view of the matter, we are not impressed with the arguments advanced in that behalf.