Case: M/S. Makhija Construction &amp; Enggr.P.Ltd Vs. Indore Development Authority

is - Was it constituted for educational purposes? Out of 67 objects mentioned in its Memorandum of Association, the main objects of the appellant were to carry on the business of constructing, building, roads, bridges etc. and to act as a supplier of hardware, paints, sanitary fittings, construction material and so on. The objects incidental or ancillary to the attainment of the main objects, are specified in Clauses 3 to 28. Other objects are mentioned in Clauses 30 to 67. These include a wide variety of possible diversification of the appellants business. The last Clauses reads: The last Clauses reads: 67. To establish and construct shopping markets, show rooms Nursing homes, schools, clubs houses, cinemas, office premises and other buildings for commercial purposes on lands seized and licence basis. 13. We do not read this as in any way justifying the appellants claim that it was constituted for educational purposes. To be constituted for means the primary objective of the constitution. The primary objective of the appellant was certainly not to carry on educational activities. Besides the language of Clauses 67 does not indicate that even this object is to carry on the running of the management of the school, but rather pertains to the construction of school buildings. Where the object was to carry on the business, this has been specifically so stated in the remaining objects clauses, for example in Clauses 30-31, 34-37, 40-42, 44-64 and 66 of the Memorandum. 14. The importance of the requirement for being involved with educational activities will also appear from the Regulations for Transfer of Property and other Ancillary Matters, 1987 framed under the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam 1973, where Regulation 33 (which refers to the respondent No.1 as the Authority) says that :- (i) The Authority may transfer any property ear-marked in the layout of any scheme for fulfillment of any community needs like education, medical, social, etc. by direct negotiations with such registered institutions which run hospitals, schools or to such bodies dedicated to science, art, music, literature, etc or engaged in other social or community purposes. (ii) The Authority shall determine the rate of premium on No profit No loss basis, each year commencing from 1st October, at which such property shall be transferred to such institutions or bodies. 15. The fact that the appellant had bid the highest was, in the circumstances, immaterial as the object of allotting the land to an educational institution was not the making of profit. The learned Single Judge was therefore wrong in construing the advertisement dated 22nd September, 1993 in the manner he did and the Appellate Court erred in dismissing Crescents appeal. In our opinion the appellant was not competent to participate in the tender. 16. However, the appellant is entitled to succeed on the ground that the order of the Division Bench disposing of Crescents appeal operated as res judicata to bind not only Crescent but also Jagriti and the appellant. It makes no difference that Jagriti was a co-respondent with the appellant. The principle of res judicata has been held to bind co-defendants if the relief given or refused by the earlier decision involved a determination of an issue between co-defendants (or co-respondents as the case may be). This statement of the law has been approved as far back as in 1939 in Munni Bibi vs. Trilokinath 58 I.A. 158, 165, where it has been said that to apply the rule of res judicata as between co-defendants three conditions are requisite. (1) There must be a conflict of interest between the defendants concerned; (2) it must be necessary to decide this conflict in order to give the plaintiff the relief he claims; and (3). the question between the defendants must have been finally decided. 17. This view has been consistently followed by this Court. (See: Iftikhar Ahmed vs. Sahid Meharban Ali, (1974) 2 SCC 151 where the principle was extended to bind co-plaintiffs; Mahboob Sahab vs. Syed Ismail AIR 1995 SC 1205 ). 18. In the present case the facts show that all the three conditions were fulfilled. There was a conflict of interest between the two co-respondents in Crescents appeal, namely between Jagriti and the appellants. For the purposes of deciding the relief, if any, to be granted to Crescent it was necessary for the Appellate Court to decide whether the appellant was entitled to participate. Although, the decision of the Appellate Court is cryptic, nevertheless, it cannot be said that the Court had not applied its judicial mind to the merits of the case. The exact language of the order disposing of the Crescents appeal reads as follows:- Heard. Dismissed as the order of the Honble Single Judge has done substantial justice, it also says that I.D.A. would decide the matter by all considerations. This order is passed after hearing the L/C of the parties for about an hours. 19. Jagritis counsel was recorded as being present. The fact that the Appellate Court was wrong in affirming the decision of the learned Single Judge would not make the decision less binding. (See: State of West Bengal vs. Hemant Kumar Bhattacharjee AIR 1966 SC 1061 ; Gorie Gouri Naidu vs. Thandrothu Bodemma AIR 1997 SC 808 , 809) 20. The counsel for Jagriti has referred us to several decisions viz. Gopal Upadhyaya and others vs. Union of India and others 1986 (Supp) SCC 501, Ambica Quarry Works vs. State of Gujarat and others (1987) 1 SCC 213 , Deena Alias Deen Dayal and and others vs. Union of India and others etc. etc. (1983) 4 SCC 645 and Krishena Kumar vs. Union of India and others (1990) 4 SCC 207. None of the decisions are apposite. They refer to the principle of precedent which is distinct from the principle of res judicata. A precedent operates to bind in similar situations in a distinct case. Res judicata operates to bind parties to proceedings for no other reason, but that there should be an end to litigation.

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

Explanation:
1[ds]11. On the merits, Jagritis submissions appear to be correct13. We do not read this as in any way justifying the appellants claim that it was constituted for educational purposes. To be constituted for means the primary objective of the constitution. The primary objective of the appellant was certainly not to carry on educational activities. Besides the language of Clauses 67 does not indicate that even this object is to carry on the running of the management of the school, but rather pertains to the construction of school buildings. Where the object was to carry on the business, this has been specifically so stated in the remaining objects clauses, for example in Clauses4 and 66 of the Memorandum15. The fact that the appellant had bid the highest was, in the circumstances, immaterial as the object of allotting the land to an educational institution was not the making of profit. The learned Single Judge was therefore wrong in construing the advertisement dated 22nd September, 1993 in the manner he did and the Appellate Court erred in dismissing Crescents appeal. In our opinion the appellant was not competent to participate in the tender16. However, the appellant is entitled to succeed on the ground that the order of the Division Bench disposing of Crescents appeal operated as res judicata to bind not only Crescent but also Jagriti and the appellant. It makes no difference that Jagriti was at with the appellant. The principle of res judicata has been held to binds if the relief given or refused by the earlier decision involved a determination of an issue betweens as the case may be). This statement of the law has been approved as far back as in 1939 in Munni Bibi vs. Trilokinath 58 I.A. 158, 165, where it has been said that to apply the rule of res judicata as betweens three conditions are requisite17. This view has been consistently followed by this Court. (See: Iftikhar Ahmed vs. Sahid Meharban Ali, (1974) 2 SCC 151  where the principle was extended to bind; Mahboob Sahab vs. Syed Ismail AIR 1995 SC 1205 )18. In the present case the facts show that all the three conditions were fulfilled. There was a conflict of interest between the twos in Crescents appeal, namely between Jagriti and the appellants. For the purposes of deciding the relief, if any, to be granted to Crescent it was necessary for the Appellate Court to decide whether the appellant was entitled to participate. Although, the decision of the Appellate Court is cryptic, nevertheless, it cannot be said that the Court had not applied its judicial mind to the merits of the case19. Jagritis counsel was recorded as being present. The fact that the Appellate Court was wrong in affirming the decision of the learned Single Judge would not make the decision less binding. (See: State of West Bengal vs. Hemant Kumar Bhattacharjee AIR 1966 SC 1061 ; Gorie Gouri Naidu vs. Thandrothu Bodemma AIR 1997 SC 808 , 809)20. The counsel for Jagriti has referred us to several decisions viz. Gopal Upadhyaya and others vs. Union of India and others 1986 (Supp) SCC 501, Ambica Quarry Works vs. State of Gujarat and others (1987) 1 SCC 213 , Deena Alias Deen Dayal and and others vs. Union of India and others etc. etc. (1983) 4 SCC 645  and Krishena Kumar vs. Union of India and others (1990) 4 SCC 207. None of the decisions are apposite. They refer to the principle of precedent which is distinct from the principle of res judicata. A precedent operates to bind in similar situations in a distinct case. Res judicata operates to bind parties to proceedings for no other reason, but that there should be an end to litigation.