Case: G.B. Mahajan &amp; Others Vs. Jalgaon Municipal Council &amp; Others

3. Special leave granted. The main appeal is taken-up for final hearing, heard and disposed of by this judgment4. The controversy relates to a project for the development of real estate sponsored by the Town Municipal Council, Jalgaon, in the State of Maharashtra. In the year 1913 the Municipal Council, it would appear, received by way of gift of a piece of land of an extent of 5 acres and 32 gunthas from a certain Lila Dhar Bhatia. The land had been in the use of the Agricultural Produce Market Committee, Jalgaon, as a cotton-market and whole-sale fruit and vegetable market. The Municipal Council having entertained the idea of putting the land to a better and more profitable use persuaded the Market Committee to yield-up possession. The terms of the original gift, it would appear, stipulated conditions that the land to put to use for only as a cotton and vegetable market. In order to enable itself to put be land to uses other and more beneficial uses and to exploit the commercial-potential which the property had with the passage of time acquired, the Municipal Council appears to have approached the heirs of the original donor who appear to have agreed to amend the terms of the gift accordingly. But the permission was not without strings attached. The project as envisaged by the Municipal Council, contemplated, amongst other things, the erection of a commercial complex. The heirs appear to have bargained for and secured a benefit that they should be given five-shops free of cost in the commercial complex5. The Municipal Council invited competitive proposals as to the ways in which the potential of the land could be commercially exploited and invited competitive plans and designs on the basis of which the Architects could be selected from architects all over the country. By its Resolution dated 17-3-1988 the Municipal Council selected M/s. Kabra Chaudhary Associates as Architects for the project6. The project envisaged a Central Administrative Building with ground plus 17 floors intended to be utilized by the Municipal Council for locating its own offices and an adjacent structure with a basement plus five upper floors to be used as a vegetable-market and a commercial complex. The broad aspects as to the funding of the project were that the project was to be executed by a "Developer" who would be required to take-up and execute the project at his own cost; that the developer would be obliged to rehabilitate 486 small-time vegetable vendors who were in occupation of the land in various units by providing them small stalls at, what was described as, a confessional-premium of Rs. 3,000/- per stall; that 83 more shops, at fixed premia of Rs. 40,000/- each be given to Adatias who were carrying on their business on the property and that, further, another 60 shops, at the same rate, be allotted to some traders who are stated to have encroached upon the land. This was in addition to the five shops, which had to be made available to the heirs of the original donor free of cost. The nature of the rights conferred on to these beneficiaries is stated to be "occupancy rights" for a period of 50 years under section 272 (1) of the Maharashtra Municipalities Act, 1965 (Act for short) which regulated the matter. The municipality would get rents from those occupants at rates stipulated. The administrative block comprising of ground plus 17 floors was, however, intended to be handed over to the Municipal Council free of cost for its own use and of its tenants7. The project-scheme contemplated a mode of financing which contemplated that in consideration of the "developer" putting up the entire construction at its own cost and making various allotments to the shop-keepers to whom the Municipal Council had given assurances of alternative accommodation at fixed rates of premia and providing Ground plus 17 floors of the Administrative building free of cost to the Municipality, the developer would be entitled and at liberty to dispose of the occupancy rights in respect of the rest of the accommodation in "Commercial-Complex" and retain the premia paid by the dispense so to reimburse itself the financial outlays on the project plus its profit. The occupiers, including those who would have the benefit of the allotments at such fixed-rates as well as those to be inducted by the developer, were expected to pay rents to the Municipal Council for the period of 50 years at rates envisaged in the scheme, though, however, certain incentives and concessions were afforded for the first two periods of 3 years each. According to the financial estimates prepared by the Municipal Council with the assistance of its architects as to the economics of the scheme the project was to involve a financial outlay of about Rs. 11 crores. On certain estimates prepared by it the Municipal Council was of the view that the project would benefit the local community both from the immediate as well as long-term advantages if this mode of financing and execution of the project was adopted. It was the Councils view that while the project would help to rehabilitate all those businessmen and traders who were carrying on business on the land and obviate protracted litigation for their eviction, the Municipal Council would, in addition, get a building consisting of a Ground plus 17 floors in the Central Administrative Block which would be an impressive structure 70 metres in height adding greatly to the value of the municipal estate. It was also said that the rents from those occupants in the commercial complex would considerably augment the municipal revenues8. After enunciating these criteria the project was put to tender. Advertisements were taken out in the Newspapers and it is stated that five Developers responded and submitted their tenders. After a process of scrutiny of the tenders and elimination of ineligible and non-competitive ones, the tender of respondent No.6 was accepted by the Municipal Council by its unanimous Resolution dated 8-10-1988. On 9-10-1988, a "Letter of Intent" was issued to the respondent No.6, which, in turn, on 15-10-1988 issued its own advertisement of the project. On 18-10-1988, a formal agreement was entered into between the Municipal Council and the respondent No.6 in this behalf9. Appellants who are residents of Jalgaon and who entertained serious misgiving as to the legal permissibility, the economic soundness and propriety of the policy of this venture petitioned to the Collector of the District under the provisions of the `Act to suspend the resolutions of the Municipal Council undertaking the project and the agreement with respondent 6 for its execution. They urged that the transaction was really amounted to grant of lease for 50 years prohibited under section 92 of the "Act"; that under the Act a scheme of this kind could not be embarked upon without the sanction of the Development Department of the Government of the State of Maharashtra; that the transaction resulted in the creation of an impermissible encumbrance on the property of the Municipal Council in favour of the developer and lastly that the intended user violated the original terms of the gift. The Collector suspended the impugned resolutions. But the Minister, in a Revision-petition preferred against the Collectors order, stayed the operation of that order. Simultaneously, some persons, including some of those who had moved the Collector, filed Writ Petition No.1765/1988 in the High Court assailing the said Resolutions. It is unnecessary to refer in any great detail to the several proceedings that ensued. Suffice it to say, in Writ Petition No.1765/1988, in which the Resolutions touching the clearance of the project and the agreement with respondent No.6 had been assailed and the Writ Petition No.1825/1988 in which the Ministers order staying the Collectors order was challenged came up together before a Division Bench of the High court on 20-12-1988. The contention that was pressed appears to be that in the calculations forming the basis of the financial estimates of the project were made grossly under-estimating the probable receipts by way of premia for the grant of occupancy-rights with the intention of giving an opportunity for unjust enrichment to respondent 6 as, according to the appellants, the occupancy-rights for the shops were capable of fetching far higher premia than those estimates made by the Municipality. Learned Judges of the Division Bench who dealt with the writ-petitions were of the opinion that the apprehension in that behalf would be allayed if it was ensured that any such excess should go to the benefit of the Municipality. Accordingly, the Division Bench directed that in the matter of disposal of the occupancy-rights in regard to the shops - other than those ear-marked for the preferential category of existing businessmen and traders-tenders should be called from the public so that the difference between what was taken into account in the estimates of the project and what was actually secured in response to the advertisement, might go to the benefit of the Municipality. The order said :"Shri Singhvi, appearing for the Jalgaon Municipal Council, states that the Council will invite tenders for sale of 68 shops on the ground floor with basement per shop as the floor price, and of 32 shops on the ground floor without basement, on the rear of the above 68 shops, i.e. on the western side and facing Jaikisan wadi, stipulating Rs. 2,50,000/- per shop as the floor price. The advertisement will be given within a week from today and it will be repeated within a space of two days in between. The advertisement will mention that Rs. 25,000/- have to be paid at the time of submitting the tender for the shopIf the applications are received tendering more amount than is stipulated in the notice, then the surplus amount will be credited to the Municipal Council and only the floor-price shall be paid to the contractorIf applications for all the shops are not received, or, if the applications received tender less amount then floor-price, then the Council is at liberty to go ahead with their present scheme....."It would appear that the advertisement issued in that behalf did not elicit any favourable response from the public. The matter was listed again before the High Court on 21-1-1989. The Division Bench held that its earlier order dated 20-12-1988 was self-executory and had put an end to the writ petition finally and nothing really survived in the writ petition. That was how Writ Petition No.1765/1988 came to an end. Writ Petition 1825/1988, directed against the stay order granted by the Minister, was disposed of on 8-2-1989. In Review Petition 223 of 1989 appellants had sought a review of the order dated 20-12-1988 which was also dismissed on 7-2-1989. The advertisement issued pursuant to the order dated 20-12-1988, was itself challenged in a separate writ petition and that writ petition was also dismissed on 8-2-198911. All these orders were assailed before this Court in Special Leave Petition No.3293/1989, S.L.P. No.3222/1989, S.L.P. No.3268/1989 respectively. The S.L.P. 3293/1989 which arose out of the writ petition challenging Ministers order was disposed of on 17-4-1989 by this Court with the following observation:"Since the order made by the Honble Minister is evidently in the nature of ad-interim order, it is open to the petitioner to move the Minister for final disposal. It is hoped that the Minister, having regard to the importance of the matter, will expeditiously dispose of the matter. The minister will also consider whether the scheme in question is in conformity with the statutory provisions . With these observations the Special Leave Petition is dismissed."Leave Petition (Civil) No.3293 and 3268/1989 which arose out of the orders in Writ Petition 1765 of 1988 and the writ petition preferred against the advertisement were also dismissed with the following observation:view of the above order in Special Leave Petition (Civil) No.3222/1989 these special leave petitions are dismissed."Later, the Minister disposed of the Revision Application by his order dated 3-8-1989. The Minister took into account the order made by the High Court in Writ-Petition No.1765/1988 and was persuaded to the view that decision could not be ignored by him. The apart, he also went into the merits of the scheme and recorded findings against the appellants. Against this order of the Minister, appellants preferred a fresh Writ Petition No.2404/1989 before the High Court. The present appeal before us arises out of the High Courts order dismissing the said Writ Petition 2404/1989. The High Court was of the view that the orders made by this Court in the earlier SLPs indicated that this Court had really intended that all the controversies should conclude with the decision of the Minister. The High Court, however, also went into the merits as well and held that there were no grounds to interfere.

Court's reasoning:
14. There might be some force in what Sri Jain says if the observations which Sri Jain takes exception to are alone taken into account. The High Court was possibly wrong in its view as to the effect of this Courts earlier orders. But what appears clear is that the High Court also went into the merits of the matter. Therefore the grievance that the High Court abdicated its jurisdiction on an erroneous interpretation of this Courts earlier order may not be correct. However, in order that there be no dissatisfaction on the question that the matter did not receive adequate consideration in the High Court, we asked the appellants to present their case on the merits also so that any need for a remit of the matter to the High Court at this late stage was obviated. Parties placed their case fully before usRe Contention (a)This contention of the appellants, as a legal contentions is not somewhat vague and does not admit of clear-cut legal contours. As we apprehend the contention, it pertains to the legality or propriety of a policy-option22. On a consideration of the matter, it appears to us that the argument that a project envisaging a self-financing scheme, by reason alone of the particular policy behind it, is beyond the powers of the local authority is somewhat too broadly stated to be acceptable. A project, otherwise legal, does not become any the less permissible by reason alone that the local authority, instead of executing the project itself, had entered into an agreement with a developer for its financing and execution. The criticism of the project `unconventional does not add to or advance the legal contention any further.The question is not whether it is un-conventional by the standard of the extant practices, but whether there was something in the law rendering it. There is, no doubt, a degree of public accountability in all governmental enterprises. But, the present question is one of the extent and scope of judicial review over such matters. With the expansion of the States presence in the field of trade and commerce and of the range of economic and commercial enterprises of Government and its instrumentalities there is an increasing dimension to Governmental concern for stimulating efficiency, keeping costs down, improved management methods, prevention of time and cost over-runs in projects, balancing of costs against time-scales, quality-control, cost-benefit ratios etc. In search of these values it might become necessary to adopt appropriate techniques of management of projects with concomitant economic expediencies. These are essentially matters of economic policy which lack adjudicative disposition, unless they violate constitutional or legal limits on power or have demonstrable prerogative environmental implications or amount to clear abuse of power. This again is the judicial recognition of administrators right to trial and error, as long as both trial and error are bona fide and within the limits of authorityappears to us that in the context of expanding exigencies of urban planning it will be difficult for the Court to say that a particular policy option was better than another. The contention that the project is ultra virus of the powers of the Municipal Council does not appeal to us27. We hold that contention (a) does not justify quashing of the impugned Resolution of the Municipal CouncilRe : Contentions (b) and (c)is reasonably possible to fit in the basic conception of this project into what can be held to be comprised in the power under section 272(1), there is no reason why the provision to stifle be interpreted unduly restricitively to exclude such enterprise32. On a consideration of the matter it appears to us that the appellants have not been able to establish that the essential elements of the transaction are such that section 92 of the Act is violated. It would, indeed, be unduly restrictive of the statutory powers of the local authority if a provision enabling the establishment of markets and disposal of occupancy-rights therein are hedged in by restrictions not found in the statute. The point to note is that the developer to the extent he is authorized to induct occupiers in respect of the area earmarked for him merely exercises, with the consent of the Municipal Council, a power to substitute an occupier in his own place. This is not impermissible when it is with the express consent of the Municipal Council34. On a consideration of the matter we find no substance in contentions (b) and (c) eitherRe : Contention (d)While it is true that principles of judicial review apply to the exercise by a Government body of its contractual powers, the inherent limitations on the scope of the inquiry are themselves a part of those principles. For instance, in a matter even as between the parties, there must be shown a public law element to the contractual decision before judicial review is invoked. In the present case the material placed before the Court falls far short of what the law requires to justify interference47. In regard to the allegation that the Project Scheme was tailored to suit respondent 6 alone or that the project as put to tender did not admit of tenders on fixed comparable parameters, we find no merit.Sri K.K. Singhvi submitted that the tender papers were prepared by reputed Architects and the precise points on which comparative quotations were invited were specifically incorporated in the tender-papers.The point again is that no other tenderer expressed any grievance. The tenders were such that the tenderer could identify the terms which form the basis of comparative evaluation. The charge of arbitrariness cannot be upheld. Tests to be applied in a given case may be influenced by the extent to which a decision is supported by a democratic unanimity which evidences the decision granted, of course, the powerWhile it is true that large scale tax evasion and evils of unaccounted money bedevils the nations economic discipline and that with the increasing erosion of morality in public life and the serious personal degradations for unjust gains one sees all-round, the situation is, indeed, serious. But we fail to see what the Court can do in a case like this. The present argument proceeds on two assumptions. The first is that respondent No.6 has, in fact, indulged in such practices in the matter of disposal of occupancy rights. This is a mere allegation which is emphatically repudiated by respondent No.6. The second is that the accommodation in this commercial complex is such good competitive selling proposition that there is great demand and limited supply enabling respondent 6 to exploit the situation. This again is a matter of mere allegation. To condemn the Municipal authoritys decision, otherwise valid, on the ground alone that the developer is likely to resort to transactions of unaccounted money would, as a judicial remedy, be plainly unthinkable49. Contention (d) requires to be and is also held against appellants.