Sanjay Kumar Surve v. The State of Maharashtra

1. These Civil Appeals arise out of the impugned judgment dated 06.12.2013 passed by the High Court of Judicature at REPORTABLE 2021 INSC 797 Bombay in Writ Petition No. 702 of 2011, Writ Petition NO. 5245 of 2011, and Public Interest Litigation No. 55 of 2011.

2. At the outset, a brief sketch of the facts is necessary for determining the issue. On 11.06.2008, the appellants in Civil Appeal Nos. 3956­3957 of 2017 (City and Industrial Development Corporation of Maharashtra, for short “CIDCO”) called for a tender for lease of land within its jurisdiction, for purposes of development of necessary infrastructure such as Hotels etc., around Navi Mumbai Airport. Respondent­ M/s Metropolis Hotels was one of the bidders.

3. Before approval of the tender, technical qualifications of the bidders were scrutinized and approved by the CIDCO’s legal team on 25.07.2008 in the following manner: “Metropolis Hotels is a Partnership firm consisting of M/s Sun­n­Sand Hotel Pvt. Ltd. and Shishir Realty Pvt. Ltd having their share 30% each. A short question arises for the determination is whether Board Resolution of the partnership firm is required to be annexed with the offer. It appears from the technical bid of M/s Metropolis Hotels that the said bid is signed by both the partners jointly. Section 4 of the Indian Partnership Act 1932 defines ‘Partner’ and ‘Partnership’ is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “Firm Name”. Partnership is not created by status and arises from contract. In the Indian Partnership Act, 1932, there are no directors, and all the partners are jointly and severally responsible for all the acts of the firm. In view of this Board Resolution is not required. Therefore, the remarks appearing on the scrutiny sheet at Sr. No. 19, requires to be ignored and technical offer should be accepted.” On 25.07.2008, the financial bids were opened, which stood as under:

┌───────────────────────────────────────────────────────────────────────┐
│ SL.    NAME OF OFFEROR            RATE QUOTED (RS.          REMARKS   │
│ NO.                                PER SQ MTRS.)                      │
├───────────────────────────────────────────────────────────────────────┤
│ 1. M/s. Metropolis Hotel             60,085.10         1st Highest    │
│     (Respondent no.1 in                                               │
│     C.A. No. 3957 of 2017)                                            │
│  2. M/s. Indian Hotels Co.           55319.15           2nd Highest   │
│     Ltd.                                                              │
│  3. M/s.         Sun­N­Sand          49,361.70          3rd Highest   │
│     Hotels Pvt. Ltd.                                                  │
│  4. M/s. L&T Leela Venture           48,063.90          4th Highest   │
│     Co.                                                               │
└───────────────────────────────────────────────────────────────────────┘

51. The last submission on this aspect which the learned senior counsel for the CIDCO, Shri Rakesh Dwivedi, takes is that the relaxation of land use was made under the policy of 1997 which has been substituted by a new policy in 2004. However, such submission is patently wrong, considering the fact that the letter dated 11.02.2010 specifically alludes to the expanded policy of 2004 whereby additional categories of land use were added. It is mentioned in the letter that the policy of the CIDCO was not to impose any limit on the user of an area out of allotted area which can be converted. In light of the aforesaid discussion, the change of land use from five­star hotel to partly residential­cum­ commercial purpose cannot be said to be illegal or arbitrary.

52. The third aspect which needs to be considered is the legality of sub­division of plots and subsequent transfer of rights. It has been contended that the terms of the tender and letter of allotment do not allow such transfer. However, on perusal of the aforementioned Clause 16 of the General Terms and Conditions and the corresponding Condition 21 of the allotment letter, it is clearly revealed that the allottee was permitted to transfer or assign his rights, interests or benefits with prior written permission of the Corporation and on payment of such transfer charges as may be prescribed by the Corporation. Both the clause and the condition have further stipulated that such permission could be granted only after the agreed lease premium has been paid in full and after execution of agreement to lease. In the present case, agreed lease premium was paid in full. However, agreement to lease was made on the very next day, i.e. on 30.03.2010. In our view, merely because the agreement to lease was executed on the very next day, the assignment and transfer would not be invalidated. Such breach cannot in itself be termed as a fundamental to annul the tender, especially after receiving the lease amount, CIDCO cannot question the subsequent transfer. We can only state that such clause can be construed as a warranty alone rather than a condition, in light of the circumstances. The CIDCO, being a public body, had a duty to act fairly. Having acquiescence of the facts and allowing such transfer, they ought not to have taken such a hyper­technical view on contractual interpretation. In light of the aforesaid reasoning, we do not find any substantial reason sought to be adduced by the CIDCO to differ from the High Court.

53. Ultimately, we need to consider whether there was any illegality or unfairness in the aforesaid transaction. Learned senior counsel representing the appellants have submitted that allowing subdivision of plots with change in land use, had caused substantive loss to the State largesse, as many people would have shown a proclivity to buy land with different land use. On the contrary, the learned senior counsel representing the Respondents­lessees have stated that the allotment, change in land use and transfer have taken place in accordance with law. There is no substantial deviation as sought to be projected by the appellants herein. The appellants herein have sought to invoke the doctrine of promissory estoppel to argue that the CIDCO could not have walked out of the bargain, merely because of the possibility of larger profits. It is pertinent to note that, the CIDCO has failed to prove any losses suffered.

54. When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination. The larger public interest of upholding contracts and the fairness of public authorities is also in play. Courts need to have a broader understanding of public interest, while reviewing such contracts.

55. In Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, it was held as under: “22… The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold.

56. Similarly, this Court in the case of Andhra Pradesh Dairy Development Corporation Federation v. B. Narasimha Reddy, (2011) 9 SCC 286 held as under: “40. In the matter of the Government of a State, the succeeding Government is duty­ bound to continue and carry on the unfinished job of the previous Government, for the reason that the action is that of the “State”, within the meaning of Article 12 of the Constitution, which continues to subsist and therefore, it is not required that the new Government can plead contrary to the State action taken by the previous Government in respect of a particular subject. The State, being a continuing body can be stopped from changing its stand in a given case, but where after holding enquiry it came to the conclusion that action was not in conformity with law, the doctrine of estoppel would not apply. Thus, unless the act done by the previous Government is found to be contrary to the statutory provisions, unreasonable or against policy, the State should not change its stand merely because the other political party has come into power. “Political agenda of an individual or a political party should not be subversive of rule of law.” The Government has to rise above the nexus of vested interest and nepotism, etc. as the principles of governance have to be tested on the touchstone of justice, equity and fair play.”

57. In the present case, it was argued by the respondents that with the change in the executive head in CIDCO, enquiry was initiated against the allotment made in favour of the respondent­ M/s. Metropolis Hotel during the tenure of the earlier executive head. Even the inquiry, that was conducted against the respondents­lessees stood vitiated as no proper notice or hearing was given to them before passing the impugned order. Additionally, from the above analysis it clear that the change of usage and the subsequent division was well­within the statutory limitations. Therefore, the earlier undertakings taken by the appellant­authorities cannot be set aside with the change of person in power, without any rhyme or reason. After all one cannot change the rules of the game once it has started.

58. From the contradictory submissions asserted before this Court and the concessions given regarding practice of CIDCO to allow change in land use in other cases, clearly points to a ‘regime revenge’. Such conclusion reached herein is further buttressed by the fact that no inquiry or disciplinary proceedings were initiated against the earlier Vice­Chairman, whose orders have been annulled. Such phenomenon is clearly detrimental to the constitutional values and rule of law.

59. As the last leg of the submission, the respondents­lessees have claimed that considering they have acted upon the directions of the appellant authority and have duly paid the requisite amounts to the tune of Rs. 321.32 crores, CIDCO is bound by the doctrine of promissory estoppel. On the contrary, principles of estoppel do not apply if enforcing the promise would lead to the prejudice of public interest.

60. Before we delve into the aforesaid arguments, it is imperative for us to go to have a look at certain decisions of this Court. This Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, (1979) 2 SCC 409 laid down the necessity of the government being bound by the principles of promissory estoppel in the following words: “24. … The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. … It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel… It was laid down by this Court that the Government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promisee and the promisee would alter his position relying upon it. But if the Government makes such a promise and the promisee acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the Courts and the legislature, must, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promisee and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts as have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. ….The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden.” In the aforesaid case, this Court held that it would not be enough for the Government to merely state that public interest requires that the Government should not be compelled to carry out the promise. It is imperative that the Government when seeking exoneration from liability of enforcing contract, must satisfy the Court as to how public interest overrides the necessity of enforcing the contract. The aforesaid opinion has been reiterated in the case Union of India v. Godfrey Philips India Ltd., (1985) 4 SCC 369: “12.There can therefore be no doubt that the doctrine of promissory estoppel is applicable against the Government in the exercise of its governmental, public or executive functions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel. …

13. Of course we must make it clear, and that is also laid down in Motilal Sugar Mills case[(1979) 2 SCC 409: 1979 SCC (Tax) 144: (1979) 2 SCR 641] that there can be no promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or, power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it.”