# G.B. MAHAJAN AND ORS v. JALGAON MUNICIPAL COUNCIL AND ORS

- **Citation:** [1990] Supp. 3 S.C.R. 20
- **Court:** Supreme Court of India
- **Decided:** 1990-09-13
- **Case number:** Civil Appeal No. 6266 , of 1990
- **Bench:** M.N. Venkatachaliah, N.D. Ojha, J.S. Verma
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/g-b-mahajan-and-ors-v-jalgaon-municipal-council-and-ors-10919
- **Pages:** 28

## Headnote

Constitution of India, I950: Articles 14 and 298-State Instrumentality-Municipal Council entering into contract with private
developer for construction of Commercial Complex on self financing
basis-Adoption of such an unconventional technique as a policy
option-Validity of.
Article 226-Resort to-Contractual transaction of Government
or its instrumentality-Presence public law elemem-Essential for invoking·
Judicial Review.
D
Municipalities: Maharashtra Municipalities Act, 1965: Sections
92 & 272( 1)-Municipal Market-Disp0sal of occupancy rightsConstruction o[ Commercial Complex-Private developer to undertake
on self financing basis-Giving adrninistrative building to Municipal
Council free of cost-Shops to be given to a/lottees-Liberty to dispose
of the remaining accommodation to cover financial outlays and project
E -Whether valid.
F
Administrative Law: Judicial Review-Policy decision-Government or its instrumentality-Whether free to evo!Ve and adopt any
method for executing of a Project-Such decisions-Whether open to
Judicial Review.
Test of'Reasonableness'-To distinguish between proper use and
improper use of power-Applicability of. the test depends upon
context.
Delegation of power-Statutory function under Section 272 of the
G Maharashtra Municipalities Act, I965-0ccupancy rights-Powers to
substitute occupiers in its own place by developer~Whether permissible.
Interpretation of Statutes: Use of same word/phrase or concept in
different laws-Distinction in meaning and usage-Need for.
H
Words & Phrases: 'Reasonableness'-' Reasonable man'-Mean-
~·
ing of.
20
.,.
; .
MAHAJAN v. JALGAON MUNICIPAL COUNCIL
21
The respondent Municipal Council received by way of gill certain A
lands from one 'L' and the said lands were used by the Agricultural
Produce Market Committee as a cotton market and wholesale fruit and
vegetables market. The Respondent Council, in order to put the land to
a better and more profitable use, persuaded the Market Committee to
yield up possession. However, since the gill stipulated certain conditions regarding the user, the Respondent Connell approached the heirs B
of the donor for amending the terms of the gill, and the heirs bargained
for and secured a benefit that five shops be given to them free of cost in
the proposed c<immercial complex. The entire project of constructing
the Administrative building, an adjacent structure for vegetable market
and a commercial complex wa8 to be executed by a developer at his own
expense. The estimated financial outlay was about Rs.11 crores. It was
contemplated that the developer was to hand over the Adlninistrative C
building free of cost to the Municipality and the vegetable market to the
allottees and the five shops to tht heirs of the donee of the land. Thereafter the developer would be entitled to dispose of the occupancy rights
in respect of the rest of the accommodation in the commercial complex
and retain the promia received therefrom to cover the fmancial outlays D
and profit thereon. The occupie..S to whom allotments were made as
also the occupiers inducted by the developer were to pay rents .to the
Respondent Connell for 50 years.
Tenders were issued for the project, and after scrutiny of the
tenders submitted by five developers, the tender of Respondent No. 6 E
was accepted by the Respondent-Connell, and a formal agreement was
entered into between the Council and Respondent No. 6.
The appellants, residents of the area petitioned to the Collector to
suspend the Resolutions of the Connell nnder:tal<ing the said project and
the agreement entered with Respondent No. 6, on the grounds that the
F
_,
proposed transaction amounted to a lease for 50 years which was prohibited under Section 92 of the Maharashtra Municipalities Act, 1956;
that sanction of the Development Department was not ob_tained; that an
impermissible encumbrance would be created on the Council's property in favour of the developer and that the intended user violated the
original terms of the gift. On th

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G.B. MAHAJAN AND ORS.
v.
JALGAON MUNICIPAL COUNCIL AND ORS.
SEPTEMBER 13, 1990
[M.N. VENKATACHALIAH, N.D. OJHA AND J.S. VERMA, JJ .]
Constitution of India, I950: Articles 14 and 298-State Instrumentality-Municipal Council entering into contract with private
developer for construction of Commercial Complex on self financing
basis-Adoption of such an unconventional technique as a policy
option-Validity of.
Article 226-Resort to-Contractual transaction of Government
or its instrumentality-Presence public law elemem-Essential for invoking·
Judicial Review.
D
Municipalities: Maharashtra Municipalities Act, 1965: Sections
92 & 272( 1)-Municipal Market-Disp0sal of occupancy rightsConstruction o[ Commercial Complex-Private developer to undertake
on self financing basis-Giving adrninistrative building to Municipal
Council free of cost-Shops to be given to a/lottees-Liberty to dispose
of the remaining accommodation to cover financial outlays and project
E -Whether valid.
F
Administrative Law: Judicial Review-Policy decision-Government or its instrumentality-Whether free to evo!Ve and adopt any
method for executing of a Project-Such decisions-Whether open to
Judicial Review.
Test of'Reasonableness'-To distinguish between proper use and
improper use of power-Applicability of. the test depends upon
context.
Delegation of power-Statutory function under Section 272 of the
G Maharashtra Municipalities Act, I965-0ccupancy rights-Powers to
substitute occupiers in its own place by developer~Whether permissible.
Interpretation of Statutes: Use of same word/phrase or concept in
different laws-Distinction in meaning and usage-Need for.
H
Words & Phrases: 'Reasonableness'-' Reasonable man'-Mean-
~·
ing of.
20
.,.
; .
MAHAJAN v. JALGAON MUNICIPAL COUNCIL
21
The respondent Municipal Council received by way of gill certain A
lands from one 'L' and the said lands were used by the Agricultural
Produce Market Committee as a cotton market and wholesale fruit and
vegetables market. The Respondent Council, in order to put the land to
a better and more profitable use, persuaded the Market Committee to
yield up possession. However, since the gill stipulated certain conditions regarding the user, the Respondent Connell approached the heirs B
of the donor for amending the terms of the gill, and the heirs bargained
for and secured a benefit that five shops be given to them free of cost in
the proposed c<immercial complex. The entire project of constructing
the Administrative building, an adjacent structure for vegetable market
and a commercial complex wa8 to be executed by a developer at his own
expense. The estimated financial outlay was about Rs.11 crores. It was
contemplated that the developer was to hand over the Adlninistrative C
building free of cost to the Municipality and the vegetable market to the
allottees and the five shops to tht heirs of the donee of the land. Thereafter the developer would be entitled to dispose of the occupancy rights
in respect of the rest of the accommodation in the commercial complex
and retain the promia received therefrom to cover the fmancial outlays D
and profit thereon. The occupie..S to whom allotments were made as
also the occupiers inducted by the developer were to pay rents .to the
Respondent Connell for 50 years.
Tenders were issued for the project, and after scrutiny of the
tenders submitted by five developers, the tender of Respondent No. 6 E
was accepted by the Respondent-Connell, and a formal agreement was
entered into between the Council and Respondent No. 6.
The appellants, residents of the area petitioned to the Collector to
suspend the Resolutions of the Connell nnder:tal<ing the said project and
the agreement entered with Respondent No. 6, on the grounds that the
F
_,
proposed transaction amounted to a lease for 50 years which was prohibited under Section 92 of the Maharashtra Municipalities Act, 1956;
that sanction of the Development Department was not ob_tained; that an
impermissible encumbrance would be created on the Council's property in favour of the developer and that the intended user violated the
original terms of the gift. On the said petition, the Collector passed G
orders suspending the Resolutions. On revision, the Minister stayed the
operation of the Collector's order.
Meanwhile, a Writ Petition was flied before the High Court,
assailing the said Resolutions. Another Writ Petition was f'ded challenging the Minister's orders staying the order of the Collector. Both the
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[ 1990] Supp. 3 S.C.R.
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Writ Petitions were heard together. The main contention of the Writ
Petitioners was that the fmancial 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 No. 6. The ffigh Court directed
that occupancy rights in regard to the shops at the disposal of the
B developer tenders be called from the public, so that the difference between what was taken into account in the estimate and what was actually
secured might go to the benefit of the Municipality. Accordingly,
advertisement were issued, but it did not evoke any favourable response
from the public. The matter was listed again before the High Court. It
...
was held that tbe High Court's earlier order was self-executory, and the
c Writ Petitions were dismissed. Review Petition was also dismissed.
Another Writ Petition challenging the advertisement issued pursuant to
High Court's earlier order was also dismissed.
The Special Leave Petitions fded against the above-said orders of
the High Court, were dismissed by this Court with the observations that
D it was open to the petitioners to move the Minister for final disposal and
the Minister would expeditiously dispose of the matter taking into consideration whether the scheme was in conformity with the statutory
provisions. The Minister disposed of the Revision Application recording
his findings against the appellants. Thereupon, the appellants fded a
fresh Writ Petition before the High Court challenging the Minister's
E orders. The High Court declined to interfere. Aggrieved by the High
Court's order, appellate preferred the present appeal by special leave.
It was contended on behalf of the appellants that the scheme of
financing the project was not, as a matter of policy, open and permissihie to a Governmental authority; that the Municipal authority could
F have put up the construction itself departmentally or awarded the
execution of the whole project to a building contractor; that the method
of financing and the execution of the project are, beyond the powers of
the Municipal authority under the Act; that the terms of the agreement
with the developer that the latter be at liberty to dispose of the occupancy rights in the commercial complex In such manner and on such
G terms as it may choose would amount to an impermissible delegation of
the statutory functions of the Municipal Council, under Section 272 of
the Maharashtra Municipalities Act; that the project, in effect
amounted to disposal of Municipal property by way of a long term lease
with rights of sub-letting in favour of the developer and hence violative
of Section 92 of the Act; and that the scheme was arbitrary, unreason-
..
H able and violative of Article 14 of the Constitution. It was further con-
MAHAJAN v. JALGAON MUNICIPAL COUNCIL
23
tended that the project was patently intended to provide for an unjust
A
enrichment of.Respondent No. 6 at public expense.
On behalf of the Respondent it was contended that the- increasing
revenue expenditure and other rmancial commitments rendered it
impossible for the Municipal Council to set apart the rmancial inputs
required for the project; that in the management of the transaction
regarding disposal of occupancy rights and prompt mobilisation of
funds, the deficiencies and limitations of the bureaucratic machinery
should not" be i~ored in assessing the value and utiliti of the alternatives; that all the said Resolutions in regard to the Project were passed
unanimously which lend credance to the propriety and wisdom of the
measure and its reasonableness; that the estimates and calculations on
which the scheme was worked out by the Respondent Council would
show that the developer had no opportunity of making any run-away
profits or exploitative gains.
Dismissing the appeal, this Court,
HELD: 1. 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 rmancing and execution. The question is not whether it is
on-conventional by the standard of the extant practices, but whether
there was something in the law rendering it impermissible. No doubt
there is a degree of public accountability in all governmental enterprises. But, the present question is one of the extent and scoiie of judi·
cial review over such matters. With the expansion of the State's presence in. the field of trade and commerce and of the range of economic
and commercial enterprises of government an,d 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 concommitant economic expediencies.
There are essentially matters of economic policy with lack adjudicative
disposition, unless they violate constitutional or legal limits on power or
have demol)Strable pejorative .environmental implications, or if they
amount to clear abuse of power. This again is the judicial recognition of
administrator's right to trial and error, as long as both trial and error
are bona fide and within the limits ofauthority. (3SC-G]
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SUPREME COURT REPORTS
[ 1990] Supp. 3 S.C.R.
Forward Construction Co. & Ors. v. Prabhat Manda!, [1986] 1
SCC HNI; relied on.
Ramana Dayanand Shetty v. International Airport Authority,
[1979] 3 SCR 1014; Kasturi/al Laxmi Reddy v. State of J & K, [1980] 3
SCR 1338; explained.
New State Ice Company v. Ernest A. Liebmann, 285 US 261--Dissenting opinion of Brandeis J; Education Secretary v. Tameside B.C.,
[1977] AC 1014; referred to.
<.:._
"The Purpose and Scope of Judlclal Review" by Sir Gerard
'I
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Brennan is "Judicial Review of Admlnlstrative Action in the 1980s",
Oxford University Press; referred to.
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2. In the ever increasing tempo of urban life and the emerging
stresses and strains of planning, wide range of policy options not inconsistent with the objectives of the statute should be held permissible. lo
the context of exp'!11ding exigencies of urban planning it will be difficult
for the court to say that a particular policy option was better than
another. The project is not ultra vires of the powers of the Municipal
Council, and hence there is no justification for quashing the Resolution
of the Municipal Council. [36G]
Policy making Paradigms in Administrative Law" by Colin
S. Diver in Harward Law Review, vol. 95 p. 393; referred to.
3. In the instant case, it is possible to fit the power exercised by
the Municipal authority Into Section 272(1) of the Maharashtra
Municipalities Act and hence there is no reason why the provision be
interpreted unduly restrictively to exclude such enterprise. [40E]
4. It has not been established 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 developer who was authorised to induct occupiers in
respect of the area earmarked for him merely exercised, with the consent of the Municipal Council a power to substitute an bccupier in his
own place. This is not impermissible when it is with the express consent
of the Municipal Council. [40H; 41A-B]
,..
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MAHAJAN v. JALGAON MUNICIPAL COUNCIL
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5.1 Some phrases which pass from one branch of law to
another-as did the expression 'void' and 'voidable' from private law
areas to public law situations-carry over with them meanings that may
be inapposite in the chaoged context. Some such thing has happened to
the words "Reasonable", "Reasonableness" etc. Different contexts in
which the operation of "Reasonableness" as test of validity must be
kept distinguished. The administrative law test of 'reasonableness' as
the touch-stone of validity of the Resolution in the instant case is different from the test of the 'reasonable man' familiar to the law of torts,
whom English Law figuratively identifies as the "man on the clapham
omnibus". In the latter case the standards of the 'reasonable-mao', to
the extent such a 'reasonable man' is court's creation, is a mere transferred epithet. Yet another area of reasonableness which must be distinguished is the constitutlonal standards of 'reasonableness' of the restrictions on the fundamental rights of which the Court of Judicial Review is the arbiter. [42F-G; 43A-B]
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5.2. The 'reasonableness' in administrative law must distinguish
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between proper and improper use of power. [ 44D]
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Davis Contractors v. Fareham U.D.C., (1956] 2 All ER 145; Associated Provincial Picture Houses Ltd. v. Fednesbury Corporations,
[1948] 1 KB 223; Nottinghamshire County Council v. Secretary of State
for Environment; [1986] AC 240; Tiller v. Atlantic Coast Line Rail
Road Company, 318 US 54; Chief Constable v. Evans, [1982] 3 All ER
E
141; referred to.
Administrative Law, by H.W.R. Wade, 6th Edn., pp. 407, 408;
Legal Control of Government, by Bernard Sehwartz aod H.W.R.
Wade, p. 253; referred to.
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6. 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. 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
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before the Court fails far short of what the law requires to justify interference. [46F]
7. There is no merit in the contention that the Project Scheme was
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tailored to suit Respondent No. 6 alone or that the project as put to
tender did not admit of tenders on fixed comparable parameters. No
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SUPREME COURT REPORTS
[1990] Supp. 3 S.C.R.
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. [46G-H; 47A]
8. To condemn the Municipal authority's 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
unthinkable. [47E]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6266
,
of 1990.
"'
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From the Judgment and Order dated 18.9.1989 of the Bombay
High Court in W.P. No. 2404 of 1989.
R.K. Jain, Gopal Subramaniam, Mukul Mudgal, R.D. Bande
and Nitin Talk for the Appellants.
D
K.K. Singhvi, Dr. Y.S. Chitale, B.N. Singhvi, A.K. Gupta, A.S.
Bhasme, R.N. Keshwani, N.N. Keshwani and Meraj Khayyam for the
Respondents.
The Judgment of.the Court was delivered by
E
VENKATACHALIAHJ. Petitioners seek special leave to appeal
to this Court from the order dated 18.9.1989 made by the Bombay
High Court, Aurangabad Bench, dismissing appellants' Writ Petition
No. 2404 of 1989 in which they assailed certain contracts of the Municipal Council of Jalgaon with a Developer of real estate for the execution of a project for 'Administrative Building' and a 'Commercial
.P
Complex' on a plot of land belonging to the Municipality.
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2. We have heard Sri R.K. Jain, learned Senior Advocate for
the Petitioners; Sri K.K. Singhvi, Sri A.S. Bhasme and Dr. Y.S.
Chitale, learned Senior Advocates for Respondents l, 4, 5, and 6
respectively.
Special leave granted. The main appeal is taken-up for final
hearing, heard and disposed of by this judgment.
3. The controversy relates to a project for the development of
real estate sponsored by the Town Municipal Council, Jalgaon, in the
H State of Maharashtra. In the year 1913 the Municipal Council, it would
,. ..
MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J .l 27
appear, received by way of gift a piece of land of an extent of 5 acres
and 32 guntas 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 yeild-up
possession. The terms of the original gift, it would appear, stipulated
conditions that the land be put to use for only as a cotton and vegatable
market. In order to enable itself to put the land to other and more
beneficial uses and to exploit ihe commercial-potential which the
proper\y 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 complex.
4. 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.
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Kabra Chaudhary Associates as Architects for the project.
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The project envisaged a Central Administrative1 Building with
ground plus 17 floors intended to be utilised by the Municipal Council
for locating its own offices and an adjacent structure with a basement
plus five upper floors to be used as vegetable-market and a commercial
complex. The broad aspects as to the funding of the project were that
F
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 concessional~prerriium
of Rs.3,000 per stall; that 83 more shops,-at fixed premia of Rs~40,000 G
each, be given to Adatias who were carryjng 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 these beneficiaries is stated to be "occupancy
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[ 1990] Supp. 3 S.C.R.
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 tenants.
5. 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 disponees
so to reimburse itself the financial outlays on the project plus its profit.
The occupiers, including those who would have the benefit of the
D 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
E 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 Council's view that while the project would help to rehabilitate
F
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 occupG ants in the commercial complex would considerably augment the
municipal revenues.
6. 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 proH cess of scrutiny of the tenders and elimination of ineligible and non-
...
,
,...
MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHAL!AH, J .[ 29
competitive ones, the tender of respondent No. 6 was accepted by the
Municipal Council by its unanimous Resolution dated 8. JO. 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 behalf.
7. 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 tpis 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 really amounted to grant of a lease of 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 Collector's
order, stayed the operation of that order. Simultaneously, some
persons, including some of those who had moved the Collector, filed
Writ Petition No. 1765/)988 in the High Court assailing the said Resolutions. It is necessary to refer in any great detail to the several proceedings that ensued. Suffice it to say, in WP 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
1825/1988 in which the Minister's order staying the Collector's 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 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 rnade by the
Municipality. Learned Judges of the Division Bench who dealt with
the writ-petitions were of the opinion that any 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
!
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[ 1990] Supp. 3 S.C.R.
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 basedient on the eastern
side facing Sane Guruji Road, stipulating Rs.3,50,000 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 Jaikisanwadi, 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 wit!lin 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 shop.
If 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 contractor.
If applications for all the shops are not received, or, if
the applications received tender less amount than the floorprice, then the Council is at liberty to go ahead with their
present scheme .... "
[W.P. No. 1765/ 1988 dated 20.12.1988]
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 10.12.1988 was self-executory and had
G put an end to the Writ-Petition finally and nothing really survived in
the Writ-Petition. That was how WP 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
H the order dated 20.12.1988, was itself challenged in a separate Writ1
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MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J .] 31
Petition and that Writ-Petition was also dismissed on 8.2.1989.
8. All these orders were assailed before this Court in Special
Leave Petition No. 3292/1989, SLP No. 3222/1989, SLP No. 3268/1989
respectively. The SLP 3293/1989 which arose out of the Writ-Petition
challenging Minister's order was disposed of on 17.4.1989 by this
Court with the following observation:
"Since the order made by the Hon'ble 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."
Special Leave Petition (Civil) No. 3293 and 3268/1989 which arose out
of the orders in W.P. 1765 of 1988 and the Writ-Petition preferred
against the Advertisement were also dismissed with the following
observation:
"In view of the above order in Special Leave petition
(Civil) No. 3222/1989 these Special Leave Petitions are
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dismissed."
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9. 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 that decision could not be ignored by him.
That apart, he also went into the merits of the scheme and recorded
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findings against the appellants. Against this order of Minister, appellants preferred a fresh Writ-Petition No. 2404/1989 before the High
Court. The present appeal before us arises out of the High Court's
order dismissing the said W.P. 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
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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.
10. Sri R.K. Jain, strenuously contended before us that the High
Court misdirected itself as to the scope of the proceedings before it on
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[1990] Supp. 3 S.C.R.
an obviously erroneous view that this Court, while disposing of the
earlier SLPs, had precluded any further enquiry into the merits after
the Minister's decision. Sri Jain submitted that this Court while disposing of the Special Leave Petitions had merely indicated its disinclination to interfere at that stage and had left the matter to be dealt with
under the statute by the Minister which obviously meant that at an
appropriate stage when the correctness of the Minister's order came to
be assailed the matter would require to be examined on its own merits.
It was erroneous to think, contended Sri Jain, that the effect of the
orders of this Court was to impart a finality to the Minister's order
whatever its vitiating features.
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
Court's 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 Court's 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 us.
11. Sri Jain raised a number of contentions touching the power
of the Municipal Council to make such disposal of Municipal property
as was implicit in the scheme and on, what Sri Jain called, a manifest
susceptibility of the scheme for arbitrariness in the matter of the choice
of the developer. The main thrusts on Sri Jain's argument are, first,
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that the project, in substance, envisaged a disposal of the propertyrights of the Municipal Council in favour of Respondent No. 6 which,
in turn, became entitled to further deal with the properties squarely
attracting the prohibition under section 92 of the Act; and secondly,
that the scheme was a wholly non-conventional one unknown to settled principles of public finance. Sri Jain strenuously urged that the
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non-conventional and unorthodox features of the scheme particularly
as to the mode of its finances, were tailored with Respondent 6 in mind
and were intended to, and did, confer on Respondent 6 a pre-mediated
largesse, in flagrant violation of financial disciplines and morality. It
was also urged that the project gave enormous pecuniary advantage to
Respondent 6 wholly disproportionate to its outlay of funds on the
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project.
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MAHAJAN v. JALGAON MUNICIPAL COUNCIL [VENKATACHALIAH, J .1 33
In the ultimate analysis, the contentions of Sri Jain admit of
being formulated thus:
(a) That the scheme of financing of the project was not one that
was, as a matter of policy, open and permissible to a Governmental authority. The Municipal authority could either have putA
up the construction itself departmentally or awarde.d the execuB
ti on of the whole project to a building contractor. The method of
financing and execution of the project are, in short, ultra-vires of
the powers of the Municipal authority under the Act.
(b) That the terms of the agreement with the developer that the
latter be at liberty to dispose of the occupancy-rights in the commercial complex in such manner and on such terms as it may
choose woul
amount to an impermissible delegation of the
statutory functions of the Municipal Council under Section 272
of the Act to the developer.
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( c) That the project, in effect, amounted to and involved the
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disposal of Municipal property by way of a long term lease with
rights of sub-letting in favour of the developer violative of
section 92 of the 'Act'.
(d) That the scheme is arbitrary and unreasonable and is violative of Article 14 of the Constitution. The project is patently one
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intended to and does provide for an unjust enrichment ofrespondent no. 6 at public expense.
We may now deal with these contentions.
12. Re: Contention (a)
The mode of financing of the project is stated to be un-conventional one and does not accord with any recognised or accepted
norms of functioning and financial discipline of Governmental bodies.
It is urged that the Municipal Council could have engaged a contractor
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to execute the work against payment in accordance with well accepted
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procedures for Government contracts or could have executed the
works itself departmentally. It is said that the method now chosen for
the development involves a policy impermissible for a Government
body. This contention of the appellants, as a legal contention is 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
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[ 1990] Supp. 3 S.C.R.
policy-option. However, reliance was placed on certain observations
of this Court in Ramana Dayanand Shetty v. International Airport
Authority, [1979] 3 SCR 1014 and Kasturilal Laxmi Reddy v. State of J
& K, [ 1980] 3 SCR 1338.
In those cases relied this Court pointed out that with the growth
of a welfare state and with the Government assuming a pluralist role as
provider of social welfare services and with the corresponding increase
in the magnitude of the governmental functions and the consequent
evolution of new forms of wealth and new forms of property, the scope
for conferment of largessee by Government had increased and the
discretion of Government in the disposal of such properties, rights or
privileges should not be unlimited and arbitrary.
Sri Jain said that in the present case the project involved purely
commercial considerations and had had no social objectives and the
securing of terms to the best advantage of the Municipal Council
should have been the objective. It is urged that the Municipal Council
D disregarded this criterion and resorted to a method which gave uncontrolled discretion and authority to Respondent 6 to exploit the commercial potential of the property for its own aggradisement. Sri Jain
said that the avowed reason why the Municipal Council did not itself,
with all its vast financial resources, undertake the execution of the
project was that the Municipal Council wanted to save itself from the
E difficulties involved in the process. Sri Jain said that if the developer
could finance the project by the income received from a disposal of the
occupancy-rights and make huge profits, there was no reason why the
Municipal Council itself could not have done the same.
13. Sri Singhvi, for the Municipal authority submitted that the
F execution of the project of this magnitude involved a degree of financial outlay and management expertise well beyond the immediate
sources of the Municipal Council and that though the Municipal
Council had a budget which indicated crores of rupees on the receipt
side, the increasing revenue expenditure and other financial commitments rendered it well-neigh impossible to set-apart the financial
G inputs requisite for this project. Sri Singhvi said that in the matter of
management of the transactions relating to the disposal of occupancyrights and prompt mobilisation of funds, the deficiencies and limitations of the bureaucratic machinery should not be put out of consideration in assessing the value and utility of the alternatives. Sri Singhvi
pointed out that despite the heterogeneity of their political affiliations,
•
H the members of the Municipal Council, passed all the resolutions in
MAHAJAN v. JALGAON MUNICIPAL COUNCIL (VENKATACHALIAH, J.l 35
regard to this project unanimously. Sri Singhvi said that although
popular support could not validate an ultra vires action, it might
become relevant to the question whether a certain action was reasonable or not and that the circumstance that all the resolutions had been
passed unanimously would lend credence to the propriety and wisdom
of the measure. Sri Singhvi claimed that the estimates and calculations
on which the scheme was worked-out by the Municipal Council would
show that the developer would not have any opportunity of making
any run-away profits or exploitative gains.
14. 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, <loes 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 being '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 impermissible. 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 State's presence in the field of trade and commerce and of
the range of economic and commercial enterprises of government and
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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, costbenefit ratios etc. In search of these values it might become necessary F
to adopt appropriate techniques of management of projects with
concommitant economic expediencies.