# MAHARASHTRA LTD.& ANR v. SHISHIR REALTY PRIVATE LIMITED & ORS. ETC

- **Citation:** [2021] 13 S.C.R. 190
- **Court:** Supreme Court of India
- **Decided:** 2021-11-29
- **Case number:** Civil Appeal Nos. 3956-3957 of 2017
- **Bench:** N. V. Ramana, Vineet Saran, Surya Kant
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/maharashtra-ltd-anr-v-shishir-realty-private-limited-ors-etc-35242
- **Pages:** 41

## Headnote

Government contracts: Judicial review - Scope of - On facts,
appellant (CIDCO) invited tender for lease of land for the
development of Hotels - Issuance of allotment letter in favour of
the highest bidder - Complaints regarding irregularities in allotment
of plots of land, change of user and deviation from the terms and
conditions of the tender - On the basis of preliminary enquiry,
issuance of notice to the highest bidder and the respondent-lessee
by the newly appointed Vice Chairman - Thereafter, cancellation
of lease deed, pursuant to the enquiry - Writ petitions - High Court
quashed the cancellation order - On appeal, held: There is an
element of abuse of bureaucratic power behind subsequent change
in the tender allotment - When a contract is being evaluated, the
mere possibility of more money in the public coffers, does not in
itself serve public interest - Blanket claim by the State claiming loss
of public money cannot be used to forgo contractual obligations -
On facts, post-decisional hearing given to respondent-lessee was
just to sanctify the process of cancellation - Change of usage and
the subsequent division was within the statutory limitations - Thus,
the earlier undertakings taken by the appellant-authorities cannot
be set aside with the change of person in power, without any rhyme
or reason - Phenomenon of 'regime revenge' is detrimental to the
constitutional values and rule of law - Equity demands that when
the State failed to produce an iota of evidence of either financial
loss or any other public interest that has been affected, it should be
compelled to fulfill its promises - Thus, the order of CIDCO, inter
alia, annulling the allotment on hyper-technical grounds cannot be
sustained for being contrary to the doctrine of fairness, and is set
aside - Judicial restraint.
[2021] 13 S.C.R.190
190
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Government contracts: Tender process - Judicial review of -
Power of constitutional courts - Explained.
Government contracts: Constitutional factors - Satisfaction
of - Held: Governmental bodies being public authorities are
expected to uphold fairness, equality and rule of law even while
dealing with contractual matters - Right to equality u/Art. 14 abhors
arbitrariness - Public authorities have to ensure that no bias,
favouritism or arbitrariness are shown during the bidding process,
unless public interest demands otherwise - Degree of compromise
of any private legitimate interest must correspond proportionately
to the public interest, so claimed - On mere grounds of public interest
or loss to the treasury, the successor public authority cannot undo
the work undertaken by the previous authority - In that case,
businessmen would be hesitant to enter Government contract or
make any investment.
Administrative law: Administrative orders - Principle of
natural justice - Significance of - Held: Natural justice is an
important aspect while viewing the administrative orders - To
maintain rule of law, effective natural justice is to be provided to
affected parties, before a decision is taken - Any attempt by authority
to evade the requirement of providing effective hearing before
reaching a conclusion, cannot pass the muster.
Dismissing the appeals, the Court
HELD: 1.1 The Constitution of India allows the government
to enter into contracts and perform certain commercial activities.
Due to increase in government business, there is a requirement
of this Court to uphold certain discretion accruing to the
government and disallow certain conduct in light of prevailing
circumstances. Merely instilling an agency with discretion may
not be prohibited by the Constitution, rather it is unfettered use
of such discretion, that is prohibited; the Constitution frowns upon
those decisions which are taken in gross abuse of law. [Para
25][210-C]
1.2 Being governed under "rule of law" every action of the
State or its instrumentality while exercising its executive powers
must met the aforesaid requirements. While recognising t

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SUPREME COURT REPORTS
[2021] 13 S.C.R.
THE VICE CHAIRMAN & MANAGING DIRECTOR, CITY AND
INDUSTRIAL DEVELOPMENT CORPORATION OF
MAHARASHTRA LTD.& ANR.
v.
SHISHIR REALTY PRIVATE LIMITED & ORS. ETC
(Civil Appeal Nos. 3956-3957 of 2017)
NOVEMBER 29, 2021
[N. V. RAMANA, CJI, VINEET SARAN AND
SURYA KANT, JJ.]
Government contracts: Judicial review - Scope of - On facts,
appellant (CIDCO) invited tender for lease of land for the
development of Hotels - Issuance of allotment letter in favour of
the highest bidder - Complaints regarding irregularities in allotment
of plots of land, change of user and deviation from the terms and
conditions of the tender - On the basis of preliminary enquiry,
issuance of notice to the highest bidder and the respondent-lessee
by the newly appointed Vice Chairman - Thereafter, cancellation
of lease deed, pursuant to the enquiry - Writ petitions - High Court
quashed the cancellation order - On appeal, held: There is an
element of abuse of bureaucratic power behind subsequent change
in the tender allotment - When a contract is being evaluated, the
mere possibility of more money in the public coffers, does not in
itself serve public interest - Blanket claim by the State claiming loss
of public money cannot be used to forgo contractual obligations -
On facts, post-decisional hearing given to respondent-lessee was
just to sanctify the process of cancellation - Change of usage and
the subsequent division was within the statutory limitations - Thus,
the earlier undertakings taken by the appellant-authorities cannot
be set aside with the change of person in power, without any rhyme
or reason - Phenomenon of 'regime revenge' is detrimental to the
constitutional values and rule of law - Equity demands that when
the State failed to produce an iota of evidence of either financial
loss or any other public interest that has been affected, it should be
compelled to fulfill its promises - Thus, the order of CIDCO, inter
alia, annulling the allotment on hyper-technical grounds cannot be
sustained for being contrary to the doctrine of fairness, and is set
aside - Judicial restraint.
[2021] 13 S.C.R.190
190
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Government contracts: Tender process - Judicial review of -
Power of constitutional courts - Explained.
Government contracts: Constitutional factors - Satisfaction
of - Held: Governmental bodies being public authorities are
expected to uphold fairness, equality and rule of law even while
dealing with contractual matters - Right to equality u/Art. 14 abhors
arbitrariness - Public authorities have to ensure that no bias,
favouritism or arbitrariness are shown during the bidding process,
unless public interest demands otherwise - Degree of compromise
of any private legitimate interest must correspond proportionately
to the public interest, so claimed - On mere grounds of public interest
or loss to the treasury, the successor public authority cannot undo
the work undertaken by the previous authority - In that case,
businessmen would be hesitant to enter Government contract or
make any investment.
Administrative law: Administrative orders - Principle of
natural justice - Significance of - Held: Natural justice is an
important aspect while viewing the administrative orders - To
maintain rule of law, effective natural justice is to be provided to
affected parties, before a decision is taken - Any attempt by authority
to evade the requirement of providing effective hearing before
reaching a conclusion, cannot pass the muster.
Dismissing the appeals, the Court
HELD: 1.1 The Constitution of India allows the government
to enter into contracts and perform certain commercial activities.
Due to increase in government business, there is a requirement
of this Court to uphold certain discretion accruing to the
government and disallow certain conduct in light of prevailing
circumstances. Merely instilling an agency with discretion may
not be prohibited by the Constitution, rather it is unfettered use
of such discretion, that is prohibited; the Constitution frowns upon
those decisions which are taken in gross abuse of law. [Para
25][210-C]
1.2 Being governed under "rule of law" every action of the
State or its instrumentality while exercising its executive powers
must met the aforesaid requirements. While recognising the
existing principle of freedom to enter or not to enter into contracts
THE VC & MD, CITY AND IND. DEVEL. CORP. OF MAHARASHTRA
LTD. v. SHISHIR REALTY PVT. LTD.
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[2021] 13 S.C.R.
by the state and its instrumentalities, the manner, method and
motive behind the aforesaid decision can be subjected to judicial
review on the touchstone of equality, fairness, proportionality and
natural justice. The decision of the executive must strike a
balance with the alleged violation with that of the penalty imposed.
This Court, in many of its orders reviewing tender conditions,
has vouched for providing sufficient discretion and independence
to administrative authorities so as to enable them to perform
their duties in the interest of the public. Further, the observation
of judicial restraint while reviewing such contracts is a continuing
trend. The power of judicial review accorded to Constitutional
Court of India and its jurisdiction is supervisory. [Para 26, 27][210F-H; 211-A]
1.3 The principles elucidated in Tata Cellular case acquire
importance as the efficacy of commercial activities in the public
sector increases greatly. It appears that public interest litigation
has opened a large window to entertain any tender, regardless of
scale, which are now sought to be challenged as a matter of
routine. Such disruption could hardly have been the objective of
expanding the need of Constitutional Review. Close scrutiny of
minute details, contrary to the view of the tendering authority,
makes execution of contracts in the public sector a cumbersome
exercise. Often, it is the case that parties entertain the idea of a
long-drawn-out litigation at the very threshold itself. The purpose
of imbibing the spirit of competition in a process such as that of
the bidding process, is lost in this meandering exercise and delays
suffered due to pending litigation. This causes great disadvantage
to the government and public sector in general. This Court, in
appropriate cases while interpreting the contract, can restrict
the review mechanism by not inuring to the interpretation so
provided by third parties or parties competing for the tender,
unless the impugned interpretation is shown to be gross abuse
of law. The object of judicial review cannot be that in every
contract where some parties lose out, a second opportunity is
provided to such parties to pick holes so as to disqualify successful
parties, on grounds which even the party floating the tender find
to be without merit. [Para 30][212-E-H; 213-A-B]
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1.4 The perusal of the materials produced on record shows
that the initiation of the enquiry by the Principal Secretary, Urban
Development Department was suo-motu, without any natural
justice being provided for the respondents-lessees. After arriving
at a conclusion, a show-cause notice was issued by CIDCO to
sanctify the enquiry. The said fact of post-decisional hearing just
to sanctify the process of cancellation is clearly evidenced in the
order dated 16.03.2011, passed by the Vice-Chairman and
Managing Director CIDCO, cancelling the tender. Such illegal
procedure adopted, clearly vitiates the subsequent order by the
Vice-Chairman, due to the irregularity, which goes to the root of
the matter. The conduct of the appellant authorities indicate that
the enquiry was not conducted with an open mind. The preexisting findings of the Principal Secretary recommending the
cancellation of allocation has the potential to color the entire
proceedings held subsequently just to meet the procedural
requirements. [Para 36-37][214-A-B, H; 215-A]
1.5 Natural justice is an important aspect while viewing
the administrative orders. Providing effective natural justice to
affected parties, before a decision is taken, it is necessary to
maintain rule of law. Natural justice is the sworn enemy of
intolerant authority. Any attempt by authority to circumvent the
requirement of providing effective hearing before reaching a
conclusion, cannot pass the muster. Coming to the facts, the postdecisional hearing given to the respondent-lessee is reduced to
a lip-service, which cannot be upheld in the eyes of law. [Para
38][215-B-C]
1.6 As a first step of judicial review, when statutory
functionaries such as CIDCO render an order based on certain
grounds, its validity must be judged by the reasons so mentioned
and cannot be supplemented by fresh reasons in the shape of an
affidavit or otherwise. To this extent, the submission that the
scope of this Court is limited is accepted. [Para 39][215-D]
1.7 The perusal of the bid document clearly indicates that
the respondent at the time of applying for the bid had duly
disclosed that the firm had already applied for registration and
had also forwarded the Registration Form and Partnership Deed
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along with the tender documents. Subsequently, on 16.01.2009
the Registrar of the firms issued the certificate of registration in
favour of the respondent. Having considered the communication
and legal opinion tendered before accepting the highest bid,
CIDCO's law officers did their due diligence, who opined that
partnerships being creatures of contracts, the requirement of
Board resolutions and other technical objections raised were not
an essential condition. Therefore, at this stage it may not be
equitable to review such issues in detail. Moreover, after
accepting the lease premium of Rs.282,39,99,700/- and a transfer
fee of Rs. 1,38,56,000/-, the appellant authority cannot contend
that the respondents-lessees lacked the eligibility to contend in
the tender. The respondents-lessees also pointed out that, being
the highest bidder with a margin of Rs. 23 crores over the second
highest bidder, the appellant authority did not go into the
technicalities behind the matter. Even, the High Court while
passing the impugned judgment has commented that the appellant
was aware about the pending registration, and even assented to
the same as no objections were raised while assessing the
technical bids. [Para 41- 43][215-G-H; 216-A-D]
1.8 As regards, the second objection by the CIDCO of
multiple offers, there is no reason provided as to what provision
of law such bids violate. Further, there is no concrete allegation
or adjudication on the suggested cartelization. There is no
reasoning considered as to why such a practice was harmful to
public interest. Such considerations are important elements of
party autonomy and commercial freedoms while framing the
contract, which is not within the purview of judicial review. As
there is no such law or contract provision which bars such conduct,
the considerations undertaken by the order of CIDCO are
extraneous and the same cannot be accepted. [Para 45][216-FG]
1.9 Clause 15 of the tender document and the corresponding
Condition 19 of the allotment letter, allows for such modification.
Although the language used in the aforesaid clause is
contradictory, this Court needs to interpret the same to harmonize
and eliminate any absurdity. If the interpretation supplied by
CIDCO, by reading Clause 15 (m) and (n) of allotment letter with
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Clause 15 of the tender document in isolation, is accepted, then
the phrase 'If he so desires, may apply for the application of the
modified regulation of the General Development Control
Regulation to CIDCO', as occurring under Clause 15 of the tender
document, is rendered redundant. In this context, the said clause
needs to be interpreted to mean that, 'lessee cannot apply for
change of land use as a matter of right, rather, CIDCO, on its
discretion could grant such 'change in land use' on satisfaction
based on material considerations'. The contradictory contractual
clauses, seen within various documents issued by CIDCO, have
led to this seemingly unending dispute, which required more than
a decade to be settled. This only emphasizes the importance of
due diligence and careful drafting, which could have avoided such
type of litigation in the first place. In the same breath, the CIDCO
has fairly conceded that the power of change of land of use does
exist with CIDCO and has, on multiple occasions, been used to
change the land use pattern. Most importantly, in the instant case,
after accepting the change of user fee, the authorities cannot postfacto question the same. [Para 47-49][220-C-G]
1.10 The plots fell in the zone of commercial-cumresidential area, and through the contract, this condition was
earmarked for construction of a five-star hotel. As seen from the
records, the respondents-lessees sought dilution of this condition
basing on the fact that the airport, which was supposed to come
up near the area had not materialized; similarly situated hotels
were loss-making endeavors; and a general economic slump.
Further, the order of the CIDCO dated 11.02.2010 clearly
indicates the reasons as to the change in land use in view of
prevailing circumstances. From the said reasoning, CIDCO has
not been able to show as to how the its own order was illegal or
arbitrary. Moreover, they have not been able to identify whether
the consideration taken by CIDCO at that time was deficient.
The prevailing circumstances and changes in the factual conditions
need to be appropriately considered. It may be noted that delay
in construction of Navi-Mumbai airport, economic slump and lossmaking endeavors by similarly situated hotels are 'material
considerations' and the order has appropriately taken the same
into account. [Para 50][221-A-B; 222-A]
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CIDCO Maharashtra Ltd. v. M/s. Shree Ambica
Developers C.A. No.7581 of 2012 - relied on.
1.11 The submission that the relaxation of land use was
made under the policy of 1997 which has been substituted by a
new policy in 2004, 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 said discussion, the
change of land use from five-star hotel to partly residential-cumcommercial purpose cannot be said to be illegal or arbitrary. [Para
51][222-B-C]
1.12 On perusal of the 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
instant 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. 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.
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 hyper-technical view on contractual interpretation. Thus,
no substantial reason sought to be adduced by the CIDCO to
differ from the High Court is found. [Para 52][222-D-H]
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1.13 There is no substantial deviation as sought to be
projected by the appellants. The appellants 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. [Para 53][223-B-C]
1.14 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.
[Para 54][223-D]
Jagdish Mandal v. State of Orissa (2007) 14 SCC 517;
Andhra Pradesh Dairy Development Corporation
Federation v. B. Narasimha Reddy (2011) 9 SCC 286 :
[2011] 14 SCR 1 - referred to.
1.15 It is clear that the change of usage and the subsequent
division was well-within the statutory limitations. Therefore, the
earlier undertakings taken by the appellant-authorities 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. [Para 57][224-F-G]
1.16 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 is further buttressed
by the fact that no inquiry or disciplinary proceedings were
initiated against the earlier Vice-Chairman, whose orders have
been annulled. Such phenomenon is clearly detrimental to the
constitutional values and rule of law. [Para 58][224-G-H; 225-A]
1.17 The respondents-lessees claimed that considering they
have acted upon the directions of the appellant authority and have
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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. [Para
59][225-B]
1.18 Although the appellants are right in claiming that
Government cannot be compelled to perform its undertaking,
but equity demands that the Government must place on record
sufficient material on record to claim such exemption. [Para
61][227-H; 228-A]
Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar
Pradesh (1979) 2 SCC 409 : [1979] 2 SCR 641; Union
of India v. Godfrey Philips India Ltd. (1985) 4 SCC
369 : [1985] 3 Suppl. SCR 123; Vasantkumar
Radhakisan Vora (Dead) by His LRs. v. Board of
Trustees of the Port of Bombay (1991) 1 SCC 761 :
[1990] 3 SCR 825 - referred to.
1.19 There is no substantial violation portrayed by the
appellants with respect to allotment of the scheduled land. Further,
the tender documents, make it clear that the CIDCO had the
power to change the land use, sub-divide and transfer the plots
and accordingly, has been carried out in terms of the same. It is
observed that 'good faith standards' applicable in Government
contracts, serve an important purpose in reinforcing the 'reliance
interest' in contracts. Even, the High Court while passing the
impugned judgment correctly held that respondents-lessees have
acted pursuant to the permission granted by CIDCO. Moreover,
after getting the commencement certificate and other necessary
clearances, the respondents-lessees borrowed a substantial sum
of money from other financial institutions for the development of
the plot. However, due to the ongoing dispute, no development
could take place for the past decade. [Para 63, 64][228-E-G]
1.20 It is admitted as per record that the respondent was
the highest bidder. Moreover, the appellants failed to bring
anything on record to prove that the state exchequer has suffered
losses pursuant to the said allotment. Nothing has been produced
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on record, the public interest that will be prejudiced if the
respondents-lessees are allowed to go ahead with the said project.
On the contrary, the respondents-lessees acting in furtherance
of the assurances given by the authorities, obtained huge financial
assistance. Equity demands that when the State failed to produce
an iota of evidence of either financial loss or any other public
interest that has been affected, it should be compelled to fulfill
its promises. In fact, it is respondents-lessees who shall be gravely
prejudiced if the order of cancellation is upheld by this Court
after investing a significant amount and facing prolonged litigation.
[Para 65][228-H; 229-A-C]
1.21 The public interest as sought to be shown in by the
PIL petitioner is doubtful in light of his involvement in the
business of construction service. Moreover, the tone and tenor
of the notice dated 12.01.2009, issued by the PIL Petitioner to
the CIDCO, threatening the concerned officers with criminal
prosecution under Sections 405, 406, 420 read with Section 120(b)
IPC, inter alia, on the ground of allowing partnership firm, which
was in the process of registration, to bid, needs to be viewed
with some suspicion. In fact, the non-prosecution of the erring
officials for the alleged mismanagement and irregularities is quite
telling. [Para 66][229-C-E]
1.22 When the Government contracts are spoken about,
the constitutional factors are also in play. Governmental bodies
being public authorities are expected to uphold fairness, equality
and rule of law even while dealing with contractual matters. Right
to equality under Article 14 abhors arbitrariness. Public
authorities have to ensure that no bias, favouritism or
arbitrariness are shown during the bidding process. A transparent
bidding process is much favoured by this Court to ensure that
constitutional requirements are satisfied. [Para 67][229-E-G]
1.23 Fairness and the good faith standard ingrained in the
contracts entered into by public authorities mandates such public
authorities to conduct themselves in a non-arbitrary manner
during the performance of their contractual obligations. [Para
68][229-G]
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1.24 The constitutional guarantee against arbitrariness as
provided under Article 14, demands the State to act in a fair and
reasonable manner unless public interest demands otherwise.
However, the degree of compromise of any private legitimate
interest must correspond proportionately to the public interest,
so claimed. [Para 69][229-H; 230-A]
1.25 By merely using grounds of public interest or loss to
the treasury, the successor public authority cannot undo the work
undertaken by the previous authority. Such a claim must be
proven using material facts, evidence and figures. If it were
otherwise, then there would remain no sanctity in the words and
undertaking of the Government. Businessmen would be hesitant
to enter Government contract or make any investment in
furtherance of the same. Such a practice is counter-productive to
the economy and the business environment in general. [Para
70][230-B-C]
1.26 From the facts and circumstances, it is clear that there
is an element of abuse of bureaucratic power behind subsequent
change in the tender allotment. After conducting a tender process
and receiving money, the Government backtracked which led to
this present prolonged litigation. The impugned order of CIDCO,
inter alia, annulling the allotment on hyper- technical grounds
cannot be sustained for being contrary to the doctrine of fairness.
The reasons stated in the said order are perverse and per-se
based on extraneous considerations. Any substantive violation
of law or tender conditions, which mandate annulling the allotment
and subsequent arrangements, thereby proving the conduct of
the appellant authority to be disproportionate are not been
identified. [Para 71][230-D-E]
M/s Star Enterprises v. City and Industrial Development
Corporation of Maharashtra Ltd. (1990) 3 SCC 280 :
[1990] 2 SCR 826; Municipal Corporation, Ujjain v.
BVG India Ltd., (2018) 5 SCC 462 : [2018] 6 SCR
861; Tata Cellular v. Union of India (1994) 6 SCC 651
: [1994] 2 Suppl. SCR 122; B. S. N Joshi & sons Ltd. v.
Nair Coal Services Ltd. (2006) 11 SCC 548 : [2006] 8
Suppl. SCR 11; Mohinder Singh Gill v. Chief Election
Commissioner, New Delhi (1978) 1 SCC 405 : [1978] 2
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SCR 272; Ramana Dayaram Shetty v. International
Airport Authority of India AIR 1979 SC 1628; Motilal
Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh
(1979) 2 SCC 409 : [1979] 2 SCR 641 - referred to.
Council of Civil Service Unions v. Minister for the Civil
Service [1985] AC 374 - referred to.
Case Law Reference
[1990] 2 SCR 826
referred to
Para 28
[2018] 6 SCR 861
referred to
Para 28
[1994] 2 Suppl. SCR 122
referred to
Para 29
[2006] 8 Suppl. SCR 11
referred to
Para 30
[1978] 2 SCR 272
referred to
Para 39
AIR 1979 SC 1628
referred to
Para 47
(2007) 14 SCC 517
referred to
Para 55
[2011] 14 SCR 1
referred to
Para 56
[1979] 2 SCR 641
referred to
Para 60
[1985] 3 Suppl. SCR 123
referred to
Para 60
[1990] 3 SCR 825
referred to
Para 61
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 39563957 of 2017.
From the Judgment and Order dated 06.12.2013 of the High Court
of Judicature at Bombay in Writ Petition Nos.702 and 5245 of 2011.
With
Civil Appeal Nos. 3959-3961 of 2017
Rakesh Dwivedi, A. S. Nadkarni, Mukul Rohatgi, J. P. Cama, Sr.
Advs., Harinder Toor, Amol Nirmalkumar Suryawanshi, Shikhil Suri,
Ms. Madhu Suri, Arya Tripathy, Ms. Divya Swami, M/s Karanjawala &
Co., Gaurav Goel, Vilol Khaladkar, Arunabh Chowdhury, Dhawal Mehta,
Pranaya Goyal, Nanki Grewal, Chiranjivi Sharma, Dharav Shah,
Ms. Priyakshi Bhatnagar, Mrs. Pragya Baghel, Ms. Liz Mathew, Rahul
Chitnis, Sachin Patil, Aaditya A. Pande, Geo Joseph, Nishant Ramakantro
THE VC & MD, CITY AND IND. DEVEL. CORP. OF MAHARASHTRA
LTD. v. SHISHIR REALTY PVT. LTD.
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Katneshwarkar, Sanjay Udeshi, Aditya Udeshi, Darshan Ashar, Gaurav
Nair, Ms. Pranati Bhatnagar, Saurabh Chaudhary, Ms. Anne Mathew,
Advs. for the appearing parties.
The Judgment of the Court was delivered by
N. V. RAMANA, CJI
1. These Civil Appeals arise out of the impugned judgment dated
06.12.2013 passed by the High Court of Judicature at 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.
3956-3957 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 Sun-n-Sand 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.
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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:
4. On 25.07.2008, M/s. Indian Hotels Company Ltd., who were
H2 in the bidding process, wrote to CIDCO, objecting to the eligibility of
the highest bidder in the following manner:
"3. We are informed that the highest bidder is a partnership
firm and has relied on the experience of one of this partners
to satisfy the eligibility norm. The same partner has also bid
on its own. This amounts to multiple bidder with the same
experience being concerned for more than one bid."
On 04.08.2008, these objections were considered by the law
officers of the CIDCO and subsequently rejected.
5. On 07.08.2008, the CIDCO issued a letter of allotment in favour
of M/s. Metropolis Hotels. Being the highest bidder, M/s. Metropolis
Hotels was accordingly, allotted Plot No. 5, admeasuring about 47,000
sq. mtrs., for construction of a five-star hotel near the proposed Navi
Mumbai Airport.
6. Thereafter, on 29.12.2009, M/s. Metropolis Hotels-Respondent
no.1, by way of a letter to CIDCO, applied for change of user of 34,000
sq. mtrs. of the said plot to commercial-cum-residential use. On
11.02.2010, this request for change/expansion of user of Plot No.5 was
considered and subsequently permitted only for 23,000 sq. mtrs.
7. On 11.03.2010, M/s. Metropolis Hotels requested for subdivision
of the Plot No.5 into two, i.e. 24,000 sq. mtrs. for the five-star hotel and
23,000 sq. mtrs. for the residential-cum-commercial plot. By way of a
THE VC & MD, CITY AND IND. DEVEL. CORP. OF MAHARASHTRA
LTD. v. SHISHIR REALTY PVT. LTD. [N. V. RAMANA, CJI.]
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[2021] 13 S.C.R.
letter dated 29.03.2010, CIDCO demarcated the said plot as requested,
forming Plot No.5 (admeasuring 24,000 sq. mtrs.) and Plot No.5A
(admeasuring 22,999.08 sq. mtrs). M/s. Metropolis Hotels also requested
assignment of their rights in respect of the plot on which the residentialcum-commercial user was permitted, i.e. Plot No.5A. Assignment of
this plot to M/s. Shishir Realty Private Ltd. was approved by CIDCO in
its letter dated 30.03.2010, wherein it referred to the said assignee as
one of the partners in the original allotment.
 8. On 30.03.2010, the CIDCO executed two separate lease deeds
in respect of the two plots, i.e. Plot No. 5 and Plot No. 5A. M/s. Shishir
Realty Private Ltd. took further steps for mortgaging their plot with the
permission of the CIDCO and obtained loan for development of the said
plot for commercial-cum-residential user. Third-party rights were also
created.
9. As complaints were made regarding irregularities in allotment
of plots of land, change of user and deviation from the terms and
conditions of the tender, a preliminary enquiry was held by the Principal
Secretary, Urban Development Department as per the directions of the
State Government of Maharashtra. Based on such enquiry, the newly
appointed Vice-Chairman issued a show-cause notice dated 06.12.2010
to M/s. Metropolis Hotels and M/s. Shishir Realty Private Ltd.
(respondents-lessees) as to why the lease deeds which were executed
in their favour should not be cancelled on account of breach of tender
conditions by M/s. Metropolis Hotels. It may be relevant to note
observations made in the show cause notice which inter alia read as
under:
"13. Since the tenders were invited for grant of lease of
five-star hotel plot, only bidders interested in development of
5-star Hotel participated in the bidding process. Had the
Corporation invited tenders with residential + commercial use
of the plot, several bidders could have participated in the
bidding process and the Corporation might have fetched
higher revenue. Due to change of user and sub-division of
the plot contrary to the terms and conditions of invitation of
offer, several eligible bidders were deprived and also caused
financial loss to the public exchequer. Besides this, due to
change of user and sub-division of the plot, the basic object
of development of 5-star hotel is frustrated.
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14. For the bench or benches (sic) of the terms and conditions
of tender and letter of allotment dated - 07.08.2008, you are
hereby called upon to show cause as to why the Corporation
should not cancel or revoke the agreements concluded vide
Letter of Allotment dated 07.08.2008 and Agremeents to lease
dated 30.03.2010, in respect of Plot No.5, admeasuring
24,000 m2 in favour of M/s. Metropolis Hotels and Plot No.5A,
admeasuring 23,000 m2 in favour of M/s. Shishir Realty Pvt.
Ltd."
10. Vide order dated 16.03.2011, the Vice Chairman, CIDCO,
cancelled the lease deeds, pursuant to the enquiry. The issues under
consideration, as identified in the said order, are reproduced as under:
SL. NO.
ISSUES
FINDINGS
1.

Whether M/s. Metropolis Hotels was eligible
to participate in the bidding process for
allotment of 5-Star Hotel Plot, in accordance
with Clause 4(c) of the invitation of offer?
No
2.

Whether change of user for part of the plot
admeasuring 23,000 m2 and sub-division of
plot in breach of the terms and conditions
represented in the Tender document and letter
of allotment?
Yes
3.

Whether transfer of part of the sub-divided
plot of admeasuring 23,000m2 with change
of user in favour of M/s. Shishir Realty Pvt.
Ltd. before execution of agreement to lease
was consistent with Condition No.16 of the
General Terms and Conditions of Tender and
Condition No.21 of the letter of allotment?
No
4.

Whether change of user and sub-division of
plot has adversely affected the object of
development of 5 Star Hotel in Navi
Mumbai?
Yes
5.

Whether change of user and sub-division of
plot and transfer of part of the plot was legal,
just and proper?
[No]
11. Pertaining to the first issue of the eligibility of M/s. Metropolis
Hotels to participate in the bidding process, the order held that Clause
4(c) of the tender document obligated the bidders to have a registered
partnership firm. It concluded that since M/s. Metropolis Hotels was not
registered, on the date of submission of the bid, they were ineligible for
bidding. Accordingly, their offer was void ab initio. The second reason
provided was that M/s. Sun-N-Sand Hotels, being partners in
THE VC & MD, CITY AND IND. DEVEL. CORP. OF MAHARASHTRA
LTD. v. SHISHIR REALTY PVT. LTD. [N. V. RAMANA, CJI.]
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M/s. Metropolis Hotels, could not have submitted a separate bid, which
also vitiated the bid made by Metropolis Hotels.
12. On the aspect of whether sub-division of the plots and change
of land use were consistent with the terms and conditions of the tender
document and letter of allotment, the order observed that offers were
invited for five-star hotels and sub-division/change of use could not have
been permitted as such changes were not conducive to public interest
and were against express terms and conditions mentioned within the
agreement.
13. On the third issue of whether transfer of part of the subdivided plot to Shishir Realty Pvt. Ltd was consistent with terms of the
tender and letter of allotment or not, the order observed that the terms of
the allotment letter read with the General Terms and Conditions clearly
showed that the transferee should fulfil all eligibility criteria prescribed
in the invitation of offer. As there was nothing on record to establish that
M/s. Shishir Realty Pvt. Ltd. had fulfilled such criteria, the transfer was
held to be in violation of such terms and conditions.
14. On the aspect of whether the change of user and sub-division
of the plot adversely affected the object of development of a five-star
hotel, the order noted that the change of user and sub-division of plots
were in contravention of the terms and conditions initially offered. Due
to such changes, the basic object of development of a five-star hotel in
Navi Mumbai was frustrated.
15. On the aspect of whether allotment of the plot, change of land
use, and sub-division of plots was arbitrary, illegal, and unjustified, the
order noted that the deviations could be categorized as major deviations
from the terms and conditions mentioned in both the tender documents
and letter of allotment. Such deviation frustrated the basic purpose of
development of a five-star hotel. Therefore, it was concluded that the
aspect of promissory estoppel against the CIDCO would not be applicable
as specific terms of the tender and letter of allotment were deviated.
Further, such deviations were not in public interest. Accordingly, the two
lease deeds in favour of the respondents-lessees were cancelled.
16. Aggrieved by the cancellation of the lease deeds,
M/s. Metropolis Hotels and Shishir Realty Pvt. Ltd., challenged the
aforesaid order of the Vice Chairman, CIDCO, through two writ petitions
being Writ Petition No. 702 of 2011 and Writ Petition No. 5245 of 2011
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before the High Court of Judicature at Bombay. Separately, a PIL was
also filed challenging the allotment of the plot in question, change of land
use, and sub-division of the said plot.
17. The High Court, vide impugned order dated 06.12.2013, while
quashing the aforesaid cancellation order passed by CIDCO, held that
the change of land use and sub-division of the plot had taken place with
due authorization of the CIDCO. Further, it held that the CIDCO was
not able to show any concrete violations which go to the root of the
matter. Finally, the High Court held that, without producing any pressing
need on record, the CIDCO is precluded and estopped on the doctrine
of promissory estoppel from canceling the allotment.
18. Aggrieved by the impugned judgment, the CIDCO and PIL
petitioner- appellant in C.A. Nos. 3959-3961 of 2017 have filed separate
appeals before this Court.
19. Mr. Rakesh Dwivedi, learned Sr. Counsel, appearing on behalf
of the CIDCO, has argued that:
a)
The High Court judgment cannot be sustained as the same
was delivered ignoring blatant violations and illegalities
committed during the tender process.
b)
Primarily, the bid by M/s. Metropolis Hotels itself was illegal
as it has only registered subsequent to the allotment, which is
a clear violation of clause 4(c) and 8(b) of the tender
document.
c)
Moreover, subsequent to the award of the contract,
M/s. Metropolis Hotels went beyond the tender conditions
and expanded the usage to residential-cum-commercial.
Additionally consequent to change of usage, the
M/s. Metropolis Hotels sub-divided the plot and executed a
fresh lease in favour of Shishir Realty Pvt. Ltd. The aforesaid
acts were in breach of the original allotment letter.
d)
This Court while concerned with distribution of State largesse,
should ensure that no arbitrariness, favouritism has taken place.
e)
The Respondents cannot claim any relief based on the doctrine
of promissory estoppel as being a creature of equity, it must
yield when the equity so requires.