# STAR EN1ERPRISES ETC. ETC v. CITY AND INDUSTRIAL DEVELOPMENT CORPORATlON OF MAHARASHTRA LTD. & ORS

- **Citation:** [1990] 2 S.C.R. 826
- **Court:** Supreme Court of India
- **Decided:** 1990-04-30
- **Case number:** Civil Appeal Nos. F 2076-2078 of 1990
- **Bench:** Ranganath Misra, Kuldip Singh, R.M. Saha!
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/star-en1erprises-etc-etc-v-city-and-industrial-development-corporatlon-of-10806
- **Pages:** 5

## Headnote

Maharashtra Regional Town Planning Act, 1966: s. 113 (3A)-
New Town Planning Authority-Whether a 'State' within the meaning
of Art. 12 of the Constitution-Whether entitled to look for best deal in
regard to its properties.
Constitution of India: Articles 298 & 14: Government Company
entering commercial field-Refusing to accept highest offer in response
to public tender-Action whether arbitrary.
Indian Contract Act, 1872: Public authority making contractInvitation by public tender-Highest offer-When rejected.
Administrative /aw-Administrative action-Public authority
rejecting highest tender-Duty to record reasons to lend credibility to
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action-Need.for public accountability.
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The appellants had given the highest offers for certain specified
plots for lease In response to invitation by public tender by the respondent Corporation a Government Company, and complied with the
requirements of deposit. The respondent, however, rejected the said
offers without assigning any reason.
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The appellants challenged the action of the respondent before the
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High Court as arbitrary, unconstitutional and contrary to rule of law.
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The High Court, dismissed the writ petitions in limine.
In these appeals by special leave, it was contended for the appellants that the resoondent Corooration was a •State' under Article 12 of
the Constitution, that the power of rejection of offers without assigning
any reason was unregulated and unfettered, contrary to the requirement of rule oflaw, and that it was in the interest of the public authority
itself, the State and everyone in the society at large that reasons for
State action are placed on record and or even communicated to the
persons from whom the offers came.
826
STAR ENTERPRISES v. C.I.D.C. MAHARASHTRA
827
Dismissing the appeals, the Court,
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HELD: 1. The respondent No. 1 was 'State' within the meaning of
Article 12 of the Constitution and in its dealings with the citizens of
India, it would he required to act within the ambit of rule of law and
would not be permitted to conduct its activities arbitrarily. [829B-C)
R. D. Shetty v. International Airport Authority of India & Ors.,
[1979] 1SCR1042 and Ajay Basia v. Khalid Mujib Sehravardi, [1981] 2
SCR 79, referred to.
2. The State is certainly entitled to look for the best deal in regard
to its properties. In the instant case, there was no allegation of mala
fides in the conduct of respondent No. 1 in refusing to accept the highest
offers. It could, therefore, be presumed that in so doing the respondent
had been actuated by the consideration of looking for better offers for
the specific plots in its economic interest. There was thus no arbitrariness in respond~nt trying to get proper price for its plots. [829E-F, 828E-F]
3. When highest offers of commercial nature are rejected reasons
sufficient to inljicate the stand of the public authority should be made
available and the same should be communicated to the concerned
parties unless there be any specific justification not to do so. That would
assure credibility to the action, discipline public conduct and improve
the culture of accountability and provide an opportunity for an objective review in appropriate cases both by the administrative superior and
by the judicial process. [830F-G, E-F J
State of U.P. v. Raj Narain & Ors., [1975] 4SCC 428, referred tii.
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## Text

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STAR EN1ERPRISES ETC. ETC.
v.
CITY AND INDUSTRIAL DEVELOPMENT CORPORATlON
OF MAHARASHTRA LTD. & ORS.
APRIL 30, 1990
[RANGANATH MISRA, KULDIP SINGH AND
R.M. SAHA!, JJ.]
Maharashtra Regional Town Planning Act, 1966: s. 113 (3A)-
New Town Planning Authority-Whether a 'State' within the meaning
of Art. 12 of the Constitution-Whether entitled to look for best deal in
regard to its properties.
Constitution of India: Articles 298 & 14: Government Company
entering commercial field-Refusing to accept highest offer in response
to public tender-Action whether arbitrary.
Indian Contract Act, 1872: Public authority making contractInvitation by public tender-Highest offer-When rejected.
Administrative /aw-Administrative action-Public authority
rejecting highest tender-Duty to record reasons to lend credibility to
E
action-Need.for public accountability.
F
The appellants had given the highest offers for certain specified
plots for lease In response to invitation by public tender by the respondent Corporation a Government Company, and complied with the
requirements of deposit. The respondent, however, rejected the said
offers without assigning any reason.
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\
The appellants challenged the action of the respondent before the
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High Court as arbitrary, unconstitutional and contrary to rule of law.
G
H
The High Court, dismissed the writ petitions in limine.
In these appeals by special leave, it was contended for the appellants that the resoondent Corooration was a •State' under Article 12 of
the Constitution, that the power of rejection of offers without assigning
any reason was unregulated and unfettered, contrary to the requirement of rule oflaw, and that it was in the interest of the public authority
itself, the State and everyone in the society at large that reasons for
State action are placed on record and or even communicated to the
persons from whom the offers came.
826
STAR ENTERPRISES v. C.I.D.C. MAHARASHTRA
827
Dismissing the appeals, the Court,
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HELD: 1. The respondent No. 1 was 'State' within the meaning of
Article 12 of the Constitution and in its dealings with the citizens of
India, it would he required to act within the ambit of rule of law and
would not be permitted to conduct its activities arbitrarily. [829B-C)
R. D. Shetty v. International Airport Authority of India & Ors.,
[1979] 1SCR1042 and Ajay Basia v. Khalid Mujib Sehravardi, [1981] 2
SCR 79, referred to.
2. The State is certainly entitled to look for the best deal in regard
to its properties. In the instant case, there was no allegation of mala
fides in the conduct of respondent No. 1 in refusing to accept the highest
offers. It could, therefore, be presumed that in so doing the respondent
had been actuated by the consideration of looking for better offers for
the specific plots in its economic interest. There was thus no arbitrariness in respond~nt trying to get proper price for its plots. [829E-F, 828E-F]
3. When highest offers of commercial nature are rejected reasons
sufficient to inljicate the stand of the public authority should be made
available and the same should be communicated to the concerned
parties unless there be any specific justification not to do so. That would
assure credibility to the action, discipline public conduct and improve
the culture of accountability and provide an opportunity for an objective review in appropriate cases both by the administrative superior and
by the judicial process. [830F-G, E-F J
State of U.P. v. Raj Narain & Ors., [1975] 4SCC 428, referred tii.
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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
F
2076-2078 of 1990.
From the Judgment and Orders dated 25.8.1989, 10.11.1989 &
5.9.1989 of the Bombay High Court in W.A. Nos. 2198, 3377 and 219/
of 1989.
D .N. Dwivedi and Sarva Mitter for the Appellants.
Arnn Jetley, Additional Solicitor General, Raian Karanjawala,
H.S. Anand, Nandini Gore, Ravi Kumar, M. Karanjawala, Y:N. Patil
and A.S. Bhasme for the Respondents.
The Judgment of the Court was delivered by
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828
SUPREME COURT REPORTS
[1990] 2 S.C.R.
RANGANATH MISRA, J. Special leave granted.
Three applications were filed under Article 226 of the Constitution before the High Court of Bombay by the respective appellants
before us challenging the rejection of their highe~J offers in response
to invitation by public tender without assigning any reason for the
same as arbitrary, unconstitutional and contrary to rule of law.
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The respondent a Government CQmpany within the meaning of
section 617 of the Companies Act has been constituted as the New
Town Development Authority under sub-s. (3A) of s. h3 of the
Maharashtra Regional Town Planning Act, 1966. The respondent is
empowered to dispose of land vested in it and the respondent has
C formulated with the approval of the State Government under s. 159 of
the said Act a code for regulating, inter alia disposal of land. Regulation 4 provides:
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"The Corporation may dispose of plots of lands by putting
to auction or considering the individual applications as the
Corporation determines from time to time."
According to the appellants the normal practice adopted by the
Corporation is to invite tenders for the disposal of specified plots
which the Corporation chooses to assign according to the terms and
conditions for lease of plots for mercantile use. The appellants
E maintained that they had given the highest offers by way of tender for
certain specified plots by complying with the requirements of deposit
and claim that though the offers were the highest, yet the same have
not been accepted. Each of the appellants was before the High Court
challenging the action of respondent No. 1 but the writ petitions were
dismissed m limine by saying that there was no arbitrariness in the
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respondent No. 1 trying to get proper price for its plots.
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It is not disputed that the scheme which is operating provides
that "respondent No. 1 reserves the right to amend, revoke or modify
the scheme at its discretion as well as to reject any or all offers for
allotment without assigning any reason." Obviously it is in exercise of
this power that the highest tenders have not been accepted.
It is the contention of Mr. Dwivedi appearing in support of these
appeals that the respondent is 'State' under Article 12 of the Constitution and conferment of naked and unguided power as referred to
above is arbitrary and contrary to the provisions of Article 14 of the
Constitution; and since there is no prescribed norm or guideline and
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the power is unregulated and unfetu.:red and the highest offer after
complying with the prescribed requirements is available to be rejected
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STAR ENTERPRISES v. C.LD.C. MAHARASHTRA
829
without assigning any reasons, citizens are likely to be affected by
exercise of such uncanalised power. Shortly put, Mr. Dwivedi submits
that the procedure is contrary to the requirement of rule of law and
therefore, cannot be sustained. An affidavit in opposition has been
filed on behalf of respondent No. 1 wherein the circumstances under
which the highest offers have not been accepted has been indicated
and the position has been explained.
We do not find it difficult to agree with Mr. Dwivedi's submissions that respondent No. 1 is 'State' within the meaning of Art. 12 and
in its dealings with the citizens of India it would be required to act
within the ambit of rule of law and would not be permitted to conduct its activities arbitrarily. It is too late in the day tor an institution
like respondent No. 1 to adopt the posture that the aclivity in question
is commercial and as respondent No. 1 is engaged in trading activity it
would be open to it to act as it considers appropriate for the purpose .of
protecting its business interest. An instrumentality of the State as has
been laid down by this Court in a series of authoritative decisions
beginning with R.D. Shetty v. International Airport Authority of India
& Ors., [1979] 1 SCR 1042 and in Ajay Rasia v. Khalid Mujib
Sehravardi, [ 1981] 2 SCR 79 and a number of decisions thereafter has
to act within the ambit of rule of law and would not be allowed to
conduct itself arbitrarily and in its dealings with the public would be
liable to judicial review.
The State is certainly entitled to look for the best deal in regard
to its properties. This has been accepted by several decisions of this
Court with reference to State action under the Excise Laws. There is
no allegation of ma/a /ides in the conduct of respondent No. 1 in
refusing to accept the highest offer. We must, therefore, proceed on
the footing that respondent No. 1 acted bona fide and in refusing to
accept the highest offers of the appellants in regard to specific plots has
been actuated by the consideration of looking for better offers for the
specific plots in the economic interest of respondent No. 1.
The question which still remains to be answered is as to whether
when the highest offer in response to ap invitation is rejected would
not the public authority be required to provide reasons for such
action? Mr. Dwivedi has not asked us to look for a reasoned decision
but has submitted that it is in the interest of the public authority itself,
the State and every one in the society at large that reasons for State
action are placed on record and are even communicated to the persons
from whom the offers came so that the dealings remain above board;
the interest of the public authority is adequately protected and a citizen knows w.here he stands with reference to his offer. What this Court
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SUPREME COURT REPORTS
[1990] 2 S.C.R
said in State of U. P. v. Raj Narain & Ors., [ 1975] 4 SCC 428 may be
usefully recalled here:
"In a government of responsibility like ours, where all the
agents of the public must be responsible for their conduct,
there can be but few secrets. The people of this country
have a right to know every public act, everything that is
done in a public way, by their public functionaries. They
are entitled to know the particulars of every public transaction in all its bearing. The right to know, which is derived
from the concept of freedom of speech, though not absolute, is a factor which should make one wary, when secrecy
is claimed for transactions which can, at any rate, have no
repercussion on public security. To cover with veil of
secrecy, the common routine business, is not in the interest
of the public."
In recent times, judicial review of administrative action has
become expansive and is becoming wider day by day. The traditional
limitations have been vanishing and the sphere of judicial scrutiny is
being expanded. State activity too is becoming fast pervasive. As the
State has descended into the commercial field and giant public sector
undertakings have grown up, the stake of the publi~ exchequer is also
large justifying larger social audit, judicial control and review by opening of the public gaze; these necessitate recording of reasons for executive actions including cases of rejection of highest offers. That very
often involves long stakes and availability of reasons for action on the
record assures credibility to the action; disciplines public conduct and
improves the culture of accountability. Looking for reasons in support
of such action provides an opportunity for an objective review in
appropriate cases both by the administrative superior and by the judicial process. The submission of Mr. Dwivedi, therefore, commends
itself to our acceptance, namely, that when highest offers of the type in
question are rejected reasons sufficient to indicate the stand of the
appropriate authority should be made available and ordinarily the
same should be communicated to the concerned parties unless there be
any specific justification not to do so.
We do not intend to go into matters any further in as much as we
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do not propose to apply this test to the present appeals. These appeals
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fail but we make no order as to costs.
P.S.S.
Appeals dismissed.