M.I. BUILDERS PVT. LTD. v. RADHEY SHAY AM SAHU AND OTHERS

(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-admi:Jtistrative sphere. However, the decision must not only be tested by the E application of Wednesbury principle of reasonableness (inc.luding its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.

(6) Quashing decisions may impose heavy administrative burden on · the administration and lead to increased and unbudgeted expenditure." F Lastly, Mr. Sorabjee said that after this Court allowed builder to construct, in upholding the judgment of the High Court, equities would have to be balanced. Of course, it would be different matter if the appeals were to be allowed, he said.

G Fifty prospective allottees of the shops, who had made payment to M.1. Builders for allotment of shops before High Court granted order of stay, filed an application in this Court seeking permission to intervene in these appeals. We heard Mr. Salve, learned senior counsel, who appeared for them. We record his submissions as under: -

H l. It is not in public interest to dismantle the shops if the court

' M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1109 ultimately upholds the judgment of the High Court. !A 2 Advertisement was made by .the builder on December 24, 199j offering to allot the shops and required each of the prospective allottee to pay Rs.25,000 with application for allotment. 500 such applications were received out of which 380 applications were accompanied with cheque of Rs.25,000 each. Remaining 120 B prospective allottees deposited the amount of Rs.25,000 each ... by mean of cash. When, however, possession of the area was handed over to the builder it was found that it was less than that agreed earlier and that the total number of shops to be constructed would be now in 263 in number. Shops were of two sizes of IO x 15 ft. and IO x 20 ft. c

3. Question raised now is: if by putting in possession any interest in land was created in favour of the builder? Could it be said that there was charge created in favour of the builder on the property including the land and the structure built upon it till the builder got whole of the amount invested by it plus 10% of the profit over and above that? No interest in the land was created in favour of the builder. The agreement was something like a lien on a property of an unpaid creditor as understood in law. Builder in that situation would have right to possession till it was paid its dues. As per the tenns of the contract builder would retain the property by way of security till it was paid but it could not claim to have any interest in the property. It is like an unpaid creditor. When the tenn "disposed of' is used it means that full title had passed but when we say any interest in the property is passed then we mean a slice of thaf title has passed. F

4. Agreement though is silent as to what is the legal right of the builder on the land, it grants merely a right to the builder to enter

.. 5. upon the land and to build upon as per its tenns. Provisions of Section 128 of the Act are not attracted .

It is a moot point if in a Public Interest Litigation the petitioner can tell the court to consider a document whether it is favourable G or not. Court cannot use a magnified glass to see whether any interest had been created and then to strike down the agreement being violative of Section 128 of the Act. Ultimately it boils down to the intention of the parties otherwise it will be straining the point too far which is not pennissible. H

1110 SUPREME COURT REPORTS (1999] 3 S.C.R.

A 6. If this Court decides to uphold the judgment of the High Court the applicants would request that the relief be moulded. In Public Law relief can be moulded even where the court found ~ irregularity or illegality to deny relief. That can be done under Article 142 of the Constitution. After all what the High Court has found was that the resolution was not properly considered before B passing the same; that requirements of the provisions of Sections 128 and 129 of the Act were not adhered to; and that tenders were not invited in order to favour the builder. -

7. It is not the case of the writ petitioners that any extraordinary c advantage was conferred on the builder or that funds of the taxpayers have been drained out. If it was a hospital or an industry or a dangerous building it would be imperative that the building be pulled down but here construction is underground made to remove congestion and the only complaint of the petitioners was that it would create more congestion. Therefore, D a mere irregularity or even illegality would not result in destroying the construction, particularly, when there is no clear finding of any mala fide by the High Court. It is not that any other builder has been aggrieved by the action of the Mahapalika and had come forward to complain. In fact one of the persons who himself is a party to the resolution was one of the petitioners. In the Administrative Law there is an authority that relief could be moulded. There is no affidavit of the Lucknow Development Authority that buildtng was in any way dangerous. Shopping complex and the parking lot, which has been built upon, is for public good and an order of demolition would not be iri general public interest. Discretion should be used not to invalidate the whole process even if provision of Sections 128 and 129 were violated. Some mechanism could be evolved so that fair price for the shops and use of parking lot is fixed and the case of every prospective allottee could be examined and so also perhaps the terms of the agreement between the builder and the Mahapalika. .It would be an extraordinary order if demolition is ordered. Reference was made to Wade on Administrative Law, 7th Edition, page 720 and to De Smith on Judicial Review of Administrative Action, 5th Edition, page 271 to support the contention that relief could be moulded in law. In H Wade's treatise the following part is relevant: -

' M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1111

-- -~ "The freedom with which the court cari use its discretion to mould its remedies to suit special situations is shown by two decisions already encountered. One was the case where the House of Lords refused A

mandamus to a police probationer wrongly induced to resign, although he made out a good case for that remedy, in order not to usurp the powers of the chief constable, and instead granted him an unusual form of declaration to the effect that he was entitled to the remedies B of unlawful removal from office except for reinstatement. The other was the case of the Take-over Panel, where in fact no relief was granted but the Court of Appeal explained the novel way in which remedies should be employed in future cases, with the emphasis on declaration rather than certiorari and on 'historic rather than c contemporaneous' relief. The same freedom to mould remedies exists in European Community law, where the European Court of Justice may declare non-retroactivity when holding some act or regulation to be void."

In De Smith it is as under: - D "The principle that failure to observe fom1al or procedural rules in the administrative process may be venial if no substantial prejudice has been caused to those immediately affected now appears in a number of statutory contexts, but it is too early to say that it has established itself as a general principle of law in contexts where the enabling Act E ( is silent on the point, though somi;: of the cases on the effect of disregarding statutory time limits point vaguely in this direction.

Administrative inconvenience

-- Is administrative inconvenience a proper rea:;on for rebutting the presumption that a decision which violates a statutory provision is unlawful (and therefore that the provision is, in the circumstances not F

"')" .'.'mandatory")? Administrative inconvenience is an accepte<;l criterion

•... in relation to remedies provided by the courts in judicial review. For example, where a series of commercial transactions have been G

-- undertaken in reliance upon th~ impugned decision the court may, in its discretion, fail to quash that decision in view of the administrative chaos that would result from such a remedy. Judicial discretion is employed here to balance fairness to the individual against the general public interest. The task, however, of deciding the force'of a statutory provision does not involve judicial discretion. It involves the faithful H

1112 SUPREME COURT REPORTS [1999] 3 S.C.R

' A construction of the objects and purposes of an act of Parliani.ent ~ the context of the particular decision. Although aspects of public policy may play a part in this exercise, it would be wrong of the courts to impute any general implication that Parliament may intend administrative inconvenience to excuse in advance the violation of its statutes. Such an implication invites careless administration and .B assumes that the legislature would too easily excuse a breach of its statutes. It is suggested, therefore, that administrative inconvenience is not normally a proper criterion to guide the question of whether a statutory provision is "mandatory"."

C Mr. Sorabjee and Mr. Salve were opposed by a formidable cohort of lawyers. Mr. N.M. Ghatate appeared for the corporators who filed writ petition in the High Court and were present themselves in the meetings of the Mahapalika on July 12, 1993 and October21, 1993; Mr. G.L. Sanghi appeared for the Mahapalika; Mr. Adarsh Goel for the State of U.P.; Mr. Arun Jaitley for the LDA; and Mr. Dushyant Dave for Amrit Puri, who had separately filed D the writ petition. Their submissions can be summarised as under: -

1. There was no proper convening of the meetings of the Executive Committee and the Mahapalika, which granted approval to the construction of underground shopping complex. There was also " no such agenda in the meeting of the Mahapalika. Constitution E ';ofthe High Power Committee by the Mahapalika was itself not le'gat-.Regulations had been framed under the Act for conduct of the' meetings. Under Section 91 of the Act the requirement is four days notice· for the general body meeting of the Mahapalika and three days notice for the meeting of the Executive Committee.

- Regulation 7 prescribes as to how the business of the meeting is to,~,~ c9p4p~~~q; f}~· t~)wfuc~~item is to be taken up first and rest in .seri.ati.m.., ~~g~l,a!~<.>pJZ~fJ>:;[c~quires that resolution of the E?Ce,cutiv~: So!11m~!t~~ r.~h,<;>!-!19 1 R~ ,;~~P.,¥,,ately circulated to the . meqib~r.~ ~nq, 1Jh,~ :..?Hsj~eJ~,,f;:~p~~~~grrtJiat should not be tr~n~a~t~~ .~1?- the~~~~~~i;i.~ 1~'.anY, ?th~~,b~s~FJ.~ ...,with permission of th,~ chair:;.; 9!1~~r.l_l~g1t~~tio~ ;~.9.}~ i~ _R..e_,~~J~~1 f2L~ resolution to be ..valid ,!l],a,t .~er~...s~~~ld .b,~op!'~.<?£ ~~ 1 ~ 1 ~~1~onder. 2 .. Thi impugned' agreenierltwas n:ot'ex;ecuted:-as:per thereqliifement ."of Section 133 •ofthe 1Act and on :that •accounf:ii :is· n:o'tloiftding ·oil' the' Mailapaiika:;!Reliance1 wi!S piacedfonia:rdedsi6if1:of this H "Court·ijf Dr.· fH.SPRikhJ :& !fOrs? v! 1'The''New'<belhi <Mun\fcipal

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WAO-HWA, J.] 1113

Committee, AIR (1962) SC 554. In this case the question for A consideration before this Court was whether the provisions of Section 8 of the Delhi and Ajmer Rent Control Act, 1952 (the 1 Rent Act) applied to the transactions between the appellants and the New Delhi Municipal Committee (the Committee) constituted under the Punjab Municipal Act, 1911. The Committee B had constructed a market and allotted the shops and flats by inviting tenders in pursuance to an advertisement. On an application filed under Section 8 of the Rent Act by an allottee, an objection was raised by the Committee that there was no relationship of landlord and tenant between the parties. High Court held that there was no relationship of landlord and tenant between the parties inasmuch as there was no 'letting', there being no properly executed lease. In coming to the conclusion that there was no valid lease between the parties, High Court relied upon the provisions of Section 47 of the Punjab Municipal Act. High Court negatived the contention that the Committee was estopped from questioning.the status of the applicants as tenants, having all along admittedly accepted rent from them. On an appeal against the judgment of the High Court to this Court, it was held that use of the term 'rent' cannot preclude the ( landlord from pleading that there was no relationship of landlord and tenant. The question must, therefore, depend upon whether or not there was a relationship of landlord and tenant in the sense that there was a transfer of interest by the landlord in favour of the tenant. This Court said that in its opinion the Rent Act applied only that species of 'letting' by which the rel~tionsh~p of landlord and tenant is created, that is to say, by

- which an mterest in the property, however, limited in duration is created. This Court referred to the provisions of Section 47 of the Punjab Municipal Act which is as under :

"47. _0_) E~ery contract made by or on behalfofthe Committee of any mumc1pahty of the first class whereof the value or amount exceeds one hun~r~d ~pees, and made by or on behalf of the Committee of any mumc1pal1ty of the second and third class whereof the value or :mount exceeds fifty rupees shall be in writing, and must be signed y two members, ~f whom the president or a vice-president shall be one, and countersigned by the secretary : .

Provided that, when the power of entering into any contract on H

1114 SUPREME COURT REPORTS / (1999] 3 S.C.R. ' A behalf of the committee has been delegated under the last foregoing section, the signature or signatures of the member or members to whom the power has been delegated shall be sufficient. - .,__

(2) Every transfer of immovable property belonging to any committee must be made by an instrument in writing, executed by the president B or vice-president and by at least two other members of committee, whose execution thereof shall be attested by the secretary.

(3) No contract or transfer of the de.scription mentioned in this section executed otherwise than in conformity with the provisions of this section shall be binding on the committee." c This Court said that in order that the transfer of the property in question should be binding on the Committee, it was essential that it should have been made by an instrument in writing, executed by the President or the Vice- President and at least two other members of the Committee, and the execution by them should have been attested by the Secretary and If these conditions D are not fulfilled, the contract of transfer shall not be binding on the Committee. It was observed that provisions of Section 47(3) are mandatory and not merely directory. Finally considering the argument that the Committee is e~topped by its conduct from challenging the enforceability of the contract this Court said : E "The answer to the argument is that where a statute makes a specific provision that a body corporate has to act in a particular manner, and in no other, that provision of law being mandatory and not directory, has to be strictly followed."

3. It was the appellant, the builder, who was building the F underground shopping complex. It was not undertaking the construction as an agent of the Mahapalika. In this connection reference was made to a decisions of this Court in Akadasi Padhan v. State o/Orissa, (1963] 2 Supp. SCR 691at722. It was, therefore, mandatory that the building plan be approved by the G LOA.

In Akadast Padhan v. State of Orissa, [1963] Supp. 2 SCR 691, the State of Orissa acquired a monopoly in the trade of Kendu leaves. Prior to this the petitioner used to carry on ~xtensive trade in the sale of ~e~du leav~s .. He filed a petition under Article 32 of the Constitution c6mpla1mng restnct1?ns H put on his fundamental rights. In the course of discussion this Court said:-

M.I. BUILDERS PVT.LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1115

"When the State carries on any trade, business or industry it must\ A inevitably carry it on either departmentally or through its officers · appointed for that purpose. In the very nature of things, the State cannot function without the help of its servants· or employees and that inevitably introduces the concept of agency in a narrow and limited sense. There are some trades or businesses in which it may be B inexpedient to undertake the work of trade or business departmentally or with the assistance of State servants. In such cases, it is open to the State to employ the services of agents, provided the agents work on behalf of the State and not for themselves."

The Court then said: - c "It is true that an agent is entitled to commission in commercial transactions, and so, the fact that a person earns commission in transactions carried on by him on behalf of another would not destroy his character as that other person's agent. Cases of Declarers agents are not unknown to commercial law. But we must not forget that we are dealing with agency which is permissible under Art. 19(6) (ii), and as we have already observed, agency which can be legitimately allowed under Art. 19(6)(ii) is agency in the strict and narrow sense of the term; it includes only agents who can be said to carry on the monopoly at· every stage on behalf of the State for its benefit and not for their own benefit at all. All that such agents would be entitled to would be remuneration for their work as agents. That being so, the extended meaning of the word 'agent' in a commercial sense on which the learned Attorney-General relies is wholly inapplicable in the context of Art. 19(6Xii)."

4. Mahapalika had disposed of the land in favour of the builder in contravention of the provisions relating to disposal of property

..... under Sections 128 and 129 of the Act. If the substance of the impugned agreement is looked into it is the transfer of interest in land by the Mahapalika to the builder.

5. Even Section 128 of the Act was not applicable as the land was G '' a park which could not be disposed by the Mahapalika. As a matter of fact Mahapalika was the trustee of the park and the doctrine of public trust, which was applicable in India as held by this Court in MC. Mehta v. Kamal Nath and others, (known as Span case) [1997] l sec 388, was applicable to the park in H

lt16 SUPREME COURT REPORTS [1999) 3 S.C.R.

A question. Mahapalika, therefore, could only manage the park and could not alienate it or convert it something different from the park. Park was held by the Mahapalika on trust for the citizens of Lucknow.

In MC. Mehta v. Kamal Nath and others, (1997] 1 SCC 388, B the case, which is also known as that of 'Span Resorts case', owned by Span Motels Pvt. Ltd., this Court observed, that public trust doctrine, as discussed in the judgment, is a part of the law ofland. The Court gave various directions even cancelling the lease granted in favour of the Motel and directing the Motel to pay compensation by way of cost for restitution of the c environment and ecology of the area. The judgment was cited to reaffirm the argument for preservation of ecology, which is an important factor in preserving the Jhandewala Park.

6. Section 114 of the Act provides for obligatory duties of the Mahapalika and one such obligatory functions is to maintain D public places, parks and to plant trees. This cannot now be done as the park has been dug and construction made under.ground. By allowing underground construction Mahapalika has deprived · itself to its obligatory duties which cannot be permitted. Irreversible changes have been made. Qualitatively it may still be E a park but it is a park of different nature inasmuch as trees cannot be planted. Now it is like a terrace park. Though the Park Act came into operation w.e.f. February l, 1995 and the construction of the underground shopping complex had started in January, 1995 after the interim order of this Court but since the construction was made subject to the final order of this ,F Court the provisions of the Park Act will have to be considered while deciding the matter.

7. Contract of such a magnitude could not have been awarded to the builder without calling for tenders. There was no ground to depart from the settled norms. Decision of this Court in G Sachidanand Pandey & Anr. v. State of West Bengal and others, [1987] 2 sec 295, is no authority for the proposition that it was not necessary to invite tenders. That was a case relating to development of tourism industry in the State of West Bengal. The case did not lay any rule but was an exception thereto. In H that case a lease was granted by the State Government to Taj

' M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1117

Group of Hotels for construction of a Five Star Hotel. This was A challenged on various grounds in a writ petition filed under the banner of PIL. The writ petition was dismissed by the learned single judge of the High Court. On appeal, the Division Bench confinned the judgment of the learned single Ji:idge. The matter then came to this Court under Article 136 of the Constitution . B and leave was granted. One of the questions raised was that lease which was granted by the State Government without inviting tenders or holding a public auction. This Court posed the question if in pursuing the socio-economic objective, the State is bound to invite tenders or hold a public auction. The Court referred to various judgments of this Court in Rashbihari Panda v. State C ofOrissa, [1969] 1 SCC 414; R.D. Shetty v. International Airport Authority ofIndia & Ors. [1979] 3 SCC 489; Kasturi Lal Lakshmi Reddy v. State of J & K. [1980] 4 SCC 1; State of Haryana v. Jage Ram, [1983] 4 SCC 556; Ram and Shyam Co. v. State of Haryana & Ors. [1985] 3 SCC 267 and Chenchu Rami Reddy & Anr. v. Government ofA.P. & Ors., [1986] 3 SCC 391. Then this D Court observed as under : "On a consideration of the relevant cases cited at the bar the following propositions may be taken as well established: State-owned or public- owned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to be observed. E Public interest is the paramount consideration. One of the methods of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. Though that is the ordinary rule, it is not an invariable rule. There may be situations where there are compelling reasons p necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination. Appearance of public justice is as important as doing justice. Nothing should be done which gives an appearance of bias, jobbery or nepotism. G Applying these tests, we find it is impossible to hold that the Government of West Bengal did not act with probity in not inviting tenders or in not holding a public auction but negotiating straightway at ann's length with the Taj Group of Hotels."

This Court also found that on the commercial and financial aspect of H

1118 SUPREME COURT REPORTS [1999] 3 S.C.R.

A the lease even on a prima facie view, there appears to be nothing wrong or objectionable in the 'net sales' method. The 'net sales' method is a fairly well -- known method adopted in similar situations. It is a profit-oriented and appears to be in the best interest of the Government of West Bengal.

8. There was collusion among certain members of the Mahapalika, B its officers and the builder. Even the conduct of the lawyer of the Mahapalika was commented upon adversely. It was not (

necessary for the Mahapalika to file a separate appeal against· the impugned judgment of the High Court. These members of the Mahapalika equated themselves with the builder. The lawyer of the Mahapalika drafted the agreement dated November 4, c 1993 between the Mahapalika and the builder. He also filed special leave petitions on behalf of the Mahapalika which had since been withdrawn. All the fees of the lawyer of the Mahapalika for attending the meetings of the Mahapalika, drafting the agreement, preparing special leave petitions, etc. were paid by the builder though that was shown to be done at the instance of the Mahapalika. There is on the record of the Mahapalika a letter of the builder that there was a collusion among the Mahapalika, builder, the lawyers and the officers of the Mahapalika, the architect of the Mahapalika, who approved the Jay out plan, was also the architect of the LDA. After the lay out plan was submitted to the LDA the architect of the Mahapalika himself okays the lay out plan as architect of the LDA, which is then approved by the Vice-Chairman of the LDA.

9. A body corporate cannot be made to remain bound by its earlier decision if that decision is found to be contrary to law. There F could not be any estoppel against the statute particularly when - .. the whole project is against public interest. The State Government was right in changing its stand. State Government considered the whole matter and on the representations re~eived from the public decided to accept the judgment of the High Court. G

10. The agreement is a fraud on the power of the Mahapalika. Prime land has been given to the builder for a song. The fact that the scheme was so lucrative could be seen that all shops to be constructed less 5% were booked within six days of the advertisement appearing in December, 1993. Public interest and H public exchequer have been sacrificed. Mahapalika divested itself

M.I. BUILDERS PVT . LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1119

- of its control over the project. The agreement is wholly one sided favouring the builder. It is unjust, unreasonable and irrational. A

11Copy pinpoint11. Builder had already collected Rs.25,000 from each of the prospective allottees at the time of registration when it was originally planned to constru£t 500 shops. There were no building B plan in existence. Collecting of this amount by the builder is of no consequence in deciding the present appeals. It is now stated that 263 shops had been constructed though the builder collected earnest money for 500 shops. In spite of the judgm~nt of the High Court the builder did not care to refund the earnest money so collected. Its conduct does not entitle it to any c consideration. No proper study was undertaken before the Mahapalika granted its approval for construction of the underground shopping complex. There were no building plans when the agreement was entered into. D

12Copy pinpoint12. Narrow consideration that a few crores of rupees have been spent on the construction cannot come into consideration when the construction is in clear violation of the Act, the Development Act and Article 21 of the Constitution. That crores ·of rupees have been spent is an argument which is advanced in every other case of unauthorised construction. E ... 13. There is no alternative to the construction which is unauthorised and illegal to be dismantled. The whole structure built is in contravention of the provisions of law as contained in the Development Act. The decision to award contract and the agreement itself was unreasonable. The construction of the underground shopping complex, if allowed to stand, would perpetuate an illegality. Mahapalika could not be allowed to benefit from the illegality. A decision of this Court in Seth Badri Prasad and others v. Seth Nagarmal and others, [1959] I Supp. SCR 769 at 774 was referred to, to contend that the court could G -.._ not exclude from its consideration a public statute and since the ... construction of the underground shopping complex was wholly illegal it had to be dismantled. No question of moulding a relief can arise as the builder made construction on the basis of the interim order of this Court and at its own risk. Various decisions of this Court in support of these contentions where demolition H

1120 SUPREME COURT REPORTS [1999) 3 S.C.R.

A of unauthorised construction was ordered, were referred to, these being (1) K. Ramdas Shenoy v. The Chief Officers, Town Municipal Council, Udipi and others, [1975] 1 SCR 680 at 685, (2) Virender Gaur and others v. State_ of Haryana and others, ~

' [1995] 2 SCC 577 at 582, (3) Pleasant Stay Hotel and another v. Palani Hills Conservation Council and others, [1995] 6 SCC B 127 at 139, (4) Cantonment Board, Jabalpur and others v. S.N. Awasthi and others, [1995] Supp. 4 SCC 595 at 596, (5) Pratibha Cooperative Housing Society Ltd. And another v. State of Maharashtra and others, [1991] 3 SCC 341, (6) Dr. G.N Khajuria and others v. Delhi Development Authority and others, [1995] c 5 SCC 762, (7) Mrs. Manju Bhatia and another v. New Delhi Municipal Council and another, JT (1997) 5 SC 574 and (8) an unreported decision of this Court in Ram Awatar Agarwal v. Corporation of Calcutta, (Civil Appeal 6416of1981) decided on August 20, 1996.

D In K Ramadas Shenoy v. The Chief Officers, Town Municipal Council, Udipi and others, [1975] 1 SCR 680, respondent was granted by resofotion of the Municipal Committee to construct a cinema theatre at a place where earlier respondent was granted licence for the construction ofKalyan Mantap-cum-Lecture Hall. In a petition under Article 226 of the Constitution the High Court E held that the cinema theatre could not be constructed in a place other than specified localities without proper sanction but since the third respondent had spent a large sum of money it did not • quash the impeached resolution of the Municipal Committee. The appellant contended before this Court that the Town Planning F Scheme forbade in cinema building at the place asked for and, therefore, the resolution of the Municipal Committee was invalid. This Court observed as under: - "An illegal construction of a cinema building materially affects the right to or enjoyment of the property by persons residing in the residential area. The Municipal Authorities owe a duty and obligation under the statute to see that the residential area is not spoilt by unauthorised construction. The scheme is for the benefit of the residents of the locality. The Municipality acts in aid of the scheme. The rights of the residents in the area are invaded by an illegal - '"'

construction of a cinema building. It has to be remembered that a H scheme in a residential area means planned orderliness in accordance

M.l. BUILDERS PVT. LTD. v; R.S. SAHU [D.P. WADHWA, J.] 1121 with the requirements of the residents. If the scheme is nullified by A a_rbitrary acts in excess and derogation of the powers of the Municipality the courts will quash orders passed by Municipalities in such cases.

The Court enforces the performance of statutory duty by public bodies as obligation to rate payers who have a legal right to demand compliance by a local authority with its duty to observe statutory rights alone. The scheme here is for the benefit of the public. There is special interest in the performance of the duty. All the residents in the area have their personal interest in the performance of the duty. The special and substantial interest of the residents in the area is injured by the illegal construction."

In Virender Gaur and others v. State of Haryana and others, [1995] 2 SCC 577, the Municipal Committee, Thanesar, District Kurukshetra in the State of Haryana framed Town Planning Scheme, which was sanctioned by the Government. In the Scheme certain land vested in the municipality. State D Government sanctioned allotment of that land to Punjab Samaj Sabha on: payment qf a price at the rates specified therein. When the Punjab Samaj Sabha after getting sanction started construction the appellants filed writ \ petition in the Punjab and Haryana High Court, which was, however, dismissed. It was submitted before this Court that the purpose of the Scheme was to E .. reserve the land in question for open spaces for the better sanitation, environment and the recreational purposes of the residents in the locality and that the Government had no power to lease out the land to Punjab Samaj Sabha. Reversi~g the judgment of the High Court this Court said that after the writ petition was filed by the appellants Punjab Samaj Sabha instead of awaiting the decision on merits proceeded with the construction in post-haste and expended the money on the construction. Therefore, the Court said, "we do not think that it would be a case to validate the actions deliberately chosen, as a premium, in not granting the necessary relief. It was open to the Punjab Samaj Sabha to await the decision and then proceed with the construction. Since the writ petition was pending, it was not open to them to proceed with the construction and then to plead equity in their favour. Under these circumstances, we will not be justified in upholding the action of the State Government or the Municipality in allotting the land to Punjab Samaj Sabha to the detriment of the people in the locality and in gross violation of requirements of the Scheme. Any construction made by Punjab Samaj Sabha should be pulled down and it must be brought back to the H

1122 SUPREME COURT REPORTS [1999] 3 S.C.R.

A condition in which it existed prior to allotment. The Municipality is directed to pull down the construction within four weeks from today. They should place the report on the file of the Registry of the action taken in the matter.,"

In Pleasant Stay Hotel and another etc. etc. v. Palani Hills Conservation Council and others, [1995] 6 SCC 127, the question was whether B the impugned Government Orders were lawfully and validly made and, if so, whether they could regularise the unauthorized construction. High Court quashed the impugned Government orders and issued certain directions. This Court observed as under and then referred the matter to the High Court for certain clarifications:- c "In our considered opinion the most eloquent and patent fact that must tilt the scale in this dispute in favour of the, Council is that the Hotel has admittedly made a residential construCtion of seven floors even though their sanctioned plan was only for two floors. That necessarily means that five floors of the building have been constructed illegally and unauthorisedly. It is not surprising therefore that the entire endeavour of the Hotel now is to protect the two floors constructed above the road level and to yield to any workable formula. It is in that context that the Hotel, without prejudice to its rights and contentions, had suggested that the entire structure of seven floors might be allowed to remain and, for that purpose it was prepared to give an undertaking that they would not use the five floors below the road level for any residential purpose but utilise it only for keeping air-conditioning plant and other attendant purposes for running the Hotel on the two floors above the road level. The Council, however, vehemently opposed the above suggestion on the ground that acceptance thereof would mean giving judicial imprimatur to utter and flagrant breach of statutory provisions to which the Hotel resorted to in spite of repeated opportunities given and reminders issued to retrace their steps and any sympathy shown to the Hotel would be wholly misplaced. We need not, However, dilate on this aspect of the matter as it appears to us that there is some confusion as to the nature of the above-quoted direction, given by the High Court and it requires to be clarified."

In Cantonment Board, Jaba/pur and others v. S.N. Avasthi and others, [1995] Supp. 4 SCC 595, this Court observed that construction made in contravention of law would not be a premium to extend equity so as to facilitate violation of the mandatory requirements oflaw. Here the Cantonment

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1123

,, Board had granted permission for construction of a building which was later on cancelled as the resolution of the Board granting permission was suspended by the GOC-in-Chief.

1957. After considering the provisions of the Delhi Development Act Master and Zonal Development Plans this Court said that the site at which the school was allowed to be opened was a park. It further held that it was not open to the ODA to carve out any space meant for park for a nursery school. This F Court said that the allotment for opening the nursery school was misuse of power and it cancelled the allotment. This Court observed that the construction put up by the allottee, even though permanent, was of no relevance as the same has been done on a plot of !and allotted to it in contravention of law. As to the submission that dislocation from the present site would cause G difficulty to the tiny. tots, this Court said that the same has been advanced only to get sympathy from the court inasmuch as children, for whom the nursery school is meant, would travel to any other nearby place where such a school would be set up by the allottee or by any other person. Six months time was granted to the allottee to make alternative arrangements as it thinks fit to shift the school so that the children are not put to any disadvantageous H

1124 SUPREME COURT REPORTS [1999) 3 S.C.R.

A position. Then, this Court observed as under:-

"Before parting, we have an observation to make. The same is that a feeling is gathering ground that where unauthorised constructions are demolished on the force of the order of courts, the illegality is not taken care of fully inasmuch as the officer of the statutory body who B had allowed the unauthorised construction to be made or make illegal allotments go scot free. This should not, however, have happened for two reasons. First, it is the illegal action/order of the officer which lies at the root of the unlawful act of the citizen concerned, because of which the officer is more to be blamed than the recipient of the illegal benefit. It is thus imperative, according to us, that while undoing the c mischief which would require the demolition of the unauthorised construction, the delinquent officer has also to be punished in accordance with law. This, however, seldom happens. Secondly, to take care of the injustice completely, the officer who had misused his power has also to be properly punished. Otherwise, what happens is that the officer, who made the hay when the sun shined, retains the hay, which tempts others to do the same. This really gives fillip to the commission of tainted acts, whereas the aim should be opposite."

In Mrs. Manju Bhatia and another v. New Delhi Municipal Committee and another, JT (1997) 5 SC 574, the builder, after obtaining requisite sanction to build 8 floors, constructed more floors, sold the flats and gave possession to the respective buyers. Subsequently it was found that the builder constructed the building in violation of the building regulations and consequently flats on the top four floors were ordered to be demolished. The demolition was challenged in the High Court by way of a writ petition, which - F was dismissed. Special leave to appeal to this Court was also dismissed. The question before this Court was whether the appellants, who had purchased the flats without the builder informing them of the illegal construction, should be compensated for the loss suffered by them. High Court in the impugned judgment directed the return of the amount plus the escalation charges. All this was on a suit brought by the appellants. This Court noticed that the G escalated price as on the date was around Rs.1.5 crores per flat. Taking into consideration the totality of the circumstances this Court directed the builder to pay Rs.60 lacs including the amount paid by the allottees. - In an unreported decision of this Court in Ram Awatar Agarwal & ors. v. The Corporation of Calcutta & ors., [C.A. No. 6416 of 1981] decided on H August 20, 1996, an unauthorised construction in the city of <;alcutta was

' M.l. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] ¥J25 allowed to be demolished by the Corporation of Calcutta. It was a multistory · A building. The Court observed as under:-

"We share the feeling of the Deputy City Architect when he states in paragraph 18 of his affidavit that this is a case in which an unscrupulous builder took advantage of the court's order upto a point of time and after he failed in the legal process upto this court the B 'tenants were set up to delay the inevitable and thus in this matter the unauthorised structure hazardous and unsafe has stood all these years. We have, therefore, no manner of doubt that this is a case in which exemplary costs should be awarded."

At the conclusion of the arguments and in order to decide the matter c fully and finally but without prejudice to the respective contentions of the parties, we wanted to know the nature of construction so far as carried out; the cost thereof; the area meant for shopping and parking separately; and if the plans were in accordance with the Development Act and Rules. This was particularly so when by an interim order of this Court construction was allowed though with certain clear stipulations.

Prof. T.S. Narayanaswami, Ex-Head of Department of Building Engineering and Management, School of Planning and Management, New Delhi was appointed as Local Commissioner for the purpose. He was asked to report on the following aspects of the construction : a: "l. What is the extent of construction put up by the appellant under ground the aforesaid part?

2. What is the nature of said Construction? F

3. What cost can be said to have been incurred by the appellant in the construction uptil now?

4. What further costs, if any, are required to be incurred for completion of the project with parking provisions?

5. What will be the extent of the cost required to be incurred if the · G __, structures existing on spot are required to be demolished and ~ the land is to be restored to its original position?

6. Whether the present structures are put up by the appellant in accordance with the building plans sanctioned by the Nagar Nigam? H

1126 SUPREME COURT REPORTS [1999] 3 S.C.R.

A 7. Whether the present structures comply with the bui'lding requirements as per the provisions governing the Lucknow Development Authority?

8. Whether the structures existing on spot are safe and sound and not likely to create any health hazard, if they are allowed to be B retained on spot?

9. Whether the existing structures with suitable alterations can be used for parking of vehicles and/-0r for putting up other amenities -- like public convenience etc? IQ. If the land earmarked for parking in the building plans submitted c to the Nagar Nigam by the appellant, and which land is dug up at present, if restored to its original position, is it feasible to use the existing structures for parking of vehicles and for putting up other amenities?

11. What are ·the existing general conditions of the locality and the area around the park?"

It is not necessary to examine the report of the Local Commissioner in detail except to note that :

I. extent of work carried out is approximately 80% of the civil and structural work, about 30% of the finishing work and 20% of the services support work; 2 it is a 'First Class' permanent construction;

3. cost of construction of the work so far executed is approximately Rs. 3.52 crore and the cost of work still to be done is approximately F 2.97 crore;

4. dismantling of the construction so far made and restoration of the park would cost Rs. 98,10,181 less Rs. 22,19,550 salvage value;

G 5. though there is a letter of approval of confirmation having been given, there are no sanctioned drawings (Chief Architect of the Mahapalika said that sanctioned drawings were "missing" from his files). -

6. Lucknow Development Authority (LOA) did not play any role H in sanctioning the project except the Layout Plan. (Layout Plan

' M.l. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1127 was forwarded to the LOA by the Chief Architect of the A Mahapalika who was also officiating as Chief Architect of LOA at that time. In other words, the approval of the Layout at the LOA level was recommended by the same person who forwarded it from the Mahapalika);

7. Master Plan could not have envisaged the park as a site available B for commercial exploitation, given the density and congestion of the surrounding area;

8. structure as designed is safe from the structural engineering view point;

9. air pollution levels of the park and the surrounding areas would c go up by substantial amount as a result of underground shopping complex-cum-parking; and

10. there is a lot of crowding during day hours (9.00 a.m to 6.00 p.m.) leading to generally slow movement of traffic and occasional traffic hold ups. A high decibel level thanks to vehicles and D moving people and vendors. A lot of solid waste collection at the end of the day and generally high level of pollution as a result.

By and large the Report of Prof. Narayanaswamy has found acceptance by all the parties. E Mr. M.L. Verma, learned senior advocate, who appeared for M.I. Builders after the report of Prof. Narayanaswamy, submitted that the Report of the Local Commissioner insofar as it gives cost incurred on the constructions is not correct and so also the cost required to be incurred for completion of the project. His argument was that cost so far incurred was in fact more than what the Local Commissioner said and that cost required for completion of the project was less than that arrived at by the Local Commissioner. We, however, .. do not find merit in his submission as we find that the Local Commissioner has applied the same principles while arriving at the cost so far incurred and the cost to be incurred for completion of the project. We, therefore, accept the Report of the Local Commissioner in its entirety. But to what effect we shall presently see.

Jhandewala Park, the park in question, has been in existence for a great number of years. It is situated in the heart of Aminabad, a bustling commercial- cum-residential locality in the city of Lucknow. The park is of historical H

1128 ·SUPREME COURT REPORTS [1999] 3 S.C.R.

A importance. Because of the construction of underground shopping complex and parking it may still have the appearance of a park with grass grown and path laid but it has lost the ingredients of a park inasmuch as no plantati"on now can be grown. Trees cannot be planted and rather while making underground construction many trees have been cut. Now it is more like a B terrace park. Qualitatively it may still be a park but it is certainly a park of different nature. By construction ofunderground shopping complex irreversible changes have been made. It was submitted that the park was acquired by the State Government in the year 1913 and was given to the Mahapalika for its management. This has not been ccmtroverted. Under Section 114 of the Act it is the obligatory duty of the Mahapalika to maintain public places, parks and plant trees. By allowing undergrouncl construction Mahapalika has deprived itself of its obligatory duties to maintain the park which cannot be permitted. But then one of the obligatory functions of the Mahapalika under Section 114 is also to construct and maintain parking lots. To that extent some area of the park could be used for the purpose of constructing underground parking lot. But that can only be done after proper study has been made of the locality, including density of the population living in the area, the floating population and other certain relevant considerations. This study was never done. Mahapalika is the trustee for the proper management of the park. When true nature of the park, as it existed, is destroyed it would be violative of the doctrine of public trust as expounded by this Court in Span Resort Case, E (1997] I SCC 388. Public Trust doctrine is part oflndian law. In that case the respondent who had constructed a motel located at the bank of river Beas interfered with the natural flow of the river. This Court said that the issue presented in that case illustrated "the classic struggle between those members of the public who would preserve our rivers, forests, parks and open lands in their pristine purity and those charged with administrative responsibilities F who, under the pressures of the changing needs of an increasingly complex society, find it necessary to encroach to some extent upon open· lands heretofore considered inviolate to change". ) • In the treatise "Environmental Law and Policy : Nature, Law, and Society" G by Plater Abrams Goldfarb (American Casebook series - 1992) under the Chapter on Fundamental Environmental Rights, in Section 1 (The Modem -j Rediscovery of the Public Trust Doctrine) it has been noticed that "long ago •there developed in the law of the Roman Empire a legal theory known as the "D9ctrine of the public trust." In America Public Trust doctrine was applied to public properties, s~ch as shore-lands and parks. As to how doctrine works it was stated: "The scattered evidence, taken together, suggests that

' M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1129 the idea of a public trusteeship rests upon three related principles. First, that certain interests 'like the air and the sea' have such importance to the citizenry as a wh,ole that it would be unwise to make them the subject of private ownership. Second, that they partake so much of the bounty of nature, rather than of individual enterprise, that they should be made freely available to the entire citizenry without regard to economic status. And, finally, that it is a principle purpose of government to promote the interests of the general public rather than to redistribute public goods from broad public uses to restricted private benefit...o With reference to a decision in Illinois Central Railroad Company v. Illinois, (146 U.S. 387 (1892]), it was stated that 'the court articulated in that case the principle that has become the central substantive thought in public trust litigation. When a state holds C a resource which is available for the free use of the general public, a court will look with considerable skepticism upon any governmental conduct which is calculated either to reallocate the resource to more restricted uses or to subject public uses to the self-interest of private parties'. This public trust doctrine in our country, it would appear, has grown from Article 21 of the Constitution. D Thus by allowing construction of underground shopping complex in the park Mahapalika has violated not only Section 114 of the Act but also the public trust doctrine. E

- If we now refer to the pr()visions of law relating to notice of meetings and business of the Mahapalika and its committees it is apparent that these provisions were not adhered to. There is no authority with the Mahapalika to constitute High Power Committee and to delegate its functions to that High Power Committee. There was no agenda at any time in any of the meetings of the Mahapalika for consideration of the underground shopping complex. F There were no proposals, no documents, no plan, no study, no project report or feasibility report on the basis of which Mahapalika could have given a green signal for construction of the underground shopping complex. There was no discussion and no infonned decision. Mahapalika completely abdicated its functions. Mahapalika delegated its functions to the High Power Committee G in contravention of the Act. Constitution of the High Power Committee itself '' was wholly illegal. High Power Committee took decision to hand over the park to the builder for construction of the underground shopping complex and also approved the terms of the agreement dated November 4, 1993. Decision of the High Power Committee was put before the Executive Committee and the general body of the Mahapalika for the purpose of "infonnation" and both H

1130 SUPREME COURT REPORTS [1999] 3 S.C.R.

A these bodies stamped their approval. As noted above there was no agenda for consideration of these resolutions of the Executive Committee of the Mahapalika. Corporators had no time to apply their minds. Such an important matter, where the cost of the project was likely to run in crores of rupees, could not have been considered under the topic "other subjects, subject to B the permission of the Presiding Officer". Section I 05 of the Act protects any act done or proceeding taken on account of any defect or irregularity in procedure not affecting the substance. In the present case it is not mere irregularity or defect in the procedure but the whole procedure is in clear breach of Sections 91 and 119 of the Act which are mandatory.

C The law mandates that not only the notice of the date and the time of the meeting but the notice of the business to be transacted at such meeting should be given at least 4 clear days before the date of the meeting for the Mahapalika and 3 days for the Executive Committee. When the agen~a did not include the subject of construction of underground shopping complex nor was there any material to support the discussion the subject of construction of underground shopping complex it could not have been considered in the meetings of the Mahapalika and the Executive Committee.

In Myurdhwaj Cooperative Group Housing Society Ltd. v. Presiding Officer, Delhi Cooperative Tribunal and Ors., [1998] 6 SCC 39, the appellant was a Housing Co-operative Society registered under the Delhi Co- operative Societies Act, 1972 and Delhi Co-operative Societies Rules, I ~73. In the meeting of the general body of the society, it was decided that only those who have deposited minimum amount specified by the general meeting would be allotted flats and others would be accommodated on the flats to be constructed on the additional land in Phase-II construction. Respondent No.3 F w\10 was one of the original members of the society challenged the decision of the general meeting. One of the contention raised was that decision of the general body which relegated her and other such members to Phase-II was not on the agenda. This Court said a general body can always with the ,1 approval of the house in the meeting of its members take up any other matter not covered by the agenda on that account, no illegality could be held. This Court also observed that Section 28 of the Delhi Co-operative Societies Act, 1972 vests final authority in the general body of a cooperative society. It has wide powers including residuary power except those not delegated to any other authority under the Act, the rules and its bye-laws. In other words, its power, if any, is only restricted by the Act, the rules, the bye-laws and any order having force of law. This decision is of no help to the appellant as in

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1131

the present casee.ve are considering the statutory provisions for holding of the meetings of the Mahapalika and the Executive Committee which have been violated.

Agreement dateci November 4, 1993 has not been executed as required under Section 133 of the Act. Resolution of the High Power Committee, which was placed before the Mahapalika and the Executive Committee for information, required that 'the prescribed project may be got executed by M.1. Builders Pvt. Ltd. and the Mukhya Nagar Adhikari should be authorised for conducting all the forthcoming actions and formalities". Now, Mahapalika has power to enter into contracts (Sec. 131). Under sub-section (1) of Section 132 contract shall be expressed to be made, for and on behalf of Mahapalika and shall be so executed for and on behalf of the Mahapalika. Under sub-section (4), no contract involving an expenditure exceeding five lakh rupees shall be made by Mukhya Nagar Adhikari (Chief Executive Officer) unless it has been sanctioned by the Mahapalika. Proviso (a) to Section 133(1) requires common seal of the Mahapalika to be affixed on ever; contract. The common seal shall be affixed only in the presence of a corporator (Sabhasad) who shall attach his signatures to the contract in token that the same was sealed in his presence. The signature of the corporator shall be distinct from the signature of any witness to the execution of such contract (sub-sections 2 and 3 of Section 133). Under sub-section 4 of Section 133 no contract executed otherwise than as provided in the section shall be binding on the Mahapalika. The E impugned agreement is thus not executed in accordance with the requirements --"" of law. Further, under sub- section (2) of Section 136 where the Mahapalika approves the project and the entire estimated cost exceeds rupees ten lakhs, the project report shall be submitted to the State Government and it is for the State Government to reject or sanction the project with or without modifications. Till that is done no work shall be commenced. No such sanction of the State F Government was obtained in the present case. It was submitted that this provision would apply only ir'the project cost was to be incurred by the Mahapalika. We do not think it is so. It is the cost of the project that matters and not who incurs the cost in the first instance. Agreement dated November 4, 1993 is, therefore, not a valid contract and not binding on the Mahapalika. G As held in HS. Rikhy 's case, AIR (1962) SC 554 where a statute makes a specific provision that a body corporate has to act in a particular manner and in no other, that provision of law being mandatory and not directory has to be strictly followed. This principle will apply both as regards holding of meeting of the Mahapalika and execution of contract on its behalf. This judgment is also authority for the preposition that there is no estoppel against H

1132 SUPREME COURT REPORTS (1999] 3 S.C.R.

A a statute. We may now examine some of the terms of the agreement dated November 4, 1993. There are six recitals to the agreements which cannot be co-related to any discussion in any of the meetings of the Mahapalika, the Executive Committee or the High Power Committee. Under clause (2) of the agreement it is for the builder to make construction at its own cost and then to realise the cost with profit not exceeding more than 10% of the investment in respect of each shop. Nobody knows how much cost the builder is likely to incur and how long it will continue to be in possession of the shopping complex. Full freedom has been given to the builder to lease out the shops as per its own terms and conditions to persons of its choice on behalf of the Mahapalika and Mahapalika shall be bound by these terms and conditions. Builder ha.; also been given the right to sign the agreement on behalf of the Mahapalika on the terms and conditions which the builder may deem fit and proper. Builder is only required to give a copy of the agreement to the Mahapalika after its execution and both the Mahapalika and the builder shall remain bound by the terms of that agreement. Since there is no project report nobody knows how many shops the builder would construct and of what sizes. Mahapalika is allowed to charge Rs.5,000 per shop for every second and subsequent transfer of shops by the builder but what amount is to be charged for the first transfer or subsequent transfers is left to the sole discretion of the builder. A bare glance at the terms of agreement shows that not only that the clauses of the agreement are unreasonable for the Mahapalika but they are atrocious. No person of ordinary prudence shall ever enter into such an agreement. A trustee, which the Mahapalika is, has to be more cautious in dealing with its properties. Valuable land in the heart of commercial area has been handed on a platter to the builder for it to exploit and to make run away profits. As a matter offac~ 6n examining the terms of the agreement we find that Mahapalika has been completely ousted from the underground shopping complex for an indefinite period. It has completely abdicated its functions. .. ... G To repeat, the agreement is c\lmpletely one sided favouring the builder. The land of immense value has been handed over to it to construct underground shopping complex in violation of the public trust doctrine and the Master Plan for the city of Lucknow. Mahapalika has no right to step in even if there is any violation by the builder of the terms of the agreement or otherwise. Mahapalika, though considered to be the owner of the land, is H completely ousted and divested of the land for a period which is not definite

M.l. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA,J.] 1133

and which depends wholly on the discretion of the builder. On the question A ·- ofreasonableness reference may be made to Wade on Administrative Law, 7th Edition, page 399. The learned author observed that '.'The court must strive to apply an objective standard which leaves to the deciding authority the full range of choices which the legislature is presumed to have intended. Decisions which are extravagant or capricious cannot be legitimate". Quoting Lord B Hailsham LC in Re W. (an infant) (1971) AC 682, where he said, "two reasonable persons can perfectly reasonably come to opposite conclusions on the same set of facts without forfeiting their title to be regarded as reasonable". The following passage from the treatise would be relevant:-

"This is not therefore the standard of 'the man on the Clapham C omnibus' -It is the standard indicated by a true construction of the Act which distinguishes between what the statutory authority may or may not be authorised to do. It distinguishes between proper use and improper abuse of power. It is often expressed by saying that the decision is unlawful if it is one to which no reasonable authority could have come. This is the essence of what is now commonly called D "Wednesbury unreasonableness", after the now famous case in which Lord Greene MR expounded it as follows.

It is true that discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology used in relation to exercise of statutory discretions often use the word 'unreasonable' in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be I acting 'unreasonably'. Similarly, there may be som.ething so absurd that no sensible person could ever dream that it lay within the powers of the authority. Warrington LJ in Short v. G Poole Corporation, [1926] Ch. 66. Gave the example of the red- haired teacher, dismissed because she had red hair. This is unreasonable in one sense. In another it is taking into consideration extraneous matters. It is so unreasonable that it might almost be described as being done in bad faith; and, in H

1134 SUPREME COURT REPORTS [l 999] 3 S.C.R.

A fact, all these things run into one another.

This has become the most frequently cited passage (though most commonly cited only by its nickname) in administrative law. It explains how 'unreasonableness', in its classic formulation, covers a multitude of sins. These various errors commonly result from paying B too much attention to the mere words of the Act and too little to its general scheme and purpose, and from the fallacy that unrestricted language naturally confers unfettered discretion.

Unreasonableness has thus become a generalised rubric covering not only sheer absurdity or caprice, but merging into illegitimate c motives and purposes, a wide category or errors commonly described as 'irrelevant considerations', and mistakes and misunderstandings which can be classed as self-misdirection, or addressing oneself to the wrong question. But the language used in the cases shows that, while the abuse of discretion has this variety of differing legal facets, in practice the courts often treat them as distinct. When several of them will fit the case, the court is often inclined to invoke them all. The one principle that unites them is that powers must be confined within the true scope and policy of the Act.

Taken by itself, the standard of unreasonableness is nominally pitched very high: 'so absurd that no sensible ·person could ever dream that it lay within the powers of the authority' (Lord Greene MR); 'so wrong that no reasonable person could sensibly take that view" (Lord Denning MR); 'so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it' (Lord F Diplock). It might seem from such language that the deliberate decisions of ministers and other responsible public authorities could almost never be found wanti11g. But, as may be seen in the following pages, there are abundant instances of legally unreasonable decisions and actions at all levels. This is not because ministers and public authorities take leave of their senses, but because the courts in deciding cases tend to lower the threshold of unreasonableness to fit their more exacting ideas of administrative good behaviour."

When we keep in view the principles laid by this Court in its various judgments and which we have noticed above, it has to be held that the agreement dated November 4, 1993 is not a valid one. The agreement defies

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1135

logic. It is outrageous. It crosses all limits of rationality. Mah::.ipalika has certainly acted in fatuous manner in entering into such an agreement. It is a case where the High Court rightly interfered in exercise of its powers of judicial review keeping in view the principles laid by this Court in Tata Cellular v. Union ofIndia, [ 1994] 6 SCC 651. Every decision of the authority except the judicial decision is amenable to judicial review and reviewability of such a decision cannot now be questioned. However, a judicial review is permissible if the impugned action is against law or in violation of the prescribed procedure or is unreasonable, irrational or malajide. On the principle of good governance reference was made to a decision of Division Bench of Bombay High Court in State of Bombay v. Laxmidas Ranchhoddas and another, AIR (1952) Bombay 468 at 475) (Para 12). It was submitted that bad governance sets a bad example. That is what exactly happened in the present case.

In State ofBombay v. Laxmidas Ranchhoddas & Anr., [1952] AIR Born. 468, a Division bench of the High Court was considering the argument that tpe writ of mandamus being discretionary, the Court should consider whether it should not put a limitation upon its own powers and jurisdiction. It was submitted that it was impossible for any State to function if there was a constant interference by the High Court in the eXef!ltive acts performed by the officers of the State. Chagla, CJ, speaking for the Court, said : E "It may be that interference by the High Court may result in inconvenience or difficulty in administration. But what we have to guard against is a much greater evil. When we find in the modem 1 State wide powers entrusted to Government, powers which affect the property and person of the citizen, it is the duty of the Courts to see that those wide powers are exercised in conformity with what the F Legislature has prescribed. We are not oblivious of the fact that in order that the modem State should function the Government must be armed with very large powers. But the High Court does not interfere with the exercise of those powers. The High Court only interferes when it finds that those powers are not exercised in accordance with G the mandate of the Legislature. Therefore, far from interfering with the good governance of the State, the Court helps the good governance by constantly reminding Government and its officers that they should act within the four comers of the statute and not contravene any of the conditions laid down as a limitation upon their undoubtedly wide powers. Therefore, even from a practical point of view, even from the H

1136 SUPREME COURT REPORTS [1999] 3 S.C.R.

A point of view of the good governance of the State, we think that the High Court should not be reluctant to issue its prerogative writ whenever it finds that the sovereign Legislature has not been obeyed and powers have been assumed which the Legislature never conferred upon the executive."

B It cannot be said that the construction of the underground shopping complex is by the builder as an agent of the Mahapalika. Concept of agency is totally missing in the present case. Rather the deal is from principal to principal. Reference may be made to the decision of this Court in Akadasi Padhan's case, [1963] Supp.2 SCR 691, quoted above. When the C "development" is by the builder provisions of Section 14 of the Development Act would apply. There is no sanction of the building plan of the underground shopping complex by the LDA. Construction is, therefore, per se illegal. Even after the interim order of this Court allowing construction, plans were not got sanctioned from the LOA, which would be authority under the Development Act Sanction of the building plan by the Mahapalika would, therefore, be meaningless. Even then, there were no sanctioned drawings. It has been pointed out that process of sanction appeared to be ad hoc and skeletal. When construction started LDA issued a show cause notice to the Mahapalika but then in view of the interim order made by this Court show cause notice was subsequently withdrawn. It was stated that against the order withdrawing the show cause a revision was filed by Mr. Amrit Puri, a writ petitioner to the State Government, which was stated to be still pending.

It is not disputed that there is a Master Plan applicable to city of Lucknow. This Master Plan is prepared under the Development Act. It was submitted by the builder that the park could be exploited for commercial purposes as Aminabad has been shown to be a commercial area. No doubt Aminabad is a commercial area but that does not mean that the park can be utilised for commercial purposes. Rather using the park for commercial purposes would be against the Master Plan. However, in letter dated October 16, 1993 by Vice-Chairman, LOA to the Mahapalika did say:

G "I am to inform you in this regard that the land use of the Jhandewala park situated in Aminabad is commercial one as per the Master Plan. This department has no objection on the layout plan submitted accordingly."

How this letter came to be written one may notice the sequence. High H Power Committee meets on October 13, 1993 and is adjourned to October 19,

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1137

1993. Mr. G.C. Goyal is the Architect of Mahapalika and ·he forwarded the layout plan to LOA. Mr. Goyal is also officiating as Architect of LOA. Approval of the layout plan by LOA is dated October 16, 1993, which is 3 days before the next meet of the High Power Committee. This approval of the layout at LOA was recommended by the same person who forwarded it from the Mahapalika and in a great hurry. In the Master Plan for the city of Lucknow, it is Aminabad area which is commercial and that would not mean that Park can be put to commercial use. By letter dated November 23, 1993, LOA objected to the construction being undertaken in the Park without obtaining permission/No objection from it and required the construction to stop. Mahapalika in tum by its letter sent on the following day to the builder informed it of the objection raised by LOA and that before starting any construction the permission/No objection of LOA as required under Sections 14 and 15 of the Development Act was necessary. It does appear to us that the Master Plan of the city of Lucknow could not have envisaged the Jhandewala Park as a site available for commercial exploitation considering the density and congestion in the area. D The reason for· the construction of underground shopping complex given was that it would remove the congestion in the area. We have report of the Local Commissioner, which says that it would rather lead to more congestion. We think Mr. Dave is right in his submission that a decision to construct underground shopping complex by M.I. Builders had already been E taken and that the whole process was gone into to confer undue benefit to M.I. Builders and the bogie of congestion was introduced to justify the action of the Mahapalika. It is wholly illegal and smacks of arbitrariness, unreasonableness and irrationality.

We may also note the argument of Mr. Adarsh Goel who said that F Jhandewala Park was acquired by the State in the year 1913 and was given to Mahapalika for its management. He said under Section 41 of the Development Act read with Section 5 of the U.P. Regulation of Building Operations Act a Government order was issued on August 18, 1986 by the State Government whereby the use of park for any other use was prohibited. This direction of G the State Government was incorporated in the Master Plan for the city of Lucknow and of course violated by allowing construction of underground shopping complex.

Action of the Mahapalika in agreeing to the construction of underground shopping complex in contravention of the provisions of the Act and then H

1138 SUPREME COURT REPORTS [1999] 3 S.C.R.

A entering into an agreement with the builder against settled norms was wholly illegal and has been held to be so by the High Court. No doubt Mahapalika is a· continuing body and it will be estopped from changing its stand in the given case. But when Mahapalika finds that its action was contrary to the provisions of law by which it was constituted there could certainly be no impediment in its way to change its stand. There cannot be any estoppel B operating against the Mahapalika. Principles laid in Union of India v. Mis. Indo-Afgan Agencies Ltd., [1968] 2 SCR 366, and of Calcutta High Court in The Ganges Manufacturing Co. v. Sourujmull and others, (1880) ILR Calcutta 669, cannot apply to the facts of the present case.

C Section 128 of the Act confers powers on the Mahapalika to sell, let of, hire, lease, exchange, mortgage, grant otherwise dispose of any property or - any interest therein acquired by or vested in the Mahapalika. Appellant and the intervenors said that there was no disposal of any property and no interest in the land had been transferred by the Mahapalika to the builder. Respondent, as noted above, contended to the contrary. Under Section 54 of the Transfer of Property Act, 1882 agreement to sell does not create any interest in land. We are not concerned with this provision. Reference may, however, be made to Sections 60(b) and 62(t) of the Easement Act, 1882. Though the licence under Section 60(b) is irrevocable but it can be revoked after the happening of certain event which is when the builder has recovered whole of his investment plus 10% of the profit. Reference may be made to a decisions of this Court in Chawalier I.I. Jyappan and another v. The Dharmodayam Company, [1963] l SCR 85. In this case an argument was raised by the appellant that he had been granted a licence and acting upon the licence he had executed a work of permanent character and incurred expenses in the execution thereof and, thereafter, under Section 60(b) of the F Easement Act, 1882 the licence was irrevocable. This Court said:-

"In our opinion no case of licence really arises but if it does what is the licence which the appellant obtained and what is the licence, which he is seeking to plead as a bar. The licence, if jt was a licence, was to construct the building and hand it over to the respondent - G company as trust property. There was no licence to· create another kind of trust which the appellant has sought to create. It cannot be said therefore that there was an irrevocable license which falls under - '

s. 60(b) of the Act. Even such a licence is deemed to be revoked under s. 62(t) of that Act where the licence is granted for a specific purpose and the purpose is attained or abandoned or becomes impracticable.

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1139

In the present case the purpose for which the license was granted has either been ab~ndoned or has become impracticable because of the action of the appellant."

[The Indian Easement Act, 1882: Sections 52, 53, 60(b) and 62(f) :-

52. Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount

- to an easement or an interest in the property, the right is called a licence.

53. A licence may be granted by any one in the circumstances and to the extent in and to which he may transfer his interests in the c property affected by the licence.

60. A licence may be revoked by the grantor, unless:-

(a) D (b) the licensee, acting upon the licence, has executed a work of a permanent character and incurred expenses in the execution.

62. A licence is deemed to be revoked - E (a) to (e) .......... .

(f) where the licence is granted for a specified purpose and the purpose is attained, or abandoned, or becomes impracticable;] We find force in the submissions of respondents that by granting licence to the builder to construct underground shopping complex of pennanent F nature and to hold on to the same for a period which is not definite and then under the impugned agreement builder having been authorised to lease out the shops on behalf of the Mahapalika, it is a dubious method adopted to subvert the provision of Section 128 which apply as well in the case of lease and thus the transaction will also be covered by the expression "otherwise G · dispose of any interest in the property". It is, therefore, difficult to accept the argument of the builder that transaction is outside Section 128 of the Act. Now, first licence has been granted to the builder to enter upon the park and to execute a work of permanent character and incur expenses in the execution ofthe work, thus making the licence irrevocable. However, the licence is deemed to be revoked after the licensee has recovered his full cost on the H

1140 SUPREME COURT REPORTS [1999) 3 S.C.R.

A construction plus I 0% of the profit on the investment made by him. When this purpose is achieved by the licensee is anybody~s guess. Not only that licensee, i.e., the builder is then authorised to lease out the shops so constructed, on behalf of the Mahapalika. The result would be that to the builder provisions of Section 129 of the Act, cannot be thus made applicable. In such a situation for the builder to contend that the transaction is not B covered by Section 128 and, therefore, Section 129 willnot apply is certainly incredulous. Provision of Section 129 of the Act has, therefore, been flouted. Impugned agreement dated November 4, 1993 is bad having been executed also in contravention of the requirement of Section 129 of the Act.

C The facts and circumstances when examined point to only one conclusion that the purpose of constructing the underground shopping· complex was a mere pretext and the dominant purpose was to favour the M.l. Builders to earn huge profits. In depriving the citizens of Lucknow of their amenity of an old historical park in the congested area on the spacious plea of decongesting the area Mahapalika and its officers forgot their duty towards the citizens and D acted in a most brazen manner.

Proposition of construction of underground shopping complex was so lucrative and the land so valuable that Mahapalika itself could have done it by collecting earnest money from the prospective allottees. But then nobody cared to examine this aspect and a plea was also advanced that Mahapalika E had no finance to undertake the project. If one refers to the agreement the builder itself devised a self-financing scheme and it had not to spend anything from its own pocket. On mere booking of the shops builder could collect rupees one crore twenty five lakhs and would have collected more money with the progress of the construction at various stages. A public body would not sequester away its property by devising new methods.

Thus there are two distinct areas of challenge in the present case - (I) the agreement is fraud on power, prime land has been given for a song by the Mahapalika. The fact that the scheme is so lucrative could be seen from the fact that all shops less 5% were booked within six days of the advertisement appearing in December, 1993. Public interest and public exchequer have been sacrificed. Mahapalika is divested of its control over the project though notionally not for ever but the builder, on the other hand, has control over the project for all times to come and (2) construction is in contr~vention of the provisions of law as contained in Development Act. The project has been entrusted to the builder in violation of the provisions of the Act. The decision taken by the Mahapalika was not on proper consideration and was not an

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA,J.] 1141

informed objective decision. Judicial review is permissible if the impugned action is against law or in violation of the prescribed· procedure or is unreasonable, irrational or mala fide. As said earlier High Court rightly exercised its power of judicial review in the present case. It has examined the manner in which the decision was made by the Mahapalika. Second principle laid in Tata Cellular's case, [1994] 6 SCC 651, applies in all respects. High Court held that the maintenance of the park because of its historical importance and environmental necessity was in itself a public purpose and, therefore, the construction of an underground market in the garb of decongesting the area was wholly contrary and prejudicial to the public purpose. By ~llowing the construction Mahapalika had deprived its residents as also others of the quality of life to which they were entitled to under the Constitution and the C Act. The agreement smacks of arbitrariness, unfairness and favourtism. The agreement was opposed to public policy. It was not in public interest. Whole process of law was subverted to benefit the builder. We agree ·with the findings and conclusions of the High Court.

High Court in it~ impugned judgment has not doubted the capacity of D M.I. Builders to undertake the project but then that is not the issue. The question is why it was not necessary to invite tenders for the project of such a high cost. Why it was thought that it was only the M.I. Builders in the country who could undertake the job? Why project report was not obtained to know the cost of the project? Why could it not be thought that there could be any other person who could undertake the job at a lesser cost and in equally competent manner? Public interest has certainly been given a go bye. There was some undercurrent flowing to award the contract to M.I. Builders. High Court said "lest we are taken amiss we wish to make it clear that we do not doubt either the bona tides of the authorities or the competence of the respondents Mis. M.I. Builders to enter into the impugned agreement but we are of the view ... " The competence of M/s. M.I. Builders to undertake the project is not doubted when now it is seen that proper construction has been .. J made but before taking decision to award the contract to it nobody knew its credentials. No attempt made whatsoever to consider if there was any other person more competent for the job or if of equal competence could offer better terms. In these circumstances, dictum contained in the case of Kasturi Lal Lakshmi Reddy v. State ofJ & K., [ 1980] 4 SCC I, becomes inapplicable. No advantage can be drawn by the builder from the decision of this Court in G.B. Mahajan 's case [ 1991] 3 SCC 91, as here the whole process of awarding contract to M.I. Builders has been gone through in an unabashed manner and in flagrant violation of law with the sole purpose of conferring benefit on it. H

1142 SUPREME COURT REPORTS [1999] 3 S.C.R.

A All said and done we fail to understand the certificate given by the High Court about the bona tides of the authorities in awarding the contract to Mis. M.I. Builders. The officers of the Mahapalika, who were impleaded as respondents by name, did not file any replies to contradict the allegations made against them. Rather it appears that it was a fit case where High Court B should have directed an inquiry to be made as to how the project came to be awarded to M.I. Builders including the conduct of the lawyers.

High Court has directed dismantling of the whole project and for restoration of the park to its original condition. This Court in numerous decisions has held that no consideration should be shown to the builder or any other person where construction is unauthorised. This dicta is now ..., I

almost bordering rule of law. Stress was laid by the appellant and the prospective allottees of the shops to exercise judicial discretion in moulding the relief. Such discretion cannot be exercised which encourages illegality or perpetuates an· illegality. Unauthorised construction, if it is illegal and cannot be compounded, has to be demolished. There is no way out. Judicial discretion cannot be guided by expediency. Courts are not free from statutory fetters. Justice is to be rendered in accordance with law. Judges are not entitled to exercise discretion wearing robes of judicial discretion and pass orders based solely on their personal predilections and peculiar dispositions. Judicial discretion wherever it is required to be exercised has to be in accordance with law and set legal principles. As will be seen in moulding the relief in the present case and allowing one of the blocks meant for parking to stand we have been guided by the obligatory duties of the Mahapalika to construct and maintain parking lots.

In the present case we find that the builder got an interim order from this Court and on the strength of that order got sanction of the plan from the Mahapalika and no objection from the LDA. It has no doubt invested considerable amount on the construction which is 80% complete and by any standard is a first class construction. Why should the builder take such a risk when the interim order was specific that the builder will make construction at its own risk and will not claim any equity if the decision in the appeal goes against it? When the interim order was made by this Court Mahapalika and the State Government were favouring the builder. As a matter of fact Mahapalika itself filed appeals against the impugned judgment of the High Court. Perhaps that gave hope to the bu~lder to go ahead with the construction and to take the risk of getting the construction demolished and restoring the park to its original condition at its own cost. The builder did not foresee the

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.) 1143 change in stand not only of the Mahapalika but also of the State Government. A It also, as it would appear, over-rated its capacity to manage with the State Government to change the land use of the park. Builder is not an innocent player in this murky deal when it was able to get the resolutions of the Mahapalika in its favour and the impugned agreement executed. Now, construction of shops will bring in more congestion and with that the area will get more polluted. Any commercial activity now in this unauthorised construction will put additional burden on the locality. Primary concern of the Court is to eliminate the negative impact the underground shopping complex will have on environment conditions in the area and the congestion that will aggravate on account of increased traffic and people visiting the complex. There is no alternative to this except to dismantle the whole structure and restore the park to its original condition leaving a portion constructed for parking. We are aware that it may not be possible to restore the park fully to its original condition as many trees have been chopped off and it will take years for the trees now to be planted to grow. But beginning has to be made.

There are four blocks under construction. Services like air-conditioning, fire-fighting, water supply, sanitary installation, necessary pumps for drainage and sewerage, etc. are yet to be installed and completed.

In block No. I there are shops at the level minus 9'6". These shops are divided by partition walls. There is a big hall with pillars below these shops at level of minus 19'6". E In block 2 there are shops on tlie upper basement level 9'6". There is no lower basement Jevel.

Third block is currently designed to have shops at the upper basement level and parking at the lower basement level. The upper basement level can be converted to have parking at that level too since the structural configuration will permit the same. Flooring on the lower basement is yet to be laid. There can thus be parking both on the upper basement and the lower basement. This parking place for vehicles would lead to decongestion of the roads surrounding the park which are otherwise choked with the parked vehicles in its entire periphery.

Fourth block is only partially developed with just a separate ramp going down to the first basement level and a few columns with their foundations standing from the lower basement level. This fourth block, is currently dug up. However, to facilitate the movement of the vehicles to the two levels of H

1144 SUPREME COURT REPORTS [1999] 3 S.C.R.

1.. A parking in the third block a new ramp shall be constructed adjacent tci and contiguous to the third block.

We have noted above that under clause (ix-a) of Section 114 of the Act, \ it is incumbent on the Mahapalika to make reasonable and adequate provision by_ any ~ans or measures which it is lawfully competent to it to use or to take for the construction and maintenance of parking lots, bus stops and public convenience.

Number of cases coming to this Court pointing to unauthorised constructions taking place at many places in the country by builders in connivance with the Corporation/Municipal officials. In the series of cases, this Court has directed demolition of unauthorised constructions. This does not appear to have any salutary effect in cases of unauthorised construction coming to this Court. While directing demolition of unauthorised construction, court should also direct inquiry as to how the unauthorised construction came about and to bring the offenders to book. It is not enough to direct demolition of unauthorised construction, where there is clear defiance of law. In the present case, but for the obsefvation of the High Court, we would certainly have directed an inquiry to be made as to how the project was conceived and how the agreement dated November 4, 1993 came to be executed.

We direct as under : E

1. Block 1, 2 and 4 of the underground shopping complex shall be dismantled and demolished and on these places park shall be restored to its original shape.

2. In Block 3 partition walls and if necessary columns in the upper F basement shall be removed and this upper basement shall be converted into parking lot. Flooring should be laid at the lower basement level built to be used as parking lot. Ramp shall be constructed adjacent to Block 3 to go to upper and fower basement levels for the purpose of parking of vehicles. Further G to make block 3 functional as a separate unit walls shall be constructed between block 2 and block 3 and also block 3 and block 4.

3. Dismantling and demolishing of these structures in Blocks l, 2 and 4 and putting Block 3 into operation for parking shall be H done by the Mahapalika at its own cost. Necessary services like

M.I. BUILDERS PVT. LTD. v. R.S. SAHU [D.P. WADHWA, J.] 1145

.-'--• sanitation, electricity etc. in Block 3 shall be provided by the A Mahapalika.

4. Mahapalika shall be responsible for maintaining the park and the ~ I Block 3 for parking purposes in proper and efficient manner.

5. M.I. Builders Pvt. Ltd., the appellant, is divested of any right, title or interest in the structure built by it under or over the park. B It shall have no claim whatsoever against Mahapalika or against any other person or authority

6. -- Block 3 shall vest in Mahapalika free from all encumbrances. Licence of M.I. Builders to enter into the park and the structure built therein is cancelled of which possession is restored to the c Mahapalika with immediate effect. No obstruction or hindrance shall be caused to the Mahapalika by any one in discharge of its functions as directed by this order.

7. Restoration of the park and operation of Block 3 for parking purposes shall be completed by Mahapalika within a period of D 12 months from today and report filed in the registry of this Court.

,. With the directions aforesaid, the appeals are dismissed with costs.

RK.S. Appeals dismissed.