AKHIL BHARTIYA UPBHOKTA CONGRESS v. STATE OF MADHYA PRADESH AND ORS.

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A considerations may be that some directive principle is sought to be advanced or implemented or that the contract or the property is given not with a view to earning revenue but for the purpose of carrying out a welfare scheme for the benefit of a particular group or section of people B deserving it or that the person who has offered a higher consideration is not otherwise fit to be given the contract or the property. We have referred to these considerations only illustratively, for there may be an infinite variety of considerations which may have to be taken into account c by the Government in formulating its policies and it is on a total evaluation of various considerations which have weighed with the Government in taking a particular action, that the court would have to decide whether the action of the Government is reasonable and in public interest. But one basic principle which must guide the court in arriving at its determination on this question is that there is always a presumption that the governmental action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. This burden is a heavy one and it has to be discharged to the satisfaction of the court by proper and adequate material. The court cannot lightly assume that the action taken by the Government is unreasonable or without public interest because, as we said above, there are a large number of policy considerations which must necessarily weigh with the Government in taking action and therefore the court would not strike down governmental action as invalid on this ground, unless it is clearly satisfied that the action is unreasonable or not in public interest. But where it Is so satisfied, it would be the plainest duty of the court under the Constitution to invalidate the governmental action. This is one of the most important functions of the court and also one of the most essential for preservation of the rule of law. It is imperative in a democracy governed by the rule of law that governmental action must be kept

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OF MADHYA PRADESH AND ORS. [G.S. SINGHVI, J.] within the limits of the law and if there is any A transgression, the court must be ready to condemn it. It is a matter of historical experience that there is a tendency in every Government to assume more and more powers and since it is not an uncommon phenomenon in some countries that the legislative check is getting diluted, it is 8 left to the court as the only other reviewing authority under the Constitution to be increasingly vigilant to ensure observance with the rule of law and in this task, the court must not flinch or falter. It may be pointed out that this ground of invalidity, namely, that the governmental action is c ·unreasonable or lacking in the quality of public interest, is different from that of mala tides though it may, in a given case, furnish evidence of mala tides."

(emphasis supplied) D

26Copy pinpoint26. In Common Cause, A Registered Society v. Union of/ndia (1996) 6 SCC 530 the two Judge Bench considered the legality of discretionary powers exercised by the then Minister of State for Petroleum and Natural Gas in the matter of allotment of petrol pumps and gas agencies. While declaring that allotments made by the Minister were wholly arbitrary, nepotistic and motivated by extraneous considerations the Court said:

"The Government today - in a welfare State - provides large number of benefits to the citizens. It distributes wealth in the form of allotment of plots, houses, petrol pumps, gas agencies, mineral leases, contracts, quotas and licences etc. Government distributes largesses in various forms. A Minister who is the executive head of the department concerned distributes these benefits and largesses. He is elected by the people and is elevated to a position where he holds a trust on behalf of the people. He has to deal with the people's property in a fair and just manner. He cannot commit breach of the trust reposed in him by the people." H

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27Copy pinpoint27. The Court also referred to the reasons recorded in the orders passed by the Minister for award of dealership of petrol pumps and gas agencies and observed:

"24 ........... While Article 14 permits a reasonable classification having a rational nexus to the objective B sought to be achieved, it does not permit the power to pick and choose arbitrarily out of several persons falling in the same category. A transparent and objective criteria/ procedure has to be evolve<;! so that the choice among the members belonging to the same class or category is c based on reason, fair play and non-arbitrariness. It is essential to lay down as a matter of policy as to how preferences would be assigned between two persons falling in the same category. If there are two eminent sportsmen in distress and only one petrol pump is available, there should be clear, transparent and objective criteria/procedure to indicate who out of the two is to be preferred. Lack of transparency in the system promotes nepotism and arbitrariness. It is absolutely essential that the entire system should be transparent right from the stage of calling for the applications up to the stage of passing the orders of allotment."

.28. In Shri/ekha Vidyarthi v. State of U.P. (1991) 1 SCC 212, the Court unequivocally rejected the argument based on the theory of absolute discretion of the administrative authorities and immunity of their action from judicial review and observed:

" .... We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. In our opinion, it would be alien to the Constitutional Scheme to accept the argument of exclusion of Article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are H

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OF MADHYA PRADESH AND .ORS. [G.S. SINGHVI, J.] different matters but that does not justify the view of its total ·A · exclusion. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals............................. B

Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, we have no hesitation in saying that the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14.

It can no longer be doubted at this point of time that Article of the Constitution of India applies also to matters of governmental policy and if the policy or any action of the E · Government, even in contractual matters, f9'1s to satisfy the test of reasonableness, it would be unconstitutional. (See Ramana Dayaram Sheffy v. The International Airport Authority of India ((1979) 3 SCR 1014: AIR 1979 SC 1628] and Kasturi Lal Lakshmi Reddy v. State of Jammu F and Kashmir ((1980) 3 SCR 1338: AIR 1980 SC 1992), In Co/. A. S. Sangwan v. Union of India ((1980 (Supp) SCC 559 : AIR 1981 SC 1545], while the discretion to change the policy in exercise of the executive power, when not trammelledly the statute or rule, was held to be wide, G it was emphasised as imperative and implicit in Article 14 of the Constitution that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action H

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A qualifying for its validity on this touch-stone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenet and it would be sufficient to refer only to two recent decisions of this Court for this purpose." B

29Copy pinpoint29. Similarly, in L.l.C. of India v. Consumer Education & Research Centre (1995) 5 SCC 482, the Court negatived the argument that exercise of executive power of the State was immune from judicial review and observed:

c ".... Every action of the public authority or the person acting in public interest or its acts give rise to public element, should be guided by public interest. It is the exercise of the public power or action hedged with public element becomes open to challenge. If it is shown that the exercise of the power is arbitrary, unjust and unfair it should be no answer for the State, its instrumentality, public authority or person whose acts have the insignia of public element to say that their actions are in the field of private law and they are free to prescribe any conditions or limitations in their actions as private citizens, similicitor, do in the field of private law. Its actions must be based on some rational and relevant principles. It must not be guided by traditional or irrelevant considerations ............ .

This Court has rejected the contention of an instrumentality or the State that its action is in the private law field and would be immune from satisfying the tests laid under Article 14. The dichotomy between public law and private law rights and remedies, though may not be obliterated by any straight jacket formula, it would depend upon the factual matrix. The adjudication of the dispute arising out of a contract would, therefore, depend upon facts and circumstances in a given case. The distinction between public law remedy and private law filed cannot be demarcated with precision. Each case will be examined on its facts and circumstances to find out the nature of the

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OF MADHYA PRADESH AND ORS. [G.S. SINGHVI, J.] activity, scope and nature of the controversy. The A distinction between public law and private law remedy has now become too thin and practicably obliterated .......

In the sphere of contractual relations the State, its instrumentality, public authorities or those whose acts bear 8 insignia of public element, action to public duty or obligation are enjoined to act in a manner i.e. fair, just and equitable, after taking objectively all the relevant options into consideration and in a manner that is reasonable, relevant and germane to effectuate the purpose for public good and in general public interest and it must not take any irrelevant or irrational factors into consideration or arbitrary in its decision. Duty to act fairly is 'part of fair procedure envisaged under Articles 14 and 21. Every activity of the public authority or those under public duty or obligation must be informed by reason and guided by the public interest."

30Copy pinpoint30. In New India Public School v. HUDA (1996) 5 SCC 510, this Court approved the judgment of the Division Bench of the Punjab and Haryana High Court in Seven Seas E Educational Society v. HUDA AIR 1996 (P&H) 229 : (1996) 113 PLR 17, whereby allotment of land in favour of the appellants was quashed and observed:

".... A reading thereof, in particular Section 15(3) read with Regulation 3(c) does indicate that there are several modes of disposal of the property acquired by HUDA for public purpose. One of the modes of transfer of property as indicated in Sub-section (3) of Section 15 read with sub- regulation (c) of Regulation 5 is public auction, allotment or otherwise. When public authority discharges its public duty the word "otherwise" would be construed to be consistent with the public purpose and clear and unequivocal guidelines or rules are necessary and not at the whim and fancy of the public authorities or under their garb or cloak for any extraneous consideration. It would H I

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A depend upon the nature of the scheme and object of public purpose sought to be achieved. In all cases relevant criterion should be pre-determined by specific rules or regulations and published for the public. Therefore, the public authorities are required to make necessary specific B regulations or valid guidelines to exercise their discretionary powers, otherwise, the salutory procedure would be by public auction. The Division Bench, therefore, has rightly pointed out that in the absence of such statutory regulations exercise of discretionary power to allot sites c to private institutions or persons was not correct in law."

31Copy pinpoint31. What needs to be emphasized is that the State and/ or its agencies/instrumentalities cannot give largesse to any person according to the sweet will and whims of the political entities and/or officers of the State. Every action/decision of the D State and/or its agencies/instrumentalities to give largesse or confer benefit must be founded on a sound, transparent, discernible and well defined policy, which shall be made known to the public by publication in the Official Gazette and other recognized modes of publicity and such policy must be E implemented/executed by adopting a non-discriminatory and non-arbitrary method irrespective of the class or category of persons proposed to be benefitted by the policy. The distribution of largesse like allotment of land, grant of quota, permit licence etc. by the State and its agencies/ F instrumentalities should always be done in a fair and equitable manner and the element of favoritism or nepotism shall not influence the exercise of discretion, if any, conferred upon the particular functionary or officer of the State. ·I

32Copy pinpoint32. We may add that there cannot be any policy, much G less, a rational policy of allotting land on the basis of applications made by individuals, bodies, organizations or institutions de hors an invitation or advertisement by the State or its agency/instrumentality. By entertaining applications made by individuals, organisations or institutions for allotment of land H

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OF MADHYA PRADESH AND ORS. [G.S. SINGHVI, J.] or for grant of any other type of largesse the State cannot A exclude other eligible persons from lodging competing claim. Any allotment of land or grant of other form of largesse by the State or its agencies/instrumentalities by treating the exercise as a private venture is liable to be treated as arbitrary, discriminatory and an act of favoritism and/or nepotism violating' B the soul of the equality clause embodied in Article 14 of the Constitution.

33Copy pinpoint33. This, however, does not mean that the State can never allot land to the institutions/organisations engaged in educational, cultural, social or philanthropic a<;:tivities or are rendering service to the Society except by way of auction. Nevertheless, it is necessary to observe that once a piece of land is earmarked or identified for allotment to institutions/ organisations engaged in any such activity, the actual exercise of allotment must be done in a manner consistent with the doctrine of equality. The competent authority should, as a matter of course, issue an advertisement incorporating therein the conditions of eligibility so as to enable all similarly situated eligible persons, institutions/organisations to participate in the process of allotment, whether by way of auction or otherwise. E In a given case the Government may allot land at a fixed price but in that case also allotment must be preceded by a wholesome exercise consistent with Article 14 of the Constitution. F

34Copy pinpoint34. The allotment of land by the State or its agencies/ instrumentalities to a body/organization/institution which carry the tag of caste, community or religion is not only contrary to the idea of Secular Democratic Republic but is also fraught with grave danger of dividing the society on caste or communal lines. The allotment of land to such bodies/organisations/ G institutions on political considerations or by way of favoritism · -and/or nepotism or with a view to nurture the vote bank for future is constitutionally impermissible.

35Copy pinpoint35. We may now revert to the facts of this case. Admittedly, H

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A the application for reservation of land was made by Shrf Kailash Joshi, in his capacity as convener of Memorial Trust. The respondents have not placed on record any document to show that on the date of application, the Memorial Trust was registered as a public trust. During the course of hearing also s no such document was produced before the Court. It is also not in dispute that respondent No. 5 was registered as a public trust only on 6.10.2004 i.e. after the order for reservation of land in favour of the Memorial Trust was passed. The allotment was also initially made in the name of trust, but, later on, the name c of respondent No. 5 was substituted in place of the Memorial Trust. The exercise for reservation of 30 acres land and allotment of 20 acres was not preceded by any advertisement in the newspaper or by any other recognized mode of publicity inviting applications from organizations/institutions like the Memorial Trust or respondent No.5 for allotment of land and everything was done by the political and non-political functionaries of the State as if they were under a legal obligation to allot land to the Memorial Trust and/or respondent No.5. The advertisements issued by the State functionaries were only for inviting objections against the proposed reservation and/or allotment of land in favour of the Memorial Trust and not for participation in the process of allotment. Therefore, it is not possible to accept the argument of Shri Ranjit Kumar that land was allotted to respondent No.5 after following a procedure consistent with Article 14 of the F Constitution.

36Copy pinpoint36. Although, the objectives of respondent No. 5 are laudable and the institute proposed to be established by it is likely to benefit an important segment of the society but the fact remains that all its trustees are members of a particular party and the entire exercise for the reservation and allotment of land and waiver of major portion of the premium was undertaken because political functionaries of the State wanted to favour respondent No. 5 and the officers of the State at different levels were forced to toe the line of their political masters.

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OF MADHYA PRADESH AND ORS. [G.S. SINGHVI, J.]

37Copy pinpoint37. At the cost of repetition, we consider it necessary to A reiterate that there is no provision in the Act or the Rules and even in the RSC for allotment of land without issuing advertisement and/or without inviting applications from eligible persons to participate in the process of allotment. lfthere would have been such a provision in the Act or the Rules or the RBC B the same could have been successfully challenged on the ground of violation of Article 14 of the Constitution.

38Copy pinpoint38. The argument of Shri Ravi Shanker Prasad that the impugned allotment may not be annulled because the State has C a definite policy of allotting land to religious, social, educational and philanthropic bodies, organisations/institutions without any advertisement or inviting applications and without even charging premium is being mentioned only to be rejected. From the lists annexed with the affidavits of Shri Uma Shankar Bhargav and Shri Anil Srivastava it does appear that the State and its functionaries have allotted various parcels of land to different institutions and organizations between 1982 to 2008. Large number of these· allotments have been made to the departments/establishments of the Central Government/State Governments and their agencies/instrumentalities. Some plots have been allotted to the hospitals and charitable institutions. Some have been allotted to different political parties, but quite a few have been allotted to the caste/community based bodies. Allotments have also been made without charging premium and at an annual rent of Re. 1/- only. F

39Copy pinpoint39. In our view, these allotments cannot lead to an inference that the State Government has framed a well-defined and rational policy for allotment of land. The RBC also does not contain any policy for allotment of land without issuing any G advertisement and without following a procedure in which all similarly situated persons can stake their claim for allotment. Part IV of the RBC contains the definition of Nazul land and provides for allotment of land at market price or concessional price. The authorities competent to allot land for different H

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A purposes have also been identified and provisions have been made for scrutiny of applications at different levels. However, these provisions have been misinterpreted by the functionaries of the State for several years as if the same empowered the concerned authorities to allot Nazul land without following any B discernible criteria and in complete disregard to their obligation to act in accordance with the constitutional norms. UnfortrJnately, the Division Bench of the High Court overlooked that the entire process of reservation of land and allotment thereof was fraught with grave illegality and was nothing but a blatant act of c favoritism on the part of functionaries of the State and summarily dismissed the writ petition.

40Copy pinpoint40. The next question which needs consideration is whether notifications dated 6.6.2008 and 5.9.2008 by which the Bhopal Development Plah was modified are ultra vires the provisions of Section 23-A of the Act. A reading of the provisions contained in Chapter-IV of the Act makes it clear that a development plan shall take into account the draft-five year and annual development plan of the district, if any, prepared under the Madhya Pradesh Zila Yogana Samiti Adhiniyam and broadly indicate the land use proposed in the planning area, allocation of areas or zones of land for residential, industrial, commercial or agricultural purpose; open spaces, parks and gardens, green-belts, zoological gardens and playgrounds; public institutions and offices and other special purposes as the Director may deem it fit. The development plan shall also lay down the pattern of National and State Highways connecting the planning area with the rest of the region, ring roads, arterial roads and the major roads within the planning area etc. The development plan prepared under Chapter IV is the foundation of development of the particular area for a specified number of years. No one can use land falling within the area for which the development plan has been prepared for a purpose· other than for which it is earmarked. Section 23-A was inserted in 1992 and amended in 2005 with a view to empower the State H Government to modify the development plan or zoning plan.

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OF MADHYA PRADESH AND ORS. [G.S. SINGHVI, J.] However, keeping in view the basic objective of planned development of the areas to which the Act is applicable, the Legislature designedly did not give blanket power to the State Government to modify the development plan. The power of modification of development plan can be exercised only for specified purposes. In terms of Section 23-A(1)(a), the development plan can be modified by the State Government either suo motu or at the request of the. Authority for any proposed project of the Government of India or the State Government and its enterprises or for any proposed project relating to development of the State or for implementing a c scheme of the Authority. Under clause (b), the State Government can entertain an application from any person or association of persons for modification of development plan for the purpose of undertaking any activity or scheme which is considered by the State Government or the Director, on the advice of the committee constituted for this purpose, to be beneficial to the society. This is subject to the condition that the modification so made shall be an integral part of the re'l(ised development plan. Section 23-A(2) provides for issue of public notice inviting objections against the proposed modification of the plan. Such notice is required to be published along with the modified plan continuously for two days in two daily newspapers which are on the list of the Government and which have circulation in the area. A copy of the notice is also required to be affixed in a conspicuous place in the office of the Collector. After considering the objections and suggestions, lf any received, and giving reasonable opportunity of hearing to the affected persons, the State Government can confirm the modification.

41Copy pinpoint41. It is not in dispute that in the Bhopal Development plan, . G the use of land which was reserved and allotted to respondent No.5 was shown as public and semi public (health). The State Government modified the plan by invoking Section 23-A(1)(a) of the Act for the purpose of facilitating establishment of an institute by respondent No. 5 and not for any proposed project H

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A of the Government of India or the State Government and its enterprises or for any proposed project relating to development of the State or for implementation of the Town Development: Scheme. As a matter of fact, the exercise undertaken for the change of land use, which resulted in modification of the 8 development plan was an empty formality because land had been allotted to respondent No.5 almost two years prior to the issue of notification under Section 23-A (1 )(a) and the objects for which respondent No.5 was registered as a trust have no nexus with the purpose for which modification of development c plan can be effected under that section. Therefore, there is no escape from the conclusion that modification of the development plan was ultra vires the provisions of Section 23- A(1 )(a) of the Act.

42Copy pinpoint42. The challenge to the locus standi of the appellant merits rejection because it has not been disputed that the appellant is a public spirited organization and has challenged other similar allotment made in favour of Punjabi Samaj, Bhopal, That apart, as held in Shivajirao Nilangekar Patil v. Mahesh Madhav Gosavi (1987) 1 sec 227 even if a person files a writ petition for vindication of his private interest but raises question of public importance involving exercise of power by men in authority then it is the duty of the Court to enquire into the matter.

43Copy pinpoint43. The argument of Shri Ranjit Kumar that the doctrine of prospective over ruling should be invoked and the allotment made in favour of respondent No.5 may not be quashed sounds attractive but cannot be accepted because we have found that the impugned allotment is the result of an exercise undertaken G in gross violation of Article 14 of the Constitution and is an act of favoritism and nepotism. The judgment in Harish Dhingra v. State of Haryana (supra) on which reliance was placed by Shri Ranjit Kumar is clearly distinguishable. In that case the Court had noted that plots had been allotted by the Chief Minister out of his discretionary quota in the backdrop of an H

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OF MADHYA PRADESH AND ORS. [G.S. SINGHVI, J.] earlier judgment of the Division Bench of the High Court in S.R. A Dass v. State of Haryana (1988 PLJ 123) and several allottees had altered their position.

44Copy pinpoint44. In view of the above discussion, we do not consider it necessary to deal with the argument of Shri Ravi Shanker B Prasad and Shri Ranjit Kumar that the land could have been allotted to the Memorial Trust even though it has not been registered as a trust under the 1951 Act or the Indian Trusts Act.

45Copy pinpoint45. In the result, the appeal is allowed. The impugned order of the Division Bench of the High Court is set aside and the writ petition filed by the appellant is allowed. The allotment of 20 acres land to respondent No.5 is declared illegal and quashed. Notifications dated 6.6.2008 and 5.9.2008 issued by the State Government under Section 23-A(1)(a) and (2) are also quashed. Commissioner, Town and Country Planning, Bhopal is directed to take possession of the land and use the same strictly in accordance with the Bhopal Development Plan. The State Government is directed to refund the amount deposited by respondent No.5 within a period of 15 days from today. E

D.G. Appeal allowed.