M/s Al-Can Export Pvt. Ltd. v. Prestige H.M. Polycontainers Ltd. & Ors.

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essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review not only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. The public authorities are governed by the “rule of law”. Such authorities are constitutionally obliged in law to maintain absolute fairness and transparency during the conduct of the auction sale right from the initiation of the same till its completion. Judicial audit and scrutiny play a key role in ensuring that the public authorities do not act in an unreasonable manner.

52Copy pinpoint52. The dictum as laid by this Court in Tata Cellular v. Union of India reported in (1994) 6 SCC 651 is that the judicial power of review is exercised to rein in any unbridled executive functioning. It was observed that the restraint has two contemporary manifestations viz. one is ambit of judicial intervention and the other covers the scope of the court’s ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action. It was held that the principle of judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself. It was held that the principle of judicial review would apply to the exercise of contractual powers by the Government bodies in order to prevent arbitrariness or favouritism. It was held that the duty of the court is to confine itself to the question of legality and its concern should be whether a decision-making authority exceeded its powers; whether it committed an error of law or committed a breach of the rules of natural justice or reached a decision which no reasonable tribunal would have reached or, abused its powers. The grounds upon which an administrative action can be subjected to judicial review are classified as illegality, irrationality and procedural impropriety. In that very decision, while deducing the principles from various cases referred, it was held that the modern trend points to judicial restraint in administrative action; that the Court does not sit as a court of appeal but merely reviews the manner in which the decision was made; that the court does not have the expertise to correct the administrative decision and if a review of the administrative decision is permitted, it will be substituting its own decision, without the necessary expertise which itself may be fallible; that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the

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realm of contract; and, that the government must have freedom of contract, i.e. a free-play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness, but must be free from arbitrariness not affected by bias or actuated by mala fides. Moreover, quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.

53Copy pinpoint53. In Jagdish Mandal v. State of Orissa and Others reported in (2007) 14 SCC 517, this Court observed as under: “22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made “lawfully” and not to check whether choice or decision is “sound”. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold.” (Emphasis supplied)

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54Copy pinpoint54. This Court in State of Punjab & Others v. Mehar Din reported in (2022) 5 SCC 648, after referring to both the aforesaid decisions held as under: “20. The scope of judicial review in the matters of tenders/ public auction has been explored in depth by this Court in a catena of cases. Plausible decisions need not be overturned and, at the same time, latitude ought to be granted to the State in exercise of its executive power. However, allegations of illegality, irrationality and procedural impropriety would be enough grounds for courts to assume jurisdiction and remedy such ills.” (Emphasis supplied)

55Copy pinpoint55. We are of the view that in cases such as the one at hand wherein the legality, validity and propriety of the auction sale conducted by the State through its authorities is questioned on the ground of mala fides, undue favour for extraneous considerations and gross violation of the mandatory provisions of law, it would be hazardous to apply the principles enshrined in Order XXI Rule 90 of the CPC. Times have changed. Human values and ethics in public functionaries have degraded to a considerable extent. Corruption is on a rampage. Having regard to the same and in order to protect and uphold the rule of law, the courts have a duty to ensure that the State authorities have conducted public auctions in a fair and transparent manner and have not done anything by which public exchequer has suffered. It would be too much to say that although the writ court may find an auction sale conducted by a public functionary to be in gross violation of the mandatory provisions of law and the action of such public functionary to be arbitrary, yet the aggrieved party complaining about the same should be told to establish the dual conditions stipulated in Order XXI Rule 90 of the CPC. Once the action of the State is found to be unfair and arbitrary, then that is the end of the matter so far as a writ court is concerned. The first and the foremost aspect that the writ court should look into is fairness and transparency on the part of the State in conducting the auction sale so as to be in conformity with Article 14 of the Constitution.

56Copy pinpoint56. The litigation at hand is one of gross violation of the mandatory provisions of the Revenue Code in so far as conduct of the auction sale is concerned. In terms of Section 194 of the Revenue Code, no

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sale shall take place until after the expiration of at least 30 days from the latest date on which any of the notice shall have been affixed as required by Section 193 of the Revenue Code. The materials on record reveal that the auction of the property was conducted before the expiry of 30 days’ time as prescribed under Section 194 of the Revenue Code. At the cost of repetition, Section 194 of the Revenue Code is reproduced hereunder:- “Section 194: (1) Sale shall be made by auction by such persons as the Collector may direct. (2) No such sale shall take place on a Sunday or other general holiday recognised by the State Government¸ nor until after the expiration of at least thirty days in the case of immovable property, or seven days in the case of movable property, from the latest date on which any of the said notices shall have been affixed as required by section 193.”

57Copy pinpoint57. Further, in terms of Section 195 of the Revenue Code, a fresh notice is required to be issued if the sale is postponed for any reason beyond 30 days and a fresh proclamation and notice has to be issued unless the defaulter consents to waive it. In this regard, it is relevant to note that a fresh proclamation was made on 23.11.2008 in furtherance of Section 195 of the Revenue Code. At the cost of repetition, Section 195 of the Revenue Code is reproduced hereunder:- “Section 195. Postponement of sale.─The sale may from time to time be postponed for any sufficient reason: Provided that, when the sale is postponed for a period longer than thirty days a fresh proclamation and notice shall be issued unless the defaulter consents to waive it.”

58Copy pinpoint58. Various illegalities were committed even in confirming the sale. In a process of sale, first the sale is to be conducted, then the proceeds are required to be received. It is only after the receipt of the proceeds that sale confirmation is required to be made by the collector and thereafter sale certificate and possession is to be handed over. In the present case, the sale was conducted and concluded on the same day i.e., 03.12.2008. The sale certificate was issued on the same day and that too without the confirmation from the collector and the possession was also handed over on the very next day.

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59Copy pinpoint59. From a bare perusal of Section 212 of the Revenue Code, it is evident that the purchaser can be put into possession only after confirmation of sale and the sale certificate being handed over to the purchaser. However, in the present case, the appellant was put in possession on 04.12.2008 and the sale of property was confirmed on 15.01.2009 by the Additional Collector, which is per se illegal in nature. Again at the cost of repetition, Section 212 of the Revenue Code is reproduced hereunder:- “Section 212. On confirmation of sale, purchaser to be put in possession. Certificate of purchase.— After a sale of any occupancy or alienated holding has been confirmed in the manner aforesaid, the Collector shall put the person declared to be the purchaser into possession of the land and shall cause his name to be entered in the land records as occupant or holder in lieu of that of the defaulter and shall grant him a certificate to the effect that he has purchased the land to which the certificate refers.”

60Copy pinpoint60. Indisputably, although a specific objection was raised by the IFCI on 10.12.2008, as recorded by the Tahsildar in its letter dated 19.12.2008, yet the objection was suppressed from the Additional Collector.

61Copy pinpoint61. On 07.01.2009, the Additional Collector, Head Office Jawar directed the respondent no. 4 to submit a detailed report on whether it had fulfilled all the conditions as stipulated under Section 208 of the Revenue Code. At the cost of repetition, Section 208 of the Revenue Code is reproduced hereunder:- “Section 208: Order confirming or setting aside sale.— On the expiration of thirty days or, as the case may be, one hundred and eighty days from the date of the sale, if no such application as is mentioned in section 207 has been made, or if such application has been made and rejected, the Collector shall make an order confirming the sale:”

62Copy pinpoint62. However, respondent no. 4, vide its letter dated 12.01.2009 addressed to the Additional Collector, Head Office Jawar, misinformed that except for the writ petition pending before the High Court of Bombay, no other objection was received and thereby all requirements under Section 208 of the Revenue Code had been fulfilled, despite IFCI raising its objections.

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63Copy pinpoint63. From the aforesaid, the following inescapable conclusions are discernible: a. The sale of the Property took place before the expiry of the mandatory 30 days’ notice. This clearly shows that the sale was conducted in breach of the provisions of Section 194 of the Revenue Code. The notice was issued on 19.11.2008 and the auction came to be conducted on 03.12.2008. b. The sale certificate was issued on the same day, i.e., on the date of the auction itself, much before the confirmation of sale by the Additional Collector. This clearly shows that the sale was conducted in breach of the provisions of Section 212 of the Revenue Code. c. The purchaser, that is, the appellant was put in possession of the property much before the sale came to be confirmed i.e. on 15.01.2009 and that too prior to the cheque being realised. This clearly shows that the sale was conducted in breach of the provisions of Sections 212 and 208 respectively of the Revenue Code. d. The undue haste exhibited by the Tahsildar in completing the sale in favour of the appellant speaks for itself. Why did the Tahsildar supress an important fact before the Additional Collector as regards the objections received by him from IFCI? This itself indicates that there was some collusion between the Tahsildar and the appellant.

64Copy pinpoint64. The aforesaid lapses, in our opinion, cannot be termed as irregularity. Once it is evident that the mandatory provisions as stipulated under the rules and regulations are not followed or abridged, any action pursuant to the same could be termed as gross illegality. There is a fine distinction between illegality and irregularity. Whereas the former goes to the root of the matter and renders the action null and void, of no effect whatsoever, the latter does not ipso facto invalidate the action, unless prejudice is caused to the person making a complaint, even if, for the purposes of Order XXI Rule 90 of the CPC the lapses we have taken note of could be termed as material irregularities going to the root of the matter.

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65Copy pinpoint65. Almost a century back, in Ashutosh v. Behari Lal (1908) 35 Cal 61, drawing the distinction between ‘nullity’ and ‘irregularity’, Mookerjee, J. stated; “No hard and fast line can be drawn before a nullity and irregularity; but this much is clear, that an irregularity is a deviation from a rule of law which does not take away the foundation of authority for the proceeding, or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated”.

66Copy pinpoint66. Whether a provision falls under one category or other is not of easy discernment, and in the ultimate analysis it depends upon the nature, scope and object of a particular provision. A workable test, however, has been laid down in Holmes v. Russel (1841) 9 Dowl 487, wherein it was held thus: “It is difficult sometimes to distinguish between an irregularity and a nullity, but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection; if he can waive it, it amounts to an irregularity; if he cannot, it is a nullity.” [see Dhirendra Nath v. Sudhir Chandra] (Emphasis supplied)

67Copy pinpoint67. If we were to condone or overlook all the illegalities we have taken note of in para 63 of this judgment, applying the provisions of Order XXI Rule 90 of the CPC, the same would result in nothing but gross travesty of justice. Bureaucracy feels that accountability is an impediment to efficient discharge of the duty. Accountability is no more and no less than, the concept of accountability of a private concern to their shareholders. There is a distinction between prying into details of day-to-day administration and of the legitimate actions or resultant consequences thereof. To enthuse efficiency into administration, a balance between accountability and autonomy of action should be carefully maintained. Over-emphasis on either would impinge upon public efficiency. But undermining the accountability would give immunity or carte blanche power to deal with the public property or of the debtor at whim or vagary. Whether the public

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authority acted bona fide would be gauged from the impugned action and attending circumstances. The authority should justify the action assailed on the touchstone of justness, fairness, reasonableness and as a reasonable prudent owner. Test of reasonableness is stricter. The public functionaries should be duty conscious rather than power charged. Its actions and decisions which touch the common man have to be tested on the touchstone of fairness and justice. That which is not fair and just is unreasonable. And what is unreasonable is arbitrary. An arbitrary action is ultra vires. It does not become bona fide and in good faith merely because no personal gain or benefit to the person exercising discretion has been established. An action is mala fide if it is contrary to the purpose for which it was authorised to be exercised. Dishonesty in discharge of duty vitiates the action without anything more. An action is bad even without proof of motive of dishonesty, if the authority is found to have acted contrary to reason. [See: Mahesh Chandra v. Regional Manager, U.P. Financial Corporation & Ors : (1993) 2 SCC 279] ii. Whether the Additional Commissioner, Konkan Division, Maharashtra had the jurisdiction to decide the two appeals filed by the respondent nos. 1 and 6 respectively under Section 247 of the Maharashtra Land Revenue Code, 1966?

68Copy pinpoint68. We shall now proceed to deal with the contention canvassed on behalf of the appellant that the Additional Commissioner, Konkan Division, State of Maharashtra had no jurisdiction to adjudicate the two appeals filed by the respondent no. 1 and respondent no. 6 herein respectively. It was argued that the appeals filed before the Additional Commissioner under Section 247 of the Revenue Code were not maintainable as there was a remedy available under Section 210 of the same code.

69Copy pinpoint69. Application before the Collector to get the Sale set aside has to be made within a period of 30 days. It is after considering the objections that the sale is to be confirmed. Section 210 of the Revenue Code reads: “Section 210. Application to set aside sale by person owning to holding interest in property.— (1) Where immovable property has been sold under this Code, any person either owning such property or holding an interest therein by virtue of a title acquired before such sale may,

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at any time within thirty days from the date of sale, apply to the Collector to have the sale set aside on his holding depositing- (a) For payment to the purchaser a sum equal to five per cent of the purchase money (b) For payment on account of the arrear, the amounts specified in the proclamation of sale as that for the recovery of which the sale was ordered, less any amount which may have been paid since the date of sale on that account; and (c) The cost of the sale: Provided that, such application may be made by such person belonging to a Schedule Tribe within one hundred and eighty days from the date of sale. (2) If such deposit is made within thirty days or, as the case may be, one hundred and eighty days from the date of sale, the Collector shall pass an order setting aside the sale.”

70Copy pinpoint70. As rightly argued by Mr. Dave, the said remedy was rendered illusory as the sale was finalised by the Tahsildar much before the confirmation by the Collector. In fact, the sale certificate was issued & the possession was also handed over to the appellant. The confirmation was done by the Tahsildar much before the expiry of 30 days. There was nothing left for the Collector to consider and decide under Section 210 of the Revenue Code. It is further pertinent to note that the provision may be applicable in case of owner of the property but not to a lender who has valid subsisting mortgage. The argument that lender is not required to make deposit before challenging the sale is not something which is borne on plain reading of the language of Section 210.

71Copy pinpoint71. Section 210(1) of the Revenue Code provides that an application can be made where an immovable property has been sold under the Revenue Code by i) owner of the property; and ii) holding interest therein by virtue of a title acquired before such sale. It would be relevant to state that the respondent No. 6 does not fall within the category as provided under Section 210(1) of the Revenue Code nor

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has the respondent No. 6 claimed to be the owner of the property or has an interest in the property by virtue of the “title acquired”.

72Copy pinpoint72. The confirmation of the sale had no bearing after the issuance of sale certificate. Therefore, the remedy under Section 210 was rendered illusory and not a remedy actually available as the certificate of sale was already issued. Further, once the sale certificate is issued, then the remedy falls under Section 247 instead of Section 210 of the Revenue Code. At the cost of repetition, Section 247 of the Revenue Code is reproduced hereunder: “Section 247: Appeal and appellate authorities.—(1) In the absence of any express provisions of the Code, or of any law for the time being in force to the contrary, an appeal shall lie from any decision or order passed by a revenue or survey officer specified in column 1 of the Schedule E under this Code or any other law for the time being in force to the officer specified in column 2 of that Schedule whether or not such decision or order may itself have been passed on appeal from the decision or order of the officer specified in column 1 of the said Schedule: Provided that, in no case the number of appeals shall exceed two. (2) When on account of promotion or change of designation an appeal against any decision or order lies under this section to the same officer who has passed the decision or order appealed against, the appeal shall lie to such other officer competent to decide the appeal to whom it may be transferred under the provisions of this Code.”

73Copy pinpoint73. Assuming for the moment that the Additional Commissioner had no jurisdiction to adjudicate and decide the two appeals filed by the respondent No. 1 and respondent No. 6 respectively, yet the common order passed by the Additional Commissioner allowing the appeals and remanding the matter back to the authority concerned could not have been disturbed and the High Court rightly did not disturb the same. Had the High Court taken the view that the Additional Commissioner had no jurisdiction and the order passed by it was a nullity, the result would have been the revival of the illegal order passed by the Additional Collector confirming the sale.

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74Copy pinpoint74. It is well settled principle in law that issuance of a writ or quashing/ setting aside of an order if revives another pernicious or wrong or illegal order then in that eventuality the writ court should not interfere in the matter and should refuse to exercise its discretionary power conferred upon it under Article 226 of the Constitution of India. The writ court should not quash the order if it revives a wrong or illegal order. Vide : Gadde Venkateswara Rao v. Government of Andhra Pradesh, AIR 1966 SC 828; Maharaja Chintamani Saran Nath Shahdeo v. State of Bihar, (1999) 8 SCC 16: AIR 1999 SC 3609: 1999 AIR SCW 3623; M.C. Mehta v. Union of India, (1999) 6 SCC 237: AIR 1999 SC 2583; Mallikarjuna Mudhagal Nagappa v. State of Karnataka, (2000) 7 SCC 238: AIR 2000 SC 2976: 2000 AIR SCW 3289; and Chandra Singh v. State of Rajasthan, (2003) 6 SCC 545: AIR 2003 SC 2889: 2003 AIR SCW 3518 and Raj Kumar Soni v. State of U.P., (2007) 10 SCC 635. G. CONCLUSION

75Copy pinpoint75. In view of the foregoing discussion, we are of the view that no interference is warranted with the impugned judgment of the High Court. However, the facts and circumstances of this case have left us with an uphill task to mould the final order necessary to be passed in order to do substantial justice with the parties to this litigation.

76Copy pinpoint76. Having taken the view that the High Court committed no error, much less any error of law, we could have dismissed both the appeals and closed this litigation. However, doing the same will put the appellant in immense difficulties. As noted in the earlier part of this judgment, the appellant has set up an oxygen cylinder manufacturing plant on the suit property. It has invested a huge amount in setting up this plant and has been running this plant for almost 15 years. Approximately 200 employees are working in the said plant. If the possession of the suit property is taken over, then the plant will have to be dismantled unless in any fresh auction proceedings some person is interested in taking over the entire plant with the land. In such circumstances, we deem fit to give one opportunity to the appellant to save its industrial unit set up on the subject land. If the appellant wants to save the industrial unit and the land, it must deposit a sum of Rs. 4,00,00,000/- (Rupees Four Crore Only) with the respondent no. 6-ARCIL towards full and final settlement of all liabilities. No other lender or financial institution shall thereafter put forward any further

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claim, even if any. It is for the respondent no. 6-ARCIL to deal with such a situation.

77Copy pinpoint77. In view of the aforesaid, both the appeals are allowed in part. While affirming the impugned judgment and order passed by the High Court, we direct the appellant to deposit a sum of Rs. 4,00,00,000/- (Rupees Four Crore Only) with the respondent no. 6-ARCIL within a period of six months from today, failing which we shall proceed to pass further orders.

78Copy pinpoint78. Let this matter be notified once again before this Bench to report whether the appellant has deposited the amount of Rs. 4,00,00,000/- (Rupees Four Crore Only) with ARCIL or not. We clarify that if the appellant fails to deposit the amount, we shall direct the competent authorities to take over the possession of the entire unit with the land in question and put the same once again for sale by way of fresh auction process.

79Copy pinpoint79. We may further clarify that if the appellant deposits the requisite amount within the stipulated period, then the contempt proceedings pending before the High Court of Bombay shall also stand terminated.

80Copy pinpoint80. There shall be no order as to costs.

81Copy pinpoint81. Pending applications if any shall stand disposed of.

Result of the case: Appeals partly allowed.

† Headnotes prepared by: Nidhi Jain