2021 INSC 0773
I N   THE  S UPREME  C OURT   OF  I NDIA   
C IVIL  A PPELLATE  J URISDICTION   
C IVIL  A PPEAL  N OS . 3956­3957  OF  2017   
T HE  V ICE  C HAIRMAN  & M ANAGING  D IRECTOR , 
C ITY   AND  I NDUSTRIAL  D EVELOPMENT  C ORPORATION  
O F  M AHARASHTRA  L TD .& A NR .                                …A PPELLANTS
V ERSUS
S HISHIR  R EALTY  P RIVATE  L IMITED  & O RS . E TC .      …R ESPONDENTS
WITH   
C IVIL  A PPEAL  N OS . 3959­3961  OF  2017   
S ANJAY  K UMAR  S URVE                  …A PPELLANT
V ERSUS
T HE  S TATE   OF  M AHARASHTRA  & O RS . E TC .            …R ESPONDENTS
J UDGMENT   
N. V. R AMANA , CJI   
1. These   Civil   Appeals   arise   out   of   the   impugned   judgment
dated 06.12.2013 passed by the High Court of Judicature at
1 R EPORTABLE

Bombay   in   Writ   Petition   No.   702   of   2011,   Writ   Petition   No.
5245 of 2011, and Public Interest Litigation No. 55 of 2011. 
2. At   the   outset,   a   brief   sketch   of   the   facts   is   necessary   for
determining   the   issue.   On   11.06.2008,   the   appellants   in
Civil   Appeal   Nos.   3956­3957   of   2017   (City   and   Industrial
Development   Corporation   of   Maharashtra,   for   short
“ CIDCO ”)   called   for   a   tender   for   lease   of   land   within   its
jurisdiction,   for   purposes   of   development   of   necessary
infrastructure   such   as   Hotels   etc.,   around   Navi   Mumbai
Airport.   Respondent­   M/s   Metropolis   Hotels   was   one   of   the
bidders.
3. Before approval of the tender, technical qualifications of the
bidders were scrutinized and approved by the CIDCO’s legal
team on 25.07.2008 in the following manner:
“Metropolis   Hotels   is   a   Partnership   firm
consisting   of   M/s   Sun­n­Sand   Hotel   Pvt.   Ltd.
and   Shishir   Realty   Pvt.   Ltd   having   their   share
30%   each.   A   short   question   arises   for   the
determination   is   whether   Board   Resolution   of
the   partnership   firm   is   required   to   be   annexed
with the offer.
It   appears   from   the   technical   bid   of   M/s
Metropolis Hotels that the said bid is signed by
both the partners jointly. Section 4 of the Indian
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Partnership   Act   1932   defines   ‘Partner’   and
‘Partnership’   is   the   relation   between   persons
who   have   agreed   to   share   the   profits   of   a
business carried on by all or any of them acting
for   all.   Persons   who   have   entered   into
partnership   with   one   another   are   called
individually “partners” and collectively “a firm”,
and   the   name   under   which   their   business   is
carried   on   is   called   the   “Firm   Name”.
Partnership is not created by status and arises
from   contract.   In   the   Indian   Partnership   Act,
1932,   there   are   no   directors,   and   all   the
partners   are   jointly   and   severally   responsible
for all the acts of the firm.  
In view of this Board Resolution is not required.
Therefore,   the   remarks   appearing   on   the
scrutiny   sheet   at   Sr.   No.   19,   requires   to   be
ignored   and   technical   offer   should   be
accepted.”
On 25.07.2008, the financial bids were opened, which stood
as under:
S L .
N O . N AME   OF  O FFEROR R ATE   QUOTED  (R S .
P ER  S Q  M TRS .) R EMARKS
1. M/s.   Metropolis   Hotel
(Respondent   no.1   in
C.A. No. 3957 of 2017) 60,085.10 1 st
 Highest
2. M/s.   Indian   Hotels   Co.
Ltd. 55319.15 2 nd
 Highest
3. M/s.   Sun­N­Sand
Hotels Pvt. Ltd. 49,361.70 3 rd
 Highest
4. M/s.  L&T  Leela  Venture
Co. 48,063.90 4 th
 Highest
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4. On 25.07.2008, M/s. Indian Hotels Company Ltd., who were
H2 in the bidding process, wrote to CIDCO, objecting to the
eligibility of the highest bidder in the following manner:
“3. We are informed that the highest bidder is
a   partnership   firm   and   has   relied   on   the
experience   of   one   of   this   partners   to   satisfy
the   eligibility   norm.   The   same   partner   has
also bid on its own. This amounts to multiple
bidder   with   the   same   experience   being
concerned for more than one bid.”
On 04.08.2008, these objections were considered by the law
officers of the CIDCO and subsequently rejected.
5. On   07.08.2008,   the   CIDCO   issued   a   letter   of   allotment   in
favour   of   M/s.   Metropolis   Hotels.   Being   the   highest   bidder,
M/s.  Metropolis  Hotels  was  accordingly, allotted  Plot  No.  5,
admeasuring   about   47,000   sq.   mtrs.,   for   construction   of   a
five­star hotel near the proposed Navi Mumbai Airport. 
6. Thereafter,   on   29.12.2009,   M/s.   Metropolis   Hotels­
Respondent   no.1,   by   way   of   a   letter   to   CIDCO,   applied   for
change   of   user   of   34,000   sq.   mtrs.   of   the   said   plot   to
commercial­cum­residential   use.   On   11.02.2010,   this
request   for   change/expansion   of   user   of   Plot   No.5   was
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considered   and   subsequently   permitted   only   for   23,000   sq.
mtrs.
7. On   11.03.2010,   M/s.   Metropolis   Hotels   requested   for
subdivision   of   the   Plot   No.5   into   two,   i.e.   24,000   sq.   mtrs.
for   the   five­star   hotel   and   23,000   sq.   mtrs.   for   the
residential­cum­commercial   plot.   By   way   of   a   letter   dated
29.03.2010,   CIDCO   demarcated   the   said   plot   as   requested,
forming   Plot   No.5   (admeasuring   24,000   sq.   mtrs.)   and   Plot
No.5A   (admeasuring   22,999.08   sq.   mtrs).   M/s.   Metropolis
Hotels also requested assignment of their rights in respect of
the  plot  on  which the  residential­cum­commercial user  was
permitted,   i.e.   Plot   No.5A.   Assignment   of   this   plot   to   M/s.
Shishir   Realty   Private   Ltd.   was   approved   by   CIDCO   in   its
letter   dated   30.03.2010,   wherein   it   referred   to   the   said
assignee as one of the partners in the original allotment.
 
8. On   30.03.2010,   the   CIDCO   executed   two   separate   lease
deeds in respect of the two plots, i.e. Plot No. 5 and Plot No.
5A.   M/s.   Shishir   Realty   Private   Ltd.   took   further   steps   for
mortgaging their plot with the permission of the CIDCO and
obtained   loan   for   development   of   the   said   plot   for
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commercial­cum­residential   user.   Third­party   rights   were
also created. 
9. As   complaints   were   made   regarding   irregularities   in
allotment of plots of land, change of user and deviation from
the   terms   and   conditions   of   the   tender,   a   preliminary
enquiry   was   held   by   the   Principal   Secretary,   Urban
Development   Department   as   per   the   directions   of   the   State
Government   of   Maharashtra.   Based   on   such   enquiry,   the
newly appointed Vice­ Chairman issued a show­cause notice
dated   06.12.2010   to   M/s.   Metropolis   Hotels   and   M/s.
Shishir   Realty   Private   Ltd.(respondents­lessees)   as   to   why
the  lease deeds  which  were executed  in their   favour  should
not   be   cancelled   on   account   of   breach   of   tender   conditions
by   M/s.   Metropolis   Hotels.   It   may   be   relevant   to   note
observations made in the show cause notice which  inter alia
read as under:
“13. Since the tenders were invited for grant of
lease   of   five­star   hotel   plot,   only   bidders
interested   in   development   of   5­star   Hotel
participated   in   the   bidding   process.   Had   the
Corporation   invited   tenders   with   residential   +
commercial   use   of   the   plot,   several   bidders
could   have   participated   in   the   bidding   process
and   the   Corporation   might   have   fetched   higher
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revenue.   Due   to   change   of   user   and   sub­
division   of   the   plot   contrary   to   the   terms   and
conditions   of   invitation   of   offer,   several   eligible
bidders   were   deprived   and   also   caused
financial   loss   to   the   public   exchequer.   Besides
this,  due  to   change  of  user  and   sub­division  of
the   plot,   the   basic   object   of   development   of   5­
star hotel is frustrated.
14. For the   bench  or  benches   (sic)   of  the   terms
and conditions of tender and letter of allotment
dated   –   07.08.2008,   you   are   hereby   called
upon to show cause as to why the Corporation
should   not   cancel   or   revoke   the   agreements
concluded   vide   Letter   of   Allotment   dated
07.08.2008   and   Agremeents   to   lease   dated
30.03.2010,   in   respect   of   Plot   No.5,
admeasuring   24,000   m 2
  in   favour   of   M/s.
Metropolis Hotels and Plot No.5A, admeasuring
23,000 m 2
  in favour of M/s. Shishir Realty Pvt.
Ltd.”
10. Vide   order   dated   16.03.2011,   the   Vice   Chairman,   CIDCO,
cancelled   the   lease   deeds,   pursuant   to   the   enquiry.   The
issues   under   consideration,   as   identified   in   the   said   order,
are reproduced as under:
S L .
N O . I SSUES F INDING
S
1. Whether   M/s.   Metropolis   Hotels
was   eligible   to   participate   in   the
bidding process for allotment of 5­
Star Hotel Plot, in accordance with
Clause   4(c)   of   the   invitation   of
offer? No
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2. Whether change of user for part of
the   plot   admeasuring   23,000   m2
and   sub­division   of   plot   in   breach
of   the   terms   and   conditions
represented   in   the   Tender
document and letter of allotment? Yes
3. Whether   transfer   of   part   of   the
sub­divided   plot   of   admeasuring
23,000m2   with   change   of   user   in
favour   of   M/s.   Shishir   Realty   Pvt.
Ltd. before execution of agreement
to   lease   was   consistent   with
Condition   No.16   of   the   General
Terms   and   Conditions   of   Tender
and   Condition   No.21   of   the   letter
of allotment? No
4. Whether   change   of   user   and   sub­
division   of   plot   has   adversely
affected   the   object   of   development
of 5 Star Hotel in Navi Mumbai? Yes
5. Whether   change   of   user   and   sub­
division of plot and transfer of part
of   the   plot   was   legal,   just   and
proper? [No]
11. Pertaining   to   the   first   issue   of   the   eligibility   of   M/s.
Metropolis   Hotels   to   participate   in   the   bidding   process,   the
order held that Clause 4(c) of the tender document obligated
the   bidders   to   have   a   registered   partnership   firm.   It
concluded   that   since   M/s.   Metropolis   Hotels   was   not
registered,   on   the   date   of   submission   of   the   bid,   they   were
ineligible   for   bidding.   Accordingly,   their   offer   was   void   ab
8

initio .   The   second   reason   provided   was   that   M/s.   Sun­N­
Sand Hotels, being partners in M/s. Metropolis Hotels, could
not   have   submitted   a   separate   bid,   which   also   vitiated   the
bid made by Metropolis Hotels. 
12. On   the   aspect   of   whether   sub­division   of   the   plots   and
change   of   land   use   were   consistent   with   the   terms   and
conditions   of   the   tender   document   and   letter   of   allotment,
the   order   observed   that   offers   were   invited   for   five­star
hotels  and   sub­division/change   of  use   could  not  have  been
permitted   as   such   changes   were   not   conducive   to   public
interest   and   were   against   express   terms   and   conditions
mentioned within the agreement.
13. On   the   third   issue   of   whether   transfer   of   part   of   the   sub­
divided   plot   to   Shishir   Realty   Pvt.   Ltd   was   consistent   with
terms of the tender and letter of allotment or not, the order
observed that the terms of the allotment letter read with the
General   Terms   and   Conditions   clearly   showed   that   the
transferee should fulfil all eligibility criteria prescribed in the
invitation   of   offer.   As   there   was   nothing   on   record   to
establish   that   M/s.   Shishir   Realty   Pvt.   Ltd.   had   fulfilled
9

such criteria, the transfer was held to be in violation of such
terms and conditions.
14. On   the   aspect   of   whether   the   change   of   user   and   sub­
division   of   the   plot   adversely   affected   the   object   of
development   of   a   five­star   hotel,   the   order   noted   that   the
change   of   user   and   sub­division   of   plots   were   in
contravention   of   the   terms   and   conditions   initially   offered.
Due   to   such   changes,   the   basic   object   of   development   of   a
five­star hotel in Navi Mumbai was frustrated.
15. On   the   aspect   of   whether   allotment   of   the   plot,   change   of
land use, and sub­division of plots was arbitrary, illegal, and
unjustified,   the   order   noted   that   the   deviations   could   be
categorized   as   major   deviations   from   the   terms   and
conditions   mentioned   in   both   the   tender   documents   and
letter   of   allotment.   Such   deviation   frustrated   the   basic
purpose of development of a five­star hotel. Therefore, it was
concluded that the aspect of promissory estoppel against the
CIDCO   would   not   be   applicable   as   specific   terms   of   the
tender   and   letter   of   allotment   were   deviated.   Further,   such
deviations   were   not   in   public   interest.   Accordingly,   the   two
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lease   deeds   in   favour   of   the   respondents­lessees   were
cancelled.
16. Aggrieved   by   the   cancellation   of   the   lease   deeds,   M/s.
Metropolis   Hotels   and   Shishir   Realty   Pvt.   Ltd.,   challenged
the   aforesaid   order   of   the   Vice   Chairman,   CIDCO,   through
two   writ   petitions   being   Writ   Petition   No.   702   of   2011   and
Writ   Petition   No.   5245   of   2011   before   the   High   Court   of
Judicature   at   Bombay.   Separately,   a   PIL   was   also   filed
challenging  the   allotment   of   the   plot   in   question,   change   of
land use, and sub­division of the said plot. 
17. The   High   Court,   vide   impugned   order   dated   06.12.2013,
while   quashing   the   aforesaid   cancellation   order   passed   by
CIDCO, held that the change of land use and sub­division of
the   plot   had   taken   place   with   due   authorization   of   the
CIDCO.   Further,   it   held   that   the   CIDCO   was   not   able   to
show   any   concrete   violations   which   go   to   the   root   of   the
matter. Finally, the High Court held that, without producing
any   pressing   need   on   record,   the   CIDCO   is   precluded   and
estopped   on   the   doctrine   of   promissory   estoppel   from
canceling the allotment.
11

18. Aggrieved   by   the   impugned   judgment,   the   CIDCO   and   PIL
petitioner­   appellant   in   C.A.   Nos.   3959­3961   of   2017   have
filed separate appeals before this Court.
19. Mr.   Rakesh   Dwivedi,   learned   Sr.   Counsel,   appearing   on
behalf of the CIDCO, has argued that:
a) The   High   Court   judgment   cannot   be   sustained   as   the
same   was   delivered   ignoring   blatant   violations   and
illegalities committed during the tender process.
b) Primarily,   the   bid   by   M/s.   Metropolis   Hotels   itself   was
illegal   as   it   has   only   registered   subsequent   to   the
allotment,   which   is   a   clear   violation   of   clause   4(c)   and
8(b) of the tender document. 
c) Moreover, subsequent to the award of the contract, M/s.
Metropolis   Hotels   went   beyond   the   tender   conditions
and expanded the usage to residential­cum­commercial.
Additionally   consequent   to   change   of   usage,   the   M/s.
Metropolis   Hotels   sub­divided   the   plot   and   executed   a
fresh   lease   in   favour   of   Shishir   Realty   Pvt.   Ltd.   The
aforesaid   acts   were   in   breach   of   the   original   allotment
letter.
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d) This   Court   while   concerned   with   distribution   of   State
largesse,   should   ensure   that   no   arbitrariness,
favouritism has taken place.
e) The   Respondents   cannot   claim   any   relief   based   on   the
doctrine   of   promissory   estoppel   as   being   a   creature   of
equity,   it   must   yield   when   the   equity   so   requires.
Considering   it   would   be   inequitable   to   hold   the
Government to the promise made by it, the Court should
not raise an equity in favour of the promisee and enforce
the promise against the Government.
f) It   is   well   settled   legal   proposition   that   the   private
interest  would  always   yield  place  to   the   public  interest.
Considering,   the   irregularities   committed   by   the
respondents,   it   is   expedient   to   revoke   the   allotment   in
favour   of   the   Respondents   especially   when   no   grave
prejudice will be caused to the allottee.
20. Mr.   Atmaram   Nadkarni,   learned   Sr.   Counsel,   appearing   on
behalf   of   the   State   of   Maharashtra   while   supporting   the
submissions made by CIDCO, has argued that:
13

a) This  court,  in  a  catena   of  judgments,  has  held  that   the
representations   made   to   the   public   by   way   of   tender
conditions   and   policies   cannot   be   changed   arbitrarily
after the allotment.
b) The rules of the game cannot be changed once the game
is played.
21. Mr   Harinder   Toor,   learned   Counsel,   appearing   on   behalf   of
the   PIL   petitioner­appellant   in   C.A.   No.   3959­3961,   has
argued that:
a) The   PIL   petitioner/appellant   is   a   social   activist   and   is
involved in the business of construction services.
b) The change of land use is in violation of clause 15 of the
letter   of   allotment,   which   mandated   that   the   allotted
land shall be used only for the construction of a five star
hotel.
c) The change of land use was illegal and arbitrary.
d) The sub­division of plots was also invalid.
22.   Dr.   Abhishek   Manu   Singhvi,   learned   Senior   Counsel,
appearing on behalf of Shishir Realty Pvt. Ltd., argues that:
a) M/s.Metropolis   Hotels   was   a   partnership   firm   and   had
applied   for   registration.   When   bid   was   made,   they   had
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declared   the   same   to   CIDCO.   The   enforcing   committee
received the bid being fully aware that the application for
registration   of   partnership   firm   was   pending   before   the
registrar and decided to go with their bid as it was Rs.23
crore higher than the next bid.
b) Additionally, the enquiry that was conducted against the
said   allocation   was   in   complete   abrogation   of   natural
justice.   No   notice   was   issued   to   the   respondents   during
the   pendency   of   the   enquiry.   Even   while   accepting   the
report of the Principal Secretary, no hearing was given to
the respondents.
c) Not   only   is   CIDCO   bound   by   the   principles   of   estoppel,
but they have also failed to prove any losses attributable
to the respondent. 
d) CIDCO has only  raised bald allegations  of collusion  with
management.   Had   there   been   any   real   apprehension   of
collusion   or   financial   losses   arising   out   of   this
transaction,   the   State   would   have   taken   criminal
action/disciplinary   actions   against   the   erring   officials.
15

However,  CIDCO  have  failed  to  place  anything  on  record
to prove the same.
23. Mr.   Mukul   Rohatgi,   Learned   Senior   Counsel,   appearing   on
behalf of M/s. Metropolis Hotels argues that:
a) The purpose of construction of a five­star hotel has been
frustrated   considering   the   fact   that   the   same   was
contingent on the coming up of Navi Mumbai Airport.
b) Without there being an airport, it would be commercially
absurd   to   construct   a   five­star   hotel   in   the   middle   of
nowhere.
c) The   bidding   process   was   conducted   in   2008,   when   there
was   a   huge   recession   both   globally   and   in   India.   The
tender   had   attracted   M/s.   Metropolis   Hotels   because   it
was   stated   that   the   Navi   Mumbai   Airport   would   be   built
near the concerned plot, and the area would be declared a
Special   Economic   Zone.   However,   the   promises   of   the
tender   document   were   not   fulfilled   and   hence,   an
application for change of user was made. The 1997 policy
allows   for   a   change   of   user   and   hence,   there   is   no
illegality.
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d) There   is   no   violation   of   any   condition   of   the   tender
document concerning sub­division of plots.
e) Moreover,   even   after   the   allotment   was   made   the
respondents   have   complied   with   the   due   procedure   and
have paid the requisite fees. After accepting the requisite
charges to the tune of Rs. 321 crores, the cancellation of
the allotment after 13 years is not only highly inequitable
but will also cause grave prejudice to the respondents.
f) He disputes the bona­fides of the PIL petitioner.
24. Heard learned counsels from both sides. 
25. Before   we   delve   into   analysis   of   the   case,   it   is   pertinent   to
examine   the   role   of   Constitutional   Courts   in   reviewing   the
tender   process.   The   Constitution   of   India   allows   the
government   to   enter   into   contracts   and   perform   certain
commercial   activities.   Due   to   increase   in   government
business,   there   is   a   requirement   of   this   Court   to   uphold
certain   discretion   accruing   to   the   government   and   disallow
certain   conduct   in  light   of  prevailing   circumstances.  Merely
instilling an agency with discretion may not be prohibited by
the   Constitution,   rather   it   is   unfettered   use   of   such
17

discretion,  that   is   prohibited;  the   Constitution   frowns  upon
those   decisions   which   are   taken   in   gross   abuse   of   law.
English   Courts   have   developed   many   legal   standards   for
evaluating   administrative   decisions,   one   of   them   being
enumerated in the case of   Council of Civil Service Unions
v.   Minister   for   the   Civil   Service ,   [1985]   AC   374,   wherein
Lord   Diplock   has   summarized   the   grounds   of   challenging
such   decisions   under   the   broad   heads   of   illegality,
irrationality,   procedural   impropriety   and   legitimate
expectation. Beyond these grounds, a recent development in
the   form   of   proportionality   has   further   increased   the   scope
of judicial review. 
26. Being governed under “rule of law” every action of the State
or   its   instrumentality   while   exercising   its   executive   powers
must met the aforesaid requirements. While recognising the
existing   principle   of   freedom   to   enter   or   not   to   enter   into
contracts by the state and its instrumentalities, the manner,
method   and   motive   behind   the   aforesaid   decision   can   be
subjected   to   judicial   review   on   the   touchstone   of   equality,
fairness, proportionality and natural justice. The decision of
18

the   executive   must   strike   a   balance   with   the   alleged
violation with that of the penalty imposed. 
27. This   Court,   in   many   of   its   orders   reviewing   tender
conditions,   has   vouched   for   providing   sufficient   discretion
and   independence   to   administrative   authorities   so   as   to
enable   them   to   perform   their   duties   in   the   interest   of   the
public.   Further,   the   observation   of   judicial   restraint   while
reviewing such contracts is a continuing trend which can be
seen   in   a   catena   of   cases. 1
  The   power   of   judicial   review
accorded to Constitutional Court of India and its jurisdiction
is supervisory.
28. This court in the case of   M/s   Star Enterprises v. City and
Industrial   Development   Corporation   of   Maharashtra
Ltd. ,   (1990)   3   SCC   280   reiterated   the   aforesaid   concerns
and stated the necessity of judicial review even with respect
to   the   commercial   transactions   undertaken   by   the   State.
This court held as follows:
“ 10.   In   recent   times,   judicial   review   of
administrative   action   has   become
expansive   and   is   becoming   wider   day   by
day.   The   traditional   limitations   have   been
1   Municipal Corporation, Ujjain v. BVG India Ltd.,  (2018) 5 SCC 462
19

vanishing   and   the   sphere   of   judicial
scrutiny   is   being   expanded.   State   activity
too   is   becoming   fast   pervasive.   As   the
State   has   descended   into   the
commercial field and giant public sector
undertakings   have   grown   up,   the   stake
of   the   public   exchequer   is   also   large
justifying   larger   social   audit,   judicial
control   and   review   by   opening   of   the
public gaze; these necessitate recording
of   reasons   for   executive   actions
including   cases   of   rejection   of   highest
offers.   That   very   often   involves   large
stakes   and   availability   of   reasons   for
actions on the record assures credibility
to the action; disciplines public conduct
and   improves   the   culture   of
accountability.   Looking   for   reasons   in
support   of   such   action   provides   an
opportunity   for   an   objective   review   in
appropriate   cases   both   by   the
administrative   superior   and   by   the
judicial process .”
(emphasis supplied)
29. In   this   context,   this   Court   in   Tata   Cellular   v.   Union   of
India ,   1994   (6)   SCC   651,   observed   certain   principles
elucidated as under: 
“ 94. The   principles   deducible   from   the   above
are:
(1)   The   modern   trend   points   to   judicial
restraint in administrative action.
20

(2) The court does not sit as a court of appeal
but   merely   reviews   the   manner   in   which   the
decision was made.
(3)   The  court   does  not   have  the  expertise
to   correct   the   administrative   decision.   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 .
(4) The terms of the invitation to tender cannot
be   open   to   judicial   scrutiny   because   the
invitation to tender is in the realm of contract.
Normally speaking, the decision to accept the
tender   or   award   the   contract   is   reached   by
process   of   negotiations   through   several   tiers.
More often than not, such decisions are made
qualitatively by experts.
(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
administrative   sphere.   However,   the
decision   must   not   only   be   tested   by   the
application   of   Wednesbury   principle   of
reasonableness   (including   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 .”
(emphasis supplied)
 
21

30. These   principles   acquire   importance   as   the   efficacy   of
commercial   activities   in   the   public   sector   increases   greatly.
It   appears   that   public   interest   litigation   has   opened   a   large
window   to   entertain   any   tender,   regardless   of   scale,   which
are   now   sought   to   be   challenged   as   a   matter   of   routine.
Such   disruption   could   hardly   have   been   the   objective   of
expanding the need of Constitutional Review. Close scrutiny
of   minute   details,   contrary   to   the   view   of   the   tendering
authority, makes execution of contracts in the public sector
a   cumbersome   exercise.   Often,   it   is   the   case   that   parties
entertain   the   idea   of   a   long­drawn­out   litigation   at   the   very
threshold   itself.   The   purpose   of   imbibing   the   spirit   of
competition in a process such as that of the bidding process,
is   lost   in   this   meandering   exercise   and   delays   suffered   due
to   pending   litigation.   This   causes   great   disadvantage   to   the
government   and   public   sector   in   general.   This   Court,   in
appropriate   cases   while   interpreting   the   contract,   can
restrict   the   review   mechanism   by   not   inuring   to   the
interpretation   so   provided   by   third   parties   or   parties
competing   for   the   tender,   unless   the   impugned
22

interpretation is shown to be gross abuse of law. 2
 The object
of   judicial   review   cannot   be   that   in   every   contract   where
some   parties   lose   out,   a   second   opportunity   is   provided   to
such   parties   to   pick   holes   so   as   to   disqualify   successful
parties, on grounds which even the party floating the tender
find to  be without  merit. With this  brief background on  the
standard   of   judicial   review,   we   may   analyze   the   case   at
hand.
31. At   the   outset,   the   respondents­lessees   have   argued   that
entire process of cancellation of the tender stood vitiated as
it   was   based   on   the   enquiry   conducted   by   the   Principal
Secretary,   Urban   Development   Department,   without
affording a chance to be heard.
32. It is borne from the records that, upon receiving the certain
complaints,   the   State   Government   initiated   enquiry   against
the   alleged   irregularities   during   the   tender   process.   On
18.09.2010, the Shishir Realty Private Ltd. received an order
from the Navi Mumbai Municipal Corporation directing them
2   B. S. N Joshi & sons Ltd. v. Nair Coal Services Ltd. , (2006) 11 SCC 548
23

not   to   carry   any   further   construction   and   stay   the
development.
33. On  03.11.2010,  the enquiry  committee submitted its report
to   the   State   Government   recommending   the   cancellation   of
tender.   On   19.11.2010,   the   State   Government   accepted   the
findings   of   the   enquiry   committee   and   directed   CIDCO,   to
implement the findings of the enquiry committee.
34. Shishir Realty Private Ltd. has placed on record letter dated
23.12.2010   addressed   to   the   Urban   Development
Department and CIDCO, stating that he was shocked to see
a   newspaper   report   stating   that   a   committee   appointed   by
the State Government has recommended the cancellation of
the   allotment   done   in   their   favour.   The   aggrieved
Respondent   challenged   the   aforesaid   recommendation   as   it
was   passed   without   affording   an   opportunity   of   hearing
them­the aggrieved party.
35. Subsequent   to   the   aforesaid   letter,   on   28.12.2010,   the
Respondents­lessees   received   a   show­cause   notice   dated
back   to   06.12.2010.   The   respondents­lessees   submitted
their   responses   on   30.12.2010,   13.01.2011   and   on
24

19.02.2011. Finally hearing was given to the respondent on
03.03.2011.   Thereafter,   finally   on   16.03.2011,   the   CIDCO
cancelled/revoked   the   letter   of   allotment   and   the
subsequent   permissions.   Vide   the   aforesaid   order,   the
Manager   (Town   Services)   was   also   directed   to   take   over
possession of the plots within 15 days.
36. The perusal of the materials produced on record shows that
the   initiation   of   the   enquiry   by   the   Principal   Secretary,
Urban Development Department was   suo­motu , without any
natural   justice   being   provided   for   the   respondents­lessees.
After   arriving   at   a   conclusion,   a   show­cause   notice   was
issued by CIDCO to sanctify the enquiry. The afore­said fact
of   post­decisional   hearing   just   to   sanctify   the   process   of
cancellation   is   clearly   evidenced   in   the   order   dated
16.03.2011,   passed   by   the   Vice­   Chairman   and   Managing
Director   CIDCO,   cancelling   the   tender   in   the   following
terms:
“1.   The   Government   of   Maharashtra
through   the   Principal   Secretary,   Urban
Development   Department   conducted
enquiry   into   the   irregularities   in
allotments   of   plots,   change   of   user   and
deviation   of   the   terms   and   conditions   of
25

the   tender   made   by   the   then   Vice
Chairman   and   Managing   Director,
CIDCO,   during   the   period   from   Ist
October,   2009   to   31 st
  March,   2010.   The
Principal   Secretary   Urban   Development
Department   conducted   the   enquiry   and
submitted   his   report   to   the   State
Government   on   03.11.2010.   The   change
of   user,   sub­division   and   transfer   of
part of plot no. 5, Sector 46A, Nerul, to
M/s   Metropolis   Hotels   was   also
covered   in   the   enquiry   conducted   by
the   Principal   Secretary,   Urban
Development   Department.   The   State
Government accepted the findings and
recommendations   of   the   enquiry
committee   and   directed   the   Managing
Director,   CIDCO,   vide   letter   dated
19.11.2010, to implement the findings
and   recommendations   of   the   Principal
Secretary,   Urban   Development
Department .   The   Principal   Secretary
has   recorded   his   findings   about   the
irregularities   in   acceptance   of   tender
and   breach   of   tender   conditions,
change of user, sub­division of plot and
further transfer of part of the plot and
further   recommended   cancellation   of
the tender process. 
2.   Although   the   State   Government   issued
directions   to   cancel   the   entire   tender
process,   it   was   felt   necessary   to   re­
examine   the   entire   issue   for   allotment   of
land   ….   by   conducting   an   enquiry   and
giving   opportunity   of   hearing   to   the
parties . ”
26

37. Such   illegal   procedure   adopted,   clearly   vitiates   the
subsequent   order   by   the   Vice­Chairman,   due   to   the
irregularity,   which   goes   to   the   root   of   the   matter.   The
conduct   of   the   appellant   authorities   indicate   that   the
enquiry   was   not   conducted   with   an   open   mind.   The   pre­
existing   findings   of   the   Principal   Secretary   recommending
the   cancellation   of   allocation   has   the   potential   to   color   the
entire   proceedings   held   subsequently   just   to   meet   the
procedural requirements.
38. Natural   justice   is   an   important   aspect   while   reviewing   the
administrative   orders.   Providing   effective   natural   justice   to
affected parties, before a decision is taken, it is necessary to
maintain  rule of   law.  Natural  justice  is  the  sworn  enemy  of
intolerant authority. Any attempt by authority to circumvent
the   requirement   of   providing   effective   hearing   before
reaching   a   conclusion,   cannot   pass   the   muster.   Coming   to
the   facts   herein,   the   post­decisional   hearing   given   to   the
respondent­lessee   is   reduced   to   a   lip­service,   which   cannot
be upheld in the eyes of law. 
27

39. As a first step of judicial review, we need to note that when
statutory   functionaries   such   as   CIDCO   render   an   order
based on certain grounds, its validity must be judged by the
reasons so mentioned and cannot be supplemented by fresh
reasons   in   the   shape   of   an   affidavit   or   otherwise. 3
  To   this
extent, we agree with the submission of Dr. Abhishek Manu
Singhvi,   that   the   scope   of   this   Court   is   limited.   Hence,   we
will   only   consider   the   impugned   order   of   CIDCO   dated
16.03.2011 and the reasoning supplied therein. 
40. At   this   juncture,   it   is   pertinent   to   consider   certain
allegations   of   violation   raised   by   the   appellant   authorities.
The   first   aspect   for   the   consideration   of   this   Court   is
whether   M/s.   Metropolis   Hotels   Ltd.   was   disqualified   from
participating   in   the   bidding   process.   The   impugned   order
dated   16.03.2011   of   CIDCO   provides   two   reasons:   the   first
being   that   M/s.   Metropolis   Hotels   was   not   a   registered
partnership  firm   while  applying   for   the   tender   process,  and
the   second   that   one   of   the   partners   of   M/s.   Metropolis
3   Mohinder Singh Gill v. Chief Election Commissioner, New Delhi,  
(1978) 1 SCC 405.
28

Hotels,   namely   M/s.   Sun­N­Sand   Hotels   Pvt.   Ltd,   had
submitted a separate bid.
41. The   perusal   of   the   bid   document   clearly   indicates   that   the
respondent­   M/s.   Metropolis   Hotels   at   the   time   of   applying
for   the   bid   had   duly   disclosed   that   the   firm   had   already
applied   for   registration   and   had   also   forwarded   the
Registration   Form   and   Partnership   Deed   along   with   the
tender   documents.   Subsequently,   on   16.01.2009   the
Registrar of the firms issued the certificate of registration in
favour of the respondent­ M/s. Metropolis Hotels. 
42. Having   considered   the   communication   and   legal   opinion
tendered   before   accepting   the   highest   bid ,   CIDCO’s   law
officers   did   their   due   diligence,   who   opined   that
partnerships   being   creatures   of   contracts,   the   requirement
of   Board   resolutions   and   other   technical   objections   raised
were   not   an   essential   condition.   Therefore,   at   this   stage   it
may not be equitable to review such issues in detail. 
43. Moreover,   after   accepting   the   lease   premium   of
Rs.282,39,99,700/­ and a transfer fee of Rs. 1,38,56,000/­,
the   appellant   authority   cannot   contend   that   the
29

respondents­lessees   lacked   the   eligibility   to   contend   in   the
tender. The respondents­lessees also pointed out that, being
the   highest   bidder   with   a   margin   of   Rs.   23   crores   over   the
second   highest   bidder,   the   appellant   authority   did   not   go
into   the   technicalities   behind   the   matter.   Even,   the   High
Court   while   passing   the   impugned   judgment   has
commented  that the appellant was aware about the pending
registration, and even assented to the same as no objections
were raised while assessing the technical bids.
44. The second objection which the CIDCO in its order notes as
under:
“Apart   from   this,   M/s.   Sun­N­Sand   Hotels
Pvt. Ltd., one of partners of M/s. Metropolis
Hotels     also  submitted  separate   offer in  the
bidding   process.   Such   multiple   offers   were
submitted   by   M/s.   Sun­N­Sand   Hotels   Pvt.
Ltd. with a view to get the land allotted. On
this   count   also,   the   offer   of   M/s.   Metropolis
Hotels   stand   vitiated,   and   the   concluded
agreement is liable to be terminated.”
45. In our considered opinion, the aforesaid paragraph does not
indicate sufficient reasons. There is no reason provided as to
what provision of law such bids violate.   Further, there is no
concrete   allegation   or   adjudication   on   the   suggested
30

cartelization.   There   is   no   reasoning   considered   as   to   why
such a practice was harmful to public interest. We may note
that   such   considerations   are   important   elements   of   party
autonomy   and   commercial   freedoms   while   framing   the
contract, which is not within the purview of judicial review.
As   there   is   no   such   law   or   contract   provision   which   bars
such conduct, the considerations undertaken by the order of
CIDCO are extraneous and the same cannot be accepted.
46. The   second   aspect   considered   by   the   appellant   (CIDCO)
was   the   change   of   land   use.   According   to   CIDCO,   such
change   of   land   use   was   not   permitted   under   the   contract.
Therefore, it was argued to be not valid. On the contrary, the
respondents   have   argued   that   not   only   CIDCO   was
authorized to change the usage but also the Clause 19 of the
allotment   letter   provided   that   development   of   the   plot   was
governed   under   the   General   Development   Control
Regulations   for   Navi   Mumbai   which   also   had   similar
provisions.   Moreover,   the   respondents­lessees   contended
that,   this   was   not   the   first   instance   of   change   of   usage.   To
support   the   said   averment,   the   respondents­lessees   placed
31

strong   reliance   upon   the   decision   of   this   Court   in   the
identical   matter   of   CIDCO   Maharashtra   Ltd.     v.     M/s.
Shree Ambica Developers ,   in C.A. No.7581 of 2012.   This
Court held therein:
“We have as a measure of abundant caution
examined   the   relevant   official   record   which
was   produced   before   us   by   Mr.   Bhasme,
counsel   appearing   for   the   appellant.     While
the application for change may have been
filed only a few days after the auction was
conducted,   the   same   was   processed   at
different   levels   giving   an   opportunity   to
officials   dealing   with   specialised   fields   to
record   their   opinion  on  the   permissibility
of   the   proposed   change.     From   a   perusal
of the notings recorded on the file, we are
satisfied   that   the   change   was  found   to   be
permissible   in   –   accordance   with   General
Development   Control   Regulations .     We
must   say   to   the   credit   of   M/s   Lalit   and
Bhasme   that   they   did   not   question   the
correctness   of   the   views   recorded   by   the
officers, who examined the permissibility of a
change as prayed for by the company.   It was
not   their   contention   that   the   change   was
against   the   development   plan   that   could
have   made   the   same   untenable   in   law,   nor
was there any suggestion that any one of the
functionaries   associated   with   the   decision
making   process   had   played   a   fraud   on   the
statute   or   the   exercise   of   power   vested   in
him .     It   is   true   that   the   official   record
produced   before   us,   does   not   reveal   that
the   question   of   financial   implications,   if
32

any,   involved   in   the   change   which   could
and perhaps ought to have been examined
was   examined   by   any   one   at   any   stage.
But so long as the appellant did not make
absence   of   such   a   consideration   a   ground
for   cancellation   of   change   in   use,   we
cannot   help   leave   alone   permit   the
Corporation   to   add   the   same   as   a   ground
for   supporting   the   order   recalling   –   the
grant   of   the   change .     The   order   passed   by
the   Corporation/its   Managing   Director
cancelling   the   earlier   change   was   based
entirely   on   the   alleged   absence   of   authority
vested in it to direct such a change.”  
(emphasis supplied)
47. Upon the perusal of the above cited decision, we are of
the opinion that the aforesaid opinion is squarely applicable
in   the   present   case.   Although   the   argument   made   by   the
CIDCO is attractive at the outset, a deeper analysis makes it
clear that such argument is devoid of merit. In this context,
it may be necessary to note certain clauses contained in the
Tender Document and Allotment Letter:
“ 4. Who is eligible to offer to acquire plot
(a) A person competent to contract under the Indian
Contract   Act  is  eligible  to   make  offer  to   acquire
plot.
(b) A   company   incorporated   under   the   Indian
companies Act, 1956 is eligible to make offer to
acquire plot.
33

(c) A   partnership   firm   registered   under   Indian
Partnership   Act,   1932   is   eligible   to   offer   to
acquire   plot.   Offer   shall   be   signed   by   all
partners   and   enclosed   with   a   true   certified
copies   of   Deed   of   Partnership   and   certificate   of
registration.
(d) A public trust registered under Public Trust Act,
1950   and   also   registered   under   Society
Registration   Act,   1860   is   eligible   to   offer   to
acquire plot.
(e) A   Co­operative   society   registered   under   the
Maharashtra   Co­operative   Societies   Act,   1960.
The Offer form must be signed by the Chairman
or   the   Hon.   Secretary   of   the   society   without
which   it   will   be   held   invalid.   The   authorization
of general body must be enclosed with the offer.
18. General
CIDCO reserves the rights to amend, revoke
or   modify   the   above   conditions   at   its
discretion   as   well   as   to   reject   any   or   all
offers without assigning any reasons.
…
General   Terms   and   Conditions   prescribed
for disposal of plots by open offer.
….
….
15.   Application   of   General   Development
Control Regulation for Navi Mumbai
The   development   of   land   will   be   governed   by
the   prevailing   provision   contained   in   the
General Development Control Regulation of Navi
Mumbai.   Any   modification   to   the   said
Regulation   and   in   particular   to   the   Floor   Space
Index   and   change   of   use   of   the   land   shall   not
be   made   lessee   (sic).   If   he   so   desires,   may
34

apply   for   the   application   of   the   modified
regulation   of   the   General   Development
Control   Regulation   to   CIDCO.   The
Corporation may at its sole discretion, apply the
modification   of   such   regulation   on   payment   of
(1) Development charges (2) Additional premium
and (3) other charges if any as may be decided
by the Corporation from time to time. (…)
16. Transfer of assignment of rights
The   intending   lease   can   transfer   or   assign   his
rights, interests of benefits which may accrue to
him   from   the   Agreement   with   the   prior   written
permission   of   the   Corporation   and   on   payment
of   such   transfer   charges   as   may   be   prescribed
by   the   Corporation   from   time   to   time.   Such
permission   can   however   be   granted   only   after
the   agreed   lease   premium   and   any   other
amount required has been paid in full and after
execution   of   Agreement   to   lease.   In   case   of
transfer  of  plot,  the   Transferee  should   fulfill   all
eligibility conditions prescribed in condition 4 of
the invitation of offer.”
Conditions provided in the Allotment letter:
19.   Application   of   General   Development
Control Regulation for Navi Mumbai
The   development   of   land   will   be   governed   by
the   prevailing   provisions   contained   in   the
General Development Control Regulation of Navi
Mumbai. Any modification to the said regulation
and   in   particular   to   the   Floor   Space   index   and
charge   of   use   of   the   land   shall   not   be   made
automatically   applicable   but   the   intending
lessee,   if   you   so   desire,   may   apply   for   the
application   of   the   modified   regulation   of   the
35

General Development Control.
(emphasis supplied)
Clause   15   of   the   tender   document   and   the   corresponding
Condition   19   of   the   allotment   letter,   allows   for   such
modification.   Although   the   language   used   in   the   aforesaid
clause   is   contradictory,   this   Court   needs   to   interpret   the
same   to   harmonize   and   eliminate   any   absurdity. 4
  If   the
interpretation supplied by CIDCO, by reading Clause 15 (m)
and   (n)   of   allotment   letter   with   Clause   15   of   the   tender
document in isolation, is accepted, then the phrase  ‘If he so
desires,   may   apply   for   the   application   of   the   modified
regulation   of   the   General   Development   Control   Regulation   to
CIDCO’,   as   occurring   under   Clause   15   of   the   tender
document,   is   rendered   redundant.   In   this   context,   the
aforesaid   clause   needs   to   be   interpreted   to   mean   that,
‘lessee   cannot   apply   for   change   of   land   use   as   a   matter   of
right,   rather,   CIDCO,   on   its   discretion   could   grant   such
‘change   in   land   use’   on   satisfaction   based   on   material
considerations’.
4  Ramana Dayaram Shetty v. International Airport Authority of India, AIR 
1979 SC 1628.
36

48. The   contradictory   contractual   clauses,   seen   within   various
documents   issued   by   CIDCO,   have   led   to   this   seemingly
unending dispute, which required more than a decade to be
settled.   This   only   emphasizes   the   importance   of   due
diligence   and   careful   drafting,   which   could   have   avoided
such type of litigation in the first place.
49. In the same breath, the CIDCO has fairly conceded that the
power   of   change   of   land   of   use   does   exist   with   CIDCO   and
has,   on   multiple   occasions,   been   used   to   change   the   land
use   pattern.   Most   importantly,   in   the   present   case,   after
accepting   the   change   of   user   fee,   the   authorities   cannot
post­facto  question the same. 
50. In   this   case,   the   plots   fell   in   the   zone   of   commercial­cum­
residential   area,   and   through   the   contract,   this   condition
was earmarked for construction of a five­star hotel. As seen
from the records, the respondents­lessees sought dilution of
this condition basing on the fact that the airport, which was
supposed   to   come   up   near   the   area   had   not   materialized;
similarly situated hotels were loss­making endeavors; and a
general   economic   slump.   Further,   the   order   of   the   CIDCO
37

dated   11.02.2010   clearly   indicates   the   reasons   as   to   the
change   in   land   use   in   view   of   prevailing   circumstances   in
the following manner: 
“The   plot   was   aid   (sic)   in   August   2008   for
development of a Five Star Hotel along with the
allied   activities   and   it   received   a   price   of
Rs.60085.10 per sq.  mtr. The   plot   was   initially
with   1.5   FSI   which   was   increasable   to   FSI   2.0
as   per   Government   Policy.   For   the   period   prior
and   after   the   date   of   sale   instances   of   sale   of
plots  by tender for various  usages  are  keep as
C/351   to   C/377.   It   is   well   know   fact   that   the
real estate markets in the later part of the year
2008 literally crashed and the downward trend
of 25% to 30% was noticed across various real
estate   markets   and   segments.   As   a   result   of
this, the Board had also decided to bring down
the prices of NRI Phase­II Pat­II by 10% as well
as  rescheduling  the   installments.  Also  the   DPC
rates   were   brought   down   to   10%.   The   sale
instances   on   the   file   show   that   the   prices   of
residential   and   commercial   lands   during   that
period   were   comparable   or   some   cases   lower
than   the   plot   in   question.   But   nonetheless   the
fact  of  depressed  market  cannot  be  ignored. In
cases   of   some   of   the   plots   which   are   sold   at
higher   rates,   the   Bidders   did   not   pay   the   first
installment   and   therefore   their   EMD’s   were
forfeited   and   in   some   cases   on   their   request
references   have   been   made   to   the   government
for extension of time for payment.”
From   the   aforesaid   reasoning,   CIDCO   has   not   been   able   to
show   as   to   how   the   its   own   order   was   illegal   or   arbitrary.
38

Moreover,   they   have   not   been   able   to   identify   whether   the
consideration   taken   by   CIDCO   at   that   time   was   deficient.
The   prevailing   circumstances   and   changes   in   the   factual
conditions   need   to   be   appropriately   considered.   In   our
considered   opinion,   it   may   be   noted   that   delay   in
construction   of   Navi­Mumbai   airport,   economic   slump   and
loss­making   endeavors   by   similarly   situated   hotels   are
‘material   considerations’   and   the   order   has   appropriately
taken the same into account. 
51. The last submission on this aspect which the learned senior
counsel   for   the   CIDCO,   Shri   Rakesh   Dwivedi,   takes   is   that
the   relaxation   of   land   use   was   made   under   the   policy   of
1997   which   has   been   substituted   by   a   new   policy   in   2004.
However,   such   submission   is   patently   wrong,   considering
the fact that the letter dated 11.02.2010 specifically alludes
to   the   expanded   policy   of   2004   whereby   additional
categories   of   land   use   were   added.   It   is   mentioned   in   the
letter   that   the   policy   of   the   CIDCO   was   not   to   impose   any
limit on the user of an area out of allotted area which can be
converted. In light of the aforesaid discussion, the change of
39

land   use   from   five­star   hotel   to   partly   residential­cum­
commercial purpose cannot be said to be illegal or arbitrary.
52. The   third   aspect   which   needs   to   be   considered   is   the
legality   of   sub­division   of   plots   and   subsequent   transfer   of
rights.   It   has   been   contended   that   the   terms   of   the   tender
and letter of allotment do not allow such transfer. However,
on   perusal   of   the   aforementioned   Clause   16   of   the   General
Terms   and   Conditions   and   the   corresponding   Condition   21
of the allotment letter, it is clearly revealed that the allottee
was   permitted   to   transfer   or   assign   his   rights,   interests   or
benefits   with   prior   written   permission   of   the   Corporation
and   on   payment   of   such   transfer   charges   as   may   be
prescribed   by   the   Corporation.   Both   the   clause   and   the
condition   have   further   stipulated   that   such   permission
could   be   granted   only   after   the   agreed   lease   premium   has
been   paid   in  full   and   after  execution   of  agreement   to   lease.
In the present case, agreed lease premium was paid in full.
However, agreement to lease was made on the very next day,
i.e.   on   30.03.2010.   In   our   view,   merely   because   the
agreement   to   lease   was   executed   on   the   very   next   day,   the
40

assignment   and   transfer   would   not   be   invalidated.   Such
breach cannot in itself be termed as a fundamental to annul
the   tender,   especially   after   receiving   the   lease   amount,
CIDCO   cannot   question   the   subsequent   transfer.   We   can
only state that such clause can be construed as a warranty
alone rather than a condition, in light of the circumstances.
The   CIDCO,   being   a   public   body,   had   a   duty   to   act   fairly.
Having acquiescence of the facts and allowing such transfer,
they ought not to have taken such a hyper­technical view on
contractual   interpretation.   In   light   of   the   aforesaid
reasoning,   we  do   not   find  any   substantial   reason   sought  to
be adduced by the CIDCO to differ from the High Court.
53. Ultimately,   we   need   to   consider   whether   there   was   any
illegality or unfairness in the aforesaid transaction. Learned
senior   counsel   representing   the   appellants   have   submitted
that   allowing   subdivision   of   plots   with   change   in   land   use,
had  caused substantive  loss to  the  State  largesse,  as many
people   would   have   shown   a   proclivity   to   buy   land   with
different   land   use.   On   the   contrary,   the   learned   senior
counsel   representing   the   Respondents­lessees   have   stated
41

that   the   allotment,   change   in   land   use   and   transfer   have
taken place in accordance with law. There is no substantial
deviation as sought to be projected by the appellants herein.
The appellants herein have sought to invoke the doctrine of
promissory estoppel to argue that the CIDCO could not have
walked out of the bargain, merely because of the possibility
of larger profits. It is pertinent to note that, the CIDCO has
failed to prove any losses suffered.
54. When   a   contract   is   being   evaluated,   the   mere   possibility   of
more   money   in   the   public   coffers,   does   not   in   itself   serve
public interest. A blanket claim by the State claiming loss of
public   money   cannot   be   used   to   forgo   contractual
obligations, especially when it is not based on any evidence
or   examination.   The   larger   public   interest   of   upholding
contracts   and   the   fairness   of   public   authorities   is   also   in
play. Courts need to have a broader understanding of public
interest, while reviewing such contracts. 
42

55. I n  Jagdish Mandal v. State of Orissa , (2007) 14 SCC 517,
it was held as under: 
  “22…   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 )
56. Similarly, this Court in the case of   Andhra Pradesh Dairy
Development   Corporation   Federation   v.   B.   Narasimha
Reddy ,  (2011) 9 SCC 286 held as under :
“40.   In the matter of the Government of a
State,   the   succeeding   Government   is   duty­
bound   to   continue   and   carry   on   the
unfinished   job   of   the   previous   Government,
for   the   reason   that   the   action   is   that   of   the
“State”,   within   the   meaning   of   Article   12   of
the Constitution, which continues to subsist
and therefore, it is not required that the new
Government   can   plead   contrary   to   the   State
action   taken   by   the   previous   Government   in
43

respect   of   a   particular   subject.   The   State,
being   a   continuing   body   can   be   stopped
from   changing   its   stand   in   a   given   case,
but where after holding enquiry it came to
the   conclusion   that   action   was   not   in
conformity   with   law,   the   doctrine   of
estoppel   would   not   apply.   Thus,   unless
the act done by the previous Government
is   found   to   be   contrary   to   the   statutory
provisions,   unreasonable   or   against
policy,   the   State   should   not   change   its
stand   merely   because   the   other   political
party   has   come   into   power.   “Political
agenda   of   an   individual   or   a   political   party
should not be subversive of rule of law.” The
Government   has   to   rise   above   the   nexus   of
vested   interest   and   nepotism,   etc.   as   the
principles of governance have to be tested on
the   touchstone   of   justice,   equity   and   fair
play.” 
( emphasis supplied )
57. In   the   present   case,   it   was   argued   by   the   respondents   that
with   the   change   in   the   executive   head   in   CIDCO,   enquiry
was   initiated   against   the   allotment   made   in   favour   of   the
respondent­  M/s.  Metropolis  Hotel   during  the  tenure  of  the
earlier executive head. Even the inquiry, that was conducted
against   the   respondents­lessees   stood   vitiated   as   no   proper
notice   or   hearing   was   given   to   them   before   passing   the
impugned   order.   Additionally,   from   the   above   analysis   it
44

clear  that  the  change  of usage and  the  subsequent  division
was   well­within   the   statutory   limitations.   Therefore,   the
earlier   undertakings   taken   by   the   appellant­authorities
cannot   be   set   aside   with   the   change   of   person   in   power,
without   any   rhyme   or   reason.   After   all   one   cannot   change
the rules of the game once it has started.
58. From   the   contradictory   submissions   asserted   before   this
Court   and   the   concessions   given   regarding   practice   of
CIDCO   to   allow   change   in   land   use   in   other   cases,   clearly
points to a ‘regime revenge’. Such conclusion reached herein
is   further   buttressed   by   the   fact   that   no   inquiry   or
disciplinary   proceedings   were   initiated   against   the   earlier
Vice­Chairman,   whose   orders   have   been   annulled.   Such
phenomenon   is   clearly   detrimental   to   the   constitutional
values and rule of law. 
59. As   the   last   leg   of   the   submission,   the   respondents­lessees
have   claimed   that   considering   they   have   acted   upon   the
directions of the appellant authority and have duly paid the
requisite   amounts   to   the   tune  of  Rs.   321.32   crores,  CIDCO
is   bound   by   the   doctrine   of   promissory   estoppel.   On   the
45

contrary, principles of estoppel do not apply if enforcing the
promise would lead to the prejudice of public interest.
60. Before   we   delve   into   the   aforesaid   arguments,   it   is
imperative for us to go to have a look at certain decisions of
this   Court.   This   Court   in   the   case   of   Motilal   Padampat
Sugar   Mills   Co.   Ltd.   v.   State   of  Uttar  Pradesh ,   (1979)  2
SCC   409   laid   down   the   necessity   of   the   government   being
bound   by   the   principles   of   promissory   estoppel   in   the
following words: 
“ 24.   …   The   law   may,   therefore,   now   be
taken   to   be   settled   as   a   result   of   this
decision,   that   where   the   Government
makes   a   promise   knowing   or   intending
that it would be acted on by the promisee
and,   in   fact,   the   promisee,   acting   in
reliance   on   it,   alters   his   position,   the
Government   would   be   held   bound   by   the
promise   and   the   promise   would   be
enforceable   against   the   Government   at
the   instance   of   the   promisee,
notwithstanding   that   there   is   no
consideration   for   the   promise   and   the
promise   is   not   recorded   in   the   form   of   a
formal contract as required by Article 299
of the  Constitution . … It is indeed difficult
to   see   on   what   principle   can   a   Government,
committed to the rule of law, claim immunity
from the doctrine of promissory estoppel…  It
46

was   laid   down   by   this   Court   that   the
Government   cannot   claim   to   be   immune
from   the   applicability   of   the   rule   of
promissory   estoppel   and   repudiate   a
promise   made   by   it   on   the   ground   that
such   promise   may   fetter   its   future
executive   action.   If  the   Government   does
not   want   its   freedom   of   executive   action
to   be   hampered   or   restricted,   the
Government   need   not   make   a   promise
knowing   or   intending   that   it   would   be
acted   on   by   the   promisee   and   the
promisee   would   alter   his   position   relying
upon   it.   But   if   the   Government   makes
such   a   promise   and   the   promisee   acts   in
reliance   upon   it   and   alters   his   position,
there   is   no   reason   why   the   Government
should   not   be   compelled   to   make   good
such   promise   like   any   other   private
individual.   The   law   cannot   acquire
legitimacy and gain social acceptance unless
it   accords   with   the   moral   values   of   the
society   and   the   constant   endeavour   of   the
Courts   and   the   legislature,   must,   therefore,
be to close the gap between law and morality
and   bring   about   as   near   an   approximation
between the two as possible. The doctrine of
promissory   estoppel   is   a   significant   judicial
contribution   in   that   direction.   But   it   is
necessary   to   point   out   that   since   the
doctrine   of   promissory   estoppel   is   an
equitable doctrine, it must yield when the
equity   so   requires.   If   it   can   be   shown   by
the Government that having regard to the
facts as they have transpired, it would be
inequitable   to   hold   the   Government   to
the   promise   made   by   it,   the   Court   would
47

not   raise   an   equity   in   favour   of   the
promisee and enforce the promise against
the   Government.      The   doctrine   of
promissory   estoppel   would   be   displaced   in
such   a   case   because,   on   the   facts,   equity
would   not   require   that   the   Government
should   be   held   bound   by   the   promise   made
by  it. When the Government is able to show
that   in   view   of   the   facts   as   have   transpired
since   the   making   of   the   promise,   public
interest   would   be   prejudiced   if   the
Government   were   required   to   carry   out   the
promise,   the   Court   would   have   to   balance
the   public   interest   in   the   Government
carrying   out   a   promise   made   to   a   citizen
which has induced the citizen to act upon it
and alter his position and the public interest
likely   to   suffer   if   the   promise   were   required
to   be   carried   out   by   the   Government   and
determine   which   way   the   equity   lies.   …. The
burden would be upon the Government to
show   that   the   public   interest   in   the
Government   acting   otherwise   than   in
accordance   with   the   promise   is   so
overwhelming that it would be inequitable
to   hold   the   Government   bound   by   the
promise   and   the   Court   would   insist   on   a
highly   rigorous   standard   of   proof   in   the
discharge of this burden .” 
( emphasis supplied )
In the aforesaid case, this Court held that it would not be enough
for   the   Government   to   merely   state   that   public   interest   requires
that   the   Government   should   not   be   compelled   to   carry   out   the
promise.   It   is   imperative   that   the   Government   when   seeking
48

exoneration   from   liability   of   enforcing   contract,   must   satisfy   the
Court   as   to   how   public   interest   overrides   the   necessity   of
enforcing the contract. The aforesaid opinion has been reiterated
in the case  Union of India v. Godfrey Philips India Ltd . ,  (1985)
4 SCC 369 :
“ 12 .   There can therefore be no doubt that the
doctrine of  promissory   estoppel is applicable
against the Government in the exercise of its
governmental,   public   or   executive   functions
and   the   doctrine   of   executive   necessity   or
freedom of future executive action cannot be
invoked   to   defeat   the   applicability   of   the
doctrine of promissory estoppel . …
13.   Of   course   we   must   make   it   clear,   and
that   is   also   laid   down   in   Motilal   Sugar   Mills
case [(1979)   2   SCC   409   :   1979   SCC   (Tax)
144 : (1979) 2 SCR 641] that there can be no
promissory   estoppel   against   the   Legislature
in the exercise of its legislative functions nor
can   the   Government   or   public   authority   be
debarred   by   promissory   estoppel   from
enforcing   a   statutory   prohibition.   It   is
equally   true   that   promissory   estoppel
cannot be used to compel the Government
or   a   public   authority   to   carry   out   a
representation   or   promise   which   is
contrary   to   law   or   which   was   outside   the
authority   or,   power   of   the   officer   of   the
Government   or   of   the   public   authority   to
make.   We   may   also   point   out   that   the
doctrine   of   promissory   estoppel   being   an
equitable doctrine, it must yield when the
49

equity   so   requires;   if   it   can   be   shown   by
the   Government   or   public   authority   that
having   regard   to   the   facts   as   they   have
transpired, it would be inequitable to hold
the Government or public authority to the
promise or representation made by it, the
Court  would   not  raise   an  equity  in   favour
of   the   person   to   whom   the   promise   or
representation   is   made   and   enforce   the
promise   or   representation   against   the
Government   or   public   authority.   The
doctrine   of   promissory   estoppel   would   be
displaced   in   such   a   case,   because   on   the
facts,   equity   would   not   require   that   the
Government   or   public   authority   should   be
held bound by the promise or representation
made by it.” 
( emphasis supplied )
61. Therefore, although the appellants are right in claiming that
Government   cannot   be   compelled   to   perform   its
undertaking, but equity demands that the Government must
place   on   record   sufficient   material   on   record   to   claim   such
exemption. The aforesaid opinion was affirmed by this Court
in   the   case   of   Vasantkumar   Radhakisan   Vora   (Dead)   by
His   LRs.   v.   Board   of   Trustees   of   the   Port   of   Bombay ,
(1991) 1 SCC 761.   The court held therein:
“20.  When it seeks to relieve itself from
its   application   the   government   or   the
50

public authority are bound to place before
the court the material, the circumstances
or   grounds   on   which   it   seeks   to   resile
from   the   promise   made   or   obligation
undertaken by insistence of enforcing the
promise, how the public interest would be
jeopardised   as   against   the   private
interest .   It   is   well   settled   legal   proposition
that   the   private   interest   would   always   yield
place to the public interest.”  
(emphasis supplied)
62. The learned senior counsel, Mr. Rakesh Dwivedi, has sought
to argue that promises made to the respondents­lessees are
contradicted   by   the   representation   given   to   the   general
public, that the land was being allotted for construction of a
5­star Hotel. He has sought to create an exception of public
interest as a limit to promissory estoppel. 
63. As   we   have   noted   earlier,   there   is   no   substantial   violation
portrayed by the appellants herein with respect to allotment
of   the   scheduled   land.   Further,   the   tender   documents,   as
analyzed above, make it clear that the CIDCO had the power
to   change   the   land   use,   sub­divide   and   transfer   the   plots
and accordingly, has been carried out in terms of the same.
In   this   context,   we   may   only   observe   that   ‘good   faith
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standards’   applicable   in   Government   contracts,   serve   an
important   purpose   in   reinforcing   the   ‘reliance   interest’   in
contracts.
64. Even, the High Court while passing the impugned judgment
has   correctly   held   that   respondents­lessees   have   acted
pursuant   to   the   permission   granted   by   CIDCO.   Moreover,
after   getting   the   commencement   certificate   and   other
necessary   clearances,   the   respondents­lessees   borrowed   a
substantial   sum   of   money   from   other   financial   institutions
for the development of the plot. However, due to the ongoing
dispute,   no   development   could   take   place   for   the   past
decade.
65. It   is   admitted   as   per   record   that   the   respondent­   M/s.
Metropolis   Hotel   was   the   highest   bidder.   Moreover,   the
appellants   failed   to   bring   anything   on   record   to   prove   that
the state exchequer has suffered losses pursuant to the said
allotment. Nothing has been produced on record, the public
interest that will be prejudiced if the respondents­lessees are
allowed  to   go  ahead   with   the   said  project.  On   the  contrary,
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the   respondents­lessees   acting   in   furtherance   of   the
assurances given by the authorities, obtained huge financial
assistance.   Equity   demands   that   when   the   State   failed   to
produce   an   iota   of   evidence   of   either   financial   loss   or   any
other   public   interest   that   has   been   affected,   it   should   be
compelled   to   fulfill   its   promises.   In   fact,   it   is   respondents­
lessees   who   shall   be   gravely   prejudiced   if   the   order   of
cancellation   is   upheld   by   this   Court   after   investing   a
significant amount and facing prolonged litigation.
66. Lastly, the PIL petitioner­Appellant in C.A Nos. 3959­3961 of
2017 has tried to argue the case on the same lines as that of
the CIDCO. The public interest as sought to be shown in his
PIL,   is   doubtful,   in   light   of   his   involvement   in   the   business
of construction service. Moreover, the tone and tenor of the
notice dated 12.01.2009, issued by the PIL Petitioner to the
CIDCO,   threatening   the   concerned   officers   with   criminal
prosecution under Sections 405, 406, 420 read with Section
120(b)   of   IPC,   inter   alia ,   on   the   ground   of   allowing
partnership firm, which was in the process of registration, to
bid,   needs   to   be   viewed   with   some   suspicion.   In   fact,   the
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non­prosecution   of   the   erring   officials   for   the   alleged
mismanagement and irregularities is quite telling. 
67. Before   we   state   the   conclusions,   this   Court   would   like   to
reiterate   certain   well­established   tenets   of   law   pertaining   to
Government   contracts.   When   we   speak   of   Government
contracts,   constitutional   factors   are   also   in   play.
Governmental   bodies   being   public   authorities   are   expected
to   uphold   fairness,   equality   and   rule   of   law   even   while
dealing   with   contractual   matters.   It   is   a   settled   principle
that right  to equality  under  Article 14 abhors arbitrariness.
Public   authorities   have   to   ensure   that   no   bias,   favouritism
or   arbitrariness   are   shown   during   the   bidding   process.   A
transparent bidding process is much favoured by this Court
to ensure that constitutional requirements are satisfied. 
68. Fairness   and   the   good   faith   standard   ingrained   in   the
contracts  entered  into   by  public authorities  mandates  such
public   authorities  to   conduct   themselves   in   a   non­arbitrary
manner   during   the   performance   of   their   contractual
obligations. 
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69. The   constitutional   guarantee   against   arbitrariness   as
provided under Article 14, demands the State to act in a fair
and   reasonable   manner   unless   public   interest   demands
otherwise. However, the degree of compromise of any private
legitimate   interest   must   correspond   proportionately   to   the
public interest, so claimed. 
70. At this juncture, it is pertinent to remember that, by merely
using grounds of public interest or loss to the treasury, the
successor   public   authority   cannot   undo   the   work
undertaken by the previous authority. Such a claim must be
proven  using  material  facts,  evidence and figures. If it were
otherwise,   then   there   will   remain   no   sanctity   in   the   words
and   undertaking   of   the   Government.   Businessmen   will   be
hesitant   to   enter   Government   contract   or   make   any
investment   in   furtherance   of   the   same.   Such   a   practice   is
counter­productive   to   the   economy   and   the   business
environment in general.  
71. From   a   consideration   of   the   aforesaid   facts   and
circumstances,   it  is  clear   that   there  is   an  element  of   abuse
of   bureaucratic   power   behind   subsequent   change   in   the
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tender   allotment.   After   conducting   a   tender   process   and
receiving   money,   the   Government   backtracked   which   led   to
this   present   prolonged   litigation.   The   impugned   order   of
CIDCO,   inter   alia ,   annulling   the   allotment   on   hyper­
technical grounds cannot be sustained for being contrary to
the doctrine of fairness. The reasons stated in the aforesaid
order   are   perverse   and   per­se   based   on   extraneous
considerations.   As   analyzed   above,   we   are   not   able   to
identify   any   substantive   violation   of   law   or   tender
conditions,   which   mandate   annulling   the   allotment   and
subsequent   arrangements,   thereby   proving   the   conduct   of
the appellant authority to be disproportionate. 
72. In   light   of   the   above   discussion,   we   find   no   merit   in   the
appeal   of   the   appellants   herein.   Accordingly,   these   civil
appeals are dismissed with costs.
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73. Pending applications, if any, stand disposed of. 
  
...........................................CJI.
                    (N.V. RAMANA)
 ..............................................J.
(VINEET SARAN)
..............................................J.
(SURYA KANT)
NEW DELHI;
NOVEMBER 29, 2021
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