Summary of Judgement

The Judgement

(Per Chief Justice)

1. These proceedings, instituted under Article 226 of the Constitution of India, seek to challenge the decision of respondent no. 1-the City and Industrial Development Corporation of Maharashtra Limited [CIDCO] (hereinafter referred to as “the respondent-Corporation”), whereby the bid submitted by the petitioner-firm in respect of plot no. 8, Sector 23, Node CBD Belapur has not been accepted and the said plot has been cancelled from Scheme No. MM/SCH-30/2022-23 and it has further been ordered that the Earnest Money Deposit (EMD) paid by the petitioner-firm be refunded. The said decision was communicated to the petitioner by means of the letter dated 25th November 2022.

2. The facts, which are essential for appropriate adjudication of the issues involved in this petition, need to be noted. The respondent-Corporation issued an advertisement inviting applications through E-tender and E-auction for lease of plots for residential-cum-commercial and star hotel use at various nodes of Navi Mumbai. The advertisement, apart from the details of the plots to be leased, also mentioned the base rate per square meter against each plot along with the area of the plot concerned. The advertisement also depicted the EMD to be paid by the bidder against the plots as also permissible capital FSI for the plot.

3. The petitioners, pursuant to the advertisement, submitted their bid for Plot No. 8 in Sector 23 at Central Business District (CBD), Belapur on 2nd November 2022. The base rate as per the advertisement for the subject plot was Rs. 64,813/- per square meter and accordingly, the petitioner also deposited the requisite amount of EMD. The financial bid offered by the petitioner for the subject plot was Rs. 89,813/- per square meter as against the base rate of Rs. 64,813/-. The bids for the subject plot were opened on 3rd November 2022 and auction result was also displayed by the respondent-Corporation on its website.

4. The auction result, as displayed by the respondentCorporation, is available at Exhibit ‘D’ appended to the writ petition, according to which, for the said plot, there were four bidders, who had submitted their bids and amongst these four bidders, the petitioners’ bid of Rs. 89,813/- per square meter was the highest. According to the petitioners, thus, the rate quoted by the petitioner-firm was 38.57% above the base price as fixed by the CIDCO and accordingly, the petitioners were waiting for finalization of their bid, however, by means of the impugned letter/communication dated 25th November 2022, it was informed to the petitioners that due to administrative reasons, the respondent-Corporation has decided to cancel the subject plot from the scheme in question and that the EMD amount paid by the petitioner was being refunded in their bank account. The letter dated 25th November 2022 is, thus, communication of the decision taken by the respondentCorporation cancelling the bid of the petitioners and informing them that the EMD amount was being refunded.

5. It is this decision, as embodied in the communication/ letter dated 25th November 2022, which has been assailed by the petitioners in this writ petition.

6. Mr. Janak Dwarkadas, learned senior advocate appearing on behalf of the petitioner-firm has vehemently argued that the impugned decision cancelling the bid offered by the petitioner is absolutely arbitrary, inasmuch as, though in the letter dated 25th November 2022 the reason indicated by the respondent Corporation is that the bid of the petitioners has been cancelled for administrative reasons, however, no such reason can be said to be existing to justify such action on the part of the respondent-Corporation. He has further argued that undisputedly, the rate quoted by the petitioner for the subject plot was 38.57% higher than the base price fixed by the respondent-Corporation and also that the petitioners’ bid was the highest and therefore, there cannot be any plausible reason for the respondent-Corporation not to have accepted the bid offered by the petitioner. Learned senior advocate has also argued that the respondent-Corporation is an instrumentality of State and accordingly, every action of the respondent Corporation has to be in conformity with the well settled legal norms of non-arbitrariness and there should be transparency in all its actions. In his submission, if the impugned decision of the respondent-Corporation is scrutinized on the touchstone of the State action being non-arbitrary and transparent, the same cannot be sustained.

7. Per contra, Mr. Hegde, learned senior advocate representing the respondent-Corporation has argued that the offer made by the petitioner in respect of the subject tender was considered at the appropriate level of the respondent Corporation and it was found that the same was abysmally low as compared to the price fetched in the auction of the nearby plots. He has further argued that merely because the petitioner firm was the highest bidder, it cannot be urged by it that in all circumstances the bid offered by the petitioner-firm has to be accepted. His submission is that the exercise undertaken by the respondent-Corporation has to be viewed as a commercial activity as well, and accordingly, though the respondent Corporation has to be conformed to the principles of non arbitrariness, fairness and reasonableness, yet, the process of auction of the plots being in the realm of commercial transaction, the respondent-Corporation has to be given some room to play. Mr.Hegde also argued that the decision taken by the respondent-Corporation to cancel the bid submitted by the petitioner was a conscious decision, which is informed of reasons and is based on relevant considerations.

8. Mr. Dwarkadas, in reply, has drawn our attention to the averments made in paragraph 10 of the affidavit in reply filed by the respondent-Corporation, dated 1st February 2023, wherein a chart has been extracted giving details of the rates quoted per square meter in respect of the other plots in the vicinity. The said chart contains the information relating to the subject plot as well. He has stated that the user of the land of the plot in question in the said chart is shown to be residential-cum commercial, which is absolutely incorrect and as a matter of fact, the user of the land is star-hotel. He has also stated that the said chart wrongly depicts the rate quoted per square meter in respect of the subject plot as Rs. 2,63,131/-, whereas, in fact, the rate quoted was Rs. 89,813/-. It is, thus, the submission of Mr. Dwarkadas that the informations, as contained in the chart, being completely incorrect and beyond the records, show that the respondent-Corporation, while taking the impugned decision of cancellation of the bid, did not take into account the relevant factors; rather, the decision is absolutely uninformed of valid reasons, which reflects arbitrariness and non-application of mind on the part of the respondent Corporation.

9. Noticing the aforesaid discrepancy in paragraph 10 of the affidavit filed by the respondent-Corporation, the Court passed an order on 16th April 2024 directing the respondent-Corporation to produce the record on the basis of which the said affidavit was filed.

10. Mr. Dwarkadas has further drawn our attention to another affidavit filed by the respondent-Corporation, dated 12th April 2023, wherein, it is stated that the decision of allotment of certain plots was taken only after the market potential of the subject plot was certified by an expert agency. He also drew our attention to certain averments made in the additional affidavit filed by the respondent-Corporation, dated 3rd May 2024, wherein it was mentioned that the rates quoted by the tenderers, which are depicted in paragraph 10 of the affidavit dated 1st February 2023, were referred to an expert agency, namely, Knight Frank for assessment and further that, however, the rate quoted by the petitioner was not referred to the expert agency, since it was found to be on a lower side. The learned senior advocate has drawn our attention to certain averments made in paragraph 1 of another affidavit, dated 15th July 2024 filed by the respondent-Corporation, wherein it has been stated that the views of the Knight Frank (expert agency) were not  solicited in respect of the subject plot as the CIDCO already had the necessary data to arrive at the conclusion that the price quoted by the petitioner-firm was much less than the amount which was likely to be fetched.

11. It was also submitted by Mr. Dwarkadas that in the affidavit dated 1st February 2023 filed by the respondent Corporation, the chart extracted in para 10 thereof depicts the information relating to the subject plot, however, in the subsequent affidavit dated 3rd May 2024, it is stated by the respondent-Corporation that in the said affidavit, the details mentioned at Sr. No. 7 of the chart in para 10 had crept in on account of inadvertent error and accordingly, the said entry against Sr. No. 7, having been mentioned unintentionally, be omitted. It is, thus, the submission on behalf of the petitioners that the respondent-Corporation has been taking inconsistent stands just to justify the impugned decision, which is not sustainable being arbitrary, irrational and uninformed of valid reasons.

12. We have considered the submissions made by learned counsel for the parties and have also perused the record available before us on this writ petition.

13. By means of order dated 16th April 2024, learned counsel representing the respondent-Corporation was directed to produce the original records, which have also been perused by the Court. The only issue which emerges for our consideration and adjudication is as to whether the impugned decision, as contained in the letter/communication dated 25th November 2022 for cancelling the bid offered by the petitioner in respect of the subject plot, is based on relevant considerations or not.

14. It is not in dispute that the petitioner had submitted the bid quoting the rate which is 38.57% higher than the base price advertised by the respondent-Corporation. It is also not in dispute that the petitioner is the highest bidder so far as the subject plot is concerned, however, it is well settled principle of law that merely because a tenderer quotes the highest rates, the bid may not be accepted. There are other relevant considerations which are permissible to be taken into account by the tendering authority while arriving at a decision whether or not to accept the highest bid offered by a tenderer.

15. It is also to be noticed that award of a contract or acceptance of a bid, whether it is by a private body or a public body or State, is essentially a commercial transaction and in arriving at a commercial decision, the considerations which are  paramount are commercial considerations and that any offer, even though highest or lowest, need not be necessarily accepted; it can be rejected as well, of course for valid reasons based on relevant considerations.

16. Having observed as above, we may also note that the State, its instrumentalities or agencies are bound to adhere to the norms, standards and procedures laid down by them and they cannot be permitted to depart from such norms, arbitrarily. As to what are the contours of judicial scrutiny by the courts in such matters has been laid down by Hon’ble Supreme Court in the case of Jaipur Vidyut Vitran Nigam Ltd. & Ors. vs. MB Power (Madhya Pradesh) Limited & Ors.1 . Paragraphs 144 to 146 of the said judgment are relevant, which are extracted hereunder: -

”144. In any case, we find that the High Court was not justified in issuing the mandamus in the nature which it has issued. This Court in the case of Air India Ltd. v. Cochin International Airport Ltd.14 has observed thus:

“7. The law relating to award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the Government has been settled by the decision of this Court in Ramana Dayaram Shetty v. International Airport Authority of India [(1979) 3 SCC 489], Fertilizer Corpn. Kamgar Union (Regd.) v. Union of India [(1981) 1 SCC 568], CCE v. Dunlop India Ltd. [(1985) 1 SCC 260 : 1985 SCC (Tax) 75], Tata 1 2024 SCC OnLine SC 26  Cellular v. Union of India [(1994) 6 SCC 651], Ramniklal N. Bhutta v. State of Maharashtra [(1997) 1 SCC 134] and Raunaq International Ltd. v. I.V.R. Construction Ltd. [(1999) 1 SCC 492] The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.”

145. It could thus be seen that this Court has held that the award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision, considerations which are paramount are commercial considerations. It has been held that the State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to  judicial scrutiny. It has further been held that the State can enter into negotiations before finally deciding to accept one of the offers made to it. It has further been held that, price need not always be the sole criterion for awarding a contract. It has been held that the State may not accept the offer even though it happens to be the highest or the lowest. However, the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. It has further been held that even when some defect has been found in the decision-making process, the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.

146. As has been held by this Court in the case of Tata Cellular (supra), the Court is not only concerned with the merits of the decision but also with the decision-making process. Unless the Court finds that the decision-making process is vitiated by arbitrariness, mala fides, irrationality, it will not be permissible for the Court to interfere with the same.”

17. The principle that no right is created in favour of the highest bidder has well been enunciated by a coordinate Bench of this Court in its judgment dated 20th April 2023 in the case of M/s. Aditya Enterprises vs. City Industrial and Development Corporation of Maharashtra Ltd.2 . After discussing various pronouncements of Hon’ble Supreme Court, the said decision in para 24 has concluded thus: - 2 WP/15601/2022 & WP/396/2023 

“24. We therefore hold that no right is created in favour of petitioners to have plots allotted to them by CIDCO by mere reason of they being the highest bidders in the tender process.”

18. We, thus, need to examine the submissions made on behalf of the petitioners in the light of the law as discussed in the foregoing paragraphs.

19. Paragraph 10 of the affidavit filed by the respondent Corporation dated 1st February 2023 is extracted hereinbelow: -

“10. Further, Respondent submits that the Scheme no. MM/SCH-30/2021-22 was published in the year 2022 for several plots including the plot in dispute. The rate quoted by the Petitioner is far below the Market range. Detail of rate received for subject plot and plots in vicinity CBD Belapur node considering expert agency’s report is given as below:

20. It is true that in the said affidavit it has been stated by the respondent-Corporation that the chart contains the details of the rates received for subject plot and the plots in the vicinity of CBD Belapur node considering the expert agency report. It is also true that at Sr. No. 7 of the afore-quoted chart, which is in relation to subject plot, the land use indicated is R+C (residential-cum-commercial). It is also true that against the subject plot in the said chart, in the column ‘rate quoted per sqm’, the rate indicated is 2,63,131. The said informations are factually incorrect and accordingly, when the respondent Corporation filed its reply in response to the order of the Court dated 16th April 2024, in paragraph 1 itself, it has been stated that there is an inadvertent error in the details mentioned at Sr. No. 7 of the chart which occurs in para 10 of the affidavit in reply dated 1st February 2023.

21. For ascertaining the aforesaid information, the Court had directed the respondent-Corporation to produce the original records, which have been perused by the court. The decision of the respondent-Corporation, on the basis of which the impugned communication dated 25th November 2022 has emanated, is contained in the relevant file at pages N/15 to N/17. The noting in the file, on the basis of which the decision to cancel the bid offered by the petitioner was taken and it was directed that EMD be refunded, contains a chart containing certain relevant informations, according to which the offer received for the subject plot was found to be much lower than the response received for plots in the vicinity of the subject plot in respect of which tender process was undertaken in the years 2021 and 2022 and accordingly, a proposal was made to the appropriate authority to reject the offer received from the petitioner-firm for the subject plot. The proposal and the decision taken by the competent authority, as appearing in the relevant original file of the respondent-Corporation, is extracted hereinbelow: -

“Proposal

The Star Category Hotel Plot No. 8, Sector 23, Area-14434.76 SQM in CBD Node with Base price Rs. 64813 per SQM was included in the scheme. Total 5 bidders have participated for this plot and the highest rate received is Rs. 89813 per SQM (C/131). It is to state here that the rates received for plots in CBD Node in various Scheme launched in year 2021 & 2022 are tabulated below.

It can be seen that, the offer received for Star Category Hotel Plot No. 8, Sector 23, Area-14434.76 SQM in CBD Node is much lower than the response received for plots in vicinity which are tendered in the year 2021 & 2022. Hence, it needs to reject the offer received for this plot and retender the same to have better offers.

2. Out of 70 plots only 5 plots are of area between 1006 to 2338 SQM with R+C use, 3 plots at Vashi have not received any response. The other 2 plots in Nerul area have received highest bids of Rs 305999 and Rs 318501 SQM which will be forwarded to the M/s Knight Frank, third party expert agency for their opinion.

3. Remaining 64 small plots of sizes around 57 to 201 SQM with residential use are proposed to refer to the internal Committee of Senior Economist, Chief Planner (NM) & Marketing Manager (Commercial) for evaluation of offers received. Submitted Please Sd/- AMO MM (Commercial) Sd/- JMD-III Sd/-  Hon. VC & MD As proposed EMD to be refunded Immediately EMD Refund Processed as Proposed & approved Sd/-“

22. The discussion in relation to consideration of the petitioners’ bid offer in respect of the subject plot as contained in the original record, in our opinion, takes into account relevant factors to arrive at appropriate decision. One of the relevant factors for ascertaining as to whether the bid offered by the petitioners was satisfactory was the bid amount quoted in respect of other plots in the vicinity in the previous auctions held in the year 2021 and 2022. The said discussion contained in the original record clearly reveals that the rates quoted in respect of the other plots in the vicinity in the earlier auctions held in the year 2021 and 2022 ranged from Rs. 171786/- per square meter to Rs. 281588/- per square meter, whereas, the bid offered by the petitioner in respect of the subject plot was only to the tune of Rs. 89,813/- per square meter.

23. In our considered opinion, consideration of the rates fetched by other plots in the vicinity, that too, in the previous auctions is a relevant factor and if compared with the rates  fetched in respect of plots in the vicinity, what we find is that there is huge gap between the rates fetched in relation to plots in the vicinity and the offer made by the petitioner-firm in respect of the subject plot. We have already observed above that the commercial aspect of the tender process even by the State and its instrumentalities cannot be lost sight of. After all, the State instrumentalities like the respondent-Corporation function in public interest and on public money and hence, if an endeavor is made by the respondent-Corporation to fetch maximum rates possible, we do not find any fault in the action of the respondent-Corporation to cancel the offer which was found much lower than the offer received and accepted by the respondent-Corporation in the earlier auctions in respect of the plots in the vicinity.

24. We, thus, unhesitatingly conclude that the consideration made by the respondent-Corporation for arriving at the decision to cancel the bid offered by petitioner-firm is based on relevant material and hence, the same does not suffer from vice of any irrationality, arbitrariness or unfairness.

25. At this juncture, we may also refer to the submission made by Mr. Dwarkadas representing the petitioners that the allotment letters in respect of the plots in the vicinity, which have been issued by the respondent-Corporation and form part of the additional affidavit filed by the CIDCO, dated 3rd May 2024 bear dates subsequent to the date of the impugned decision of cancellation of the bid offered by the petitioner-firm and hence, the information being submitted by the CIDCO in this regard does not appear to be correct. Such a submission on behalf of the petitioners is highly misconceived for the simple reason that consideration of the rates quoted by the bidders in respect of other plots in the vicinity would necessarily precede issuance of the allotment letters. It is very much possible that consideration of such plots may have been made prior to the impugned decision and allotment letters may have been issued subsequent to the decision, which is under challenge here. Accordingly, the submission in this regard made by Mr. Dwarkadas is based on mere suspicion, which should not be given any credit.

26. Regarding the information in respect of reference of the rate quoted by the petitioners for the subject plot based on expert agency’s report, we accept the submission made by Mr.Hegde that the information contained in paragraph 10 of the affidavit in reply dated 1st February 2023 had crept in inadvertently. While extracting the chart in para 10 of the said affidavit, the chart as contained in original record appears to have been overlooked, which mistake has been sought to be corrected by filing the subsequent affidavit dated 3rd May 2024 by the respondent-Corporation. The explanation submitted by the respondent-Corporation in respect of the wrong information mentioned in para 10 of the affidavit dated 1st February 2023 is, thus, found satisfactory. As a matter of fact, the rates quoted by the tenderers in respect of the plots in the vicinity, which have been discussed in the file noting, were accepted only after these rates were referred to the expert agency and the expert agency had given its report about the rates being satisfactory considering the commercial potential of the said plots in the vicinity. The rate quoted by the petitioner, as per the original record produced before and perused by us, was never referred to the expert agency. In this view of the matter, the submission made by learned senior advocate for the petitioners merits rejection, which is hereby rejected

27. The judgments cited by Mr. Dwarkadas in the case of Pyramid Infratech Co. & Anr. Vs. Maharashtra Industrial Development Corporation & Anr.3 dated 18th December 2023, in the case of Royal Power Turnkey Implements Pvt. 3 WPL/22311/2023 and connected matters  Ltd. Vs. Maharashtra Industrial Development Corporation, Mumbai & Ors.4 and in the case of Raju Damodar Jibhkate vs. State of Maharashtra5 dated 1st August 2023 do not help the petitioners because in the instant case, on perusal of the original records, we have already concluded above that the decision to cancel the offer made by the petitioner-firm in respect of the subject plot was based on relevant considerations and there cannot be any better material than the rate fetched in respect of the plots in the vicinity in earlier auctions to decide the commercial potential of the plots and the amount which is likely to be fetched.

28. For the reasons given and discussion made above, we do not find any illegality in the impugned decision of the respondent-Corporation whereby the bid offered by the petitioner has been rejected. The impugned decision, in our opinion, does not suffer from arbitrariness, irrationality or unfairness.

29. The writ petition is, thus, dismissed.

30. There shall be no order as to costs.

31. Interim application, if any, stands disposed of. 4 2014 (5) Mh. L. J. 399 5 WRIT PETITION /5320/2022 (Nagpur Bench)

32. The original file tendered by Mr. Hegde, learned senior advocate for the respondents be returned to him after keeping a photocopy of the same on the file of this writ petition.

(AMIT BORKAR, J.) (CHIEF JUSTICE)

33. After pronouncement of the judgement, Mr. Janak Dwarkadas, learned senior advocate representing the petitioners prayed that since in respect of the subject plot the process of re-auction is to conclude tomorrow, i.e. 24th July 2024, the respondent-Corporation may be directed to defer the proceedings of auction for two weeks to enable the petitioners to challenge this judgement before Hon’ble Supreme Court.

34. In the facts and circumstances of the case and also having regard to the reasons given in the body of judgement for dismissing the writ petition, the prayer made is declined.