The Supreme Court has asserted in several judgements that disposal of public property by the state or its instrumentalities should be done in a fair and transparent manner. Since it is a matter of public trust, all interested persons should be given an opportunity to participate in the process. But hardly any allotment, sale or auction of land is free from controversy, whether it is for a special economic zone or a kiosk in a small town. Therefore, the courts have to intervene in these disputes, as there is much speculative litigation started by bidders with deep pockets.
Such an exercise was done by the Supreme Court in two cases in recent days. On Monday, it set aside the Bombay High Court ruling in MHADA vs Shree Osta Builders. The high court had quashed the award of tender under the Swiss Challenge Method for the development of land owned by the Maharashtra Housing and Area Development Authority. The Supreme Court stated that the decision to apply the method was within the executive discretion of the authority and there was no arbitrariness justifying the intervention of the court.
In the other case, Meerut Development Authority vs Association of Management Studies, the authority invited tenders for plots for educational institutions and fixed reserved price. The association accepted the offer, but later disputed the reserved price, arguing that it was not comparable to the market value of the adjacent plots. It moved the Allahabad High Court which quashed the entire scheme of auction. The authority appealed to the Supreme Court. It found that the high court had “virtually converted the judicial review proceedings into an inquisitorial one”. While the high court was only concerned with the denial of plots to the association, it probed the conduct of the affairs of the authority as if it was an inquiry commission. It was unwarranted and, therefore, the Supreme Court upheld the action of the authority.
While delivering the judgement, the Supreme Court discussed some important aspects of such tenders. Though transparency in the disposal of public property is vital, the authority has the right not to accept the highest bid and even to prefer a tender other than that of the highest bidder, if there are good and sufficient reasons, such as the highest bid not representing the market price. But the action of the public authority should be free from arbitrariness and favouritism.
For instance, in Bangalore Medical Trust vs BS Muddappa (1991), the government converted the site reserved for a public park and allotted it to a private nursing home. The government justified it on the ground of financial gain. The court quashed the decision stating that financial gain should not be at the cost of social welfare. In Padma vs Hiralal Motilal case (2002), the Supreme Court indicted CIDCO, a no-profit-no-loss organisation set up for housing, beautification and improvement of quality of life. It sold land without following procedures and in secrecy to benefit of certain organisations and individuals. In Kasturi Lal vs State of J&K (1980), the court said: “The government cannot give a contract or sale or lease out its property for a consideration less than the highest that can be obtained by it, unless there are other considerations which render it reasonable and in public interest to do so.”
Moreover, the terms of the invitation to tender cannot be open to judicial scrutiny because it is in the realm of contract. The bidders have no other right except the right to equality and fair treatment in the matter of evaluation of competitive bids, “free from hidden agenda.” However, a limited judicial review may be available in cases “where it is established that the terms of the tender were so tailor-made to suit the convenience of any particular person, to eliminate all others from participating in the bidding process.”
Once it is clear that there is no vagueness, uncertainty or confusion with regard to the reserved price, there is no scope for judicial interference. The court is not concerned with the merits or correctness of the decision of the public authority, but with the manner in which the decision was taken. It can examine whether the decision-making process was “reasonable, rational and not arbitrary.” The court cannot substitute its own decision for the opinion of the authority deciding the matter.
The issue of judicial review in disposal of public property and public interest involved in the process is a recurring theme. With semantics stretching the meaning of property to air waves, time and space the range of disputes have widened, as seen in leading cases like Tata Cellular, Association of Registration of Plates and Educomp Datamatics Ltd.
