About Me

EduINDEX News provide discussion on current affairs and New Analysis on different topics that people need to know more and understand better. Eduindex NEWS focuses on Education, Environment, Development and Economic News Features. You can send guest post or news analysis to news@eduindex.org

Courts Can Interfere With Administrative Actions Only If It Suffers From Vice Of Illegality, Irrationality Or Procedural Impropriety: SC

It must be mentioned right at the outset that in a latest, landmark and extremely laudable judgment titled Municipal Council Neemuch vs Mahadeo Real Estate And Ors in Civil Appeal No. 7319-7320 of 2019 (Arising out of S.L.P.(C) Nos. 172-173 of 2019) which was delivered on September 17, 2019 by a three Judge Bench of Supreme Court comprising of Justice BR Gavai who authored the judgment for himself, Justice Arun Mishra and Justice MR Shah has sought to send a very loud, clear and categorical message to all the High Courts that an interference by the High Court would be warranted only when the decision impugned is vitiated by an apparent error of law. It was reiterated that while exercising its powers of judicial review of administrative action, Courts could not interfere with the administrative decision unless it suffers from the vice of illegality, irrationality or procedural impropriety. This observation was made by the three Judge Bench of Apex Court while setting aside a Madhya Pradesh High Court judgment that had interfered with an order passed by Revenue Commissioner of Ujjain in a matter of issuing tenders for allotment of land on lease, for a period of 30 years. 


To start with, the ball is set rolling in para 2 after leave is granted under para 1 wherein it is observed that, “The present appeals challenge the Judgment and Order passed by the Division Bench of the Madhya Pradesh High Court Bench at Indore dated 31.08.2017 thereby allowing the writ petition filed by respondent No. 1 herein and the subsequent Order dated 05.07.2018 thereby rejecting the Review Petition filed by the appellant.”

For the sake of brevity, para 3 then states that, “The factual background, in brief, giving rise to the present appeals is as under. The appellant, which is a Municipal Council, duly constituted under the Madhya Pradesh Municipality Act, 1961 (hereinafter referred to as the “said Act”) had invited tenders for allotment of land on lease, for a period of 30 years. The land was ad-measuring 163176 sq. ft. situated in Scheme No. 1A (Commercial-cum Residential Use), Neemuch. The Notice Inviting Tenders (“NIT” for short) was published in the daily newspapers, viz., Nai Duniya, Dainik Bhaskar, Free Press and Dashpur Express. Respondent No. 1, which is a registered partnership firm along with other bidders had submitted the tender thereby giving an offer of Rs. 5,81,00,106/-. It had also deposited the earnest money amounting to Rs. 47,00,000/-. The bids of the participants were opened in presence of the representatives of all the bidders. The bid of respondent No. 1 herein was found to be highest.”

To be sure, it is then mentioned in para 4 that, “The appellant issued a letter dated 27.09.2008 thereby informing respondent No. 1 that its bid was accepted. Respondent No. 1 was directed to deposit an amount of Rs. 1,45,25,050/-, i.e., 25% of the bid amount within a period of seven days. Respondent no. 1 in accordance therewith deposited the aforesaid amount on 01.10.2008.”

Truth be told, it is then unfolded in para 5 that, “It appears that an objection was raised by two members of the Municipal Council under the provisions of Section 323 of the said Act before the Collector with regard to the said tender process. It further appears, that the Collector vide Order dated 18.07.2008 had stayed further proceedings of the tender process. Vide Order dated 23.12.2008, the Collector disposed of the proceeding observing therein, that the proposal be sent for approval of the State Government in the Urban Administrative and Development Department, respondent No. 2 herein, under the provisions of Section 109 of the said Act.”

While continuing in the same vein, it is then pointed out in para 6 that, “Thereafter, it appears that, there was certain correspondence between the Urban Administrative and Development Department, on one hand, and the Divisional Revenue Commissioner of Ujjain, respondent No. 3 herein, on the other hand. Finally, respondent No. 3 passed an order dated 03.07.2010 observing therein that, the tenders invited in connection with transfer of the said land were not competitive. He further observed in the said Order, that the NIT was published only in Indore edition of two Hindi Newspapers at Indore and as such there was no wide circulation. As such, he rejected the proposal of the Municipal Council and returned the same with the direction to invite the tenders again by publishing the NIT in at least one National level English newspaper and one State level reputed Hindi newspaper. Being aggrieved thereby, respondent No. 1 herein approached the Madhya Pradesh High Court in Writ Petition No. 12204 of 2010. The Division Bench vide Order dated 31.08.2017 allowed the writ petition thereby quashing and setting aside the Order dated 03.07.2010 passed by respondent No. 3 and further directing him to grant approval on behalf of the State Government for allotment of the land on lease in favour of respondent no. 1. The appellant, thereafter, preferred Review Petition No. 1072 of 2017. The same was rejected. Hence the present appeals challenging both the Orders dated 31.08.2017 and 05.07.2018.”

In the context of Rule 3 of the Municipal Corporation (Transfer of Immovable Property) Rules 1994 (referred to as the “said Rules”), it would be apposite to note that para 11 envisages that, “A perusal of the aforesaid Rule 3 of the said Rules would reveal that no immovable property which yields or is capable of yielding an income shall be transferred by sale, or otherwise conveyed, except to the highest bidder at a public auction or by inviting offers in a sealed cover. The proviso thereof provides that if the Corporation is of the opinion that it is not desirable to hold a public auction or to invite offers in sealed covers, the Corporation may, with the previous sanction of the State Government, effect such transfers without public auction or inviting offers in sealed covers. The second proviso also provides that the Corporation may, with the previous sanction of the State Government and for the reasons to be recorded in writing, transfer any immovable property to a bidder other than the highest bidder.”

What is truly a no brainer is then elaborated upon in para 12 which states clearly that, “It is thus amply clear that, no land, exceeding fifty thousand rupees in the value shall be sold or otherwise conveyed without the previous sanction of the State Government. The perusal of the aforesaid Rule further makes it clear that the immovable property which yields or is capable of yielding an income shall not be transferred by sale or otherwise conveyed, except to the highest bidder at the public auction or by inviting offers in a sealed cover. No doubt, with the previous sanction of the State Government such a transfer could be effected without public auction or inviting offers in a sealed cover. The second proviso further provides that, the Corporation may, with the previous sanction of the State Government and for the reasons to be recorded in writing, transfer any immovable property to a bidder other than the highest bidder.”

What is also a no brainer is further elucidated in para 13 that, “It is thus amply clear that, whenever any land which is having a value exceeding fifty thousand rupees is to be sold the same cannot be done without the previous sanction of the State Government.”

More importantly, while discussing about the scope of judicial review, it is then rightly underscored in para 15 that, “It could thus be seen that the scope of judicial review of an administrative action is very limited. Unless the Court comes to a conclusion, that the decision maker has not understood the law correctly that regulates his decision-making power or when it is found that the decision of the decision maker is vitiated by irrationality and that too on the principle of “Wednesbury Unreasonableness” or unless it is found that there has been a procedural impropriety in the decision-making process, it would not be permissible for the High Court to interfere in the decision making process. It is also equally well settled, that it is not permissible for the Court to examine the validity of the decision but this Court can examine only the correctness of the decision making process.”

What’s more, para 17 then illustrates that, “It could thus be seen that an interference by the High Court would be warranted only when the decision impugned is vitiated by an apparent error of law, i.e. when the error is apparent on the face of the record and is self evident. The High Court would be empowered to exercise the powers when it finds that the decision impugned is so arbitrary and capricious that no reasonable person would have ever arrived at. It has been reiterated that the test is not what the court considers reasonable or unreasonable but a decision which the court thinks that no reasonable person could have taken. Not only this but such a decision must have led to manifest injustice.”

To put things in perspective, para 22 then lays bare stating that, “The situation that emerges is this. Initially the Municipal Council, Neemuch, invited tenders for allotment of the said land on lease for 30 years. This was done without taking prior approval of the State Government as is required under Section 109 of the said Act. Two municipal counselors raised objections before the Collector under the provisions of Section 323 of the said Act. The Collector, who initially granted stay on 18.07.2008, vide order dated 23.12.2008 directed the Municipal Council to seek approval of the State Government to the said proposal. Vide communication dated 21.12.2009, the State Government directed respondent No. 3-Revenue Commissioner to hand over the possession of the land to respondent No. 1. While doing so, the State Government directed the Commissioner to inspect as to whether the land was being put for use as per the development plan. On receipt of the communication the Divisional Commissioner addressed a communication to the State Government on 03.03.2010 thereby, specifically pointing out that no proper publicity was given to the NIT and that the rates were not competitive as per the market value. It was specifically observed that there was a cartel among the tenderers and therefore, sought clear orders of the State Government in view of Section 109 of the said Act. He also proposed to reject the proposal with further direction to invite fresh tenders by giving adequate publicity. In response to the said communication, the State Government re-examined the issue and by communication dated 18.05.2010 authorised the Commissioner for transferring the land in question. It is further clear from the said communication that, the State Government authorised the Commissioner to take necessary decision with regard to grant of sanction under the provisions of Section 109 of the said Act and Rule 7 of the said Rules. It specifically observed that if the Commissioner does not agree with the proposal of the Municipal Council he may while invalidating the proposal of the Municipal Council give orders for initiation of proceedings afresh. It is in view of this authorisation that the Divisional Commissioner has passed the orders which were impugned before the Madhya Pradesh High Court.”

While pooh-poohing the manner in which the Division Bench of Madhya Pradesh High Court based its decisions, the Bench then observes in para 23 that, “We are at pains to say, that the Division Bench of the High Court by only referring to the communication dated 21.12.2009 came to the conclusion that the sanction contemplated under Section 109 of the said Act was granted by the State Government. However, the Division Bench has totally ignored the subsequent correspondence between the State Government and the Commissioner. Perusal of the subsequent communication reveals that the Commissioner had pointed out the infirmities in the proposal of the Municipal Council and advised the State Government to reject the said proposal with a direction to the Municipal Council to invite fresh tenders. On the objection of the Commissioner, the State Government reexamined and reconsidered the issue and authorized the Commissioner to exercise powers under Section 109 of the said Act to take appropriate decision including rejecting the proposal and directing the process of re-tendering.”

It cannot be lost on us that it is then held in para 24 that, “It could thus be clearly seen that, the Commissioner, instead of blindly accepting the directions contained in the communication dated 21.12.2009 has acted in larger public interest so that the Municipal Council earns a higher revenue. Not only this, but the State Government, after the Commissioner pointing out anomalies to its notice, has reexamined and reconsidered the issue and authorised the Commissioner to pass appropriate orders including invalidating the tender process and directing initiation of fresh tender process. In the background of this factual situation, the finding of the Division Bench of the High Court that the action of the Commissioner is arbitrary and illegal, in our view, is neither legally or factually correct. As discussed hereinabove, the High Court, while exercising its powers of judicial review of administrative action, could not have interfered with the decision unless the decision suffers from the vice of illegality, irrationality or procedural impropriety.”

Most importantly, it is then observed in para 25 that, “In the present case, we find that the Commissioner had acted rightly as a custodian of the public property by pointing out the anomalies in the proposal of the Municipal Council to the State Government and the State Government has also responded in the right perspective by authorizing the Commissioner to take an appropriate decision. We are of the considered view that, both, the Commissioner as well as the State Government, have acted in the larger public interest. We are unable to appreciate as to how the High Court, in the present matter, could have come to a conclusion that it was empowered to exercise the power of judicial review to prevent arbitrariness or favouritism on the part of the State authorities, as has been observed by it in paragraph 13. We are also unable to appreciate the finding of the High Court in para 17 wherein it has observed that the impugned decision of the authorities are found not to be in the public interest. We ask the question to us as to whether directing re-tendering by inviting fresh tenders after giving wide publicity at the National level so as to obtain the best price for the public property, would be in the public interest or as to whether awarding contract to a bidder in the tender process where it is found that there was no adequate publicity and also a possibility of there being a cartel of bidders, would be in the public interest. We are of the considered view that the decision of the Commissioner which is set aside by the High Court is undoubtedly in larger public interest, which would ensure that the Municipal Council earns a higher revenue by enlarging the scope of the competition. By no stretch of imagination, the decision of the State Government or the Commissioner could be termed as illegal, improper, unreasonable or irrational which parameters only could have permitted the High Court to interfere. Interference by the High Court when none of such parameters exist, in our view, was totally improper. On the contrary, we find that it is the High Court, which has failed to take into consideration relevant material.”

Broadly speaking, as a corollary of what has been mentioned above, we then finally see that it is held in para 26 that, “In the result, the impugned Orders are not sustainable in law. The appeals are, accordingly, allowed and the impugned orders dated 31.08.2017 and 05.07.2018 are quashed and set aside. The petition of respondent No. 1 stands dismissed.” However, it is also then added in para 27 that, “However, the Municipal Council is directed to refund the amount deposited by respondent No. 1 herein along with interest at the rate of 6% per annum forthwith.” Lastly, it is then held in the last para 28 that, “In the facts and circumstances of the case, there shall be no order as to costs.”

In a nutshell, this decisive and laudable judgment minces just no words whatsoever to send a loud and unmistakable message that, “Courts can interfere with administrative actions only if it suffers from the vice of illegality, irrationality or procedural impropriety”. The Apex Court in this noteworthy judgment also generously cites the relevant cases like Tata Cellular Vs Union of India (1994) 6 SCC 651 and West Bengal Central School Services Commission vs Abdul Halim 2019 SCC Online SC 902 wherein it is pointed out in detail when the Court can intervene. It is pointed out that the scope of judicial review of an administrative action is very limited. Also, it is enunciated that unless the Court comes to a conclusion that the decision maker has not understood the law correctly that regulates his decision-making power or when it is found that the decision of the decision maker is vitiated by irrationality and that too on the principle of “Wednesbury Unreasonableness” or unless it is found that there has been a procedural impropriety in the decision-making process, it would not be permissible for the High Court to interfere in the decision making process. It is also equally well settled that it is not permissible for the Court to examine the validity of the decision but this Court can examine only the correctness of the decision-making process.

By the way, it is also explicitly stated that an interference by the High Court would be warranted only when the decision impugned is vitiated by an apparent error of law, i.e. when the error is apparent on the face of the record and is self evident. The High Court would be empowered to exercise the powers when it finds that the decision impugned is so arbitrary and capricious that no reasonable person would have ever arrived at.

It has also been very rightly reiterated that the test is not what the court considers reasonable or unreasonable but a decision which the court thinks that no reasonable person could have taken. Not only this but such a decision must have led to manifest injustice. Very rightly so!

It needs no Albert Einstein to conclude that all the High Courts in our country must always unflinchingly abide by what the 3 Judge Bench of the Apex Court has held so clearly, categorically and convincingly in this latest, landmark and extremely laudable judgment in similar such cases. If they do so, it will very rightly save them from getting a rap on the knuckles as we see in this notable case the High Court Bench of Madhya Pradesh got much to their own relief! This is exactly what makes this judgment so significant and crucial that no High Court Judge can ever afford to miss it out some how! .

Sanjeev Sirohi, Advocate,

s/o Col BPS Sirohi,

A 82, Defence Enclave,

Sardhana Road, Kankerkhera,

Meerut – 250001, Uttar Pradesh.