State is not as free as individual in selecting recipients for its largesse, Supreme Court

The Supreme Court recently had the occasion to reiterate that the Government cannot afford to be as free as an individual in selecting recipients for the disposal of public assets..Recounting observations made in the case of RD Shetty v International Airport Authority, wherein Justice PN Bhagwati approved the opinion of Justice KK Mathew in V Punnan Thomas v State of Kerala, the Supreme Court noted,.“The Government, is not and should not be as free as an individual in selecting the recipients for its largesse. Whatever its activity, the Government is still the Government and will be subject to restraints, inherein in its position in a democratic society. A democratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal.“.The Bench of Justices AM Sapre and S Abdul Nazeer reiterated this principle while allowing an appeal filed by a cooperative housing society aggrieved by a State Housing Board’s refusal to consider its application to buy certain State properties..The properties in question were flats developed as part of a 1995 housing project in Powai by the Maharashtra Housing and Area Development Board (Board). As the outset, the Court noted that this Board would fall under the category of ‘State’ under Article 12 of the Constitution..An advertisement for the sale of some of the flats developed by the Board at a discounted rate initially drew offers from three cooperative housing societies. These three societies offered to buy 500 flats as per the terms set out in their respective offers in February 2003..However, before a decision on these offers were made, the Powai Panchsheel Cooperative Housing Society (Powai Panchsheel) also made their own offer to buy 110 flats in March 2003. The designated contractor, M/S Kamath Construction, was also noted to have forwarded this offer to the Board on the day they were made..Nevertheless, the Housing Society proceeded to confine their deliberations to the first three offers alone and accepted the same with some modifications in May 2003. The offer made by Powai Pachsheel was not considered at all..A writ petition by Powai Panchsheel, challenging the Board’s refusal to consider their offer was rejected by the Bombay High Court. On appeal, the Supreme Court set aside the High Court verdict, noting that.“… the Board was under a legal obligation to consider all the four offers (appellant No.1 and the three societies) in their meetings held on 10/14.05.2003 with a view to decide as to which one out of the four offers was the best one for its acceptance.”.On facts, the Court rejected the defence put up by the Board that Powai Panchsheel had only asked for information regarding the flats rather than make an actual offer..The Court also observed that if the Board was of the opinion that no such offer had been made, it ought to have recorded the same in writing before making its decision. The Board is not legally permitted to cite such reasoning for the first time in Court, the Bench noted..In view of these facts, and keeping in mind the principles enunciated in RD Shetty’s case and V Punnan’s case, the Court found that the non-consideration of Powai Panchsheel’s offer served to vitiate the decision taken by the Board..“Indeed, exclusion of appellant No.1’s [Powai Panchsheel] offer dated 03.03.2003 and keeping appellant no.1 out from the zone of consideration by the Board in its meetings held on 10/14.05.2003 and only confining the consideration of the offers made by the three societies vitiates the entire decision of the Board taken on 10/14.05.2003..In our view, appellant No.1 had a legitimate right and so the expectation that it would get equal treatment from the Board like the other three societies because all four were similarly situated while considering the issue of sale of flats of Powai Project. Indeed, there was no valid reason for the Board to exclude appellant No.1’s case/offer from the zone of consideration.“.In view of these observations, the Court quashed the Board’s May 2003 decision concerning the sale of the flats in Powai, and directed the Board to proceed with the matter in accordance with law..“… the decision to sale/dispose of the flats of Powai Project taken by the Board in its meetings held on 10/14.05.2003 (Resolution No.192) is vitiated as being unreasonable, arbitrary and violative of principles enshrined in Article 14 of the Constitution of India. It is not legally sustainable and has to be, therefore, set aside.“.Read the Judgment: