DWARKADAS MARFATIA & SONS v. BOARD OF TRUSTEES OF THE PORT OF BOMBAY

Citation: [1989] 2 S.C.R. 751

Court: Supreme Court of India

Bench: SABYASACHI MUKHERJI, M.H. KANIA, S. RANGANATHAN

Case summary

On or about 13th January, 1984 the appellate court reversed that decision and also held that the issue of ma/a fide or arbitrariness was not relevant on the legality of the eviction proceedings. petition was allowed, and Natwar Parekh are now the owners of plot No.

Judgment text

~ The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This ·is an appeal by special leave from the judgment and order dated 19th November, 1986 of the learned Single Judge of the Bombay High Court. In this appeal this Court has been asked to examine theJrontiers of judicial review of the action of a statutory authority, i. e. the Board of Trustees of the Port of Bombay, in evicting its tenant and granting the land in question to another tenant. However, in order to appreciate the controversy it is necessary to have a conspectus of the facts involved. The respondent Board of Trustees of the Port of Bombay is a statutory authority. Vast areas of South Bombay which are completely tenanted, are owned by the respondent. Being a statutory authority, the re. spondent has been exempted from the operation of the relevant Rent Act. The respondent is a statutory corporation constituted under the Major Port Trust Act, 1963 as amended by the Major Port Trust (Amendment) Act, 1974. .

\ '"" Between about 1906 and 1932, one Jhunjhunwala was the Jessee:t,' of plot No. 6 (which adjoins plot SB which is the suit plot) and a building was existing on plot No. 6 which was tenanted to M/s Bombay • Bharat & Swadeshi Rice Mills, and the said Mills were desirous of operating a rice mill on plot No. 6 but could not get the licence from the Municipality for the operation of the said rice mill unless satisfactory arrangement was made for the removal and storage of rice husk in a separate chamber/structure. Since about 1932, the appellant had been the Jessee of the respondent in respect of part of the original plot No. 4 (now plot SB) which adjoins plot No. 6 of the suit plot measuring 113. 4 sq. mts. In or about 1933-34, with a view to acquire the suit plot and using the same for the rice mill/dust room, M/s Bombay Bharat & Swadeshi Rice Mills took over the appellant. The dust room structure was constructed on the suit plot.

The rice mill on pl n of the State or an instrumentality of the State, must be informed by reason. Indubitably, the respondent is an organ of the State under Art. 12 of the Constitution. In appropriate cases, as was observed in the last " mentioned decision, actions uninformed by reason may be question~d(_ as arbitrary in proceedings under Art. 226 or Art. 32 of the Constitution. But it has to be remembered that Art. 14 cannot be construed as a charter for judicial review of State action, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. The contractual privileges are made immune from the protection ~. of the Rent Act for the respondent because of the public position occupied by the respondent authority. Hence, its actions are amenable to judicial review only to the extent that the State must act validly for a discernible reason not whimsically for any ulterior purpose.

Where any special right or privilege is granted to any public or statutory body on the presumption that it must act in certain manner, such bodies must make good such presumption while acting by virtue of such privileges. Judicial review to oversee if such bodies are so acting is ~ permissible. The field of letting and eviction of tenants is normally governed by the Rent Act. The Port Trust is statutorily exempted from the operation cif Rent Act on the basis of its public/Government character. The legislative assumption or expectation as noted in the observations of Chagla C. J. in Rampratap Jaidayal's case (supra) cannot make such cond~ct it matter of contract pure and simple. These co'. porations J. must act m accordance with certam conslltut10nal conscience and whether they have so acted, must be discernible from the conduct of such corporations. In this connection, reference may be made on the observations of this Court in S. P. Rekhi v.

Union of India, [1981) 2 SCR 111, reiterated in M. C. Mehta & Anr. v. Union of India & Ors. , [1987] 1SCC395, wherein at p. 148, this Court observed: "It is dangerous to exonerate corporati. ons from the need to have constitutional conscience; and so, that interpretation, language permitting, which makes governmental agencies, whatever their mien amenable to constitutional limitations must be adopted by the court as against the alternative of permitting them to flourish as an imperium in imperio. " Therefore, Mr Chinai was right in contending that every action ~ activity of the Bombay Port Trust which constituted "State" within Art. 12 of the Constitution in respect of any right conferred or privilege granted by any Statute is subject to Art. 14 and must be reasonable and taken only upon lawful and relevant grounds of public interest. Reliance may be placed on the observations of this Court in E. P. Royappa v. State of Tamil Nadu, [1974] 2 SCR 348; Maneka Gandhi v.

Union of India, [1978] 2 SCR 621; R. D. Shetty v. The (~ International Airport Authority of India & Ors. , [1979] 3 SCR 1014; . }-)(asturi Lal Lakshmi Reddy v. State of J & K & Anr. , [1980] 3 SCR 1338 and Ajay Hasia v. Khalid Mujib Sehravardi & Ors. etc. , [1981] 2 SCR 79. Where there is arbitrariness in State action, Art. 14 springs in and judicial review strikes such an action down. Every action of the Executive Authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public autho- -1-- rity, it should meet the test of Art. 14. The observations in paras 101 & 102 of the Escorts' case (supra) read properly do not detract from the aforesaid principles. The High Court had relied on the observations of this Court in Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir & Anr. , (supra) that the State was not totally freed of the duty to act fairly and rationally, merely because it could do so under a contract.

The High Court stated that though it might be accepted that a public body like the respondent should not act unreasonably or unfairly but it did not follow that everytime the)" decided to take action against the contractual tenants, they had to decide the said action in terms of fairness, equity and good faith. In support of this proposition, reliance was placed on the observations of this Court in L. l. C v. Escorts, (supra). In this connection, Mr Chinai appearing for the appellant reiterated before us as he did before the High Court, that the basis of the legitimate assumption or expectation of which the statutory exemption had r been granted by the Legislature to the Bombay Port Trust provided a -. guideline or touch-stone by which the conduct of the public authority which had been granted exemption, should be judged. And, according to him, the necessity of eviction in the instant case, must have been only in public interest.

Reliance was placed on several decisions referred to hereinbefore. We are inclined to accept the submission that every activity of a public authority especially in the background of the assumption on which such authority enjoys immunity from the rigours of the Rent Act, must be informed by reason and guided by the public interest. All exercise of discretion or power by public authorities as the respondent, in respect of dealing with tenants in respect of which they have been treated separately and distinctly from other landlords on the assump- tion that they would not act as private landlords must be judged by that 'rstandard. If a governmental policy or action even in contractual-matters fails to satisfy the test of reasonableness, it would be unconstitutional. See the observations of this Court in Kasturi Lal Lakshmi Reddy, (supra) and RD, Shettv v. The International Airport Authority ofIndia & Ors.

, [1979) 3 SCR 1014 at 1034, Learned Additional Solicitor General reiterated on behalf of the respondent that no question of ma/a fide had been alleged or proved in these proceedings. Factually, he is right. But it has to be borne in mind'(, that governmental policy would be invalid as lacking in public interest, unreasonable or contrary to the professed standards and this is different from the fact that it was not done bona fide. It is true as learned Addi. Solicitor General contended that there is always a presumption that a governmental action is reasonable and in public interest. It is for the party challenging its validity to show that the action is unreasonable, arbitrary or contrary to the professed norms or not informed by public interest, and the burden is a heavy one.

In this background the contention of the appellant has been that 0 its eviction was not necessary in public interest, and further that the eviction was only in pursuance of an alleged policy on the part of the Port Trust to let out the reconstituted plot to the person who occupied the major portion, which, according to the appellant, was not in consonance with the obligation of the Trust to take action only in public interest. It was contended that eviction for development with least dislocation, should have been the aim and that would have served the public purpose better, On behalf of the appellant it was contended that before the Trial Court it was established that both the appellant and M/s Dhanji Mavji had been tenants of the Port Trust on the original plot No. 4 since 1932, and in fact the appellant was older tenant. Our attention was drawn to para 16 of the appellant's written statement, Vol. 2 Paper Book, page 35.

In this context, it was submitted that the decision of the Port Trust was not based on public purpose/interest, and as such was ultra vires of the powers of the Port Trust. It was contended that such a plea was justiciable in all civil suits. On behalf of the Port Trust authorities, however, the submission was that there was no obligation under the Bombay Port Trust Act to provide accommodation. So, there cannot be any governmental character. This we have already dealt with.. Learned Addi. Solicitor General submitted that in evidence it has been mentioned by Katara (P. W, 1 at page 43, Vol. II) that the plot had been allotted to Dhanji Mavji since it was the policy of the Bombay Port Trust to allot a re-constituted plot to a person occupying --'\ a major portion of such plot. There was no challenge to this evidence .. in cross-examination.

On the other hand, he contended that there was no evidence on the alleged policy of \he Port Trust of giving plots on joint tenancy to all occupants. According to him, in the letters addressed by the Port Trust at pp. 82, 123, 128 of Vol. 1 and in the letters by and on behalf of the appellant and/or their alleged associate concerns at pp. 141to147 they have specifically admitted that there was a policy of the Port Trust to allot plots to the occupants of the major portions . ,. thereof and in fact a grievance has been made by them that in accordance with the said policy of the Bombay Port Trust, Plot No, SA was not being allotted to the associates of the appellant. In that view of the matter even under the scope of judicial review, it was contended, whether it should have been given on joint-tenancies or not, is not a matter which could be gone into by the Court. Reliance was placed on the observations of Lord Justice Diplock in Council of Civil Service Unions v.

Minister for the Civil Service, [1984J 2 AER 935 at 950, where the learned Lord Justice classified 8 grounds subject to control of judicial review, namely, illegality, irrationality and procedural impropriety. Learned Addi. Solicitor General is right, in our opinion, in that we cannot really substitute a decision reached by a fair procedure keeping the policy of the respondent in mind by a different decision only on the ground that the decision which appeals to the court, is a better one. Reliance was placed on the observations of Lord Chancellor Lord Hailsham in Chief Constable of the North Wales Police v. Evans, [1982] 1WLR1155. Jn our opinion, it is necessary to remember that judicial review, in the words of Lord Brightman in that case, is not concerned with the decision, but with the decision making process. As observed by Prof. Dias in 'Jurisprudence' (5th Edn. at p.

91) unless the restriction on the power of the court is observed, the court would under the guise of preventing the abuse of power, be itself guilty of usurping power which does' not belong to it. It is therefore necessary to bear in mind the ways and means by which the court can control or supervise the judicial action of any authority which is subject to judicial control. In this connection, it is necessary to refer to the observations of Lord Justice Templeman in re Preston v.. I. R. C. , [1985] 2 WLR 836 and the observations of Lord Justice May in Regina v. Chief Constable ofthe Merseyside Police, [1986] 2 WLR 144. ! tis not within the purview of a court to substitute a decision taken by a constituted authority simply because the decision sought to be substituted is a better one. Learned Addi.

Solicitor General, in our opinion, is therefore right in contending that the appellant should not be allowed to contend that the decision of the Bombay Port Trust to allot the plot to the major holder is not one of the feasible means of achieving the objectives of development. It was not open to the appellant to contend that the Bombay Port Trust could have framed a better policy in a way in which both the goals, development and non-eviction of existing ';-tenants, could have been achieved. Furthermore, we have to bear in mind that joint-allotment for the purpose of development pre-supposes cooperation. In this connection, it is necessary to remember that Mr Singhvi, appearing for the intervener, in C. M. P. No. 19447/88 indicated that the joint development was not possible because they were not willing to take it jointly.

) He also pointed out that the appellant was aware that the decision tc>t allot this plot in his client's favour had been taken as early as 1973 and that it was within the knowledge of the present appellant that they had also put up constructions thereon at substantial cost. He urged that, though it is true that the lease in favour of the petitioner was terminated and the suit filed only in 1977, the fact is that the appellant took no step earlier to havethe allotment in favour of his clients cancel- --\. led. This, he has urged, is al~o a ground for non-interference at this stage. We are inclined to agree. · Our attention was drawn to the fact that Dhanji Mavji had held 80% of the re-constituted plot. The plot SB had been developed inasmuch as a building of ground plus Supper storeys had been erected as was the maximum possible notwithstanding the fact that the appellant had not yet surrendered their portion.

As against this, on plot 5A ;k where the Bombay Port Trust offered a joint tenancy to the three occupants, since there was no occupant holding a major portion thereof, there had been no development whatsoever and in fact there has been litigation going on to remove all the 3 occupants. In that view of the matter the Bombay Port Trust, perhaps, was justified in coming to the conclusion that the only possible way to develop the properties of the Bombay Port Trust in compliance with the Town Planning Scheme by allotting plots to holders of major portions thereon. Such a ] decision cannot be faulted. The Town Planning Scheme came into force in 1957. Plot S was' ~ divided into Plot 5A and 5B in 1963. The Town Planning Act had been enacted to meet the requirements for planning, development and use of land.

Having regard to Sections 2(7), 2(13), 2(17), 2(18), 2(21), 2(22), 2(27), 13, 14, 22, 59, 65, 88, 89, & 1S9, it appears that one of the purposes was the extinguishment of the tenancies of the Port Trust, and 'r as such tenants of plot SA and SB were liable to eviction. The Port Trust continued them as monthly tenants for many years before formulating a policy to develop the plots by offering them to major holders. In pursuance to that Scheme, regulations have been framed under Section 169 of the Town Planning Act. Our attention was placed on some of these regulations. It is contended that it was viewed that DWARKADAS v. BOARD OF TRUSTEES [MUKHARJI, J. l 767 plot of land of less than 500 sq. yards out of the Town Planning Scheme -'\ cannot be allotted. In that view of the matter it is a possible view and we need not go beyond this.

In that context even though we reiterate that the Port Trust must act reasonably and in adherence to a policy which serves the public purpose on the assumption of which exemption was granted to it from the Rent Act, while dealing with the tenants or occupants, it cannot be said that the Port Trust has acted improperly. In that light the decision KOf the High Court must be affirmed though on a different emphasis. In the view that we have taken, it is not necessary for us to go into the question whether under Art. 227 of the Constitution, it was open to the High Court to go into the question of constitutional validity for which reliance was placed on the observations of this Court in Venkatlal G. Pittie & Anr. v. Bright Bros (P) Ltd. [1987] 3 SCC 558 at 569 and Khalil Ahmed Bashir Ahmed v. Tufeihussein Samu>bhui Sarangpurwala, [1988] I SCC 155. Reliance was also placed by Mr Chinai on the observations of the House of Lords in England in Wandsworth London Borough Council v.

Winder, [1985] AC 461 at 505-507. In that case the local authority was under the agreement itself, required to fix rent under the statutory provision. It committed a breach thereof. Hence, it was held there that that was a breach of a contractual obligation enforceable under the Private Law and, therefore, justiciable. • As we look upon the facts of this case, there was an implied o. bligation in respect of dealings with the tenants/occupants of the Port Trust authority to act in public interest/purpose. That requirement is fulfilled. if it is demonstrated that the Port Trust Authorities have acted in pursuance of a policy which is referable to public purpose. Once that norm is established whether that policy. is the best policy or whether another policy was possible, is not relevant for consideration.

It is, therefore, not necessary for our present purposes to dwell on the question whether the obligation of the Port Trust Authorities to act in pursuance of a public purpose was of public law purpose or a private law purpose. Under the Constitutional scheme of this country the Port Trust Authorities were required by relevant law to 'act in pursuance of public purpose. We are satisfied that they have proceed. ed to so act. We must record that learned Addi. Solicitor General made a statement that irrespective of the result of this appeal, the Port Trust Authorities of Bombay, will consider reasonably granting of an alternative site to the appellant, if such an application is made to them. In the view that we have taken this appeal must, therefore, fail and is accordingly dismissed. The C. M. P. No. 19447/88 is disposed Of by directing that the applicants are permitted to intervene and their ).. submissions have been considered.

In the facts and the cicumstances of the case, the parties will pay and bear their own costs. All interim orders are vacated. RANGANATHAN, J. I respectfully agree with the conclusion of my learned brother Sabyasachi Mukharji, J. However, I would like to add a word ofreservation. -~ 2. The princigal argument which Shri Chinai addressed to us alj great length on behalf of appellant was that the relationship between the · appellant and the Port Trust was not purely contractual and in the realm of private law. He urged that the Port Trust, having been granted an exemption from the provisions of the rent control acts on certain public grounds, is not at liberty to take action to evict the petitioner without being accountable therefor and that its action is in the realm of public ... \,. law and hence liable to judicial review. He submitted that the decision of this Court in the Escorts case, 1985-3 Suppl. SCR 909, is not inconsistent with this contention. 3.

The learned Additional Solicitor General contested the above proposition on principle and refuted the suggestion that the Port Trust was und(or any obligation to show that its action was bona fide, and not arbitrary or unreasonable but could be justified on grounds of public interest. He submitted that on the facts of the present case, the state of ~ the pleadings at the various stages and its own findings on the facts, the High Court was not called upon to go into the larger issue at all and that its observations in this regard were purely casual. He submitted, however, that, without prejudice to these contentions, he would be willing to satisfy us on the facts of the present case that the action of the Port Trust was bona fide and based on policy and reason. He addressed us on this aspect and I agree, with respect, with the conclusion of my learned .. , ·f' brother Sabyasachi Mukharji, J.

that, on the facts of the present case, j the action of the Port Trust was not improper and that there are no grounds to interfere with the same. 4. In view of the above conclusion on the merits and in view of my opinion that we have not heard full arguments on both sides on the general propositions contended for by Shri Chinai as to the parameters and scope of judicial review in such matters which are issues of farreaching importance, I would like to refrain from expressing any final and concluded opinion on these aspects though, prima facie, I am also inclined to think, as held by my learned brother that there is considerable force in them. R. S. S. Appeal dismissed.