UNI-ADS Pvt. Ltd. vs Commissioner MCH, Hyd. and Another

The questions of law involved in these two writ petitions areinterlinked. Hence, they are heard together and being disposed of by this common order.

Writ Petition No.21781 of 1998 was filed seeking a writ of mandamus declaring the action of the respondents in not so far approving the agreement proforma submitted by the petitioner to commence the contract of three years and in not furnishing the letter of authorisation to enable the petitioner to fix advertisements as illegal and for consequential reliefs.

Writ Petition No.31868 of 1998 was filed seeking a writ of mandamus challenging the proceedings issued by the respondent-Municipal Corporation dated 21-7-1998 demanding a sum of Rs.1,86,93,500/- as illegal and without jurisdiction and for a consequential direction directing the respondents to extend the lease period for advertising on 4,500 eleclric poles of Municipal Corporation of Hyderabad (MCH) beyond 30-6-1998 by adjusting the payments already made by the petitioners.

For proper appreciation of the case, the averments made in WP No.31868 of 1998 can be referred to.

The first petitioner is an advertising agency and the second petitioner is the Director of the first petitioner agency. It was incorporated in the year 1982 under the Companies Act, 1956. It is stated that it is a premier advertising agency in the Andhra Pradesh. It has been specialising in the field of advertising on the city buses and other route buses of APSRTC, display of advertisements on bus shelters, bus stations etc. With a view to promote advertisement by Kiosks on lamp posts in the twin cities of Hyderabad and Secunderabad, they also approached the Government and offered to undertake the work by paying a huge amount. However the second respondentpublished a notice inviting tenders (NIT) for leasing out 4,500 new electrical poles owned by them for the purpose of advertising for a period of 3 years. In pursuance of the notification the petitioners submitted a quotation for a sum of Rs.56,93,000/- for one year for lease of 4,500 electric poles. Tenders were opened on 21-4-1995. The petitioner-agency was the highest tenderer. A letter was issued on 5-5-1995 by the respondents informing that their tender was accepted and they were directed to arrange payment of security deposit and also 1/3rd lease amount and enter into an agreement with the respondents. It is the case of the petitioners that on 10-5-1995 a sum of Rs. 18,98,0007-was paid towards lease amount and Rs, 1,00,000/- towards security deposit. Further, bank guarantee for a sum of Rs, 18,98,000/- was also furnished on 26-6-1995. Thereupon, they forwarded a draft agreement for finalising the same by the respondents. However, without entering into an agreement another demand was made for a sum of Rs.3,16,250/- stating that the lease had commenced from 1-7-1995. It is also the case of the petitioners that draft lease was submitted to the Municipal Corporation for approval and without taking any action to finalise the lease, a demand was made for Rs.3,16,250/-. Subsequently, reminders were made for executing the lease deed, but, however, no action was taken. It is the case of the petitioners that in the month of November they requested the respondents to give them authorisation letter so as to give advertisements and undertake the work. There was no response from the respondent-Municipal Corporation. But, however, so as to keep good relations with the Municipality a sum of Rs.3,16,250/-was paid by a cheque dated 30-11-1995. Pending execution of the agreement, the petitioners put some advertisements from advertisers like Coca Cola, ThumsUp etc., and some advertisements were displayed in about 2,052 poles for some period. Nowritten lease was executed between the petitioners and the respondents and wherever advertisements on Kiosks displayed by the petitioners they were removed by the respondents without valid authority on the alleged ground that the petitioners had no authorisation. It is also the case of the petitioners that four postdated cheques for sum of Rs.3,16,250/-each were issued at the request of the Corporation without entering into an agreement. It is the further case of the petitioners that no agreement was entered into between the petitioners and the respondents even though they fulfilled terms and conditions of tender notification, and as a result they could not get orders and they incurred heavy loss. In this process, the petitioners were forced to pay a total sum of Rs.37,95,000/-. Whileso, a show-cause notice was issued on 19-7-1997 threatening to cancel the permission given to them on 5-5-1995. The petitioners submitted a reply to the said notice on 6-8-1997. By a letter dated 1-1-1998 the respondents threatened to remove all the boards fixed to the poles and, in fact, removed advertisements thereby causing heavy loss to the petitioners. It is the case of the petitioners that they could not do any advertisement business in pursuance of having become highest bidder, as no valid agreement was entered into between the parties. They could utilise few poles with the tacit consent, and they are entitled to commence the contract for a period of 3 years from the date of valid agreement. But, on the other hand, proceedings are issued by the respondents dated 21-7-1998 calling upon the petitioners to pay sum of Rs.1,86,93,500/- towards alleged differential lease amount and display fees and if the said amount is not paid the same will be recovered as per law. Aggrieved by the said order the present writ petition has been filed.

Earlier Writ Petition No.21781 of 1998 was filed on the ground that thepetitioner became the highest bidder but no agreement was entered and he sought directions from this Court to execute the agreement and permit them to undertake the contract for a period of 3 years from the date of execution of the contract. It is stated that impugned notice is illegal and contrary to law. The action also runs counter to the principles of legitimate expectation and promissory estoppel. !t is stated that by virtue of the promise made by the respondents stating that the tender was accepted and they were directed to fulfil certain conditions to execute the contract the petitioners had bona fidely acted and he had the right to legitimately expect that the Corporation would enter into agreement of lease.

The respondent-Municipal Corporation filed counter stating that writ petition is not maintainable as the relief is in the realm of contractual sphere and this Court cannot interfere with the matter relating to the contracts under Article 226 of the Constitution of India. It is also stated that the petitioners failed to pay the lease amount due for the last 3 years and, therefore, having been given show-cause notice and final orders were passed demanding Rs.1,86,93,500/-. It is also stated that period of contract had already expired on 30-6-1998 and it is not open for the petitioners to seek a direction to complete the formalities of entering the contract with the petitioners. The petitioners were issued with allotment order dated 5-5-1995 and the lease is deemed to have been commenced from that date. The petitioners sought to display in the advertisement. Now, the petitioners taking flimsy ground of lack of proper agreement cannot deny the balance of lease amount. The petitioners having utilised the electric rules is estopped from contending that the lease is not yet commenced. It is further stated that the petitioner-Agency was no doubt the highest bidder and allotment order was made on 5-5-1995 calling upon to pay the security deposit within 7 days and also 1/3rd lease amount belatedly and the said lease was converted into monthly instalment basis. In fact, contrary to the order dated 5-5-1995, the petitioners submitted a draft agreement altering unilaterally without the approval of the Corporation the date of commencement of lease to 1-7-1995 instead of 5-5-1995 and the said agreement was not considered for the reason that already on the request of the petitioners the date of commencement was altered from 5-5-1995 to 1-7-1995. Since the petitioners have already commenced business execution of the agreement became irrelevant. It is also stated that more than 4,500 poles were under the use of the petitioners on the basis of the allotment order dated 5-5-1995. A show-cause notice dated 19-7-1997, under Sections 420 and 421 of the HMC Act (for short ''Act'') was issued. Since the reply submitted by the petitioners was not satisfactory, they are again called upon to regularise the outstanding dues. The petitioners submitted a reply and tried to evade the payments. The petitioners also filed WP No.21781 of 1998. At the time of filing the present writ petition, the petitioners were having the knowledge of demand notice and they did not challenge the same. Therefore, latter writ petition was barred by constructive res judicata. It is the case of the respondents that the petitioners were not entitled to display the advertisement without specific permission as per Sections 420 and 421 of the Act. Thus, it is submitted that the petitioners consequent to the order dated 5-5-1995 have conducted business and the lease period had already commenced and, therefore, the petitioners are bound to pay the lease amount and hence, the writ petitions are devoid of merits and the same are liable to be dismissed.

The questions that arises for consideration in these writ petitions are whether the action of the respondents inissuing the demand notice is valid, whether the action of the respondents in not entering into agreement in pursuance of the declaration as highest bidder is justified and whether a writ can be issued commanding the respondent-Municipal Corporation to enter into an agreement in pursuance of the tender submitted by the petitioner-Agency. The events are not, much, in dispute. The tender notification was issued by the Municipal Corporation on 28-3-1995 for leasing out 4,500 new electric poles in a size of ''3 x 2'' in the twin cities of Hyderabad and Secunderabad for the year 1995-96 (except the prohibited places). The following are some of the conditions of the tender notification.

The successful tenderers should enter into an agreement with the competent authority, before starting display of the advertisements.

The successful tenderers before entering into such agreement with the MCH should pay Rs.1,00,000/-towards EMD along with the amount to the extent of 1/3rd of the lease amount within 7 days from the date of allotment.

The successful tenderer within 7 days on receipt of communication of acceptance of his tender should pay the lease amount one month in advance, and then afterwards pay before 5th of every month. Otherwise, penal interest @12% will be recovered.

After this, the lease should pay advertisement tax in lumpsum on 4,500 poles within 30 days from the date of receipt of intimation from MCH and regularly on yearly basis, failing which interest @12% p.a. towards late payment will be recovered.

Some of the Tender Conditions are that :

The lease period will be for (3) years from the date of issue of order, subject to renewal every year notexceeding (3) years.

The successful tenderer shall have a right to fix the poster plates to the electric poles at his own cost. Size of the plates should not exceed 2 x 3 feet with zinc sheet of 1/6th guage.

The tenderer shall have to pay a minimum sum of Rs.13,61,250/- as lease amount per annum or more as quoted by the highest tenderer for the right to use the plates fixed to the electric poles.

On 5-5-1995 the Corporation issued the following communication to the petitioners :

"Office of the Addl. Commissioner Municipal Corporation of Hyderabad.

Lr.No.3642/Advt.A3/95 dated 5-5-1995 To

Sri M. Narayana Raju,

Premises No.8-3-677/03

Plot No.21, Navodaya Colony,

Yellareddyguda, Hyderabad-A.P.

Sir,

Sub :--MCH - Advertisement Section Allotment of new electric poles on lease - Payment of Security Deposit and lease amount - Intimation - Reg.

Ref :--Your tender dated 21-4-1995

With reference to the subject cited, you are hereby informed that your fender for allotment of 4,500 new electric poles situated within the twin cities of Hyderabad and Secunderabad @ Rs.56,93,000/- (Rupees fifty six lakhs and ninety three thousand only) as a lease amount per annum has been accepted.

You are, therefore, requested to arrange for the payment of security deposit within (7) days from the date of issue of this letter, besides this you should remit 1/3rd lease amount and enter into anagreement with the MCH immediately."

Thus, the petitioners were called upon to pay the security deposit and 1/3rd of the lease amount and they were directed to enter into an agreement with the MCH immediately. Consequently a sum of Rs.18,98,000/- was paid, apart from security deposit, towards lease amount. Thereafterwards, some other amounts were also paid. The petitioners through their letter dated 28-3-1995 forwarded a draft agreement for approval. However, for the reasons best known to the respondent-Corporation, no action on the draft lease agreement was taken. But, on the other hand, a demand was made on 12-10-1995, calling upon the petitioners to pay a sum of Rs.3,16,250/-. On 6-11-1995 another communication was sent by the petitioners to the respondents asking them to issue authorisation letter. As there was no response, on 14-11-1995 another sum of Rs.3,16,250/- was paid to the respondent-Municipal Corporation. The petitioners again reminded the respondents on 16-3-1996 about the execution of the agreement for the purpose of procuring advertisements and for filing the said document with various tax departments. It appears that pending execution of the agreement, the petitioners have utilised certain poles, which was being communicated to the respondents from time to time. It is also seen from the letters that they could not do advertisement for various obstacles as mentioned in their letter dated 21-3-1997. But, however, a letter was issued on 19-7-1997 intimating that the petitioner being the highest bidder 4,500 electric poles were allotted to him for advertisement purpose vide their office letter dated 5-5-1995 and that the lease was to commence from 5-5-1995 and that the petitioners did not pay the amounts and they have violated the following tender conditions :

M/s. Uni-Ads has fixed the Advt. Boards to the poles situate at prohibitedareas in violation of tender condition No.1.

The agency has fixed the boards at lesser than 10 feet height of the poles in violation of tender condition No.2.

The agency has neither paid the balance of lease amount nor requisite Advt. fees from the beginning i.e., from 1-7-1995 to 30-6-1996 and further the lease amount and Advt. fees from 1-7-1996 to 30-6-1997 inspite of issuing notice and even after reminders and continuing the business unauthorisedly in violation of tender condition No.23.

Penal interest @12% per annum on the amount due to MCH has to be paid by the lease as per tender condition No.22, but neither the principal nor the interest has been paid so far.

The petitioners were called upon to show-cause why the permission given earlier should not be declared as void under Sections 420 and 42! of the Act and the Security Deposit should not be forfeited. The petitioners submitted a detailed reply but, however, the orders were passed on 21-7-1998 demanding a sum of Rs.1,86,93,500/-. The question that falls for consideration is whether the said demand is valid or not. Admittedly, the petitioner was the highest bidder and on 5-5-1995 he was informed that his tender for allotment of 4,500 electric poles on a lease amount of Rs.1,86,93,500/- was accepted and he was directed to enter into an agreement with MCH after complying certain conditions. The petitioner has made certain deposits in pursuance of the communication dated 5-5-1995. But, however, for various reasons no lease agreement was entered into between the parties and it is also on record that the respondent-Corporation has knowledge of the fact that the petitioner has displayed certain advertisements on some poles. There is no document to establish that thepetitioner was handed over 4,500 poles and regular lease agreement was entered between the parties. The impugned demand has been made purporting to be the differential lease amount as per conditions of tender. But the question is whether there is any such lease between the parties. If such a lease was entered, the demand is in pursuance of the lease executed between the parties falls outside the scope of Article 226 of the Constitution of India, Alternatively, the Corporation should have a statutory power to demand such an amount under the provisions of the Act. In which event the validity of such power can be scrutinised by virtue of power of judicial review available to this Court under Article 226 of the Constitution of India. If it is established that demand was issued without the support of the provisions of the Act it has to be declared as illegal and without jurisdiction. In the instant case, admittedly, in the tender notification itself a specific clause was stipulated that the successful tenderer should enter into an agreement with the competent authority before starting display of advertisement. Obviously, in the instant case, no agreement was entered into between the parties and yet the Corporation has allowed the petitioner to utilise certain poles. Even though the Corporation has come out with an explanation that the Corporation was magnanimous in extending the lease to the petitioner and also in converting the lease amount on monthly basis yet, that cannot be a ground to sustain the impugned order. The Corporation being a public authority and instrumentality of the State is bound to act fairly and justly and if the petitioner has not complied with the conditions of entering into an agreement and not paying necessary amount as required under the conditions of tender no action was taken by the Corporation to forfeit the security deposit and take further action in accordance with the tender conditions. The Officers who are at the helm of affairs are required to discharge their duty in a fairand bona fide manner. Obviously, in this case, the respondents allowed the petitioner to utilise certain poles for advertisement purpose without there being any valid lease agreement. If that is the situation, it would be only open for the Corporation to recover the amount by resorting to civil proceedings, but in the guise of violation of tender conditions it would not be open for them to collect the amount under the impugned notice. The impugned notice, admittedly, did not emanate from the agreement entered into between the parties nor did it arise under any violation of statutory provisions. In fact, it is the case of the Corporation that the petitioner failed to deposit the lease amount and the advertisement tax in pursuance of the tender conditions. When there is no lease at all in the eye of law, the question of making any payment for such a lease would not arise. The learned Counsel for the Corporation tried to submit that the lease was already commenced from 5-5-1995 when the petitioner was ordered to proceed with the exhibition of advertisements and it was subsequently changed to 1-7-1995. I am unable to accept this contention inasmuch as letter dated 5-5-1995 is not an authorisation permitting the petitioner to carry on the advertisement process. It only directed the petitioner to enter into an agreement after depositing certain amounts. In fact, this was construed as permission in subsequent correspondence issued by the Municipal Corporation. Therefore, there is no existing lease much less a valid lease between the petitioner and the respondents.

The parameters the of the judicial review in contractual matters between the State and citizens have been well settled by the Supreme Court in catena of decisions. It can be safely concluded that in cases of contractual obligations, where public law element is present, the State or instrumentalities of the State are bound to act fairly and reasonably and their actions are subjected to scrutiny on the touchstoneof Article 14 of the Constitution of India. In Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, , the Supreme Court had categorically held that the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be limited and in doubtful cases, the parties may be relegated to the adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. But, however, when a challenge is made on the ground of violation of Article 14 alleging arbitrariness and unfair and unreasonableness, even though dispute falls within the domain of the contractual obligation, it would not relieve the State of its obligations to comply with the basic requirements of Articles 14.

Further in LIC of India and Another Vs. Consumer Education and Research center and Others, , the Supreme Court observed :

"In the sphere of contractual relations the State, its instrumentality, public authorities or those whose acts bear insignia of public element, action to public duty or obligation are enjoined to act in a manner i.e., fair, just and equitable, after taking objectively all the relevant options into considerations and in a manner that is reasonable, relevant and germane to effectuate the purpose for public good and in general public interest and it must not take any irrelevant or irrational factors into consideration or arbitrary in its decision. Duty to act fairly is part of fair procedure envisaged under Articles 14 and 21. Every activity of public authority or those under public duty or obligation must be informed by reason and guided by the public interest."

The Supreme Court further held :

"The arms of the High Court are not shackled with technical rules or of procedure. The actions of the State, its instrumentality, any public authority or person whose actions bear insignia of public law element or public characterare amenable to judicial review and the validity of such an action would be tested on the anvil of Article 14. While exercising the power under Article 226 Court would be circumspect to adjudicate the disputes arising out of the contract depending on the facts and circumstances in a given case. The distinction between the public law remedy and private law field cannot be demarcated with precision. Each case has to be examined on its own facts and circumstances to find out the nature of the activity or scope and nature of the controversy. The distinction between public law and private law remedy is now narrowed down. The action of the appellants bear public character with an imprint of public interest element in their offers with terms and conditions mentioned in the appropriate table inviting the public to enter into contract of life insurance. It is not a pure and simple private law dispute without any insignia of public element. Therefore, we have no hesitation to hold that the writ petition is maintainable to test the validity of the condition laid in Table 58 term policy and the party need not be relegated to a civil action."

The Supreme Court further observed thus :

"It is, therefore, the settled law that if a contract or a clause in a contract is found unreasonable or unfair or irrational one must look to the relative bargaining power of the contracting parties. In dotted line contracts there would be no occasion for a weaker party to bargain or to assume to have equal bargaining power. He has either to accept or leave the services or goods in terms of the doited line contract. His opinion would be either to accept the unreasonable or unfair terms or forego the service forever. With a view to have the services of the goods, the party enters into a contract with unreasonable or unfair terms obtained therein and he would be left with no option but to sign the contract."

Thus, the proposition is very clear that even in the case of contracts, the power of judicial review can be invoked by the aggrieved party on the touchstone of Article 14 of the Constitution of India. But, in the present case, there is no such contract at all existing between the State and the individual. No statutory provision under the Act has been brought to the notice of this Court for exercising such a power. It is always open for this Court to see whether any such agreement or contract was executed between the State and if any liability arises out of the said contract, the legality or otherwise of the liability cannot be gone into under Article 226 of the Constitution of India, However, if any acts are committed during the observation of the contract attracting Article 14 it is always open for this Court to scrutinise them and grant appropriate relief. But, in the instant case, there was no such contract at all. Therefore, the respondents have no power to demand any amounts on the pretext of violation of terms of lease.

Under these circumstances, I have to necessarily hold that the impugned order dated 21-7-1998 is wholly illegal and without jurisdiction and the same is liable to be quashed. Accordingly, it is quashed. However, since it is the case of the petitioner as well as the Corporation that some poles were utilised for some period, to such extent it is always open for the respondents to recover the damages in a civil proceedings before the appropriate Court.

However, the point that falls for consideration is whether the respondent-Municipal Corporation can be directed to enter into an agreement. The learned Counsel for the petitioner submitted that the petitioner being the highest bidder and in pursuance of the letter dated 5-5-1995 he acted on the promise by making deposits and also preparing the advertisement boards by spending huge amounts pending execution of the agreement between the parties. Accordingly he altered his position in time with the directions dated 5-5-1995. Under those circumstances, the Corporation is bound by principles of Promissory Estoppel. He also submitted that the petitioner being highest bidder and having fulfilled all the conditions for executing the lease is entitled to invoke the doctrine of legitimate expectation.

The learned senior Counsel for the petitioner, Mr. V.V.S. Rao, relied on the judgment of the Supreme Court in Harminder Singh Arora Vs. Union of India (UOI) and Others, . In the said case the tender for supply of milk of the Government Company was accepted ignoring the tender of the petitioner. The writ petition was filed contending that the rates quoted by the petitioner were lowest. The High Court rejected the matter holding that it was a matter relating to contractual obligation, and that there was nothing wrong or unfair in accepting Government Milk Scheme, though appellant''s tender was lowest. The Supreme Court after referring to decisions in Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, , in V. Punnen Thomas Vs. State of Kerala, and in Viklad Coal Merchants Patiala v. Union of India, AIR 1985 SC 95, held in paragraph 27 as follows :

"In the instant case, the instrumentalities of the State invited tenders for the supply of fresh buffaloes and cows milk and, therefore, this case has to be decided on the basis of bid by the tenderers. There was no question of any policy in this case. It is open to the State to adopt a policy different from the one in question. But if the authority or the State Government chooses to invite tenders then it must abide by the result of the tender and cannot arbitrarily and capriciously accept the bid of respondent No.4 although it was much higher and to the detriment of the State. The High Court, in our opinion, was not justified in dismissing the writ petition is limine by saying that the question relatesto the contractual obligation and the policy decision cannot be termed as unfair or arbitrary. There was no question of any policy decision in the instant case. The contract of supply of milk was to be given to the lower bidder under the terms of the tender notice and the appellant being the lowest bidder he should have been granted the contract to supply, especially, when he has been doing so far the last so many years."

and consequently allowed the appeal and directed the authorities to accept the tender of the petitioner.

The Supreme Court in Gujarat State Financial Corporation Vs. Lotus Hotels Pvt. Ltd., held as follows :

"It. Viewing the matter from a slightly different angle altogether it would appear that the appellant is acting in a very unreasonable manner. It is not in dispute that the appellant is an instrumentality of the Government and would be ''other authority'' under Article 12 of the Constitution. If it be so, as held by this Court in Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, , the rule inhibiting arbitrary action by the Government would equally apply where such Corporation dealing with the public whether by way of giving jobs or entering into contracts or otherwise and it cannot act arbitrarily and its action must be in conformity with some principle which meets the test of reason and relevance.

Now if appellant entered into a solemn contract in discharge and performance of its statutory duty and the respondent acted upon it, the statutory Corporation cannot be allowed to act arbitrarily so as to cause harm and injury, flowing from its unreasonable conduct, to the respondent. In such a situation, the Court is not powerless from holding theappellant to its promise and it can be enforced by a writ of mandamus directing it to perform its statutory duty. A petition under Article 226 of the Constitution would certainly lie to direct performance of a statutory duty by ''other authority'' as envisaged by Article 12."

The Supreme Court in Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay, , held that every action or activity of the State falling under Article 12 of the Constitution in respect of any right conferred or privilege granted by any statute is subject to Article 14 and must be reasonable and taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action, Article 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 authority, it should meet the test of Article 14. Even the Governmental policy or action in contractual matters have to conform to Article 14 in contractual matters and if they failed to satisfy the test of reasonableness, it would be unconstitutional. When once it is found that the State violated Article 14, the said action was liable to struck down.

The Supreme Court in Mahabir Auto Stores and others Vs. Indian Oil Corporation and others, , held that :

"The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercise of power. Therefore, the action of State organ can be checked under Article 14. Every action of the State executive authority must be subject to rule of taw and must be informed by reason. So, whatever be the activity of the public authority, it should meet the test ofArticle 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts fails to satisfy the test of reasonableness, the same would be unreasonable. Rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination. It is welt settled that there can be "malice in law". Existence of such "malice in law" is part of the critical apparatus of a particular action in administrative law. Indeed "malice in law" is part of the dimension of the rule of relevance and reason as well as the rule of fair play in action.

It was pleaded that in private law field there was no scope for applying the doctrine of arbitrariness or mala fides. A plea of arbitrariness mala fides as being so gross cannot shift a matter falling in private law field to public law field. To permit otherwise would result in anomalous situation that whenever State is involved it would always be public law field, this would mean all redress against the State would fall in the writ jurisdiction and not in suits before civil Courts. Whether public law or private law rights are involved, in a case, depends upon the facts and circumstances of the case. The dichotomy between rights and remedies cannot be obliterated by any strait jacket formula. It has to be examined in each particular case."

It was finally held that decision of the State/ public authority under Article 298 of the Constitution, is an administrative decision and can be impeached on the ground that thedecision is arbitrary or violalive of Article 14 of the Constitution of India on any of the grounds available in public law field, be it contractual or statutory,

The Supreme Court in Shrilekha Vidyanhi''s case (supra), in paragraphs 34 and 35 held as follows :

"34. In our opinion, the wide sweep of Article 14 undoubtedly takes within its fold the impugned circular issued by the State of U.P. in exercise of its executive power, irrespective of the precise nature of appointment of the Government Counsel in the district and the other rights, contractual or statutory, which the appointees may have. It is for this reason that we base our decision on the ground that independent or any statutory right, available to the appointees, and assuming for the purpose of this case that the rights flow only from the contract of appointment, the impugned circular, issued in exercise of the executive power of the State, must satisfy Article 14 of the Constitution and if it is shown to be arbitrary, it must be struck down. However, we have referred to certain provisions relating to initial appointment, termination or renewal of tenure to indicate that the action is controlled at least by settled guidelines, followed by the State of U.P. for a long time. This too is relevant for deciding the question of arbitrariness alleged in the present case.

It is now too well settled that every State action, in order to survive, must not be susceptible to the vide of arbitrariness which is the crux of Article 14 of the Constitution and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State action is sine qua non to its validity and in this respect, the State cannot claim comparison with a private individual even in the field of contract. This distinction between the State and a private individual in the field of contract has to be borne in the mind."

In State of Himachal Pradesh and others etc. Vs. Ganesh Wood Products and others, etc., , the Supreme Court explained the doctrine of Promissory Estoppel and the public interest in extenso in paras 54 and 55, which are extracted hereunder :

"54. The doctrine of Promissory Estoppel is by now well recognised in this country. Even so it should be noticed that it is an evolving doctrine, the contours of which are not yet fully and finally demarcated. It would be instructive to bear in mind what Viscount Hailsham said in Woodhouse Ltd. v. Nigerian Produce Ltd. 1972 AC 741 :

"I desire to add that the time may soon come when the whole sequence of cases based upon Promissory Estoppel since the war, beginning with Central London Property Trust Ltd v. High Trees House Ltd 1947 (1) KB 130, may need to be reviewed and reduced to a coherent body of doctrine by the Courts. I do not mean to say that they are to be regarded with suspicion. But as is common with an expanding doctrine, they do raise problems of coherent exposition which have never be systematically explored."

Though the above view was expressed as far back as 1972, it is no less valid today. The dissonance in the view expressed by this Court in some of its decisions on the subject emphasis such a need. The view expounded in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, , was departed from in certain respects in Jit Ram Shiv Kumar and Others Vs. State of Haryana and Others, , which was in turn critised in Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., . The divergence in approach adopted in Shri Bakul Oil Industries and Another Vs. State of Gujarat and Another, and Pournami Oil Mills and Others Vs. State of Kerala and Another, , is another instance. The fact that the recent decision in Kasinka Trading and another, etc. etc. Vs. Union of India and another, , is being reconsidered by larger Bench is yet another affirmation of the need stressed by Lord Hailsham for enunciating "a coherent body of doctrine by the Courts". An aspect needing a clear exposition -- and which is of immediate relevance herein -- is what is the precise meaning of the words "the promisee-alters his position", in the statement of the doctrine. The doctrine has been formulated in the following words in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, :

"The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 298 of the Constitution."

What does altering the position mean ? Does it mean such a change in the position of the promises as a result of acting on the faith of representation of the promisor that compensating him in money would not be just and equitable to him, i.e. a situation where the ends of justice and requirements of equity demand that the promisor should not be allowed to go back on his representation and must be held to it or does altering his position mean doing of some act, big or small, which the promisee does acting on the faith of the representation which he would not have done but for the representation ? In otherwords, is it enough that the promisee has spent some money or has taken some step acting on the basis of representation, which can be recompensed in money or otherwise ? Is it not ultimately a matter of doing equity and justice between the parties a case of holding the scales even between the parties and deciding whether in the interests of justice and equity the promisor can be allowed to resile from his promise and compensate the promisee appropriately or the promisor ought to be held to his promise and not allowed to go back since such a course is necessary in view of the change in position of promisee ? Our view of the matter is probably evident from the way we have posed the above questions. To wit, the rule of Promissory Estoppel being an equitable doctrine, has to be moulded to suit the particular situation. It is not a hard and fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. If it is more just from the point of view of both promisor and promisee that the latter is compensated appropriately and allow the promisor to go back on his promise, that should be done; but if the Court is of the opinion that the interests of justice and equity demand that the promisor should not be allowed to resile from his representation in the facts and circumstances of that case, it will do so. This, in our respectful opinion, is the proper way of understanding the words "promisee altering his position". Altering his position should mean such alteration in the position of the promisee as it makes it appear to the Court that holding the promisor to his representation is necessary to do justice between the parties. The doctrine should not be reduced to a rule of thumb. Being an equitable doctrine it should be kept elastic enough in the hands of the Court to do complete justice between the parties. It must be remembered that the doctrine of Promissory Estoppel was evolved toprotect a promisee who acts on the faith of a promise/representation made by promisor and alters his position even though there is no consideration for the promise and even though the promise is not recorded in the form of a formal contract. Surely a representation made or undertaking given in a formal contract is as good as, if not better than, a mere representation. All that we wish to emphasis is that anything and everything done by the promisee on the faith of the representation does not necessarily amount to altering his position so as to preclude the promisor from resiling from his representation. If the equity demands that the promisor is allowed to resile and the promisee is compensated appropriately, that ought to be done. If, however, equity demands, in the light of the tilings done by the promisee on the faith of the representation, that the promisor should be precluded from resiling and that he should be held fast to his representation, that should be done. To repeat, it is a matter of holding the scales even between the parties--to do justice between them. This is the equity implicit in the doctrine."

In Dr. Ashok Kumar Maheshwari Vs. State of U.P. and Another, , the doctrine of Promissory Estoppel again came up for consideration. It was held by the Supreme Court that even though the case did not fall within the term of Section 115 of the Evidence Act which indicates the rule of estoppel, it would be still open for a party who had acted upon a representation made by the Government to claim that the Government should be bound to carry out the promise made by it, even though the promise was not recorded in the form of a formal contract. In order to invoke the doctrine of Promissory Estoppel, the Supreme Court held, that it is not necessary for the promisee to show that he suffered detriment as a result of acting in reliance on the promise. The detriment in such a case is not some prejudice suffered by thepromisee by acting on the promise, but the prejudice which would be caused to the promisee if the promisor were allowed to go back on the promise. But, however, this doctrine of Promissory Estoppel cannot be invoked on the basis of a promise made by the promisor contrary to law made by the State.

The learned Counsel for the petitioner also refers to the decision of this Court in B. Sanjeeva Reddy v. Government ofA.P. 1995 (3) ALD 625. While dealing with Promissory Estoppel it was held that :

"The doctrine of Promissory being an equitable doctrine, it must yield place to the equity if larger public interest so requires, and if it can be shown by the Government or the public authority seeks to review itself from the application of the principles, it is bound to place before the Court the material, the circumstances or grounds on which it seeks to resile from the promise made or obligation undertaken by necessitates in enforcing the promise."

Thus, it is clear from the aforesaid decisions of the Supreme Court that if the representation or promise is made by the State and if the individual alters his position in pursuance of such representation of promise, the State cannot be allowed to resile from its promise. The promisee need not establish that some prejudice was suffered by him, but it will be sufficient if he establishes that prejudice would be caused to him if the promisor was allowed to go back on the promise. It is also held that in case promisor resiles from promise, it is open for the Court to compensate the promisee appropriately or direct the promisor or prevent the promisor from going back on his promise. Thus the principle has to be applied keeping in view the facts and circumstances of a particular case, by holding the scales even between the parties to do justice between them, asthe doctrine of Promissory Estoppel has been evolved by the Courts on the principles of equity to avoid injustice. The definitions of ''estoppel'' and ''promissory estoppel'' in Black''s Law Dictionary which are based on decided cases indicates that before the rule of Promissory Estoppel can be invoked, is to be shown that there was a declaration or promise made which induced the party to whom the promise was made to alter its position to its disadvantage.

Applying the aforesaid principles to the facts of the present case, it is not disputed that the petitioner was the highest bidder and that his bid was accepted on 5-5-1995 that he was directed to deposit certain amounts to enable him to execute the lease deed and that in pursuance of the directions on 5-5-1995, the petitioner altered his position by depositing the amounts required for the purpose and also incurred huge sum of money for preparing the advertisement boards. Thus, it cannot be said that the petitioner has not acted in a bona fide manner on the representation made by the respondents through their communication dated 5-5-1995. It is not a case where a promise is made contrary to law, or outside the authority or power of the Corporation or the person making the promise. Thus, I hold that the principles of Promissory Estoppel squarely apply to this case.

In view of this finding, I need not consider the other issue, namely, whether the petitioner can invoke the doctrine of legitimate expectation and the consequences of its infraction.

The learned Counsel for thepetitioner submits that there shall be a positive direction to the respondents to enter into a lease agreement as held by the Supreme Court in Prestress India Corporation Vs. U.P. State Electricity Board and Others, . In this regard it is stated that the aforesaid decision was rendered in different circumstances.

In the present case I held that the respondents are bound by the principles of ''Promissory Estoppel''. As held by the Supreme Court two causes are open for this Court whiie granting relief. Either the promisee can be compensated or the promisor could be directed to bound by its promise. In deciding this the Court has to keep the scales even, while avoiding injustice to the promises. It is not a case where the petitioner had adopted any dialatory attitude for proper execution of the lease deed. On the other hand, he had furnished the security deposit and the 1/ 3rd lease amount. The said sums were accepted by the respondents without any protest. Further subsequent demands raised by the respondents were also fulfilled by the petitioner in part. For the reasons best known to the respondents the offer was neither cancelled nor the agreement was executed. Even the file produced by the respondents did not reveal the reasons for not initiating either of these actions. Thus, I find the equities are in favour of the petitioners directing the respondents to fulfil the promise made by them. Hence, I am of the considered opinion that the respondents shall be made to honour their promise as held out in their communication dated 5-5-1995.

The writ petition is accordingly allowed and the respondents are directed to execute the lease deed for a period of three years as per the terms of the tender notification dated 28-3-1995 and the communication No.3642/Advt./A3/95 dated 5-5-1995 within a period of four weeks from the date of receipt of a copy of this order duly adjusting the amounts already paid.

Accordingly, both the writ petitions are allowed. No costs.