Holding

The Court held that the Minister’s arbitrary and unconstitutional allotment of shops/stalls was illegal and made her liable to pay exemplary damages of Rs. 60 lakhs to the Government.

Summary

The Supreme Court examined a public interest writ petition challenging the allotment of 52 shops and stalls by the then Minister of Urban Development, Smt. Sheila Kaul. The Court found that the allotments were made without public notice, contrary to the policy she herself had framed in 1994, and were granted to her relatives, staff and friends, indicating arbitrary and malafide exercise of power. CBI investigations revealed possible criminal conspiracy, leading to registration of cases under the Prevention of Corruption Act. The Court held that such unconstitutional actions attracted exemplary damages and ordered the allotments to be quashed. Consequently, the Minister was directed to pay Rs. 60 lakhs as exemplary damages to the Government exchequer, with the amount to be deposited within nine months.

Issues considered

Whether the allotment of shops/stalls by the Minister violated the policy and was arbitrary, discriminatory and unconstitutional.
Whether such arbitrary exercise of ministerial power attracts liability for exemplary damages.
Whether the Minister can be held personally liable to pay exemplary damages to the Government exchequer.
Whether the CBI‑registered offences under the Prevention of Corruption Act are applicable to the ministerial conduct.

Legislation cited

Constitution of Indias. Article 32
Prevention of Corruption Act, 1988s. 120-B, s. 13(1)(d), s. 13(2), s. 420, s. 468, s. 471

Subjects

public officeabuse of powerexemplary damagesadministrative lawarbitrary actiongovernment propertyPrevention of Corruption ActArticle 32writ petitionministerial discretion

Judgment

SHIV SAGAR TIWARI A
v.
UNION OF INDIA AND ORS.

NOVEMBER 8, 1996

[KULDIP SINGH AND B.L. HANSARIA, JJ.] B

Adn1inistrative Lalv :

Public functionary-Exercise of power in arbitrmy manner-Minister
of Urban Affairs and Employment-Allotment of shops/stalls by-Allotments C
made violating the norms of the policy framed by the Minister herself and
without inviting tenders from eligible public-Held, while allotting the shops!
stalls, the Minister did not follow any policy or criteria-Allotments were
made in an arbitrary and illegal manner-The action of the Minister was
wholly arbitrary, malafide and unconstitutional-The Minister is liable to
pay Rs. 60 lakhs as exemplary damages to the Government exchequer- D
Public Interest Litigation.

Nilabati Be~era (Smt.) alias Lalita Behera v. State of Orissa and
Ors., [1993] 2 SCC 746 and Common Cause, A Regd. Society v. Union of
India & Ors., Writ Petition (C) No. 26 of 1995 decided on November
4, 1996, relied on. E

Rookes v. Barnard & Ors., 1964 Appeal Cases 1129 and A.B. and
Ors. v. South West Water Services Ltd., 1993 Queen's Bench 507, referred
to.
F
CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 585 of
I994.

(Under Article 32 of the Constitution of India.)

Shiv Sagar Tiwari, Petitioner in person, Kapil Sibal and Ranjit Kumar G
for the Petitioner.

Altaf Ahmed, ASG, S.S. Ray Dr. Rajeev Dhawan, T.C. Sharma,
Ms. Sushma Suri, V.K. Verma, Hemant Sharma, Ms. A. Subhashini, S.R.
Hegde, Akshay Anand, Rama Kant, Rajiv K. Garg, N.D. Garg, R.S. Sodhi, H
65I
652 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A Raj Kumar Gupta, H.P. Sharma, A.N. Baadiyar and Ms. Kamini Jaiswal
for the Respondents.

The following Order of the Court was delivered :

One of the issues for consideration before this Court in this Public
B Interest Petition is the validity of the allotment of 52 shops/stalls made by
Smt. Shiela Kaul, the then Minister for Housing and Urban
Development,Government of India.

While monitoring this case, this Court has passed various interim
orders from time to time. It would be useful to quote three such orders.
C The relevant part of the order dated April 17, I 996 is as under:

"The material placed before us inter a/ia, discloses that 4 l shops/
stalls allotted by Smt. Shiela Kaul on June 7, 1995 and 2 shops allotted on
July 3, 1995 were in total contravention of the rules/policy approved by
D herself on December 26, 1994. These shops/stalls were situated in Lodhi
Road Complex l & ll, Hanuman Road Market, Baba Kharak Singh Marg
Market, DIZ area Market, and Pleasure Garden near Lajpat Nagar Market.
The material on the record further shows that the said 43 shops/stalls were
allotted by Smt. Shiela Kaul without issuing any public notice/inviting
applications from the eligible persons which was in violation of the policy
E formulated by her on December 26,1994. The material also discloses that
orders of allotment in respect of said 41 shops/stalls were passed by Smt.
Shiela Kaul on June 7, 1995 (5 shops and 36 stalls). The material further
discloses that all the six shops have been allotted by her to her own relations/
employees/domestic servants of her family members and family friends.
She has allotted two shops to her two grand-sons, one shop to the maid
F servant of her son, Shri Vikram Kaul, who is residing in Dubai. One shop
to Handloom Manager of the firm, owned by her son-in-law and another
shop to a close friend. One shop has been allotted to the nephew of her
Minister of State, Shri P.K. Thungon. It is further on the record that
while making allotments in respect of stalls she has allotted most of the
G stalls to the relations, friends of her personal staff and officials of Directorate
of Estate. The details and the names of allottees and their relationship
have also been placed on the record.

The relevant part of the order dated July 19, 1996 is as under :

H, "Mr. N.N. Singh, Superintendent of Police, CBI, New Delhi has
S.S. TIWARI v. U.0.1. 653

placed on record interim report No. 3 dated June 17, 1996 and Interim A
Report No. 4 dated July 16, 1996. Interim Report No. 3 indicates that a
separate preliminary enquiry was registered against Smt. Shiela Kaul and
others in the matters of allotment of shops/stalls made by her on June 7,
1995 and July 3, 1995 in favour of her close relations/friends of her personal
staff as well as those of the officials of Directorate of Estates. According
to the report, the preliminary enquiry, prima facie, establishes that Smt. B
Shiela Kaul had abused her official position as the Minister for Urban
Development and she had entered into a criminal conspiracy with some of
the acquaintances and her personal staff, pursuant to which she in abuse of
her official position made these allotments and caused wrongful loss to
the Government by effecting allotments on economical licence fees basis
without inviting any tender or by issuing public notice for inviting the C
response from the general public from the point of view of earning
maximum revenue for the Government. A regular case under Section
120-B, 420, 468/471 !PC and Section 13(2) read with 13(1)(d) of the
Prevention of Corruption Act, 1988, has been registered against Shiela
Kaul and her additional Private Secretary Rajan S. Lala and others."
D
The ocder dated September 6, 1996 to the extent relevant is as under:

"'Pursuant to this Court's order dated July 19, 1996, the Director of
Estates has filed its report along with an affidavit regarding the shops and
stalls allotted by Smt. Shiela Kaul. lt is stated that from 1992 onwards 52 E
shops have been sanctioned by the then Minister for Urban Development
(Smt. Shiela Kaul) out of which 7 shops were allotted by Smt. Shiela
Kaul before she herself had approved the policy in 1994 for disposal of
the shops on tender basis. It is further stated in the affidavit that 45 shops
were allotted by Smt. Shiela Kaul after 1994 in violation of the policy
framed by the Ministry. F

The gist of the objections filed by the various allottees have been
enclosed along with the affidavit. Before any action is taken, we consider
it appropriate to give an opportunity of hearing to all these persons. We,
therefore, direct the Director of Estates to issue individual notices to these
42 persons to be personally present in this Court or through their counsel G
to argue their point of view in respect of theirobjections on 27th September,
1996 at 2 PM. They shall show cause to this Court why their allotment be
not cancelled and why they be not burdened with damages." j

This Court by the Judgment dated October 11, 1996 has come to the H
654 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A conclusion that the allotments of the said 52 shops/stalls made by Smt.
Shiela Kaul were arbitrary, discriminatory, unconstitutional and as such
were liable to be quashed. This Court quashed the said allotments on the
following reasoning:

''The CBI has since inquired into the matter in some detail and has
B by now submitted 4 Interim Reports. According to the CBI, orders of
allotment in respect of the shops/stalls in question were passed by Smt.
Shiela Kaul, the then Minister of Urban Development and "all the 6 shops
have been allotted by her to her own relation/employees/domestic servants
of her family members and family friends. She has allotted 2 shops to her
2 grandsons. One shop to the maidservant of her son, Sh. Vikram Kaul
C who is residing in Dubai, one shop to handloom manager of the firm
owned by her son-in-law and another shop to a close friend. One shop has
been allotted to the nephew of the Minister of State, Sh. P.K. Thungon.
While making allotments in respect of stalls, she has allotted most of stalls
to the relations/friends of her personal staff and officials ofDte. of Estates."
The CBI has also reported that Smt. Shiela Kaul had made ten different
D categories of persons as the basis for deciding allotments, but even this
categorisation was not adhered to while making allotments. The further
findings are: (I) "Many other Organisations/persons who had also applied
for allotment of shops/stalls ·from time to time were not considered for
allotment and no reasons, whatsoever, were assigned for non-allotment of
E shops/stalls to them" : and (2) -"At the time of discretionary allotments
made by Smt. Shiela Kaul in 1992 and 1994 persons who were relations
of her personal staff were considered and allotted shops .......".

Question is whether they were selected in accordance with law, which
aspect as its importance because apparently a large number of other persons
F could as well fall within the categories in question and had applied also?
From the repo11 of the CBI it is clear that the allottees had been selected,
not by following the tender system, as required by the policy of 1994, but
because of their relationship with the Minister or her personal staff, or
being employees or friends of such persons. If that be so, the allotments
G were wholly arbitrary and speak of misuse of power. All important question
is what is required to be done to undo the wrong and how the wrong doer
is to be dealt with within the parameters known to .Jaw."

.._., Finally in para 18 of the judgment, this Court directed as under:

H "Secondly, Smt. Shiela Kaul, who was prima facie personally
S.S. TIWARI v. U.0.1. 655

responsible for the illegal allotments, has to be asked to show A
cause as to why damage should not be awarded against her for
her alleged misuse of power. So, a notice be issued to her to
show cause why she should not be asked to pay such sum as
damages, for each of the illegal allotments made by her, as this
Court would deem just and proper. The cause would be shown
within three weeks of the receipt of this order." B
Pursuant to the above quoted directions, a show cause notice was
issued to Smt. Shiela Kaul. She has filed affidavit in reply to the show
cause notice.

Smt. Shiela Kaul was arrayed as respondent in the writ petition. C
This Court has been monitoring this case for a period of about 2 years.
Various interim orders were passed from time to time. Despite ample
opportunity available to her Smt. Shiela Kaul did not choose to file any
counter-affidavit in this Court. Dr. Rajiv Dhawan, learned counsel
appearing for Smt. Shiela Kaul has very fairly stated that her client cannot
take her case higher than what has been stated in the affidavit filed on D
behalf of the Union of India. The learned counsel has relied upon paras 6
& 7 of the affidavit dated September 6, 1996 filed by Harcharanjeet Singh,
Director of Estates, Ministry of Urban Affairs and Employment, on behalf
of Union of India. The said paras are ·as under:

"6. That the Ministry of Works & Housing (renamed as Ministry E
of Urban Affairs & Employment) on 24th March, 1979 had
issued the policy to be adopted for development and construction
of shopping centers in various Government colonies in Delhi.
A copy of the Office Memorandum issued in this regard is
given as Annexure-R-V. The salient features of the policy are
indicated as follows: F

i) The shops under construction in convenient/local shopping
centers in the sanctioned scheme would be sold by auction by
the Land & Development Officer after fixing minimum reserve
price in consultation with the Finance Division.
G
ii) In respect of the shopping centres which are to be constructed
in various colonies the L&DO would auction the sites for various
purposes on perpetual leasehold basis.

iii) Such shops that are constructed in multistorey buildings
would be taken in the books of the Director of Estateo would H
656 SUPREME COL:RTREPORTS [1996] SUPP. 8 S.C.R.

A allot the same on licence fee basis.

iv) While the above was the general policy to be adopted in
future (after 24th March, 1979) exceptions may be made if the
circumstances so warranted.

B 7. The records of the Director of Estates indicate that after the
issue of these instructions in March 1979, the Office of L & D
0 has not been able to auction any shops in any of the shopping
centres in Government colonies, despite the efforts made by the
Office of L & D 0 in this regard since the reserve price fixed
by the L & D 0 was considered too high and no bidders came
forward for auction of shops. At present, the records of the
c Directorate of estates where decisions have been taken by various
Ministers to allot the shops on licence fee basis are with the
Central Bureau oflnvestigation. In the absence of records which
were not easily accessible it has not been possible to indicate the
exact position in respect of each shop which has been given on
licence fee basis after the policy as indicated above came into
D force. However, on the basis of the individual files it is observed
that in January, 1986, 5 shops were given on licence fee basis
by the then Minister (Shri Abdul Gafoor). From 1987 to 1990,
18 shops were allotted on licence fee basis by the then Minister
(Smt. Mohsina Kidwai). Thereafter, from 1992 onwards 52
shops have been sanctioned by the then Minister for Urban
E Development (Smt. Shiela Kaul) out of which 7 shops were
al'otted by Smt. Shiela Kaul before she herself had approved
the policy in 1994 for disposal of the shops on tender basis.

8. Break-up of the shops allotted by Smt. Shiela Kaul, the then
Minister during her tenure is as follows:
F
Shops allotted from 1992 to 1994 7
....
(Before the policy ofgiving the shops on tender basis was approved).

G Shops allotted after 1994 policy was laid down. 45

Shops not accepted by the allottees. 9

'The contents, quoted above, only give the factual position pertaining
to the allotment of shops/stalls during the period from 1979 onwards. It is
H further obvious that Smt. Shiela Kaul herself framed the policy in 1994
S.S. TIWARI v. U.0.1. 657

for disposal of the shops on tender basis but did not follow the same. At A
this stage it would be instructive to quote the explanation given by Sm!.
Shiela Kaul in her affidavit in reply to the show cause notice to the allegation
that she allotted shops to her two grand children, friends, and relations:

"ln any case, the allegations are wrong in material particulars in
~ B
Jn respect to the 2 shops to her grandsons, she was not aware at
that time because the name in the list were Vivek Kumar &
Ashish Kumar and the addresses were of Delhi of which she
was not aware. The shop allotted to maid servant of her son
Vikram Kaul, she was not aware of her name and addresses in C
the statement given to bet. She comes from a weaker section of
society and comes under Schedule Tribes."

We do not wish to comment except that we are at pains to read the
above quoted stand taken by a person who has held high offices like Central
Minister and Governor. D

This Court in Common Cause A Regd. Society v. Union of India &
Ors. Writ Petition (C) No.26 of l.995 (Capt. Satish Sharma 's case) decided
on November 4, 1996 relied upon this Court's judgment in Nilabati Behera
(Smt.) Alias Lalita Behera v. State o/Orissa and Ors., [1993] 2 SCC 746.
This Court also referred to Rookes v. Barnard & Ors., [1964] Appeal E
Cases 1129 and the Judgment of the Court of Appeal in A.B. and Ors. v.
South West Water Services Ltd. [1993] Queen's Bench 507 and held as
under:

"We are of the view that the legal position that exemplary damages F
can be awarded in a case where the action of a public servant is
oppressive, arbitrary or unconstitutional is unexceptionable.':

Even in the judgment dated October 11, 1996 by which show cause
notice was issued to Sm!. Shiela Kaul, this Court referred to various
judgments of different Courts from different countries in the world and G
has held that a public serv&nt is liable to exemplary damages for his acts
which are oppressive, arbitrary or unconstitutional.

The question for consi~eration, however, is whether the action of
Smt. Shiela Kaul, as discussed in detail in our judgment dated October 11,
1996 (relevant part quoted above) and also in various interim orders quoted H
658 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A above, makes her liable to pay exemplary damages. After giving our
thoughtful consideration to the material on record and in particular the
findings of this Court-quoted above-the answer has to be in the affirmative.
Smt. Shiela Kaul's action was wholly arbitrary, malafide and
unconstitutional. This Court has given clear finding in the judgment/
orders quoted above to this effect. We, therefore, hold that Sm!. Shiela
B Kaul is liable to pay exempla1y damages.

We have heard Dr. Raj iv Dhawan, Mr. Kapil Sibal, Mr. Altaf Ahmad,
learned Additional Solicitor General and Mr. Shiv Sagar Tiwari on the
question of quantum. Dr. Dhawan has stated that Smt. Shiela Kaul has
followed the same policy which was being followed by her predecessors
C in office. Mr. Kapil Sibal has contended that exemplary damages should
be awarded for public injury caused as a result of arbitrary exercise of
power on the part of Smt. Shiela Kaul. He has, however, contended that
so far as the allotments made by her are concerned, in the facts and
circumstances of the case, exemplary damages are not called for. Mr.
Sibal has based his contention on the assumption that if the allotments
D were to be made to the persons belonging to the weaker sections of the
society, then, there would not have much gain to the State Exchequer.
There is nothing on the record to show that the allotments were to be
made only to weaker sections or to any category of persons. In any case
Smt. Shiela Kaul did not follow any policy or criteria. Allotments were
E made by her in an arbitrary and illegal manner.

We may mention that this Court in the order dated November 4,
1996 concerning Capt. Satish Sharma awarded Rs. 50 lacs as damages for
his actions which were arbitrary, malafide and unconstitutional.

F After examining all the facts and circumstances of the case and giving
our thoughtful consideration to this aspect, we direct Smt. Shiela Kaul to
pay a sum of Rs. 60 lacs (on all counts) as exemplary damages to the
Government Exchequer. Since the property with which Smt. Shiela Kaul
was dealing was public property, the Government which is "by the people"
has to be compensated. We further direct Smt. Shiela Kaul to deposit the
G amount with the Secretary, Ministry of Finance, Government of India
within nine months from today. The amount ifnot paid, shall be recoverable
as arrears of land revenue.

Before parting with this order, we make it clear that the CBI, which
H is separately investigating the matter, shall not be influenced by any
S.S. TIWARI v. LJ.0.1.

observations made by this Court for reaching the conclusion as to whether A
any prima facie case for prosecution/trial is made out against Smt. Shiela
Kaul. It shall have to be decided on the basis of the material collected and
made available with the CBI as a result of the investigation.

R.P. Petition still pending.