Holding

CIDCO was not justified in unilaterally cancelling the allotment; the cancellation order is void and CIDCO is estopped from rescinding the allotment.

Summary

The City and Industrial Development Corporation of Maharashtra (CIDCO) allotted a commercial plot to original allottees, who transferred it to the appellants. CIDCO accepted transfer fees and full lease premium, executed lease and confirmation deeds, and issued development permission and commencement certificate, after which the appellants began construction. CIDCO later issued a show‑cause notice claiming the lease was void under Section 23 of the Contract Act and cancelled the allotment, demanding possession. The appellants challenged this in a writ petition; the Bombay High Court dismissed it on the ground of an alternative remedy. The Supreme Court held that CIDCO could not unilaterally cancel the allotment after giving assurances and receiving payments, that the cancellation was not justified under its regulations, and that the allotment was not opposed to public policy. Consequently, the Court set aside the cancellation order and allowed the appeal.

Issues considered

Whether CIDCO acted beyond its jurisdiction and authority in cancelling the allotment on the ground of violation of its own regulations and Section 23 of the Contract Act, 1872.
Whether the allotment was opposed to public policy rendering it void under Section 23 of the Contract Act.
Whether CIDCO is estopped from rescinding the allotment after having given assurances and receiving full premium and transfer fees.
Whether the High Court was correct in dismissing the writ petition on the ground of an alternative remedy.

Legislation cited

Subjects

urban developmentland allotmentcancellationpublic policyestoppelcontract actjurisdictionCIDCOleasedevelopment permissionwrit petition

Judgment

SUNIL PANNALAL BANTHIA AND ORS.
A
v.
CITY AND INDUSTRIAL DEVELOPMENT CORPN. OF
I .
MAHARASHTRA LTD. AND ANR.

MARCH 8, 2007
B
[DR. AR. LAKSHMANAN AND AL TAMAS KABIR, JJ.]

Urban Development-Allotment of plots-Cancellation of, by
Corporation on ground of violation by itself of its own Regulations-Challenge
c to-Held: Corporation was not justified in cancelling the allotment
unilaterally on the ground that it acted without jurisdiction and in violation
of its Rules and Regulations and was void as being opposed to public
policy-Corporation accepted transfer fees from original allottees and full
· premium lease from the transferees and issued sanction certificate-Transferees
D acted and altered their position to their prejudice on basis ofsuch assurance-
Thus, order of cancellation of allotment set aside-Contract Act, 1872-
Section 23.

Respondent-Corporation issued a letter of allotment of plot on lease in
favour of M and N. Original allottees applied for transfer of the said plot to
E the appellants. Corporation accepted the transfer charges and full premium
lease and executed Lease Deed and Confirmation Deed in favour of the
appellants and issued the Development Permission and Commencement
Certificate. Appellants then commenced the construction work. Thereafter,
Corporation issued Notice to the appellants to terminate the lease agreement
being void under Section 23 of the Contract Act. Corporation cancelled the
F allotment in favour of the appellants. Appellants filed writ petition challenging
(._
the act.ion of the respondent and demanded possession of the allotted plot.
Respondent contended that the allotment had been made by not calling for
tenders and such action on its part was void as being opposed to public policy.
High Court dismissed the writ petition on the ground of alternative remedy
G available. Hence the present appeal.

Allowing the appeal, the Court
~

HELD: 1. In the instant appeal, the concern is only with the question of •
law as to whether the respondent-Corporation had acted in excess of its
H 798
SUNIL PANNALAL B.\NTHIA ,- CITY A~D INDUSTRIAL DE\.ELOPMENT ('QRPN OF MAH.\RASlffRA LTD. 799

jurisdiction and authority in cancelling the allotment made to the appellants A
..- t on a unilateral consideration that the allotment had been made in contravention
of its rules and regulations and was thereby opposed to public policy and was
illegal and void in terms of section 23 of the Contract Act, 1872. No decision
is required to be taken in the matter on facts, which could have merited an
order of remand. The submission that the facts of this appeal are different
from those which have been earlier remitted to the High Court for re- B
consideration on merits and also for making a re-valuation are accepted.
(Para 21( [806-A-CI

2. On the legal question, it is quite obvious that having acted and held
out assurances to the appellants which caused the appellants to alter their C
position to their prejudice, it was not open to CIDCO to take a unilateral
decision to cancel the allotment on the ground that it had acted without
jurisdiction and/or in excess of jurisdiction and in violation of its rules and
regulations. Even on that score, the argument of CIDCO is unacceptable having
regard to Regulation 4 of the New Bombay Disposal of Land Regulations, 1975
which empowered CIDCO to dispose of plots of land even on the basis of D
individual applications. (Para 22) (806-C-EI

3. The stand taken by CIDCO that allotment being opposed to public
policy, is opposed to public policy since CIDCO was not entitled to taRe a
unilateral decision to cancel the allotment after the appellants had acted on
the basis thereof and had expended large sums of money towards the E
construction which has progressed to some extent. The Regulations allowed
CIDCO to entertain individual applications for allotment Merely by indicating
that the law declared by this Court was universally binding under Article 141
of the Constitution, it could not contend that such allotment was contrary to
public policy on a fresh consideration made by the Board of Directors of the F
Corporation upon considering the recommendations made by the then Addi.
Secretary. That consideration, was not suflkient in the instant case to cancel
the allotment which had been made in accordance with the Regulations and
the appellants had made payments as directed by the Corporation, which, in
fact, was higher than the price recommended by the Shankaran Committee.
(Paras 23 and 241 G
;, Century Spinning and Manufacturing Company Ltd.and Anr. v. The
Ulhasnagar Municipal Council and Anr., (19701 l SCC 582; U.P. Rajkiya
Nirman Nigam Ltd v. Indure Private Limited & Ors., 119961 2 SCC 667,
referred to.
H
800 SUPREME COURT REPORTS (2007] 3 S.C.R.

A Falmouth Boat Construction Limited v. Howell, (1950) I All.E.R. 538,
referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1219 of2007.

From the Judgment and Order dated 12.7.2006 of the High COurt of
B Judicature at Bombay in Writ Petition No. 3360 of 2006.
J.P. Cama, Nitin S. Tambwekar, Sunil l Jayakar, B.S. Sai and K. Rajeev for
the Appellants. )'

Altaf Ahmed and A.S. Bhasme for the Respondents.
c
The Judgment of the Court was delivered by

ALT AMAS KABIR, J. 1. Leave granted.

2. This appeal is directed against the order passed by the Division
D Bench of the Bombay High Court dismissing the writ petition filed by the
appellants herein challenging the action of the respondent, City and Industrial
Development Corporation of Mahara$h!ra Ltd. (for short 'CIDCO') in cancelling
the allotment made in favour of the appellants. The Division Bench indicated
in its impugned order that in identical matters other writ petitions filed at
E different points of time had been dismissed on the ground of alternative
remedy available.

3. The facts as can be garnered from the materials on record, indicate
that the CIDCO had issued a letter of allotment of a commercial plot measuring
1453.75 sq. mts. on lease in plot No. I in Sector 9, Panvel (West), Navi
F Mumbai, for a period of 60 years for a premium ofRs.2,12,24,750/- in favour
of Mrs. Meera Balkrishna Dhumale and Mrs. Neeta Hemant Patankar jointly.
The original allottees applied for transfer of the said plot to the appellants
herein. Upon accepting the transfer charges of Rs.2 lacs, CJDCO issued a
corrigendum to the original allotment letter dated 5th February, 2004 and
executed a Deed of Lease in favour of the appellants on receipt of the full
G lease premium of Rs. 2,12,24,750/-. CIDCO also executed a Deed ofConfinnation
in favour of the appellants and issued the Development Permission and
Commencement Certificate in tenns of Section 45 of the Maharashtra Regional
Town Planning Act, 1966 (for short 'the MRTP Act').

H 4. On the basis of the above, the appellants commenced the construction
SUNIL PANNALAL BANTHIA \'_ CJn' AND INDUSTRIAL DEVELOPMENT CORPN OF MAHARASHTRA LTD. IALTAMAS KABIR. J r 801

't work and proceeded up to the Ist floor and also completed the construction A
of the underground water tank. However, on 19th July, 2005, CIDCO issued
a Show Cause Notice to the appellants to show cause why the agreement to
lease should not be terminated as being void under Section 23 of the Contract
Act. The appellants duly replied to the show cause notice through their
learned advocate, but despite the above, on 29th March, 2006, CIDCO passed
an order terminating the Agreement of Lease and demanded return of B
possession of the allotted plot with a threat of forcible resumption unless the
demand was complied with.

5. The appellants filed a writ petitio"n against CIDCO challenging the
show cause notice dated 19th July, 2005, and the order dated 29th March, C
2006, terminating the Agreement of Lease and demanding possession of the
allotted plot on 13th April, 2006. The matter was hotly contested before the
Bombay High Court and all the aforesaid facts were brought to its notice. On
behalf of the respondents, it was sought to be highlighted that the allotment
had been made by it in contravention of the provisions of Section 23 of the
Contract Act by not calling for tenders and such action on its part was void D
as being opposed to public policy.
).
6. Without going into the aforesaid questions, the Bombay High Court
simply dismissed the writ petition on the ground of alternative remedy available.

7. On behalf of the appellants, it was sought to be urged by Mr. J.P. E
Cama, learned senior advocate, that two similar matters, being Civil Appeal
No. 408/07 (Amey Co-operative Housing Societies Limited v. Public Concern
for Governance Trust & Ors) and Civil Appeal No.410/07 filed by Mis. Vijay
Associates (Wadhwa) Developers, had been considered in detail by this
Court and the said appeals had been disposed of on !st February, 2007 by F
a judgment in which most of the points raised in the instant appeal had also
been raised and decided. Mr. Cama submitted that on the issues as already
decided, nothing further was needed to be added, but there was a basic
difference between the reliefs sought for in the said appeals and the instant
appeal. Mr. Cama pointed out that the said two appeals had arisen out of two
writ petitions filed by way of Public Interest Litigation and one of the grievances G
of the writ petitioners was that the properties which had been allotted had
been undervalued, thereby causing huge loss to CJDCO. Besides asking for
cancellation of the allotments, the writ petitioners had made an alternate
prayer for the appointment of an independent valuer to revalue the plots
allotted and in the event the valuation was found to be higher, for a direction H
802 SUPREME COURT REPORTS [2007] 3 S.C.R.

A upon the allottees to pay the balance to CIDCO on account of the fact that
the construction work had reached an irreversible stage.
( .
8. Mr. Cama submitted that in the instant case, there was no such prayer
and it was the appellants herein who had challenged the cancellation of their
allotment by CIDCO in terms of its order dated 29th March, 2006 purportedly
B on account of violation of the provisions of Section 23 of the Contract Act.
According to Mr. Cama, the only question to be decided in this appeal is
whether having accepted the entire premium lease from the appellants as also
the transfer fees from the original allottees and having issued Sanction and
Commencement Certificate, CIDCO was entitled to resile from its original
C actions and to cancel the allotment unilaterally on the ground of violation by
CIDCO itself of its own Regulations which attracted the provisions of Section
23 of the Contract Act. It was urged that since the appellants had substantially
altered their position to their prejudice on the assurances held out by CIDCO
by investing huge amounts on the development of the allotted plot, CIDCO
was estopped in law from resiting from its earlier assurances and seeking
D eviction of the appellants on the ground that the allotment had not been made
in accordance with the Regulations.

9. Referring to the decision of the Court of Appeal in the case of
Falmouth Boat Construction Limited v. Howell, reported in [1950] I All.E.R.
538, Mr. Cama referred to the observations made by Lord Denning with regard
E to the steps taken on the basis of an oral assurance. Witile dealing with the
situation where a Ship Builder had.proceeded to effect repairs on the basis
of an oral direction, Lord Denning held that whenever government officers,
in their dealings with a subject, take on themselves to assume authority in
a matter with which the subject is concerned, he is entitled to rely on their
F having the authority which they assume. He does not know and cannot be
expected to know, the limits of their authority and he ought not to suffer if
they exceed it.

10. Mr. Cama submitted that the defence being taken on behalf of the
CIDCO that it had acted arbitrarily and in contravention of its own rules, was
G not available to CIDCO since the appellants had acted and altered their
position on the basis of such assurance and the appellants were not required
to know whether CIDCO had acted in conformity with its rules or not.

11. In this connection, Mr. Cama also referred to the decision of this
Court in the case of Century Spinning and Manufacturing Company Ltd. and
H
SLJNIL PANNALAL BANTHli\ '- rm· AND INDUSTRIAL DE\'ELOPMEt-.'T CORPN. OF MAHARASHTRA LTD.14J. TAMAS KABIR J. I 803

Anr. v. The Ulhasnagar Municipal Council and Anr., reported in [ 1970] 1 SCC A
582, wherein it was observed as under:-

"Public bodies are as much bound as private individuals to carry out
representations of facts and promises made by them, relying on which
other persons have altered their position to their prejudice. The
obligation arising against an individual out of his representation B
amounting to a promise may be enforced ex contractu by a person
who acts upon the promise: when the law requires that a contract
enforceable at law against a public body shall be in certain form or
be executed in the manner prescribed by statute, the obligation may
be enforced against it in appropriate cases in equity. In Union ofIndia C
and Ors. v. Mis. Inda-Afghan Agencies Ltd., [1968] 2 SCR 366, this
Court as held that the Government is not exempt from the equity
arising out of the acts done by citizens to their prejudice, relying upon
the representations as to its future conduct made by the Government.
This Court held that the following observations made by Denning, J.,
in Robertson v. Minister of Pensions, (1949) 1KB227, applied in India: D

"The Crown cannot escape by saying that estoppels do not bind
•
>I the Crown for that doctrine has long been exploded. Nor can the
Crown escape by praying in aid the doctrine of executive necessity,
that is, the doctrine that the Crown cannot bind itself so as to fetter
its future executive action." E
We are in this case not concerned to deal with the question whether
Denning L.J., was right in extending the rule to a different class of
cases as in Falmouth Boat Construction Co. Ltd. v. Howell, [1950]
I All ER 538 where he observed at p.542:
F
'j "Whenever Government officers in their dealings with a subject
take on themselves to assume authority in a matter with which the
subject is concerned, he is entitled to rely on their having the authority
which they assume. He does not know, and cannot be expected to
know, the limits of their authority, and he ought not to suffer if they
exceed it." G
,. It may be sufficient to observe that in appeal from that judgment
(Howell v. Falmouth Boat Construction Co.Ltd.) (supra) Lord Simonds
observed after referring to the observations of Denning, L.J.:

"The illegality of an act is the same whether the action has been H
804 SUPREME COURT REPORTS [2007] 3 S.C.R.

A misled by an assumption of authority on the part of a Government
officer however high or low in the hierachy. ( .
The question is whether the character of an act done in force of a
statutory prohibition is affected by the fact that it had been induced
by a misleading assumption of authority. In my opinion the answer is
B clearly: No."

12. It was further observed that different standards of contract for the
people and the public bodies could not ordinarily be permitted and the public
body was not exempt from the liability to carry out its obligation arising out '
of representations made by it relying upon which a citizen has altered his
C position to his prejudice.

13. The same sentiments have also been expressed by this Court in
another decision in the case of UP. Rajkiya Nirman Nigam Ltd v. Indure
Private Limited & Ors., [1996] 2 SCC 667, where the concept of indoor
D management was argued on behalf of the appellant. Repelling such argument,
this Court held that when the negotiations were undertaken on behalf of the
appellant, the respondent was led to believe that the officer was competent
to enter into the contract on behalf of the appellant. When the counter
proposal was sent, the appellant had not returned the proposal. It, therefore,
amounted to acceptance and hence a concluded contract came into existence.
E
14. On the strength of the above, Mr. Cama submitted that having
allotted the plot in question to the appellants, it was not open to CIDCO to
unilaterally claim that such allotment was void since it had no authority to
make such allotment in the manner in which it had been done.

F 15. Mr. Cama submitted that even such a stand was untenable in view
of Regulation 4 of the New Bombay Disposal of Land Regulations, 1975,
which had been framed under Section 159 of the MRTP Act and provides as
follows:-

Manner of disposal of land: "The Corporation may dispose plot of
G
land by public auction or tender or by considering individual
applications as the Corporation may detennine from time to time."

16. Mr. Cama submitted that C!DCO had also adopted Resolutions on
the aforesaid basis, which issue had been dealt with by this Court in the case
H of Amey Co-operative Housing Society Limited (supra). It was not, therefore,
SUNIL PANNALAL BA!'ITHIA r. CIT\" .>\~D INDUSTRIAL DE\'ELOPMENT CORPN. OF MAflARASHTR~ LTD IAL TAMAS 1'·\l:llR 1 I 805

available to CIDCO to contend that the allotment could not have been made A
-' on the basis of an individual application and that the same was void on
account of the fact that no public auction had been held in connection with
such allotment.

17. Mr. Cama also submitted that the availability of an alternate remedy
which was less efficacious than a writ petition, did not absolutely bar the B
filing of a writ petition and even on such ground the impugned order of the
High Court was liable to be set aside, particularly when the writ petition had
been admitted and the parties had completed their pleadings. Mr. Cama
submitted that the subject-matter of the instant appeal being different from
those decided earlier by this Court, there was no reason for the appeal to be C
remitted back to the High Court since the only question involved in the
instant appeal was whether the allotment made was at all void in terms of
Section 23 of the Contract Act, 1872 and also whether CIDCO acted within
its jurisdiction in cancelling such allotment unilaterally.

18. Appearing for CIDCO, Mr. Altaf Ahmed, learned Senior Advocate, D
submitted that certain other similar appeals which had been disposed of by
the High Court without going into merits, had been remitted to the High Court
for fresh determination and there was no difference in the instant case where
also the High Court had adopted a similar procedure. Mr. Ahmed contended
that since the merits of the matter had not been gone into by the High Court, E
it was not available to the appellants to argue the merits which the High Court
had no occasion to consider. The question of valuation or the mode of
allotment was yet to be adjudicated upon and the matter was, therefore,
required to be remitted to the High Court for a full adjudication thereupon.

19. Mr. Ahmed tried to urge that having regard to Section 23 of the F
Contract Act, an agreement would not be lawful if it was found to be immoral
or opposed to public policy. He urged that since CIDCO had made the
allotment in violation and/or contravention of its own rules regardi111g such
allotment, the allotment must be held to be opposed to public policy and was
therefore unlawful and void in terms of Section 23 of the Contract Act, 1872. G

20. Mr. Ahmed submitted that the decisions cited by Mr. Cama were not
applicable to the facts of this case since the High Court did not go into the
facts to determine as to whether the allotment was, in fact, opposed to public
policy and was, therefore, illegal and void.
H
806 SUPREME COURT REPORTS [2007] 3 S.C.R.

A 21. Although, we were at one stage inclined to remit the matter to the
High Court since the writ petition had not been considered on merits and had
been dismissed on the existence of an alternate remedy by way of suit, after
considering the submissions made on behalf of the respective parties, we
have decided otherwise. We are inclined to accept Mr. Cama's submission that
the facts of this appeal are different from those which have been earlier
B remitted to the High Court for re-consideration on merits and also for making
a re-valuation. In the present appeal, we are only concerned with the question
of law as to whether CIDCO had acted in excess of its jurisdiction and
r
authority in cancelling the allotment made to the appellants on a unilaterally
consideration that the allotment had been made in contravention of its rules
C and regulations and was thereby opposed to public policy and was illegal and
void in terms of Section 23 of the Contract Act, 1872. No decision is required
to be taken in the matter on facts, which could have merited an order of
remand.

22. On the legal question, it is quite obvious that having acted and held
D out assurances to the appellants which caused the appellants to alter their
position to their prejudice, it was not open to CIDCO to take a unilateral
decision to cancel the allotment on the ground that it had acted without
jurisdiction and/or in excess of jurisdiction and in violation of its rules and
regulations. Even on that score, the argument advanced on behalf of CIDCO
E is unacceptable having regard to Regulation 4 of the New Bombay Disposal •
of Land Regulations, 1975 extracted hereinabove which empowered CIDCO
to dispose of plots of land even on the basis of individual applications. The
said aspect of the matter has been dealt with in detail in Civil Appeal Nos.
408/07 and 410/07 referred to hereinabove.

F 23. On the question of the allotment being opposed to public policy, we
failed to see how CIDCO can raise such an issue. On the other hand, the
stand taken by CIDCO is, in our view, opposed to public policy since CIDCO
was not entitled to take a unilateral decision to cancel the allotment after the
appellants had acted on the basis thereof and had expended large sums of
G money towards the construction which has progressed to some extent. The
Regulations allowed CIDCO to entertain individual applications for allotment.
as has been done in the instant case. Merely by indicating that the law
declared by this Court was universally binding under Article 141 of the
Constitution, it could not contend that such allotment was contrary to public
policy on a fresh consideration made by the Board of Directors of the
H Corporation upon considering the recommendations made by Dr. D.K.
SUNJL PASNALAL B.\NTHl..\1· cm· .\t-.'OINDUSTRIAL OEVELOPMENTCORPN. OF MAHARASHTRA LTD \AL TAMAS l':ABIR.J I 807

.., 1 Shanakran, the then Addi. Secretary (Planning) of the State of Maharashtra. A
It may be mentioned that Dr. Shankaran had been appointed by the State
Government in January 2005 to conduct a discreet inquiry into allotments of
certain plots of land made by the Corporation during the tenure of Shri Y.M.
Lal, the then Vice-Chairman and Managing Director allegedly in contravention
of the established Rules, Regulations and Conventions.
B
24. That consideration, in our view, was not sufficient in the instant
case to cancel the allotment which had been made in accordance with the
Regulations and the appellants had made payments as directed by the
Corporation, which, in fact, was higher than the price recommended by the
Shankaran Committee.
c
25. For the reasons aforesaid, we allow the appeal, set aside the order
of the High Court impugned in this appeal and quash the order dated 29th
March, 2006 passed by CIDCO as also the Show Cause Notice dated 19th
July, 2005 on the basis of which the aforesaid order of cancellation of allotment
was made. D
26. There will, however, be no order as to costs.

N.J. Appeal allowed.