The Tamil Nadu Housing Board v. A.Madudhachalam

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 22.06.2009CORAM:THE HONOURABLE MRS. JUSTICE PRABHA SRIDEVANandTHE HONOURABLE MR. JUSTICE C.T.SELVAMWrit Appeal Nos.1757 & 1758 of 2004& WAMP.Nos.3287 and 3288 of 20041. The Tamil Nadu Housing Board rep. by its Chairman, Nandanam Chennai 600035.2. The Executive Engineer and Administrative Officer Erode Housing Unit T.N.H.B., Erode – 1... Appellants in both Appeals/Respondent 1 & 2vs. A.Madudhachalam..Respondent in both appeals/Writ Petitioner Writ Appeals against the common order dated 02.12.2002 passed in Writ Petition Nos.672 and 6396 of 1999 on the file of this Court.W.P.No.672/99: This W.P.filed under Article 226 of the Constitutionof India praying to issue a 'writ of Certiorarified Mandamus' callingfor the records of the 2nd respondent comprised in his proceedingsNo.R4/2928A/85 dated 13.11.98 and quash the same so far it relates tofixing the value of the house site in L.181 in periyar Nagar, ErodeTown, Erode District and consequently direct the respondents to refixthe land price at the prevailing market price as in the year'95.W.P.No.6396/99: to issue a 'Writ of Certiorari' Calling for therecords of the 2nd Respondent comprised in and by his proceedings inLr.No.R4/2928A/85 dated 19.1.99 quash the same.

For Appellants : Mr.P.Wilson Additional Advocate General for Mr.D.VeerasekaranFor Respondent : Mrs.G.Devi.--- https://hcservices.ecourts.gov.in/hcservices/ Common Judgment(Judgment of the Court was delivered by PRABHA SRIDEVAN,J.)Problems will arise, if, under Article 226 of the Constitutionof India, we enter into areas that are purely governed by contract. In this case, the Housing Board has come up in appeal complainingthat the learned single Judge has virtually re-written the terms ofthe contract. 2. The respondent is an Ex-Service Man. Therefore, he isentitled to a house site under the Ex-Service Men Category. Aboutsix house sites were to be put up for sale by auction under the ErodeHousing Unit of the Tamil Nadu Housing Board. He felt that he couldnot participate along with others in the public auction and come outsuccessfully. Therefore, he prayed for a Mandamus to allot a housesite. During the pendency of the writ petition, he obtained aninterim order by which one site was kept out of allotment and L.181was reserved as per the orders of this Court.

When the matter cameup for final disposal, he filed an affidavit stating that L.181 shallbe allotted to him subject to the condition that he will pay areasonable price fixed by the Housing Board and this Court passed anorder dated 04.08.1995 as follows:- "The respondent shall allot to the petitioner thesite No.L.181 measuring 161 sq.ft. in the housing unitat Periyar Nagar, Erode at the prevailing price as fixedby the Housing Board for the year 1995 in respect of thesaid area, within a period of 3 months to the date ofthe order. "3. The Housing Board was aggrieved, but reacted belatedly withan appeal. The delay was not condoned by this Court. Thereafter, only on 13.11.1998, three years after the order dated 04.08.1995, the Housing Board passed an order in Lr.No.R4/2928A/85, fixingRs.5,84,280/- towards the cost of the land for an extent of 661sq.ft. and further directed to pay the initial deposit ofRs.1,75,280/- and pay the remaining amounts in 13 monthly instalmentof Rs.6,828/- with interest @ 18% p.a.

The petitioner was notsatisfied with this order. Therefore, he disputed the amount fixedby the Housing Board and sent telegrams for extension of time andattacked the order as arbitrary and then filed a writ petition. According to him, the market value of the land in 1995 was much lessthan Rs.885/- sq.ft., which is the price fixed by the Housing Board. 4. The Housing Board filed its counter in which, it has giventhe details of the rate at which all other plots, which wereauctioned at the same time, were proposed to be sold for. In https://hcservices.ecourts.gov.in/hcservices/ paragraph 8, they have also given the basis on which the price wasfixed and when the sites were auctioned on 11.04.1985, the price wasRs.91/- per sq.ft. They had capitalised the interest on that andthey had arrived at Rs.5,84,280/-. In paragraph 14, it is statedthat in 1995 the price was Rs.474/- per sq.ft. and then in 1998adding 18% interest, arrived at the figure of Rs.5,84,280/-. Thelearned Judge was not impressed by the objections of the HousingBoard and taking the accepted market value of Rs.91/- per sq.ft. forthe year 1985, the Court felt 9% p.a. simple interest will be areasonable rate of interest and thus fixed the final cost of plot atRs.1,75,000/-, which included the interest and initial cost and thefollowing order was passed: "14.

The order of cancellation impugned in W.P.No.6396of 1999 is quashed and the cost of allotment as fixed in theallotment letter is quashed and there will be a direction tothe respondents to allot the plot L.181 measuring 669 sq.ft.at a fixed cost of Rs.1,75,000/- as on 1.12.2002 and inother respects the petitioner shall comply with the usualconditions, namely the proportionate rate of securitydeposit or advance and the petitioner shall pay the balancewithin a period of six months from the date of allotment.15. On payment of advance sum of Rs.75,000/- out ofRs.1,75,000/- within three months from today, therespondents shall hand over the the said plot and thebalance sum of Rs.1,00,000/- shall be paid by the petitionerwithin a period of six months from the date of handing overpossession or the petitioner may approach the respondents topay the said amount in easy instalments with usual rate ofinterest and it is for the respondents to pass appropriateorders permitting the petitioner to pay the sum ofRs.1,00,000/- in equal monthly instalments taking intoconsideration of the entire facts.

In the event of thepetitioner failing to remit Rs.75,000/- within three monthsfrom this date, the petitioner shall forfeit all his rightsto the plot and the writ petitions will stand dismissed. "5. We are now informed that the Housing Board had also cancelledthe allotment for non-payment of the security deposit as per theallotment order. 6. Against the common order of the learned single Judge, twowrit appeals have been filed. Mr.P.Wilson, learned AdditionalAdvocate General, submitted that when the State or other Authorityenters into an ordinary contract with private persons, the partiesare governed by the terms of the contract. It is apt to refer tothe decision of this Court in Bareilly Development Authority and Another vs. Ajai Pal Singh and Others (1989 2 Supreme Court Cases https://hcservices.ecourts.gov.in/hcservices/ 116). There Bareilly Development Authority had allotted houses/sitesand they had also revised certain terms.

This was challenged on theground that unilateral enhancement of cost was arbitrary. The HighCourt accepted it and directed to re-determine the cost. TheSupreme Court allowed the appeal filed by the BDA holding as follows: "19. The respondents were under no obligation to seekallotment of houses/flats even after they had registeredthemselves. Notwithstanding, they voluntarily registeredthemselves as applicants, only after fully understandingthe terms and conditions of the brochure inclusive ofclauses 12 and 13 and Notes 1 and 2 of the GeneralInformation Table which we have reproduced above, they arenow trying to obtain the houses/flats at the priceindicated in the brochure at the initial stage convenientlyignoring the other express conditions by and under whichthe BDA has reserved its right to change the terms andconditions as and when felt necessary, evidently dependingupon the escalation of the prices.

One should not losesight of the fact that the BDA did not compel anyone of theapplicants to purchase the flat at the rates subsequentlyfixed by it and pay the increased monthly instalments. Onthe contrary, the option was left over only to theallottees. In fact, the respondents in Civil AppealNo.2809 of 1986 except the four above mentioned haveunconditionally accepted the changed terms and conditions.20. Thus the factual position in this case clearly andunambiguously reveals that the respondents aftervoluntarily accepting the conditions imposed by the BDAhave entered into the realm of concluded contract pure andsimple with the BDA and hence the respondents can onlyclaim the right conferred upon them by the said contractand are bound by the terms of the contract unless somestatue steps in and confers some special obligations on thepart of the BDA in the contractual field. In the casebefore us, the contract between the respondents and the BDAdoes not contain any statutory terms and/or conditions.

When the factual position is so, the High Court placingreliance on the decision in Ramana Dayaram Shetty case haserroneously held: It has not been disputed that the contestingopposite party is included within the term 'otherauthority' mentioned under Article 12 of the Constitution. Therefore, the contesting oppositeparties cannot be permitted to act arbitrarilywith the principle which meets the test of reasonand relevance. Where an authority appears acting https://hcservices.ecourts.gov.in/hcservices/ unreasonably this Court is not powerless and awrit of mandamus can be issued for performing itsduty free from arbitrariness or unreasonableness.21. This finding, in our view, is not correct in thelight of the facts and circumstances of this case becausein Ramana Dayaram Shetty case, there was no concludedcontract as in this case. Even conceding that the BDA hasthe trappings of a State or would be comprehended in 'otherauthority' for the purpose of Article 12 of the Constitution, while determining price of the houses/flatsconstructed by it and the rate of monthly instalments to bepaid, the 'authority' or its agent after entering into thefield of ordinary contract acts purely in its executivecapacity.

Thereafter the relations are no longer governedby the constitutional provisions but by the legally validcontract which determines the rights and obligations of theparties inter se. In this sphere, they can only claimrights conferred upon them by the contract in the absenceof any statutory obligations on the part of the authority(i.e. BDA in this case) in the said contractual field. "7. Exercising the power under Article 226, we can check perverseorders or arbitrary orders or illegal orders, but, we cannot andshould not re-work the terms of the contract. Does the petitionerstand as a class by himself that unique conditions are applied to himfor allotment of a flat? We will be exceeding our jurisdiction, ifwe single out one person for giving a public favour. 8. In this regard, it is apt to refer the decision of the Supreme Court in State of NCT of Delhi vs. Sanjeev [2005 (5) SCC 181]and the relevant paragraphs are extracted hereunder: "15.

One of the points that falls for determinationis the scope for judicial interference in matters ofadministrative decisions. Administrative action is statedto be referable to broad area of governmental activitiesin which the repositories of power may exercise everyclass of statutory function of executive, quasi-legislative and quasi-judicial nature. It is trite lawthat exercise of power, whether legislative oradministrative, will be set aside if there is manifesterror in the exercise of such power or the exercise ofthe power is manifestly arbitrary (see State of U.P. v.Renusagar Power Co.). At one time, the traditional viewin England was that the executive was not answerablewhere its action was attributable to the exercise ofprerogative power. Professor de Smith in his classical https://hcservices.ecourts.gov.in/hcservices/ work Judicial Review of Administrative Action, 4th Edn.at pp.285-87 states the legal position in his ownterse language that the relevant principles formulated bythe courts may be broadly summarised as follows: Theauthority in which discretion is vested can be compelledto exercise that discretion, but not to exercise it inany particular manner.

In general, discretion must beexercised only by the authority to which it is committed. That authority must genuinely address itself to thematter before it; it must not act under the dictates ofanother body or disable itself from exercising discretionin each individual case. In the purported exercise of itsdiscretion, it must not do what it has been forbidden todo, nor must it do what it has not been authorised to do. It must act in good faith, must have regard to allrelevant considerations and must not be influenced byirrelevant considerations, must not seek to promotepurposes alien to the letter or to the spirit of thelegislation that gives it power to act, and must not actarbitrarily or capriciously. These several principles canconveniently be grouped in two main categories: (i)failure to exercise a discretion, and (ii) excess orabuse of discretionary power. The two classes are not, however, mutually exclusive.

Thus, discretion may beimproperly fettered because irrelevant considerationshave been taken into account, and where an authorityhands over its discretion to another body it acts ultravires.16. The present trend of judicial opinion is torestrict the doctrine of immunity from judicial review tothose classes of cases which relate to deployment oftroupes, entering into international treaties, etc. Thedistinctive features of some of these recent casessignify the willingness of the courts to assert theirpower to scrutinise the factual basis upon whichdiscretionary powers have been exercised. One canconveniently classify under three heads the grounds onwhich administrative action is subject to control byjudicial review. The first ground is “illegality”, thesecond “irrationality”, and the third “proceduralimpropriety”. These principles were highlighted by LordDiplock in Council of Civil Service Unions v.

Ministerfor the Civil Service6 (commonly known as CCSU case). Ifthe power has been exercised on a non-consideration ornon-application of mind to relevant factors, the exerciseof power will be regarded as manifestly erroneous. If apower (whether legislative or administrative) is https://hcservices.ecourts.gov.in/hcservices/ exercised on the basis of facts which do not exist andwhich are patently erroneous, such exercise of power willstand vitiated. (See CIT v. Mahindra and Mahindra Ltd.7)The effect of several decisions on the question ofjurisdiction has been summed up by Grahame Aldous and John Alder in their book Applications for JudicialReview, Law and Practice thus: “There is a general presumption against oustingthe jurisdiction of the courts, so that statutoryprovisions which purport to exclude judicialreview are construed restrictively. There are, however, certain areas of governmental activity, national security being the paradigm, which thecourts regard themselves as incompetent toinvestigate, beyond an initial decision as towhether the government’s claim is bona fide.

Inthis kind of non-justiciable area judicial reviewis not entirely excluded, but very limited. It hasalso been said that powers conferred by the RoyalPrerogative are inherently unreviewable but sincethe speeches of the House of Lords in Council of Civil Service Unions v. Minister for the CivilService6 this is doubtful. Lords Diplock, Scarmanand Roskill appeared to agree that there is nogeneral distinction between powers, based uponwhether their source is statutory or prerogativebut that judicial review can be limited by thesubject-matter of a particular power, in that casenational security. Many prerogative powers are infact concerned with sensitive, non-justiciableareas, for example, foreign affairs, but some arereviewable in principle, including theprerogatives relating to the civil service wherenational security is not involved. Another non-justiciable power is the Attorney General’sprerogative to decide whether to institute legalproceedings on behalf of the public interest.”(Also see Padfield v.

Minister of Agriculture, Fisheries and Food8.)17. The court will be slow to interfere in suchmatters relating to administrative functions unlessdecision is tainted by any vulnerability enumeratedabove; like illegality, irrationality and proceduralimpropriety. Whether action falls within any of thecategories has to be established. Mere assertion in thatregard would not be sufficient. https://hcservices.ecourts.gov.in/hcservices/

The famous case commonly known as “the Wednesbury case9” is treated as the landmark so far aslaying down various basic principles relating to judicialreview of administrative or statutory direction.

Before summarising the substance of theprinciples laid down therein we shall refer to thepassage from the judgment of Lord Greene in AssociatedProvincial Picture Houses Ltd. v. Wednesbury Corpn.9 (KBat p.229 : All ER pp.682 H-683 A). It reads asfollows:

… It is true that discretion must be exercisedreasonably. Now what does that mean? Lawyers familiarwith the phraseology used in relation to exercise ofstatutory discretions often use the word ‘unreasonable’in a rather comprehensive sense. It has frequently beenused and is frequently used as a general description ofthe things that must not be done. For instance, a personentrusted with a discretion must, so to speak, directhimself properly in law. He must call his own attentionto the matters which he is bound to consider. He mustexclude from his consideration matters which areirrelevant to what he has to consider. If he does notobey those rules, he may truly be said, and often issaid, to be acting ‘unreasonably’. Similarly, there maybe something so absurd that no sensible person could evendream that it lay within the powers of the authority. …In another, it is taking into consideration extraneousmatters. It is unreasonable that it might almost bedescribed as being done in bad faith; and in fact, allthese things run into one another.

Lord Greene also observed (KB p.230 : All ER p.683 F-G)

… it must be proved to be unreasonable in the sense thatthe court considers it to be a decision that noreasonable body can come to. It is not what the courtconsiders unreasonable. … The effect of the legislationis not to set up the court as an arbiter of thecorrectness of one view over another.

(emphasissupplied)Therefore, to arrive at a decision on “reasonableness” the court has to find out if the administrator has leftout relevant factors or taken into account irrelevant https://hcservices.ecourts.gov.in/hcservices/ factors. The decision of the administrator must have beenwithin the four corners of the law, and not one which nosensible person could have reasonably arrived at, havingregard to the above principles, and must have been a bonafide one. The decision could be one of many choices opento the authority but it was for that authority to decideupon the choice and not for the court to substitute itsview.

The principles of judicial review ofadministrative action were further summarised in 1985 by Lord Diplock in CCSU case6 as illegality, proceduralimpropriety and irrationality. He said more grounds couldin future become available, including the doctrine ofproportionality which was a principle followed bycertain other members of the European Economic Community. Lord Diplock observed in that case as follows: (All ERp.950h-j)

Judicial review has I think developed to a stage todaywhen, without reiterating any analysis of the steps bywhich the development has come about, one canconveniently classify under three heads the grounds onwhich administrative action is subject to control byjudicial review. The first ground I would call‘illegality’, the second ‘irrationality’ and the third‘procedural impropriety’. That is not to say that furtherdevelopment on a case-by-case basis may not in course oftime add further grounds. I have in mind particularly thepossible adoption in the future of the principle of‘proportionality’ which is recognised in theadministrative law of several of our fellow members ofthe European Economic Community;

Lord Diplock explained “irrationality” as follows: (AllER p.951a-b)

By ‘irrationality’ I mean what can by now be succinctlyreferred to as ‘Wednesbury unreasonableness’. It appliesto a decision which is so outrageous in its defiance oflogic or of accepted moral standards that no sensibleperson who had applied his mind to the question to bedecided could have arrived at it.

In other words, to characterise a decision ofthe administrator as “irrational” the court has to hold, on material, that it is a decision “so outrageous” as to https://hcservices.ecourts.gov.in/hcservices/ be in total defiance of logic or moral standards. Adoption of “proportionality” into administrative law wasleft for the future.

These principles have been noted in theaforesaid terms in Union of India v. G. Ganayutham10. Inessence, the test is to see whether there is anyinfirmity in the decision-making process and not in thedecision itself. (See Indian Rly. Construction Co. Ltd.v. Ajay Kumar11.)

Though Section 52 limits the scope ofconsideration by the courts, the scope for judicialreview in writ jurisdiction is not restricted, subject ofcourse to the parameters indicated supra.

It is true that some material must exist butwhat is required is not an elaborate decision akin to ajudgment. On the contrary the order directing externmentshould show existence of some material warranting anorder of externment. While dealing with the question mererepetition of the provision would not be sufficient. Reference is to be made to some material on record and ifthat is done, the requirements of law are met. As notedabove, it is not the sufficiency of material but theexistence of material which is sine qua non25. As observed in Gazi Saduddin case3 satisfactionof the authority can be interfered with if thesatisfaction recorded is demonstratively perverse basedon no evidence, misreading of evidence or which areasonable man could not form or that the personconcerned was not given due opportunity resulting inprejudice. To that extent, objectivity is inbuilt in thesubjective satisfaction of the authority.26.