Ravi Development vs Shree Krishna Prathisthan & Ors

Ravi Development .... Appellant(s)

Versus

Shree Krishna Prathisthan & Ors. .... Respondent(s)

WITH CIVIL APPEAL NOS.............OF 2009 (Arising out of S.L.P.(c) Nos. 11229, 11355-11356, 21754-21755 & 21756-21757 of 2008)

JUDGMENT

P. Sathasivam, J.

1) Ravi Development and Maharashtra Housing and

Area Development Authority (in short "MHADA") filed

S.L.P.(c) No. 13149 of 2008, S.L.P.(c) Nos. 11229 of 2008

and 11355-11356 of 2008 against the common order

dated 27.03.2008 in W.P. (L) No. 2714 of 2007 with PIL

No. 72 of 2007 of the High Court of Bombay, whereby it

was held that inviting public tender on 20.05.2007 for

1 development of the Government lands by invoking the

Swiss Challenge Method with a view to confer preferential

treatment to Ravi Development was wholly unfair,

unreasonable, arbitrary, illegal and quashed the contract

awarded to Ravi Development. As in the impugned

judgment, High Court disapproved the Swiss Challenge

Method and accordingly, MHADA had refused to award

the contract to Shree Developers to whom land at Kavesar,

Thane was allotted and Gurukrupa Developers, to whom

land at Chhitalsar Manpada at Thane was allotted, both

the said developers filed S.L.P.(c) Nos. 21754-21755 &

21756-21757 of 2008 respectively challenging the very

same common order after getting permission from this

Court.

2) Leave granted.

3) The common issue involved in all these appeals

centres around the validity of the Swiss Challenge Method

adopted by the MHADA on a pilot basis with respect to a

proposal received from a private entrepreneur i.e. Ravi

2 Development for development of undeveloped land owned

by MHADA.

4) Brief facts in a nutshell are as under:

Ravi Development submitted a proposal dated 25.08.2006

to the Chief Executive Officer, MHADA for development of

undeveloped land in Survey No. 126 to 130, 150 (pt.), 151

(pt.) at Mira Road, District Thane which was received by

MHADA on 31.08.2006. On 11.10.2006, similar proposal

was also submitted by Ravi Development to the Chief

Minister of Government of Maharashtra who was also

holding the portfolio of Housing. The Desk Officer,

Housing Department, Government of Maharashtra

forwarded the aforesaid proposal received by the office of

Chief Minister on 11.10.2006 to MHADA calling upon a

detailed report. On 04.12.2006, the Chief Executive

Officer, MHADA submitted note regarding proposal of Ravi

Development to Housing Department of Government of

Mahrashtra. The Chief Executive Officer, Maharashtra on

24.04.2007 submitted detailed report of West Bengal Joint

3 Venture Method and Jaipur Swiss Challenge Method to

Housing Department of Government of Maharashtra and

recommended for Swiss Challenge Method thereby seeking

Government's approval. It was recommended that

proposal received could be advertised under Swiss

Challenge Method on pilot basis.

5) The Housing Department of Government of

Maharashtra approved Swiss Challenge Method on

17.05.2007 and directed MHADA to use the same on pilot

project basis and for other similar proposals in future

MHADA should take policy decision at its own level.

Pursuant to the said decision MHADA issued a public

notice on 20.05.2007 for development of the land in

question and two other lands by Swiss Challenge Method.

In the public notice as well as bid document, it was

specifically stated that Swiss Challenge Method would be

applied. The Swiss Challenge Method was also explained

in the publication as well as in bid document making it

4 clear that the developer, who has given proposal, would

have first right of refusal.

6) In respect of the land in question, MHADA received

four bids on 11.06.2007, they are: (a) M/s EBR

Enterprises; (b) M/s Harshad P. Doshi Associates; (c) M/s

Ravi Developments; and (d) M/s Ostwal Builders Ltd. All

the bidders including M/s Ostwal Builders Ltd. accepted

knowledge of initiator of proposal and following of Swiss

Challenge Method and gave an undertaking to the effect

that they are well aware of Swiss Challenge Method and

that the original proposer shall be given an opportunity to

take up the project on the highest eligible bid offer. They

were also informed that in case the original proposer

agrees to match his bid to the highest offer then the

project shall be awarded in his favour. On 14.06.2007,

Ravi Development wrote a letter to MHADA accepting to

match highest bid amount. While so on 04.09.2007,

Shree Krishna Pratisthan filed PIL No. 72 of 2007 before

the High Court of Bombay challenging the public notice

5 dated 20.05.2007 issued by MHADA only in respect of

Mira Road Project and not in respect of two other projects.

7) On 22.11.2007, MHADA passed Resolution No. 6284

of 2007 accepting the bid of Ravi Development and

awarded contract to them for getting construction of

30,000 Sq. Mtr. + 18,841 sq. mtr. (in lieu of receivable

amount) = 48,841 sq. mtr. After giving undertaking

accepting the Swiss Challenge Method and after

participation and having failed in tendering process, M/s

Ostwal Builders Ltd. filed W.P. (L) No. 2714 of 2007

challenging the public notice dated 20.05.2007 as well as

MHADA's resolution dated 22.11.2007. The High Court of

Bombay, by the impugned common order dated

27.03.2008, allowed the writ petition holding that Swiss

Challenge Method itself is arbitrary and unreasonable

consequently, struck down the action taken thereto.

Aggrieved by the said order, MHADA, Ravi Development,

Shree Developers and Gurukrupa Developers filed the

above appeals by way of special leave petitions.

6

8) Heard Mr. G.E. Vahanwati, learned Solicitor General

of India for State of Maharashtra and MHADA, Mr. P.P.

Rao, learned senior counsel for Ravi Development, Mr.

Mukul Rohtagi, learned senior counsel for Shree

Developers, Mr. P.H. Parekh, learned senior counsel for

Gurukrupa Developers and Mr. Shyam Diwan and Mr.

Rakesh Dwivedi, learned senior counsel for the contesting

respondents.

9) Learned Solicitor General for the State and MHADA

and learned senior counsel appearing for Ravi

Development contended that there was no flaw in applying

Swiss Challenge Method and awarding contract in favour

of Ravi Development. They also submitted that there is no

arbitrariness or illegality in the said contract as concluded

by the High Court, on the other hand, Swiss Challenge

Method is followed in many countries as well as several

States in India also. It was also pointed out that by

adopting the said method proper public notice was issued,

all the intending developers offered their bid and

7 originator of proposal was given an opportunity to match

the highest bid amount and after fulfilling all the

formalities the contract was accepted in favour of Ravi

Development. It was further submitted that the

Government of Maharashtra was, in no way, suffered any

financial loss or sidelined the other developers in awarding

contract in favour of Ravi Development. It is their claim

that the High Court cannot substitute its decision in the

light of various clauses in the tender documents,

particularly, when the policy decision of the Government

is based upon the expert opinion. On the other hand,

learned senior counsel appearing for the contesting

respondents submitted that in the absence of any

innovative method offered by Ravi Development,

application of Swiss Challenge Method and awarding of

contract in their favour cannot be sustained. They also

submitted that the High Court was fully justified in

quashing the public notice and awarding of contract in

favour of Ravi Development.

8

10) We have considered the rival contentions and

perused the relevant materials. It was highlighted that

the High Court has gone totally wrong in observing that

the proposal of Ravi Development under Swiss Challenge

Method ought to have been innovative and since the said

proposal was not innovative, the same should not have

been processed under Swiss Challenge Method. With

regard to the said conclusion, MHADA and the

Government of Maharashtra placed materials to show that

the said proposal under Swiss Challenge Method by

`originator of proposal' need not be innovative at all and

the said requirement has nowhere been stated under the

said Swiss Challenge Method. Accordingly, it was pointed

out that the repeated observations of the High Court to

that effect are unsustainable.

11) It is useful to refer the Project details about the

contract allotted to Ravi Development:

"Project Details

1.1 Maharashtra Housing and Area Development Authority (MHADA) established under MHADA

9 Act, 1976 is engaged in the activity of housing development, Konkan Housing and Area Development Board is a regional unit of MHADA. An opportunity to private develop land at Mira Road, District Thane, owned by MHADA, is made available.

1.2 Scheme of the Project:

1. The work of Planning, scheme, actual construction and for that purpose obtaining necessary sanctions from various authorities concerned shall be done by the developer.

2. The area of the said project is approximately 3.55 hectares, bearing survey Nos. 226 to 230, 150 (part) and 151 (part).

3. The successful developer has to prepare plans/designs in consultation with MHADA.

4. In this project approximately 60% of the flats should be for Lower Income Group, is possible.

5. Plans shall have got to be sanctioned by the Mira-Bhayander Municipal Corporation.

Save and except the minimum area required to be handed over to MHADA free of costs, the developer will be at liberty to sell remaining area at market price.

1.3 Details of the Project:

1. Area Approximately 3.55 hectares.

2. Area available for construction approximately 70,000 sq. meters.

3. The specifications of the flats, which are required to be handed over to MHADA free of costs, shall be as directed by MHADA.

10

4. The remaining area, as per sanctions of Mira-Bhayandar Municipal Corporation, may be utilized for High Income Group and Commercial purpose.

1.6 SWISS CHALLENGE METHOD

1. MHADA has received a Suo Moto proposal from a developer for development of this land. The tenders will be received in response to this advertisement will be compared with the proposal given by the developer (original proposer) to MHADA. As per the Swiss Challenge method the developer who has given the original proposal has the opportunity (first right of refusal). However, the said developer has to match/raise his bid (rate) with the highest proposal tendered. The original proposer shall have the opportunity to take up the project on highest offer, and in the event if he refuses, then the highest bidder shall have right to implement the project.

As such if the original proposer exercises his right of first refusal then the project will be offered to the highest bidder. However, if such highest bidder refuses the offer then the amount deposited shall be forfeited."

12) It was highlighted by the appellants that Swiss

Challenge Method is adopted in Chile, Coasta Rica,

Guram (U.S. Territory), Indonesia, Korea, Philippines,

South Africa, Sri Lanka, Taiwan (China), Virginia (U.S.)

and also in India by Andhra Pradesh, Rajasthan, Madhya

Pradesh, Chhattisgarh, Gujarat, Uttaranchal, Punjab

11 States and Cochin Port authorities. The above

information by way of an assertion shows that Swiss

Challenge Method is already in prevalence in various

States in India as well as overseas.

13) The application of Swiss Challenge Method by MHADA is

accused of being not fair and transparent but the said

contention raised by the respondent as well as concluded in

the impugned judgment cannot be relied upon as the public

notice for tender dated 20.05.2007 issued by MHADA had

clearly mentioned about the said method and the scheme to be

followed under it. Moreover, in the said notice the rule of "First

right to refusal" to the "originator of the proposal" has also

been discussed accordingly. Though the name of the

"originator of the proposal" may not have been mentioned but

it was contended in the said public notice that "MHADA has

received a suo motu proposal from a developer for development

of this land" pointing out the land marked in the said public

notice for due development. So it can be concluded that the

existence of the "originator of the proposal" was very much in

knowledge of the other builders at the time of applying for the

12 said bidding. The relevant portion of the Judgment of this

Court in Monarch Infrastructure (P) Ltd. vs. Commissioner,

Ulhasnagar Municipal Corporation and Others, (2000) 5

SCC 287, which has been relied upon by the High Court in the

impugned judgment reads as under :-

"10. There have been several decisions rendered by this Court on the question of tender process, the award of contract and have evolved several principles in regard to the same. Ultimately what prevails with the courts in these matters is that while public interest is paramount there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike. We may sum up the legal position thus:

(i) The Government is free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest.

(ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate.

(iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons."

We are of the view that the said rejection of the highest bidder

has been made by following the pre-condition of the

acceptance of the tender already given in the said public

notice.

13

14) The appellant had provided MHADA in its innovative

project plan how to balance with highly developed high-rise

with the low-rise building of lower specifications built up for

the EWS, LIG and MIG groups and in that way this project

plan was in accordance with the objective MHADA was looking

for as well as profit sharing mode in a public-private

partnership. After going through this idea, it can be concluded

that the contention given in the impugned judgment of the

High Court that there was dearth of innovativeness and

originality in the proposal made by the appellant is wrong on

factual ground. Moreover, the acceptance letter of the

appellant to accept the project on the terms offered by the

highest bidder to MHADA was sent on 14.06.2007 i.e. much

before the filing of PIL No. 72 of 2007 to challenge the public

tender. So it can be concluded that failure in the said bidding

has raised the question of acceptability of Swiss Challenge

Method and not before that when the public notice was

actually published.

15) It was also pointed out that the tender notice and bid

documents specify the details about Swiss Challenge

14 Method without mentioning the innovativeness of the

proposal, in such circumstances, interference by the High

Court under the wrong assumption of innovativeness as

one of the pre-conditions in the proposal of Ravi

Development is totally incorrect.

16) The following materials are culled out from the

information furnished by MHADA and State of

Maharashtra. They are:-

At Mira Road, total land available with MHADA is 100286.25 sq.mtr. and out of the same (excluding area of 18969.40 sq.mtr. which went under D. P. Road, Nalla, amenities, open spaces etc.), near about 46400 sq.mtr. have been utilized and on the same, construction of merely 17840.23 sq.mtr. is actually carried. Thus, it is a fact that with the available subsidy to keep prices of LIG, EWS & MIG affordable MHADA has to construct low rise structures with poor specifications and MHADA was not able to utilize the potential of the land which is the case in most of the MHADA layouts. Further from the year 2001 to 2005 MHADA was not able to sale these constructed houses even at

15 reduced prices & MHADA had same experience in case of another property at Ambernath, Thane. As against this, in the present proposal submitted by M/s Ravi Development on the available balance land of 35500 sq. mtr., construction of 70000 sq.mtr. was proposed with richer specifications. Furthermore, for allowing 0.8 TDR, additional construction 65052.80 sq.mtr. (with the total share of MHADA to 48841.02 sq.mtr.) will be there on the said land of 35500 sq.mtr. from that point of view, proposal of Ravi Developments can be called as innovative proposal. Further, though as stated herein above, Swiss Challenge Method is adopted in various countries outside, and also in various States in India, but for MHADA and for State of Maharashtra, this was suggested and applied for the first time therefore, it can certainly be called as pilot innovative proposal of M/s. Ravi Developments.

17) It is also seen from the approved order of the

Government of Maharashtra dated 17.05.2007 that Swiss

Challenge Method has to be applied in the area of Mira

Road land, Kavesar land, Chitalsar Manpada land on Pilot

Project basis and MHADA has to evolve its own policy for

16 taking decision in future in identical cases. In those

circumstances, as rightly pointed out by Mr. G.E.

Vahanwati, learned Solicitor General appearing for

MHADA and Mr. P.P. Rao, learned senior counsel for Ravi

Development that requirement of innovativeness is not

there in Swiss Challenge Method, even otherwise, the

above mentioned facts clearly show that the proposal of

Ravi Development under the Swiss Challenge Method was

a new innovative venture for MHADA and for State of

Maharashtra.

18) The next ground on which the High court interfered

with the decision of MHADA awarding contract for

developing Mira Road in favour of Ravi Development was

about the influence of the Chief Minister of Maharashtra.

With regard to the said allegation, the MHADA and the

State of Maharashtra placed relevant materials which

show that at first Ravi Development submitted their

proposal to the Chief Executive Officer, MHADA on

25.08.2006 and thereafter, to the Chief Minister of

17 Maharashtra on 11.10.2006. It is clear from the

provisions of MHADA Act, 1976, that MHADA is an

undertaking working under the control and in

coordination with the Housing Department of Government

of Maharashtra. It was explained that Ravi Development

on 25.08.2006 submitted the proposal to the CEO,

MHADA and since no immediate decision was taken by

MHADA level as the same was new proposal, therefore, on

11.10.2006 similar proposal was submitted by them to the

Chief Minister of Government of Maharashtra. It was

pointed out that the Chief Minister had portfolio of

Housing Department and as per Rules 3 and 12 of

Maharashtra Government Rules for Conduct of Business,

1975 - business of the concerned Department of the

Government are transacted by the Cabinet Minister of the

said Department. In those circumstances, there was

nothing wrong in submitting the same proposal to the

Chief Minister of Maharashtra on 11.10.2006. As rightly

pointed out by Mr. P.P. Rao, learned senior counsel, if

18 there was no decision by MHADA in respect of their

proposal dated 25.08.2006, naturally the party concerned

viz., Ravi Development in the normal circumstances could

approach to the higher authorities, in the case on hand,

Cabinet Minister of Housing Department (i.e. Chief

Minister of Maharashtra), hence rightly approached the

Chief Minister by submitting the same proposal on

11.10.2006 which cannot be motivated or deemed as

contrary to any of the Government orders. It was pointed

out that the Chief Minister or Government has not at all

favoured Ravi Development and no order or endorsement

to that effect was either made or reflected anywhere in the

record. On the other hand, the Desk Officer of Housing

Department of Government of Maharashtra, by letter

dated 20.10.2006, simply forwarded the proposal

submitted by Ravi Development to MHADA thereby calling

upon a detailed report. Pursuant to the said

communication, CEO, MHADA recommended the proposal

of Ravi Development on 04.12.2006 and also submitted a

19 detailed study report on 24.04.2007 to Principal

Secretary, Housing Department, Government of

Maharashtra after examining the merits and demerits of

`West Bengal Joint Venture Method' and `Jaipur Swiss

Challenge Method' and recommended for following the

Swiss Challenge Method and sought Government's

approval. It is seen that thereafter, Housing Department

of Government of Maharashtra, by letter dated

17.05.2007, issued directions to follow Swiss Challenge

Method as recommended by MHADA and also directed

MHADA to take policy decision at its own level for other

similar proposals in future. It was pointed out that

thereafter, by a letter dated 14.06.2007, in terms of the

Ravi Developments willingness to match the highest bid,

MHADA took a decision on 22.11.2007 to award the said

contract to Ravi Development. In those circumstances

and in view of the materials placed, particularly, two

letters dated 20.10.2006 and 10.05.2007 issued by the

Housing Department of Government of Maharashtra, it is

20 clear that no favoritism was ever shown to Ravi

Development at the instance of the Chief Minister of

Maharashtra. We are satisfied that contrary observations

of the High Court are baseless and not warranted.

19) Apart from the above information and conclusion by

us, it was highlighted that MHADA, as a State

Government Undertaking, works under the control of

Housing Department of Government of Maharashtra and

as per Section 164 of the MHADA Act, 1976, Government

could issue instructions if really had to favour Ravi

Development and the same would be statutorily binding

on MHADA. However, the materials placed by the State

and MHADA show that on receipt of the representation

from the Ravi Development without any endorsement or

direction to consider the case of Ravi Development, the

officer concerned merely forwarded the same to the Chief

Executive Officer, MHADA to offer their remarks. As

rightly pointed out, perusal of the entire documents

clearly shows that there was no attempt either from the

21 authorities of the State of Maharashtra or from the Chief

Minister to favour Ravi Development. In such

circumstances, the contention of the learned Solicitor

General appearing for the State and MHADA is well

founded and the contrary conclusion of the High Court is

liable to be rejected.

20) In the public notice and bid documents dated

20.05.2007, it was specifically mentioned about the

principle of "initiator or proposer" and with the said

understanding Shree Ostwal Builders Ltd. has

participated in the tender process and also gave an

undertaking on 11.06.2007 while submitting their bid

document. The following undertaking submitted by them

which is not in dispute is as follows:-

"We are well aware of Swiss Challenge method and that the original proposer of the suo moto proposal shall be given opportunity to take up the project on the highest eligible bid offer. In case the original proposer agrees to match his bid to the highest offer then the project shall be awarded in his favour."

In view of clear undertaking, as rightly pointed out by the

State, after participation in tender process and failing in

22 the same when the contract was awarded to Ravi

Development by MHADA's decision dated 22.11.2007 only

at that point of time i.e. on 11.12.2007 Shree Ostwal

Builders filed a writ petition in the High Court.

21) It is relevant to mention that the legality of Swiss

Challenge Method in its entirety is not challenged. Except

the land at Mira Road, in respect of other two remaining

properties, no challenge was ever raised till date by any

party. Only after issuance of public notice in the

newspaper to follow Swiss Challenge Method, Krishna

Pratisthan choose to file public interest litigation that too

only in respect of land at Mira Road, Thane and

admittedly no challenge was raised in respect of other two

properties.

22) It was submitted by the learned Solicitor General

before us that as per the initial tender document, what

was receivable for MHADA was 30,006 sq. mtr.

construction (out of 70000 sq.mtr. construction) with 1.2

Floor Space Index (FSI). As per the rules, with the help of

23 Transferable Development Rights (TDR), FSI can be

extended upto 2 that means 0.8 TDR = 65052.80 sq.mtr.

can be utilized. For this utilization of 0.8 TDR i.e.

additional construction of 65052.80 sq.mtr., MHADA was

entitled to receive amount of Rs.2750/- per sq. mtr. which

comes to Rs.17.89 crores. However, it was pointed out

that changing the said terms in the approval order dated

22.11.2007, it is the assertion of MHADA that it gained

more and Ravi Development had to loose more, as in view

of the said amount of Rs.17.89 crores, M/s Ravi

Development was directed to give additional constructed

carpet area of 18841 sq. mtr., whose actual market value

comes to Rs.60.69 crores. Thus, it was pointed out that

after the said alternate construction of Rs.60.69 crores is

compared to receivable amount of Rs.17.89 crore, then,

MHADA is in fact gaining advantage of Rs.42.80 crores. It

was brought to our notice that all the details are matter of

record. In those circumstances, it was pointed out that

the terms were altered to the great advantage of MHADA

24 and more dis-advantage of Ravi Development.

23) The further particulars furnished by the State of

Maharashtra show that National Housing Policy &

Maharashtra State Housing Policy promote Public-Private

partnership for construction of EWS (Economically

Weaker Section), LIG (Lower Income Group), MIG (Middle

Income Group) Housing. MHADA is a major player for the

same in state of Maharastra. Subsidy provided is not

adequate and MHADA has no control on actual quality

construction, therefore, MHADA has to construct low rise

and ground floor structures with poor specifications so as

to keep the prices of the EWS, LIG, MIG houses affordable

to masses and FSI of 1.20 is unutilized due to the low rise

structures and poor specifications in almost all the

layouts of MHADA in Mumbai and in Mumbai

Metropolitan region and MHADA is finding it difficult to

sell even these houses at concessional rates. Therefore,

MHADA conducted a detailed survey of Public Private

Participation (PPP) options available for carrying out land

25 developments for construction of better EWS, LIG and

MIG houses at affordable price. In the report dated

24.04.2007, written to the Government, pros and cons of

Joint Venture Method and Swiss Challenge Method are

clearly reflected and Swiss Challenge Method is

recommended with due application of mind. Therefore, on

that count also, application of Swiss Challenge Method

into present allotment of Mira Road land at Thane is

justified and not violative of Article 14 of the Constitution.

24) As pointed out earlier, in the Swiss Challenge

Method, there is no provision for allowing other tenderers

to raise the bid further, when "initiator of proposal"

accepts to raise up to the highest bid. It was brought to

our notice that even there was no such request by Shree

Ostwal Builders Ltd. after Ravi Development accepting to

match highest bid by their letter dated 14.06.2007.

25) It is well settled principle that in the matters of

Government contract, the scope for judicial review is very

limited and that the Court cannot substitute its own

26 decision for that of the government vide Tata Cellular

vs. Union of India, (1994) 6 SCC 651 and Air India vs.

Cochin International Airport, (2000) 2 SCC 617. Even

as early as in State of M.P. and Others vs. Nandlal

Jaiswal and Others, (1986) 4 SCC 566, this Court held

that when the State Government is granting licence for

putting up a new industry, it is not at all necessary that it

should advertise and invite offers for putting up such

industry. The State Government is entitled to negotiate

with those who have come up with an offer to set up such

industry. In that case, the predominant purpose of the

policy decision dated 30.12.1984 was to ensure

construction and setting up of new distilleries with

modern technologically advanced plant and machinery at

new sites where there would be no possibility of air and

water pollution and if for achieving this purpose the State

Government considered the offer of the existing

contractors and negotiated with them and ultimately

decided to grant to them licences for construction of new

27 distilleries on the terms and conditions set out in the

recommendations of the Cabinet Sub-Committee. This

method was approved by the Court and held that the

State Government could not be said to have acted

arbitrarily or capriciously in violation of Article 14. In 5 M

& T Consultants, Secunderabad vs. S.Y. Nawab and

Another, (2003) 8 SCC 100, it is worthwhile to refer the

following conclusion in para 17:

"17. ... ... ... It is by now well settled that non-floating of tenders or absence of public auction or invitation alone is no sufficient reason to castigate the move or an action of a public authority as either arbitrary or unreasonable or amounting to mala fide or improper exercise or improper abuse of power by the authority concerned. Courts have always leaned in favour of sufficient latitude being left with the authorities to adopt their own techniques of management of projects with concomitant economic expediencies depending upon the exigencies of a situation guided by appropriate financial policy in the best interests of the authority motivated by public interest as well in undertaking such ventures. ... ..."

26) The decision to apply Swiss Challenge Method clearly

fell within the realm of executive discretion and in this

case, exercised after due application of mind. It is clear

from the materials placed before us that there is neither

28 arbitrariness nor unreasonableness in the adoption of the

said policy.

27) Recently, there has been shift towards encouraging

private participation in the government works and

promoting of public-private partnership. The Ministry of

Housing and Urban Poverty Alleviation in its National

Urban Housing Habitat Policy, 2007 specifically mentions

participation of private sector as one of its aims. It

envisages that the State Government and the Central

Government shall act as facilitators and enablers. The

Maharashtra State Housing Policy dated 23.07.2007

provides for private participation. Pursuant to the

declared policy by the Central and State Governments, the

Maharashtra State Housing Board and MHADA are well

within their rights to apply the Swiss Challenge Method

with respect to the MHADA lands that were lying

undeveloped since the same was being applied only on

trial basis as a method of encouraging private

participation. Though an argument was built up by the

29 contesting respondents based on Ramanna Dayaram

Shetty vs. International Airport Authority of India &

Ors., (1979) 2 SCC 489, E.P. Royappa vs. State of Tamil

Nadu, (1974) 4 SCC 3, Maneka Gandhi vs. Union of

India, (1978) 1 SCC 248, and Erusion Equipment and

Chemicals Ltd. vs. State of West Bengal, (1975) 1 SCC

70, in the light of the stand of the State of Maharashtra

and MHADA and the materials placed before us, we are of

the view that while holding that there is no doubt about

the principles laid down but they are not helpful to the

case on hand. On the other hand, we are satisfied that

the State of Maharashtra, after due deliberations and

study of the methodologies which is prevailing in the

country for dealing with suo motu development proposals,

decided to apply Swiss Challenge method to the proposal

of Ravi Development. Further, Swiss Challenge method

was being applied by the State Government only on a pilot

basis. The method is transparent inasmuch as all the

parties were well aware of the "right of first refusal" 30

accorded to the "originator of proposal". As per the

method which was known to all the parties the originator

of the proposal must in consideration of his vision and his

initiative be given to the benefit of matching the highest

bid submitted. As pointed out earlier, the said method is

beneficial to the government inasmuch as the government

does not loose any revenue as it is still getting the highest

possible value. Further, in view of financial crunch and

availability of undeveloped lands, National and State

Housing Policies provide for encouragement of private

participation. The State Government is also well within its

rights to try out on pilot basis a methodology recognized

internationally as well as in India. In those

circumstances, the High Court is not justified in striking

out the Swiss Challenge Method without allowing the

State Government to exercise its executive discretion on a

pilot basis. It is not possible to reject the claim of State of

Maharashtra and MHADA, in view of shortage of land,

increasing cost in housing sector, the Central and State

31 Governments recommended strongly for public private

joint ventures and in the said category Swiss Challenge

method is the acceptable democratic method as compared

to other options.

28) The slums in urban area are primarily a resultant of

shortage of supply of housing and shortage in supply of

LIG/MIG category of housing. To ensure that the lands

for public housing and metropolis like Mumbai are put to

maximum utilization and maximum tenements are made

available for families of MIG and LIG categories for which

in the present scenario one of the way outs is joint venture

development by public and private bodies.

29) Due to shortage of land, ever increasing cost, and

maximum utilization of permissible FSI, by adopting

public-private joint ventures, it would be possible to

minimize the cost of LIG, EWS and MIG categories. In the

present project, land is partially developed by MHADA

with ground floor structures and low rise buildings with

lower specifications so as to make housing affordable for

32 EWS, LIG and MIG with the subsidies granted by the

Government. The balance FSI cannot be utilized without

high rise buildings which involves higher cost and

expenses. Ravi Development has proposed multi-storied

building to consume balance FSI with 60% number of

tenements under LIG and EWS category as per DCR 33(5)

of Mira Bhainder Municipal Corporation, which if

constructed by MHADA will require higher cost of

construction and subsidies required to make MIG, LIG

houses will be quite high. In the present project,

constructed built up area with richer specifications is to

be handed over by Ravi Development to MHADA free of

costs in turn MHADA will be at liberty to price these

tenements in accordance with policies of MHADA or as

may be determined by MHADA. Therefore, utilization of

maximum permissible FSI, adopting higher specifications

and effecting utilization of scarce land for housing and yet

make LIG, MIG housing group financially attractive to the

people is possible through joint venture of public and

33 private bodies in which reasonable built area be available

by private developer free of cost to MHADA. The above

claim and concept cannot be ignored lightly.

30) Lastly, we conclude that the impugned pilot project or

initiation taken by the Government of Maharastra along with

MHADA to encourage public-private participation is in

accordance with the need of the time as well as a laudable

effort. But to make it an effective approach Swiss Challenge

Method or any other encouraging concept should be duly

publicized first. The effort of public-private participation can

only be possible when private entities are aware of such

scheme. Also in the scheme of availing a new system thorough

rules and regulations are needed to be followed otherwise

unfairness, arbitrariness or ambiguity may creep in. In order

to avoid such ill-effects the State Government is suggested to

consider the following aspects:-

1. The State/Authority shall publish in advance the nature of Swiss Challenge Method and particulars;

2. Publish the nature of projects that can come under such method;

34 3. Mention/notify the authorities to be approached with respect to the project plans;

4. Mention/notify the various fields of the projects that can be considered under the method;

5. set rules regarding time limits on the approval of the project and respective bidding:

6. the rules are to be followed after a project has been approved by the respective authorities to be considered under the method.

7. All persons interested in such developmental activities should be given equal and sufficient opportunity to participate in such venture and there should be healthy inter se competition amongst such developers.

These suggestions are not exhaustive and the State is free to

incorporate any other clauses for transparency and proper

execution of the scheme. The State Government is suggested

to frame regulations/instructions on the above lines and take

necessary steps thereafter in future.

31) In view of the above discussion and conclusion, the

common impugned judgment and order dated 27.03.2008

of the Bombay High Court in W.P. (L) No. 2714 of 2007

35 and P.I.L. No. 72 of 2007 are set aside. Consequently, the

appeals are allowed. No costs.

....................................CJI. (K.G. BALAKRISHNAN)

..........................................J. (P. SATHASIVAM)

NEW DELHI;

MAY 11, 2009.

36