STAR ENTERPRISES ETC. ETC. versus CITY AND INDUSTRIAL DEVELOPMENT CORPORATLON OF MAHARASHTRA LTD. & ORS.

Citation: [1990] 2 S.C.R. 826 · Decided: 30-04-1990 · Supreme Court of India · Bench: RANGANATH MISRA · Disposal: Dismissed
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Judgment (excerpt)

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B 
c 
D 
STAR EN1ERPRISES ETC. ETC. 
v. 
CITY AND INDUSTRIAL DEVELOPMENT CORPORATlON 
OF MAHARASHTRA LTD. & ORS. 
APRIL 30, 1990 
[RANGANATH MISRA, KULDIP SINGH AND 
R.M. SAHA!, JJ.] 
Maharashtra Regional Town Planning Act, 1966: s. 113 (3A)-
New Town Planning Authority-Whether a 'State' within the meaning 
of Art. 12 of the Constitution-Whether entitled to look for best deal in 
regard to its properties. 
Constitution of India: Articles 298 & 14: Government Company 
entering commercial field-Refusing to accept highest offer in response 
to public tender-Action whether arbitrary. 
Indian Contract Act, 1872: Public authority making contract-
Invitation by public tender-Highest offer-When rejected. 
Administrative /aw-Administrative action-Public authority 
rejecting highest tender-Duty to record reasons to lend credibility to 
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action-Need.for public accountability. 
F 
The appellants had given the highest offers for certain specified 
plots for lease In response to invitation by public tender by the respon-
dent Corporation a Government Company, and complied with the 
requirements of deposit. The respondent, however, rejected the said 
offers without assigning any reason. 
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The appellants challenged the action of the respondent before the 
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High Court as arbitrary, unconstitutional and contrary to rule of law. 
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The High Court, dismissed the writ petitions in limine. 
In these appeals by special leave, it was contended for the appel-
lants that the resoondent Corooration was a •State' under Article 12 of 
the Constitution, that the power of rejection of offers without assigning 
any reason was unregulated and unfettered, contrary to the require-
ment of rule oflaw, and that it was in the interest of the public authority 
itself, the State and everyone in the society at large that reasons for 
State action are placed on record and or even communicated to the 
persons from whom the offers came. 
826 
STAR ENTERPRISES v. C.I.D.C. MAHARASHTRA 
827 
Dismissing the appeals, the Court, 
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HELD: 1. The respondent No. 1 was 'State' within the meaning of 
Article 12 of the Constitution and in its dealings with the citizens of 
India, it would he required to act within the ambit of rule of law and 
would not be permitted to conduct its activities arbitrarily. [829B-C) 
R. D. Shetty v. International Airport Authority of India & Ors., 
[1979] 1SCR1042 and Ajay Basia v. Khalid Mujib Sehravardi, [1981] 2 
SCR 79, referred to. 
2. The State is certainly entitled to look for the best deal in regard 
to its properties. In the instant case, there was no allegation of mala 
fides in the conduct of respondent No. 1 in refusing to accept the highest 
offers. It could, therefore, be presumed that in so doing the respondent 
had been actuated by the consideration of looking for better offers for 
the specific plots in its economic interest. There was thus no arbitrari-
ness in respond~nt trying to get proper price for its plots. [829E-F, 828E-F] 
3. When highest offers of commercial nature are rejected reasons 
sufficient to inljicate the stand of the public authority should be made 
available and the same should be communicated to the concerned 
parties unless there be any specific justification not to do so. That would 
assure credibility to the action, discipline public conduct and improve 
the culture of accountability and provide an opportunity for an objec-
tive review in appropriate cases both by the administrative superior and 
by the judicial process. [830F-G, E-F J 
State of U.P. v. Raj Narain & Ors., [1975] 4SCC 428, referred tii. 
A 
B 
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D 
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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 
F 
2076-2078 of 1990. 
From the Judgment and Orders dated 25.8.1989, 10.11.1989 & 
5.9.1989 of the Bombay High Court in W.A. Nos. 2198, 3377 and 219/ 
of 1989. 
D .N. Dwivedi and Sarva Mitter for the Appellants. 
Arnn Jetley, Additional Solicitor General, Raian Karanjawala, 
H.S. Anand, Nandini Gore, Ravi Kumar, M. Karanjawala, Y:N. Patil 
and A.S. Bhasme for the Respondents. 
The Judgment of the Court was delivered by 
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828 
SUPREME COURT REPORTS 
[1990] 2 S.C.R. 
RANGANATH MISRA, J. Special leave granted. 
Three applications were filed under Article 226 of the Constitu-
tion before the High Court of Bombay by the respective appellants 
before us challenging the rejection of their highe~J offers in response 
to invitation by public tender without assigning any reason for the 
same as arbitrary,
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