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PETITIONER:

DWARKADAS MARFATIA & SONS

Vs.

RESPONDENT:

BOARD OF TRUSTEES OF THE PORT OF BOMBAY

DATE OF JUDGMENT27/04/1989

BENCH:

MUKHARJI, SABYASACHI (J)

BENCH:

MUKHARJI, SABYASACHI (J)

KANIA, M.H.

RANGNATHAN, S.

CITATION:

1989 AIR 1642 1989 SCR (2) 751

1989 SCC (3) 293 JT 1989 Supl. 146

1989 SCALE (1)1157

CITATOR INFO :

R 1990 SC1031 (12)

F 1991 SC 537 (48)

F 1991 SC 855 (69)

ACT:

Constitution of India, 1950: Articles 12, 14, 32 and

226--'Bombay Port Trust'--Whether 'State'--Evicting its

tenant and granting the land in question to another

tenant--Frontiers of judicial review of such action.

HEADNOTE:

The respondent Board of Trustees of the Port of Bombay

is a statutory authority, and as such has been exempted from

the operation of the Bombay Rents, Hotel & Lodging House

Rates (Control) Act, 1947. The appellant has been the lessee

of the respondent since about 1932 in respect of part of the

original plot No. 4 (now plot 5B) which adjoins plot No. 6

tenanted by M/s Bombay Bharat & Swadeshi Rice Mills. In or

about 1933-34, M/s Bombay Bharat & Swadeshi Rice Mills took

over the appellant, and a rice mill was started on appel-

lant's part of plot No. 4 and plot No. 6.

In December 1957, the Town Planning Scheme No. 1 in

Bombay City came into force, and the original plot No. 4 was

reconstituted into final plot No. 5. In or about 1963 the

respondent sub-divided plot No. 5 into final plot 5A and

final plot 5B, and as a result of the sub-division M/s

Dhanji Mavji became the tenant/occupant of a major portion

of plot 5B, In 1970-71 the respondent agreed to let the

entire plot 5B, including the portion which had been let to

and was in possession of the appellant since 1933, to Dhanji

Mavji. The appellant objected to the offer made to Dhanji

Mavji but the respondent asserted that as Dhanji Mavji had

been in possession of the major portion of plot No. 5B, it

agreed to let the entire plot to them. In the premise, the

respondent purported to terminate the tenancy of the appel-

lant in respect of its . portion of plot 5B, and later filed

suit for eviction. The Trial Court dismissed the suit hold-

ing that it would be legitimate to infer that the letting

was for a manufacturing purpose and hence the notice of

termination was bad. The appellate court reversed that

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decision. Aggrieved thereby, the appellant filed a writ

petition under Article 227 of the Constitution. The High

Court accepted the finding of the appellate court that the

notice of ejectment was valid notice and there was no

waiver of notice.

752

Before this Court, it was contended on behalf of the

appellant that (1) the exemption from the operation of the

Rent Act was given to the Port Trust Authority on the as-

sumption that it would act in public interest and would not

behave like ordinary landlords; (2) the action of the re-

spondent in terminating the appellant's contractual tenancy

had a public law character attached to it and was according-

ly subject to judicial review; (3) every action of the

respondent which was 'State' within Article 12 of the Con-

stitution, whether it be in the field of contract or any

other field, was subject to Article 14 of the Constitution

and must be reasonable and taken only upon lawful and rele-

vant grounds of public interest; (4) the respondent's estab-

lished rational/policy was to offer/allot a final/reconsti-

tuted plot for development to the existing occupants thereof

as joint tenants; and (5) the eviction of the appellant was

not necessary in the public interest for the proper develop-

ment of the plot as required by the Town Planning Scheme.

On behalf of the respondent it was contended that (1)

the onus was entirely on the appellant to establish that the

Bombay Port Trust had terminated the tenancy or taken the

proceedings in eviction not in public interest but for a

collateral purpose or mala fide or that it had acted in a

manner contrary to the provisions of Article 14; (2) since

there was no obligation or duty cast upon the Bombay Port

Trust to provide accommodation, there could be no question

of acting in governmental character, and such a body stood

on the same footing as any other citizen and would, in

respect of such activity, not be subjected to public law

duty; (3) the respondent's dealing with tenants was a con-

tractual dealing and it was not a matter for public law

domain and was not subject to judicial review; and (4) it

was the policy of the respondent to allot the entire re-

constituted plot to one person who was occupying the major

portion of such plot, for its proper development.

Dismissing the appeal, it was,

HELD: Per Sabyasachi Mukharji, J., (Kania, J. agreeing)

(1) Bombay Port Trust being a public body, even in

respect of its dealing with its tenants, it must act in

public interest, and an infraction of that duty is amenable

to examination either in civil suit or in writ jurisdiction.

[761G]

Rampratap Jaidayal v. Dominion of India, [1952] 54 Bom.

L.R. 927; and Baburao Shantaram More v. The Bombay Housing

Board, [1954] V SCR 572, referred to.

753

(2) Where any special right or privilege is granted to

any public or statutory body on the presumption that it must

act in a certain manner. such bodies must make good such

presumption while acting by virtue of such privilege. Judi-

cial review to oversee if such bodies are so acting is

permissible. ]762D-E]

Radhakrishna Agarwal & Ors. v. State of Bihar & Ors.,

[1977] 3 SCR 249 and Life Insurance Corporation of India v.

Escorts Ltd. & Ors., [1985] 3 Supp SCR 909, referred to.

(3) The field of letting and eviction of tenants is

normally governed by the Rent Act. The Port Trust is statu-

torily exempted from the operation of the Rent Act on the

basis of its public/Governmental character. Every

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action/activity of the Bombay Port Trust which constituted

"State" within Article 12 of the Constitution in respect of

any right conferred or privilege granted by any statute is

subject to Article 14 and must be reasonable and taken only

upon lawful and relevant grounds of public interest. [762E-

F; 763A-B]

S.P. Rekhi v. Union of India, [1981] 2 SCR 111 and

M.C. Mehta & Anr. v. Union of India & Ors., [1987] 1 SCC

395, referred to.

(4) Where there is arbitrariness in State action, Arti-

cle 14 springs and judicial review strikes such an action

down. Every action of the Executive authority must be sub-

ject to rule of law and must be informed by reason. So,

whatever be the activity of the public authority, it should

meet the test of Article 14. [763C]

All exercise of discretion or power by public authori-

ties as the respondent, in respect of dealing with tenants

in respect of which they have been treated separately and

distinctly from other landlords on the assumption that they

would not act as private landlords must be judged by that

standard. [763H; 764A]

If a governmental policy or action even in contractu-

al matters fails to satisfy the test of reasonableness, it

would be unconstitutional. [764A-B]

E.P. Royappa v. State of Tamil Nadu, [1974] 2 SCR 348;

Maneka Gandhi v. Union of India, [1978] 2 SCR 621; R.D.

Shetty v. The International Airport Authority of India &

Ors., [1979] 3 SCR 1014; Kasturi Lal Lakshmi Reddy v. State

of J & K, [1980] 3 SCR 1338 and

754

Ajay Hasia v. Khalid Mujib Sehravardi, [1981] 2 SCR 79,

referred to.

(7) Governmental Policy would be invalid as lacking in

public interest, unreasonable or contrary to the professed

standards and this is different from the fact that it was

not done bona fide. [764B-C]

(8) There is always a presumption that a governmental

action is reasonable and in public interest. It is for the

party challenging its validity to show that the action is

unreasonable, arbitrary or contrary to the professed norms

or not informed by public interest, and the burden is a

heavy one. [764C-D]

(9) Judicial review is not concerned with the decision,

but with the decision making process. Unless this restric-

tion on 'the power of the court is observed, the court under

the guise of preventing the abuse of power, would be itself

guilty of usurping power which does not belong to it.

[765E-F]

(10) The Court cannot really substitute a decision

reached by a fair procedure keeping the policy of the re-

spondent in mind by a different decision only on the ground

that the decision which appeals to the court is a better

one. [765G]

Council of Civil Service Unions v. Minister for the

Civil Service, [1984] 2 AER 935; Chief Constable of the

North Wales Police v. Evans, [1982] 1 WLR 1195; In re Pres-

ton v. I.R.C., [1985] 2 WLR 336 and Regina v. Chief Consta-

ble of the Merseyside Police, [1986] 2 WLR 144, referred to.

(11) The Bombay Port Trust, perhaps, was justified in

coming to the conclusion that the only possible way to

develop the properties of the Bombay Port Trust in compli-

ance with the Town Planning Scheme was by allotting plots to

holders of major portions thereon. Such a decision cannot be

faulted. [766E-F]

(12) Upon the facts of the instant case, there was an

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implied obligation in respect of dealings with the

tenants/occupants of the Port Trust Authority to act in

public interest/purpose. That requirement is fulfilled if it

is demonstrated that the Port Trust authorities have acted

in pursuance of a policy which is referable to public pur-

pose. Once that norm is established whether that policy is

the best policy or whether another policy was possible, is

not relevant for consideration. [767E-F]

755

(13) Under the constitutional scheme of this country,

the Port Trust Authorities were required by relevant law to

act in pursuance of public purpose. This Court is satisfied

that they have proceeded to so act. [767G]

Per S. Ranganathan, J. (Concurring)

On the facts of the instant case, the action of the Port

Trust was not improper and there are no grounds for inter-

ference. [768F]

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2036 of

1987.

From the Judgment and Order dated 19.11.1986 of the

Bombay High Court in W.P. No. 710of 1984.

Aspi Chinai, R.F. Nariman, Miss Darshna Bhogilal, K.K.

Lahiri, R. Karanjawala, Ejaz Maqbool and Mrs. Manik Karanja-

wala for the Appellant.

K.K. Singhvi, Brij Bhushan and Anil Kumar Gupta for the

Respondent in C.M.P. No. 19447 of 1988.

G. Ramaswamy, Additional Solicitor General, U.J. Mukhi-

ja, B.S. Basania, Mrs. A.K. Verma, Arun Banga and D.N. Misra

for the Respondent.

The Judgment of the Court was delivered by

SABYASACHI MUKHARJI, J. This is an appeal by special

leave from the judgment and order dated 19th November, 1986

of the learned Single Judge of the Bombay High Court. In

this appeal this Court has been asked to examine the fron-

tiers of judicial review of the action of a statutory au-

thority, i.e. the Board of Trustees of the Port of Bombay,

in evicting its tenant and granting the land in question to

another tenant. However, in order to appreciate the contro-

versy it is necessary to have a conspectus of the facts

involved.

756

The respondent Board of Trustees of the Port of Bombay

is a statutory authority. Vast areas of South Bombay which

are completely tenanted, are owned by the respondent. Being

a statutory authority, the respondent has been exempted from

the operation of the relevant Rent Act. The respondent is a

statutory corporation constituted under the Major Port Trust

Act, 1963 as amended by the Major Port Trust (Amendment)

Act, 1974.

Between about 1906 and 1932, one Jhunjhunwala was the

lessee of plot No. 6 (which adjoins plot 5B which is the

suit plot) and a building was existing on plot No. 6 which

was tenanted to M/s Bombay Bharat & Swadeshi Rice Mills, and

the said Mills were desirous of operating a rice mill on

plot No. 6 but could not get the licence from the Municipal-

ity for the operation of the said rice mill unless satisfac-

tory arrangement was made for the removal and storage of

rice husk in a separate chamber/structure.

Since about 1932, the appellant had been the lessee of

the respondent in respect of part of the original plot No. 4

(now plot 5B) which adjoins plot No. 6 of the suit plot

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measuring 113.4 sq. rots. In or about 1933-34, with a view

to acquire the suit plot and using the same for the rice

mill/dust room, M/s Bombay Bharat & Swadeshi Rice Mills took

over the appellant. The dust room structure was constructed

on the suit plot. The rice mill on plot No. 6 and the dust

room on the suit plot had a common wall and were inter-

connected by ducts.

It was stated that the respondent's inspectors had

regularly visited the premises in question but had never

objected to the user of the rice mill/dust room. In Decem-

ber'57, the Town Planning Scheme No. 1 in Bombay City came

into force. The original plot No. 4 was reconstituted into

final plot No. 5 but continued to belong to the respondent.

The Scheme also stipulated that all rights of lessee/tenants

in the original plots stood transferred to the final plots.

It may be noted that in December'57 original plot No. 4

comprised of 113.4 sq. mts. let to the appellant, 390 sq.

mts. let to M/s Dhanji Mavji, 453 sq. mts. let to two asso-

ciate firms (M/s Gordhandas Ranchoddas and M/s Chunilal

Gupta) and 195 sq. mts. let to M/s Vassanji Hirji. Hence, of

the final plot No. 5, the appellant and their associates, it

was asserted, held 569 sq. mts., Dhanji Mavji held 390,

Vassanji Hirji held 195 sq. rots. and the balance 155 sq.

mts. was with the respondent/others. Total area of final

plot 5 was 1309 sq. mts. From 1957-72, the respondent, it is

asserted, continued the tenancies of the appellant and its

associate firms. In or about 1963, however, the respondent

applied for and got final plot No. 5 sub-divided into final

plot 5A (659 sq. mts.)

757

and final plot 5B (650 sq. mts.). The suit plot and M/s

Dhanji Mavji's plot fell entirely in final plot 5B and as a

result of the sub-division, Dhanji Mavji became the

tenant/occupant of a major portion of plot 5B. It is assert-

ed that appellant's associate firm and Chunilal Gupta fell

in plot No. 5A and became the tenants/occupants of a major

portion of plot No. 5A. In 197 1 the Municipality renewed

the mill licence covering both the structures.

It is the case of the appellant that in 1970-71, the

respondent arbitrarily agreed to let the entire plot 5B

including the portion which had been let to and in the

possession of the appellant since 1933 to M/s. Dhanji Mavji,

and thereby agreed to give him 650.6 sq. mrs. against his

existing 390 sq. mts. Also the appellant offered to develop

final plot 5B jointly with Dhanji Mavji in 1972-76. The

appellant, however, asserted that it had offered to pay the

revised rent that might be fixed by the respondent. The

appellant objected to the offer made to Dhanji Mavji exclu-

sively and pointed out that the established practice of the

respondent was to continue the existing tenants/ occupants

on the final plots. The respondent, however, asserted that

as Dhanji Mavji had been in possession of the major portion

of plot No. 5B (390 sq. mts. vis-a-vis 113.4 sq. mts.), they

agreed to let the entire plot to Dhanji Mavji and, there-

fore, could not entertain the appellant's request. In the

premises, by notices issued in 197 1-73, the respondent

purported to terminate the tenancy of the appellant. In

1973-74, the Municipal Corporation auctioned the right,

title and interest of Jhunjhunwala and the respondent in

plot No. 6 for nonpayment of property taxes. An associate

firm of the appellant M/s. Natwar Parekh & Sons purchased

plot No. 6 and became the owner thereof. The case of the

appellant was that the respondent got the Corporation to

wrongfully exclude the respondent's interest from the con-

veyance. The said Natwar Parekh challenged such exclusion by

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filing writ petition No. 52/74 in the High Court. On

26.7.1976, the writ petition was allowed, and Natwar Parekh

are now the owners of plot No. 6. This, according to the

appellant, caused resentment to the respondent, and it

offered Plot No. 5A to the existing tenants, i.e. the peti-

tioner's associates who held 453 sq. mts. and Vassanji

Hirji, who held 195 sq. mts. The petitioner's associates who

held 70% of the plot 5A, pointed out that the said Vassanji

Hirji was not interested and that the entire plot should

accordingly be given to them. The respondents declined and

instead commenced eviction proceedings against all the three

holders. In or about October 1977, the respondent issued one

month's notice to the appellant to terminate the tenancy.

In December, 1977 the respondent filed suits Nos. 447 &

603/77 against the appellant in the Court of Small Causes,

Bombay. The

758

appellant filed its written statement and pleaded that the

proceedings had been instituted mala fide and just to bene-

fit Dhanji Mavji and to harass the appellant's associates,

who had acquired the respondent's title to plot no. 6.

Secondly, it was asserted that the premises had been ac-

quired and used for rice mill for 40 years and accordingly

it could not be terminated by one month notice. The lease

was for manufacturing purposes. Thirdly, it was asserted,

that the notice of termination, in any event, had been

waived by demanding and recovering rent/ enhanced rent.

It is asserted that at the hearing the witnesses of the

respondent had admitted that the plot would be given to

Dhanji Mavji if the appellant was evicted therefrom. It also

agreed that the respondent was under no statutory obligation

to give the entire plot to Dhanji Mavji.

On or about 31st March, 1981 the Trial Court dismissed

the suit, holding that the appellant was admittedly using

the plot for a rice mill for over 50 years to the knowledge

of the respondent; and it would be legitimate to infer that

the letting was for a manufacturing purpose. Hence, the

notice of termination was bad. The Trial Court did not deal

with the question of mala fide. On or about 13th January,

1984 the appellate court reversed that decision and also

held that the issue of mala fide or arbitrariness was not

relevant on the legality of the eviction proceedings. Ag-

grieved thereby, the appellant filed a writ petition No.

710/84 under Article 227 of the Constitution. The High Court

dismissed the said writ petition by the judgment under

appeal and upheld the order of eviction. The High Court

accepted the finding of the appellate court that the notice

of ejectment was valid notice and there was no waiver of

notice. In our opinion, the High Court was right on this

aspect and in any event under Article 227 of the Constitu-

tion the High Court could not have gone into this question.

We, in an appeal under Article 136 of the Constitution

cannot re-appraise that question.

The question that survived after the finding of the

appellate court and which was urged mainly before the High

Court and also in this appeal, was whether the action of the

respondent in evicting the appellant and granting the prem-

ises in question to M/s Dhanji Mavji was proper and right.

It was contended on behalf of the appellant that the action

of the respondent in terminating the appellant's contractual

tenancy had a public law character attached to it and was

accordingly subject to judicial review. It was asserted that

every action of the respondent which was 'State' within

Article 12 of the Constitution, whether it be in the field

of contract, or any other field, was subject to Article 14

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of the Constitution and must be reasonable and taken only

759

upon lawful and relevant grounds of public interest. In that

light, it was urged that if the eviction of the appellant

was not necessary in the public interest and if it had been

taken pursuant to any norm or policy which does not permit

eviction of the appellant, then the action is arbitrary and

discriminatory and not in accordance with any policy which

the respondent was enjoined to follow..

In the aforesaid background it was contended that the

eviction of the appellant was not necessary in public inter-

est. It appears that the eviction of the appellant was only

in pursuance of a policy of the Port Trust to let out a

reconstituted plot to the person who occupied the major

portion and who could use it for development. It was urged

that the decision of the Port Trust to allot the entire plot

to M/s Dhanji Mavji to the exclusion of the appellant

(although the appellant was thereof for the past 40 years)

was an arbitrary and discriminatory departure from the

established policy of the Port Trust, which was to offer the

plot to the existing tenants (where two or more tenants were

in occupation of one plot) as joint-tenants. It was contend-

ed that the impugned termination was ultra vires and arbi-

trary. It was contended that the exclusive allotment of the

entire plot 5B to M/s Dhanji Mavji and the consequent termi-

nation of the appellant's tenancy was not necessary to

enable proper development of the plot as required by the

Town Planning Scheme. There was no policy requiring the

entire final/reconstituted plot to be allotted exclusively

to the person occupying the major portion thereof or requir-

ing the other existing occupants to be evicted. Nor, it was

submitted, was the allotment of the entire plot, pursuant to

any such alleged policy. On the other hand, the appellant

contended that the respondent's established policy was to

offer/allot a final/ reconstituted plot for development to

the existing occupants thereof as joint tenants. It was

contended that this rational policy which, according to the

appellant, would have fulfilled the public interest of

development in accordance with the regulations of the Town

Planning Scheme and at the same time would not have required

or necessitated the eviction of the existing occupants.

Contrary to the established rational policy of accommo-

dating tenants by offering/allotting a new plot jointly to

the existing occupants/tenants, the respondent arbitrarily,

it was contended, and discriminatingly did not offer the new

plot 5B to M/s Dhanji Mavji and the appellant (both of whom

were existing tenants/occupants of the plot) as joint ten-

ants, but instead wrongfully decided to give the entire plot

to M/s Dhanji Mavji to the exclusion of the appellant.

"Our attention was drawn to Section 4 of the Bombay

Rents, Hotel & Lodging House Rates (Control) Act, 1947,

which enjoins that

760

the Act would not apply to the premises belonging to the

Govt. or to the local authorities. By the provisions of the

said Section 4, the Port Authorities were exempted from the

operation of the Rent Act. This privilege was given to the

Port Trust Authorities, it was submitted, on the assumption

that it would act in public interest, and would not behave

like ordinary landlords. The special privileges, powers and

benefits were statutorily conferred on the Bombay Port Trust

by Section (4) of the aforesaid Act. It had those rights due

to its statutory or public character, as a local authority.

Our attention was also drawn to the decision in Rampra-

tap Jaidayal v. Dominion of India, [1952] 54 Bom. LR 927 at

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934 where the Chief Justice Chagla observed as follows:

"It is not too much to assume, as the Legisla-

ture did in this case assume, that the very

Government whose object was to protect the

tenants and prevent rent being increased and

prevent people being ejected, would not itself

when it was the landlord do those very things

which it sought to prohibit its people from

doing, and therefore the underlying assumption

of this exemption is that Government would not

increase rents and would not eject tenants

unless it was absolutely necessary in public

interest and unless a particular building was

required for a public purpose."

This Court in Baburao Shantaram More v. The Bombay

Housing Board & Anr., [1954] V SCR 572 had to consider

Section 4 of the Bombay Rents, Hotel & Lodging House Rates

Control Act, 1947, and so far as material for our present

purposes explained the basis of exemption under Section 4 as

that the Govt. or local authority or the Board would not be

actuated by any profit making motive so as to unduly enhance

the rents or eject the tenants from their respective proper-

ties as private landlords are or are likely to be. In other

words, this Court recognised that the basis of differentia-

tion in favour of the public authorities like the respond-

ent, was on the ground that they would not act for their own

purpose as private landlords do, but must act for public

purpose.

'Our attention was also drawn by Mr Chinai, learned

counsel for the appellant, to the observations on 'Adminis-

trative Law by Wade, 5th Edn. at page 355. It was stated

therein as follows:

"Statutory power conferred for public pur-

poses is conferred as it were upon trust, not

absolutely-that is to say, it can

validly be used only in the right and proper

way which Parliament when conferring

it is presumed to have intended."

761

It, therefore, follows that the public authorities which

enjoy this benefit without being hidebound by the require-

ments of the Rent Act must act for public benefit. Hence, to

that extent, this is liable to be gone into and can be the

subject-matter of adjudication.

Learned Addl. Solicitor General Mr Ramaswami contended

that the onus was entirely on the appellant and the burden

lay on the defendant to establish that the Bombay Port Trust

had terminated the tenancy or taken the proceedings in

eviction not in public interest but for a collateral purpose

or mala fide or that it had acted in a manner contrary to

the provisions of Art. 14 of the Constitution. He is right

so contending.

It was further urged by Mr Ramaswamy that public law

duties are owed to society at large and the nature of the

body performing the functions is not determinative of public

law or private law character of the action taken. He con-

tended that since the provisions of the Bombay-Rent Act did

not apply to the premises of the Bombay Port Trust in the

notice of termination no reason was required to be given

either in the notice itself terminating the tenancy or in

the plaint for evicting the appellant. He further contended

that originally the Bombay Port Trust was constituted as a

body corporate under the provisions of the Bombay Port Trust

Act, 1889 and is now constituted under the provisions of the

Major Port Trusts Acts, 1988. In both these Statutes the

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object for constituting the Bombay Port Trust was not to

provide accommodation to persons and, therefore, the object

was totally different from the object for which the Bombay

Rent Act and similar enactments have been enacted. It was,

therefore, urged that since there was no obligation or duty

cast upon the Bombay Port Trust to provide accommodation,

there could be no question of acting in Government charac-

ter.

It was urged that the respondent did not enjoy any

special privileges/powers of benefits vis-a-vis such activi-

ties by virtue of its being a local Body or Government

character. In the premises, it was contended that such a

body stands on the same footing as any other citizen and

will, in respect of such activity, not be subjected to

public law duty.

We are unable to accept the submissions.. Being a

public body even in respect of its dealing with its tenant,

it must act in public interest, and an infraction of that

duty is amenable to examination either in civil suit or in

writ jurisdiction.

Our attention was drawn to the observations of this

Court in Radhakrishna Agarwal & Ors. v. State of Bihar &

Ors., [1977] 3 SCR 249. Reliance was also placed on the

observations of this Court in Life

762

Insurance Corpn. of India v. Escorts Ltd. & Ors., [1985] 3

Suppl SCR 909, in support of the contention that the public

corporations' dealing with tenants is a contractual dealing

and it is not a matter for public law domain and is not

subject to judicial review. However, it is not the correct

position. The Escorts' decision reiterated that every action

of the State 'or an instrumentality of the State, must be

informed by reason. Indubitably, the respondent is an organ

of the State under Art. 12 of the Constitution. In appropri-

ate cases, as was observed in the last mentioned decision,

actions uninformed by reason may be questioned as arbitrary

in proceedings under Art. 226 or Art. 32 of the Constitu-

tion. But it has to be remembered that Art. 14 cannot be

construed as a charter for judicial review of State action,

to call upon the State to account for its actions in its

manifold activities by stating reasons for such actions.

The contractual privileges are made immune from the

protection of the Rent Act for the respondent because of the

public position occupied by the respondent authority. Hence,

its actions are amenable to judicial review only to the

extent that the State must act validly for a discernible

reason not whimsically for any ulterior purpose. Where any

special right or privilege is granted to any public or

statutory body on the presumption that it must act in cer-

tain manner, such bodies must make good such presumption

while acting by virtue of such privileges. Judicial review

to oversee if such bodies are so acting is permissible.

The field of letting and eviction of tenants is normally

governed by the Rent Act. The Port Trust is statutorily

exempted from the operation of Rent Act on the basis of its

public/Government character. The legislative assumption or

expectation as noted in the observations of Chagla C.J. in

Rampratap Jaidayal's case (supra) cannot make such conduct a

matter of contract pure and simple. These corporations must

act in accordance with certain constitutional conscience and

whether they have so acted, must be discernible from the

conduct of such corporations. In this connection, reference

may be made on the observations of this Court in S.P. Rekhi

v. Union of India, [1981] 2 SCR 111, reiterated in M.C.

Mehta & Anr. v. Union of India & Ors., [1987] 1 SCC 395,

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wherein at p. 148, this Court observed:

"It is dangerous to exonerate corporations

from the need to have constitutional con-

science; and so, that interpretation, language

permitting, which makes governmental agencies,

whatever their mien amenable to constitutional

limitations must be adopted by the court as

against the alternative of permitting them to

flourish as an imperium in imperio."

763

Therefore, Mr Chinai was right in contending that every

action activity of the Bombay Port Trust which constituted

"State" within Art. 12 of the Constitution in respect of any

right conferred or privilege granted by any Statute is

subject to Art. 14 and must be reasonable and taken only

upon lawful and relevant grounds of public interest. Reli-

ance may be placed on the observations of this Court in E.P.

Royappa v. State of Tamil Nadu, [1974] 2 SCR 348; Maneka

Gandhi v. Union .of India, [1978] 2 SCR 621; R.D. Shetty v.

The International Airport Authority of India & Ors., [1979]

3 SCR 1014; Kasturi Lal Lakshmi Reddy v. State of J & K &

Anr., [1980] 3 SCR 1338 and Ajay Hasia v. Khalid Mujib

Sehravardi & Ors. etc., [1981] 2 SCR 79. Where there is

arbitrariness in State action, Art. 14 springs in and judi-

cial review strikes such an action down. Every action of the

Executive Authority must be subject to rule of law and must

be informed by reason. So,, whatever be the activity of the

public authority, it should meet the test of Art. 14. The

observations in paras 101 & 102 of the Escorts' case (supra)

read properly do not detract from the aforesaid principles.

The High Court had relied on the observations of this

Court in Kasturi Lal Lakshrni Reddy v. State of Jammu &

Kashmir & Anr., (supra) that the State was not totally freed

of the duty to act fairly and rationally, merely because it

could do so under a contract. The High Court stated that

though it might be accepted that a public body like the

respondent should not act unreasonably or unfairly but it

did not follow that every time they decided to take action

against the contractual tenants, they had to decide the said

action in terms of fairness, equity and good faith. In

support of this proposition, reliance was placed on the

observations of this Court in L.I.C v. Escorts, (supra). In

this connection, Mr Chinai appearing for the appellant

reiterated before us as he did before the High Court, that

the basis of the legitimate assumption or expectation of

which the statutory exemption had been granted by the Legis-

lature to the Bombay Port Trust provided a guideline or

touch-stone by which the conduct of the public authority

which had been granted exemption, should be judged. And,

according to him, the necessity of eviction in the instant

case, must have been only in public interest. Reliance was

placed on several decisions referred to hereinbefore.

We are inclined to accept the submission that every

activity of a public authority especially in the background

of the assumption on which such authority enjoys immunity

from the rigours of the Rent Act, must be informed by reason

and guided by the public interest. All exercise of discre-

tion or power by public authorities as the respondent, in

respect of dealing with tenants in respect of which they

have been treated separately and distinctly from other

landlords on the assump-

764

tion that they would not act as private landlords must be

judged by that standard. If a governmental policy or action

even in contractual matters fails to satisfy the test of

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reasonableness, it would be unconstitutional. See the obser-

vations of this Court in Kasturi Lal Lakshrni Reddy, (supra)

and R.D. Shettv v. The International Airport Authoritv of

India & Ors., [1979] 3 SCR 1014 at 1034.

Learned Additional Solicitor General reiterated on

behalf of the respondent that no question of mala fide had

been alleged or proved in these proceedings. Factually, he

is right. But it has to be borne in mind that governmental

policy would be invalid as lacking in public interest,

unreasonable or contrary to the professed standards and this

is different from the fact that it was not done bona fide.

It is true as learned Addl. Solicitor General contended that

there is always a presumption that a governmental action is

reasonable and in public interest. It is for the party

challenging its validity to show that the action is unrea-

sonable, arbitrary or contrary to the professed norms or not

informed by public interest, and the burden is a heavy one.

In this background the contention of the appellant has

been that its eviction was not necessary in public interest,

and further that the eviction was only in pursuance of an

alleged policy on the part of the Port Trust to let out the

reconstituted plot to the person who occupied the major

portion, which, according to the appellant, was not in

consonance with the obligation of the Trust to take action

only in public interest. It was contended that eviction for

development with least dislocation, should have been the aim

and that would have served the public purpose better. On

behalf of the appellant it was contended that before the

Trial Court it was established that both the appellant and

M/s Dhanji Mavji had been tenants of the Port Trust on the

original plot No. 4 since 1932, and in fact the appellant

was older tenant. Our attention was drawn to para 16 of the

appellant's written statement, Vol. 2 Paper Book, page 35.

In this context, it was submitted that the decision of the

Port Trust was not based on public purpose/interest, and as

such was ultra vires of the powers of the Port Trust. It was

contended that such a plea was justiciable in all civil

suits.

On behalf of the Port Trust authorities, however, the

submission was that there was no obligation under the Bombay

Port Trust Act to provide accommodation. So, there cannot be

any governmental character. This we have already dealt with.

Learned Add|. Solicitor General submitted that in evi-

dence it has been mentioned by Katara (P.W. 1 at page 43,

Vol.II) that the plot had been allotted to Dhanji Mavji

since it was the policy of the Bombay Port Trust to allot a

re-constituted plot to a person occupying

765

a major portion of such plot. There was no challenge to this

evidence .in cross-examination. On the other hand, he con-

tended that there was no evidence on the alleged policy of

the Port Trust of giving plots on joint tenancy to all

occupants. According to him, in the letters addressed by the

Port Trust at pp. 82, 123, 128 of Vol. 1 and in the letters

by and on behalf of the appellant and/or their alleged

associate concerns at pp. 14 1 to 147 they have specifically

admitted that there was a policy of the Port Trust to allot

plots to the occupants of the major portions thereof and in

fact a grievance has been made by them that in accordance

with the said policy of the Bombay Port Trust, Plot No. 5A

was not being allotted to the associates of the appellant.

In that view of the matter even under the scope of judicial

review, it was contended, whether it should have been given

on joint-tenancies or not, is not a matter which could be

gone into by the Court. Reliance was placed on the observa-

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tions of Lord Justice Diplock in Council of Civil Service

Unions v. Minister for the Civil Service, [1984] 2 AER 935

at 950, where the learned Lord Justice classified 8 grounds

subject to control of judicial review, namely, illegali-

ty, irrationality and procedural impropriety. Learned

Addl. Solicitor General is right, in our opinion, in that we

cannot really substitute a decision reached by a fair proce-

dure keeping the policy of the respondent in mind by a

different decision only on the ground that the decision

which appeals to the court, is a better one. Reliance was

placed on the observations of Lord Chancellor Lord Hailsham

in Chief Constable of the North Wales Police v. Evans,

[1982] 1 WLR 1155. In our opinion, it is necessary to remem-

ber that judicial review, in the words of Lord Brightman in

that case, is not concerned with the decision, but with the

decision making process. As observed by Prof. Dias in 'Juri-

sprudence' (5th Edn. at p. 91) unless the restriction on the

power of the court is observed, the court would under the

guise of preventing the abuse of power, be itself guilty of

usurping power which does not belong to it. It is therefore

necessary to bear in mind the ways and means by which the

court can control or supervise the judicial action of any

authority which is subject to judicial control. In this

connection, it is necessary to refer to the observations of

Lord Justice Templeman in re Preston v. I.R.C., [1985] 2 WLR

836 and the observations of Lord Justice May in Regina v.

Chief Constable of the Merseyside Police, [1986] 2 WLR 144.

It is not within the purview of a court to substitute a

decision taken by a constituted authority simply because the

decision sought to be substituted is a better one. Learned

Addl. Solicitor General, in our opinion, is therefore right

in contending that the appellant should not be allowed to

contend that the decision of the Bombay Port Trust to allot

the plot to the major holder is not one of the feasible

means of achieving the objectives of development. It was not

open to the appellant to contend

766

that the Bombay Port Trust could have framed a better policy

in a way in which both the goals, development and non-evic-

tion of existing tenants, could have been achieved.

Furthermore, we have to bear in mind that joint-allot-

ment for the purpose of development pre-supposes coopera-

tion. In this connection, it is necessary to remember that

Mr Singhvi, appearing for the intervener, in C.M.P. No.

19447/88 indicated that the joint development was not possi-

ble because they were not willing to take it jointly. He

also pointed out that the appellant was aware that the

decision to allot this plot in his client's favour had been

taken as early as 1973 and that it was within the knowledge

of the present appellant that they had also put up construc-

tions thereon at substantial cost. He urged that, though it

is true that the lease in favour of the petitioner was

terminated and the suit filed only in 1977, the fact is that

the appellant took no step earlier to have the allotment in

favour of his clients cancelled. This, he has urged, is also

a ground for non-interference at this stage. We are inclined

to agree.

Our attention was drawn to the fact that Dhanji Mavji had

held 80% of the re-constituted plot. The plot 5B had been

developed inasmuch as a building of ground plus 5 upper

storeys had been erected as was the maximum possible not-

withstanding the fact that the appellant had not yet surren-

dered their portion. As against this, on plot 5A where the

Bombay Port Trust offered a joint tenancy to the three

occupants, since there was no occupant holding a major

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portion thereof, there had been no development whatsoever

and in fact there has been litigation going on to remove all

the 3 occupants. In that view of the matter the Bombay Port

Trust, perhaps, was justified in coming to the conclusion

that the only possible way to develop the properties of the

Bombay Port Trust in compliance with the Town Planning

Scheme by allotting plots to holders of major portions

thereon. Such a decision cannot be faulted.

The Town Planning Scheme came into force in 1957. Plot 5

was divided into Plot 5A and 5B in 1963. The Town Planning

Act had been enacted to meet the requirements for planning,

development and use of land. Having regard to Sections 2(7),

2(13), 2(17), 2(18), 2(21), 2(22), 2(27), 13, 14, 22, 59,

65, 88, 89, & 159, it appears that one of the purposes was

the extinguishment of the tenancies of the Port Trust, and

as such tenants of plot 5A and 5B were liable to eviction.

The Port Trust continued them as monthly tenants for many

years before formulating a policy to develop the plots by

offering them to major holders. In pursuance to that Scheme,

regulations have been flamed under Section 169 of the Town

Planning Act. Our attention was placed on some of these

regulations. It is contended that it was viewed that

767

plot of land of less than 500 sq. yards out of the Town

Planning Scheme cannot be allotted. In that view of the

matter it is a possible view and we need not go beyond this.

In that context even though we reiterate that the Port

Trust must act reasonably and in adherence to a policy which

serves the public purpose on the assumption of which exemp-

tion was granted to it from the Rent Act, while dealing with

the tenants or occupants, it cannot be said that the Port

Trust has acted improperly. In that light the decision of

the High Court must be affirmed though on a different empha-

sis.

In the view that we have taken, it is not necessary for

us to go into the question whether under Art. 227 of the

Constitution, it was open to the High Court to go into the

question of constitutional validity for which reliance was

placed on the observations of this Court in Venkatlal G.

Pittie & Anr. v. Bright Bros (P) Ltd. [1987] 3 SCC 558 at

569 and Khalil Ahmed Bashir Ahmed v. Tufelhussein Samasbhai

Sarangpurwala, [1988] 1 SCC 155. Reliance was also placed by

Mr Chinai on the observations of the House of Lords in

England in Wandsworth London Borough Council v. Winder,

[1985] AC 461 at 505-507. In that case the local authority

was under the agreement itself, required to fix rent under

the statutory provision. It committed a breach thereof.

Hence, it was held there that that was a breach of a con-

tractual obligation enforceable under the Private Law and,

therefore, justiciable.

As we look upon the facts of this case, there was an

implied obligation in respect of dealings with the

tenants/occupants of the Port Trust authority to act in

public interest/purpose- That requirement is fulfilled if it

is demonstrated that the Port Trust Authorities have acted

in pursuance of a policy which is referable to public pur-

pose. Once that norm is established whether that policy is

the best policy or whether another policy was possible, is

not relevant for consideration. It is, therefore, not neces-

sary for our present purposes to dwell on the question

whether the obligation of the Port Trust Authorities to act

in pursuance of a public purpose was of public law purpose

or a private law purpose. Under the Constitutional scheme of

this country the Port Trust Authorities were required by

relevant law to act in pursuance of public purpose. We are

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satisfied that they have proceeded to so act.

We must record that learned Addl. Solicitor General

made a statement that irrespective of the result of this

appeal, the Port Trust Authorities of Bombay, will consider

reasonably granting of an alternative site to the appellant,

if such an application is made to them.

In the view that we have taken this appeal must, there-

fore, fail and is accordingly dismissed. The C.M.P. No.

19447/88 is disposed of

768

by directing that the applicants are permitted to intervene

and their submissions have been considered. In the facts and

the circumstances of the case, the parties will pay and bear

their own costs. All interim orders are vacated.

RANGANATHAN, J. I respectfully agree with the conclusion

of my learned brother Sabyasachi Mukharji, J. However, I

would like to add a word of reservation.

2. The principal argument which Shri Chinai addressed to

us at great length on behalf of appellant was that the

relationship between the appellant and the Port Trust was

not purely contractual and in the realm of private law. He

urged that the Port Trust, having been granted an exemption

from the provisions of the rent control acts on certain

public grounds, is not at liberty to take action to evict

the petitioner without being accountable therefore and that

its action is in the realm of public law and hence liable to

judicial review. He submitted that the decision of this

Court in the Escorts case, 1985-3 Suppl. SCR 909, is not

inconsistent with this contention.

3. The learned Additional Solicitor General contested

the above proposition on principle and refuted the sugges-

tion that the Port Trust was under any obligation to show

that its action was bona fide, and not arbitrary or unrea-

sonable but could be justified on grounds of public inter-

est. He submitted that on the facts of the present case, the

state of the pleadings at the various stages and its own

findings on the facts, the High Court was not called upon to

go into the larger issue at all and that its observations in

this regard were purely casual. He submitted, however, that,

without prejudice to these contentions, he would be willing

to satisfy us on the facts of the present case that the

action of the Port Trust was bona fide and based on policy

and reason. He addressed us on this aspect and I agree, with

respect, with the conclusion of my learned brother

Sabyasachi Mukharji, J. that, on the facts of the present

case, the action of the Port Trust was not improper and that

there are no grounds to interfere with the same.

4. In view of the above conclusion on the merits and in

view of my opinion that we have not heard full arguments on

both sides on the general propositions contended for by Shri

Chinai as to the parameters and scope of judicial review in

such matters which are issues of far-reaching importance, I

would like to refrain from expressing any final and conclud-

ed opinion on these aspects though, prima facie, I am also

inclined to think, as held by my learned brother that there

is considerable force in them.

R.S.S. Appeal dismissed.

769