Review of administrative action

A 3-judge bench of the Supreme Court consisting of Justices Arun Mishra, M.R. Shah and Justice B.R.Gavai, has in the judgment of the case – Municipal Council, Neemuch v. Mahadeo Real Estate & Others, delivered on September 17, 2019, ruled that scope of judicial review of an administrative action is very limited.

In a 21-page well researched detailed judgment authored by Justice Bhushan Gavai, the Court has pointed out that unless the Court comes to a conclusion, that the decision-maker has not understood the law correctly that regulates his decision-making power or when it is found that the decision of the decision - maker is vitiated by irrationality and that too on the principle of “Wednesbury unreasonableness” or unless it is found that there has been a procedural impropriety in the decision-making process, it would not be permissible by the High Court to interfere in the decision-making process.

It is also equally well settled, that it is not permissible for the Court to examine the validity of the decision but this Court can examine only the correctness of the decision-making process.

It could be thus seen that interference by the High Court would be warranted only when the decision impugned is vitiated by an apparent error of law, that is, when the error is apparent on the face of record and is self-evident. The HC would be empowered to exercise the powers when it finds that the decision impugned is so arbitrary and capricious that no reasonable person would have ever arrived at.

It has been reiterated that the test is not what the Court considers reasonable or unreasonable but a decision which a court thinks that no reasonable person could have taken. Not only this, but such a decision must have led to manifest injustice. 

According to the Court, on examining the facts of this case in the light of these principles, undisputedly, in this case, before inviting the bids, prior approval of the State Govt. as is required under section 109 of the Madhya Pradesh municipality Act, 1961, was not taken. 

The division bench of the Madhya Pradesh HC by only referring to the communication of December 21, 2009, came to the conclusion that the sanction contemplated under section 109 of the Act was granted by the state Govt. However, the division bench had totally ignored the subsequent correspondence between the State Govt. and the Commissioner. 

Perusal of the subsequent communication reveals that the Commissioner had pointed out the infirmities in the proposal of the Municipal Council and advised the State Govt. to reject the said proposal with a direction to the Municipal Council to invite fresh tenders for allotment of 163176 sq. feet land on 30 years’ lease. On the objection of the Commissioner, the State Govt. re-examined and reconsidered the issue and authorized the commissioner to exercise powers under section 109 of the said Act  to take appropriate decision, including rejecting the proposal and directing the process of re-tendering.

It could thus be clearly seen that, the Commissioner, instead of blindly accepting the directions contained in the communication of December 21, 2009, has acted in larger public interest so that the Municipal Council earns higher revenue.  

In the background of this factual situation, the finding of the HC division bench that the action of the Commissioner is arbitrary and illegal, in the Sc’s view is neither legally or factually correct. The HC, while exercising its powers of judicial review of administrative action, could not have interfered with the decision unless the decision suffers from the vice of illegality, irrationality or procedural impropriety. 

In this case, the SC found that the commissioner had acted rightly as a custodian of the public property by pointing out the anomalies in the proposal of the Municipal Council to the State Govt. and the state Govt. had also responded to the right perspective by authorizing the Commissioner to take an appropriate decision. 

The Court has said that it was of the considered view that both the Commissioner and the State Govt., have acted in the larger public interest. The Court said that it was unable to appreciate as to how the HC, in this case, could have come to a conclusion that it was empowered to exercise the power of judicial review to prevent arbitrariness or favouritism on the part of the State authorities, as has been observed by it in paragraph 13 of its judgment.

The SC has observed that it is also unable to appreciate the finding of the HC in para 17, wherein it has observed the impugned decision of the authorities are found not to be in the public interest. In this context, the SC has made a query to itself as to whether directing re-tendering by inviting fresh tenders after giving wide publicity at national level so as to obtain best price for the public property, would be in the public interest or as to whether awarding contract to a bidder in the tender process where it is found that there was no adequate publicity and also a possibility of there being a cartel of bidders, would be in the public interest.

The Apex-Court has expressed its “considered view” that the decision of the Commissioner which was set aside by the HC is undoubtedly in larger public interest, which would ensure that the Municipal Council earns a higher revenue by enlarging the scope of the competition. By no stretch of imagination, the decision of the State Govt. or the Commissioner could be termed as illegal, improper, unreasonable or irrational, which parameters only could have permitted the HC to interfere. The HC’s inference, what it is, in absence any of these parameters, “in our view”, was “totally improper”. On the contrary, the SC’s finding is that the HC failed to take into consideration relevant material.

In the result, the Supreme Court has held the impugned orders not sustainable and accordingly, it quashed and set aside the orders of August 31, 2017 and July 5, 2018 and allowed the appeals. The SC also dismissed the petition of the respondent - Mahadeo  Real Estate.

However, The SC has directed the civic body to refund the amount deposited by the Mahadeo Real Estate along with 6 pc per annum interest, forthwith.