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2004 DIGILAW 171 (JK)

State Of J. &K. v. Trehan Industries Pvt. Ltd.

2004-05-31

S.N.JHA, Y.P.NARGOTRA

body2004
Per : S.N. Jha, Chief Justice The dispute in this letters patent appeal arising from a writ petition relates to the Canal Power House, Jammu. The Power House was handed over to the respondent. By the order impugned, the State Government decided to take over it. The respondents challenged the order by a writ petition. By the judgement and order under appeal the impugned order was quashed with a direction to the appellant to give effect to the earlier order. The State of Jammu and Kashmir and others have come in appeal. 2. The case of the respondent shortly stated, is that pursuant to a policy decision of the State Government regarding setting up of small power project in Jammu and Kashmir through private entrepreneurship, on 4-7-2001, they came forward with a proposal a revive and modernize Canal Power House, Jammu, which was lying defunct for more than two decades. Earlier, outside agencies had not shown any interest in making investments in the State, and in the circumstances the Chief Minister had approached the Chamber of Commerce to motivate local private entrepreneurs. On 29-8-2001 the Managing Director, J&K State Power Development Corporation Limited asked the respondents to submit a Detailed Project Report (DPR). On 18-9-2001 the respondents submitted the DPR on 18-09-2001, the Report was sent to the Central Electricity Authority for scrutiny. On receipt of comments from the Central Electricity Authority the respondents were asked to revise the Project report vide letters dated 17-11-2001 of the Power Development Corporation. A revised project report in conformity with the advice of the Central Electricity Authority/Power Development Corporation was submitted on 21-11-2001. No further clarification was asked for nor the respondents were asked to make any modification in the project report. On or about 29-1-2002 the Chief Minister approved the proposal for handing over the Power House to the respondents which was communicated by the General Administration Department vide letter dated 29-1-2002. In the light of the said decision, on 30-1-2002, Government Order no. 34-PDD of 2002 was issued direction handing over of possession of the Power House to the respondents. The terms and conditions for transfer of assets and liabilities were to be finalized by a Committee. The constitution of the Committee consisting of the Chief Secretary, Financial Commissioner (P&D), Financial Commissioner (Finance), Secretary, Power Development Department and Managing Director, Power Development Corporation was separately communicated by Government Order no. The terms and conditions for transfer of assets and liabilities were to be finalized by a Committee. The constitution of the Committee consisting of the Chief Secretary, Financial Commissioner (P&D), Financial Commissioner (Finance), Secretary, Power Development Department and Managing Director, Power Development Corporation was separately communicated by Government Order no. 35-PDD of 2002 on the same day. On 31-1-2002 the Power House except rooms/portions which were under the occupation of the Commercial Division and Workshop Division of the Corporation was handed over to the respondents: 3. Meanwhile, on 25-2-2002 the said Committee among other things decided to hand over five kanals of land pertaining to the Power House to the respondents for a period of forty years, extendable thereafter. As regards the machinery/equipments the Committee decided to get their book value evaluated and subject to negotiations with the respondents, transfer them on outright sale or lease basis. The committee further decided that the respondents would supply power to the Power Development Department at the rate of Rs.3/- per unit, -- to start with, subject to review and award of the State Electricity Regulatory Commission. The respondents, further, were to enter into Power Purchase Agreement, to be signed on behalf of the Government by Development Commissioner (Power). 4. The further case of the respondents is that for completing the formalities regarding execution of Power Purchase Agreement, the Special Secretary, Power Development Department vide his letter dated 15-3-2002 asked the Development Commissioner (Power) to take steps for preparing the draft of the Agreement and its execution. At this juncture, the general elections were declared and things came to a halt. The Power Development Department informed the Chief Electoral Officer, J&K that the assets of the Power House had already been handed over to the respondents under Government Order no. 34-PDD of 2002 dated 30-1-2002 and the work on the project had already commenced in February 2002. The Election Commission, however, advised the government to wait till conclusion of the elections. After the elections, the political setup changed with the installation of a new government in November 2002. In the mean time the respondents had entered into agreement with a French Company, HYDRO POWER sa and HPP Energy (India) Pvt. Ltd. The Department asked the respondents to submit physical and financial progress report. After the elections, the political setup changed with the installation of a new government in November 2002. In the mean time the respondents had entered into agreement with a French Company, HYDRO POWER sa and HPP Energy (India) Pvt. Ltd. The Department asked the respondents to submit physical and financial progress report. While submitting status report along with balance sheet the respondents among other things informed the Government that the Project was complete and ready for generation. The Power House was simply to be connected with the Grid. The matter was placed before the Cabinet for consideration on 14-2-2003. The Cabinet disputed a high level Committee headed by the Power Minister for on-the-spot-inspection. The Power Minister along with the members of the Committee visited the spot and found that the Power House/Project was indeed ready for generation. In its report the Committee recommended the case of the respondents pointing out that any adverse decision may impede the process of privatization of power which could have an adverse impact on the government. Besides, in such a situation the government may have also to compensate the respondents for the investments made by them and there was also the possibility of the decision being challenged in court. According to the respondents, notwithstanding the favourable report/recommendation of the Committee and ignoring the factual background in which the Power House had been handed over to them for modernization, renovation and generation of hydro electric power culminating into the Canal Power House/Project being made operational, the State Government vide cabinet decision No. 90/6 dated 19-5-2003 decided to take over the Power House by the Power Development Corporation and constitute a committee to estimate the work done by the respondents on the project and, also, get a thorough investigation conducted by an appropriate agency about the manner in which the power house was handed over to the respondents. 5. Aggrieved by the decision of the state government the respondents approached the Court in OWP no. 467/2003, seeking quashing of the decision dated 19-5-2003 followed by Government Order no. 100-PDD of 2003 dated 31-5-2003 taking over the Power House from the respondents, seeking, further, mandamus for execution of Power Purchase Agreement and implementation of the terms and conditions settled by the Committee and restraining the appellants from dislodging the respondents from Power House except in accordance with law. 6. 100-PDD of 2003 dated 31-5-2003 taking over the Power House from the respondents, seeking, further, mandamus for execution of Power Purchase Agreement and implementation of the terms and conditions settled by the Committee and restraining the appellants from dislodging the respondents from Power House except in accordance with law. 6. The decision/order of the government was challenged inter alia on the ground that the same was contrary to the rules of natural justice as opportunity of hearing was not given to the respondents before taking over possession; that the appellants were estopped by principle of promissory estoppel from acting contrary to the earlier orders of the previous government; that the Power House had been handed over in the light of government policy to privatize power sector and the sanction of the government was not required again, and even if the government intended to reverse the policy of privatization, no decision had been taken in respect of mega power houses; a conscious decision having been taken by the previous government, it could not be withdrawn by the successor government and such withdrawal impinges on elementary principles of fair administration. 7. In the reply affidavit, besides objecting to the maintainability of the writ petition on the grounds that the petition involved disputed questions of fact and that the petition was one for enforcement of contractual rights which cannot be done in writ jurisdiction and the proper course was to file civil suit, the appellants took the stand that at no stage government had taken policy decision for revival of Power House in the private sector i.e. by non-state agencies, though in a meeting held under the chairmanship of the Chief Secretary it had been agreed in principle to encourage private entrepreneurs and the Power Development Corporation had been asked by the Administrative Department to take steps for renovation and modernization of Mohra Power Project and the Canal Power House i.e. the power house in question, and for that purpose enter into Memorandum of Understanding (MoU) with M/s Shakti Hydroelectric Company and M/S Trehan Industries Corporation i.e. respondents herein respectively, after obtaining a detailed project report. The Detailed Project Report received from the respondents for renovation and modernization of the Canal Power house was sent to the Central Electricity Authority for scrutiny. Meanwhile the Corporation constituted a committee to examine the Detailed Project Report. The Detailed Project Report received from the respondents for renovation and modernization of the Canal Power house was sent to the Central Electricity Authority for scrutiny. Meanwhile the Corporation constituted a committee to examine the Detailed Project Report. The Committee submitted its findings to the effect that the cost of generation of power could be Rs.1.174/- per unit in case revival is undertaken by the Power Development Corporation taking into account the subsidy from the Government of India, Ministry of Non-Conventional Energy Source. The then Chief Minister, however, approved the proposal for handing over the Power House to the respondents without placing the matter before the Cabinet for consideration. Neither any agreement was executed by the government nor the terms and conditions were fixed; yet, the Power House was handed over to the respondents. Inasmuch as the Cabinet never approved the proposal for handing over the Power House to the respondents, they did not acquire any legal right not withstanding certain work done by them at the site. In the facts and circumstances, neither there has been violation of the rules of natural justice nor the principle of promissory estoppel was attracted. 8. At this stage, it may be mentioned that on 3-6-2003 a learned Single Judge, in seisin of the case, passed interim order of status quo which was vacated by the Division Bench on appeal preferred by the appellants on 7-7-2003, the respondents preferred special leave petition in the Supreme Court. Observing that the order of the Single Judge was an ad interim order, subject to objections, and therefore the Division Bench should not have interfered with it, the Supreme Court vide order dated 11-7-2003 set aside the order of the Division Bench directing that status quo ante as on 10-7-2003 (when the SLP was filed) at 10.30 a.m. shall be maintained The result of the said orders was that the Power House, taken over by the Power Development Department on 10-7-2003 after the status quo order of the Single Judge stood vacated by the Division Bench, was restored to the respondents on 17-7-2003 pursuant to the order of Supreme Court. 9. The respondents, later after seeking permission amended the writ petition bringing on record the inventory prepared by the officials of the Power Development Corporation on 10-7-2003 -- when they took possession of the Power House. 9. The respondents, later after seeking permission amended the writ petition bringing on record the inventory prepared by the officials of the Power Development Corporation on 10-7-2003 -- when they took possession of the Power House. They also brought on record the earlier inventory prepared in 2002 at the time of handing over of the Power House to the respondents. Supplementary averments were also made adding few paragraphs to the original writ petition. The appellants also filed reply to the amended writ petition reiterating more or less the same facts as stated in the earlier reply. They denied the respondents case in all respects and their entitlement. The respondents filed rejoinder affidavit virtually reiterating their case stated in the writ petition. Besides being more or less reiteration of the facts stated earlier, they are argumentative in nature, and therefore it is not necessary to refer to the reply/rejoinder affidavit. 10. The learned Single Judge framed five questions for consideration namely, (a) whether the writ petition is maintainable on the ground that there are disputed questions of fact involved in the case, (b) whether the state government had taken policy decision at any stage with regard to revival, renovation, modernization etc. of the Canal Power House, (c) whether any formal agreement had been reached with the respondents, (d) whether in the absence of any formal agreement, the respondents had renovated the Power House or executed repair works at their risk and (e) whether the Power house had been handed over to the respondents without observing proper procedure and codal formalities. The learned Single Judge after a detailed consideration of the materials on record held that the writ petition did not involve disputed questions so as to render it not maintainable. The Power house had been given to the respondents in pursuance of policy decision of the government for revival, to encourage private entrepreneurship in the power sector. The learned Judge held that there was no universal rule that the Government should give its largesse only by inviting tenders. In an appropriate case, this could be done also by negotiations. Though no formal agreement has been executed in the sense that no agreement had been signed between the parties, the correspondence showed that parties had entered into agreement pursuant to which the respondents came in possession of the Power House, and thereafter made the Power House operational after renovation etc. Though no formal agreement has been executed in the sense that no agreement had been signed between the parties, the correspondence showed that parties had entered into agreement pursuant to which the respondents came in possession of the Power House, and thereafter made the Power House operational after renovation etc. and it could not therefore be said that the works executed by them was at their own risk. The learned Single Judge also did not find any violation of the procedure or codal formalities. The learned Judge further held that the decision having been duly taken by the previous government, it could not be reserved by the successor government. Further, impugned decision was in violation of rules of natural justice as no opportunity has been given to the respondents. On these findings, amongst others, the learned Single Judge quashed the impugned decision with a direction to the appellants to give effect to the earlier decision/order dated 31-1-2002. 11. We heard Mr. A.H. Naik, learned Advocate General for the appellants and Mr. Zaffar A. Shah for the respondents and perused the records. 12. Learned Advocate General submitted that the state government never took the decision to hand over the Power House to the respondents. Under the Business Rules framed under section 43 read with section 45(2) of the Constitution of Jammu and Kashmir (corresponding to Article 166 of the Constitution of India), the matter should have been laid before the Cabinet. Even the order of the Chief Minister was in anticipation of Cabinets approval. But without obtaining such approval orders were issued on 30-1-2002 and the Power House was handed over to the respondents, curiously without settling the terms and conditions and/or executing the agreement. A committee was constituted to negotiate and formulate the terms and conditions of handing over. Any grant, it was submitted, without finalizing the terms and conditions cannot be said to be in public interest. The terms and conditions are supposed to be finalized first before parting with the property. If the terms were still to be negotiated and settled, the action of handing over the Power House cannot be said to be a correct decision. There was no justification to hurriedly hand over the possession. The terms and conditions are supposed to be finalized first before parting with the property. If the terms were still to be negotiated and settled, the action of handing over the Power House cannot be said to be a correct decision. There was no justification to hurriedly hand over the possession. The Committee constituted for the purpose, later, not only resolved to give five kanals of land for the period of 40 years but also fixed rate of supply of electricity at Rs. 3/- per unit without any basis, whereas in the opinion of the Committee of Experts the electricity could be supplied @ Rs.1.174 per unit taking into consideration the subsidy provided by the Government of India. Be that as it may, it was pointed out, when the proposal came up for consideration before the Cabinet of the previous Government itself, the same was not approved. The Cabinet rather vide decision dated 24-4-2002 decided to have the matter examined by the Law Department for consideration of the Cabinet. The said decision was not challenged by the respondents. This, it was submitted, shows that the Cabinet of the previous Government also was not favourably disposed towards handing over of the Power House to the respondents. 13. According to the learned Advocate General, decision to hand over the power house never having been taking by the Cabinet, the impugned decision/order dated 19-5-2003/21-5-2003 to take over the power house cannot be said to be reversal of the so-called decision of the previous government. 14. Learned Advocate General also submitted that in deciding/handing over the power house, the government did not follow the laid down procedure or the norms of grant of largesse nor observed the codal formalities and, therefore, the action of the government cannot be said to be in accordance with law. Further, the writ petition involved disputed questions of fact which could not be determined in writ jurisdiction. In any view, the learned Single Judge could not have issued direction to execute agreement in favour of respondents which, apart from the question of jurisdiction, if implemented, would result in perpetuation of wrong and illegality and be against public interest. Further, the writ petition involved disputed questions of fact which could not be determined in writ jurisdiction. In any view, the learned Single Judge could not have issued direction to execute agreement in favour of respondents which, apart from the question of jurisdiction, if implemented, would result in perpetuation of wrong and illegality and be against public interest. Advocate General placed reliance on Ramana Dayaram Shetty v. International Airport Authority of India and Ors., 1979 (3) SCC 489, Express Newspapers Pvt. Ltd. v. Union of India & Ors., 1986 (1) SCC 133, Raunaq International Ltd. v. I.V.R.Construction Ltd. & Ors., 1999 (1) SCC 492, M.I. Builders Pvt. Ltd. v. Radhey Shyam Sahu & Ors., 1999 (6) SCC 464, Verigamto Naveen v. Government of A.P. & Ors., 2001 (8) SCC 344, Union of India v. S.B. Vohra & Ors., AIR 2004 SC 1402. Passing reference was also made to Rita Mishra and Ors. v. Director, Primary Education Bihar & Ors., AIR 1988 Patna 26 on the point of natural justice. 15. Mr. Zaffar Shah appearing for the respondents made the following submissions. The impugned government order dated 19-5-2003 and 31-5-2003 do not spell out reasons. No affidavit was filed by the Government. The Power Development Corporation alone filed affidavit and, therefore, views of the Government are not known. The Business Rules is an unpublished confidential document. They have been framed for transaction of business amongst different departments. They are in the nature of internal arrangement. They cannot be construed as delegation of authority. When the order is authenticated in the name of Governor or Government of Jammu and Kashmir in terms of Section 45 of the Constitution of the State, it becomes the order of the Governor/Government. When the Chief Minister or a Minister acts, he acts on behalf of the Governor and not as a delegate. Reliance was placed on Municipal Corporation of Delhi v. Shiv Shanker, 1971 (1) SCC 443, Shamsher Singh v. State of Punjab and Anr., 1974 (2) SCC 831, Dattatraya Moreshwar v. State of Bombay and Ors., AIR 1952 SC 181 and Chandrakant Sakharam Karkhamis & Ors. v. State of Maharashtra & Ors., AIR 1977 Bombay 193. 16. The moot question is, it was submitted, whether cabinet approval was required at all in law. v. State of Maharashtra & Ors., AIR 1977 Bombay 193. 16. The moot question is, it was submitted, whether cabinet approval was required at all in law. There being no such requirement, according to the counsel, it was just an act of discretion on the part of the Chief Minister to seek approval of the Cabinet. Referring to the Government Order dated 30-1-2002 it was submitted that there was nothing in the order which required approval of the Cabinet. Reference was made to relevant provisions of the Business Rules. It was submitted that it is not inflexible rule to invite tenders in all cases of grant of public property/largesse as held in M/s Kasturi Lal Lakshmi Reddy v. State of J&K and Ors., 1980 (4) SCC 1. In the instant case, the choice of the respondents was not selective. The respondents had only responded to the appeal of the Chief Minister to come forward and make investment in the power sector. By doing so, the respondents did not enrich themselves. As a matter of fact, they virtually closed their options in view of lack of control over investments in the business without any guarantee of return because the respondents had no right to control the price of electricity. 17. It was submitted that as would appear from the record, it was the policy of the Government/Power Development Corporation to encourage private entrepreneurship in mini power sector, but a different stand is now being taken that the government would opt for power generation itself. The contention of the Advocate General that the respondents had installed machinery etc. after the status-quo order was not correct. Even the Minister in his local inspection on 14-2-2002 found that the project was ready for generation whereas status-quo order was passed on 3-6-2003. 18. Finally, it was submitted that the respondents having acted on the promise/assurance of the State Government and altered position by making huge investments entered into agreement with third parties, the appellants are bound by the principle of promissory estoppel and could not, therefore, take over the power house and/or create any impediment in the way of respondents in operating the power house. In any view of the matter, the impugned decision having been taken without giving an opportunity of hearing to respondents, is bad on account of violation of rules of natural justice. In any view of the matter, the impugned decision having been taken without giving an opportunity of hearing to respondents, is bad on account of violation of rules of natural justice. The order/direction of the learned Single Judge in the circumstances does not warrant interference. 19. While considering the submissions of the counsel for the parties it is to be kept in mind that though the point in issue was validity of the order by which the power house was taken over by the government reversing the earlier order, in effect and substance, the dispute revolves around the validity of the grant in favour of the respondents vide government order dated 30-1-2002. Usually, the question as to the validity or otherwise of such grant arises for consideration at the instance of co-tenderer i.e. unsuccessful compitator or in a public interest litigation by an activist i.e. by a third person. Unlike such cases, in the present case, the challenge comes from the government itself -- to be precise, the successor government, finding fault not on the ground of malafide but on technical ground that the decision should have been taken by the Cabinet as per the Business Rules and violation of other codal formalities. Also, it is suggested that it was a selective decision without inviting tenders etc. and that the decision was not in public interest. We have reservations whether in the absence of any plea as to malafide etc. against the previous government, much less proof of it, the decision of a lawfully constituted government can be challenged on any technical ground, we shall presently see whether there was violation of Business Rules to warrant reversal of the earlier decision. This, indeed, was the main thrust of the argument of the Advocate General. 20. It was submitted that in terms of the Business Rules framed by the Governor in exercise of powers conferred by sections 43 and 45(2) of the Constitution of Jammu and Kashmir (Article 166 of the Constitution of India), the proposal should have been laid before the Cabinet and as this was not done, the order of the Chief Minister which itself was in anticipation of the approval of the Cabinet, had not legal or binding effect. On behalf of the respondents, on the other hand, it was submitted that for transacting the business in question approval of the Cabinet was not required. On behalf of the respondents, on the other hand, it was submitted that for transacting the business in question approval of the Cabinet was not required. Even if it were so, the Business Rules are in the nature of internal arrangement as to conduct of business among different departments of the government. The provisions are directory in nature. Neither they create any right nor non-compliance thereof invalidates the action, but once the order is issued in the name of the Governor or the government of the State, it becomes government order and the question of non-compliance of the Business Rules becomes insignificant. 21. In our opinion, in the instant case it is not necessary to go into larger questions as we are satisfied that the matter in hand did not require approval of the Cabinet in terms of the Business Rules. The Business Rules, as indicated above, have been framed for "more convenient transaction of the business of the Government" under section 43 and section 45(2) of the Constitution of Jammu and Kashmir. Section 43 provides that Governor shall make rules for the more convenient transaction of the business of the Government of the State and for the allocation among Ministers of the said business. Section 45(2) provides that orders and other instruments made and executed in the name of the Governor or of the Government of Jammu and Kashmir shall be authenticated in such a manner as may be specified in the rules to be made by the Governor, and the validity of an order or instrument which is so authenticated shall not be called in question on the ground that it is not an order or instrument which is so authenticated shall not be called in question on the ground that it is not an order or instrument made or executed by the Governor or, as the case may be, by the Government of Jammu and Kashmir. 22. Rule 8 of the Business Rules to which reference was made, provides that subject to the orders of the Chief Minister under rule 14, all cases referred to in the Second Schedule shall be brought before the Cabinet in accordance with the provisions of the rules contained in Part II, Rule 14(1), occuring in part II, lays down the procedure in accordance with which the proposals are to be laid before the Cabinet. Under sub-rule (2) -- if the matter is specified in any of the three clauses thereof, instead of laying it before the Cabinet, only a note may be circulated for information of the Cabinet, subject to orders of the Chief Minister with the approval of the Minister Incharge. We are not concerned with this aspect of the matter as the proposal regarding handing over the power house to the respondents does not come in any of the clauses. The question thus is whether the proposal fell under any of the entries of the Second Schedule read with rule 8? If that is so, in terms of rule 8, it was required to be placed before the Cabinet. 23. The Second Schedule contains as many as 41 entries (as upto 12-10-2002, the date of the last reprint of the Business Rules). Reference was made to entry 38. The said entry runs as under: -- "Except the cases of forest leases and sale of forest produce including minor forest produce, proposals involving alienation, either temporary or permanent, or sale of Government property including land and temporary lease of immovable property, where such lease of government property is not in accordance with the rules or a general scheme already approved by the Cabinet and the value thereof exceeds Rs.50,000 in each case." 24. It was submitted that proposal involved transfer by way of lease, of immovable property and, therefore, it was covered by entry 38. On behalf of the respondents, it was submitted that entry would be attracted only in cases alienation/sale/lease not in accordance with the rules or a general scheme already approved by the Cabinet. In other words, if the proposed alienation etc. involves relaxation of the rules or the terms and conditions of any scheme, the approval of the Cabinet may be required but where no such violation/relaxation is involved, the approval of the Cabinet is not required under entry 38. 25. We find force in the submission on behalf of the respondents. As a matter of fact, strictly speaking, it is doubtful if handing over of the power house in itself constitutes alienation etc. of any immovable property. 25. We find force in the submission on behalf of the respondents. As a matter of fact, strictly speaking, it is doubtful if handing over of the power house in itself constitutes alienation etc. of any immovable property. It is true, as pointed out on behalf of the appellants, that 5 kanals of land also was proposed to be handed over to the respondents, but that was a subsequent decision of the Committee, subject to concurrence/approval of the competent authority. Under Rule 9 of the Business rules, except otherwise provided in the rules, all business allotted to a department are to be disposed of by or under the general or special directions of the Minister-in-charge. Further, under Rule 7, the Cabinet is collectively responsible for all executive orders issued in the name of the Governor or the Government of Jammu and Kashmir in accordance with Business Rules, whether such orders are authorized by an individual Minister on a matter pertaining to his portfolio or as the result of discussion at a meeting of the Cabinet, or otherwise. 26. In Shamsher Singh v. State of Punjab, (1974) 2 SCC 831, it was held that Article 166 of the Constitution of India (Section 43 of the Constitution of J&K), does not provide for any delegation. The decision of a Minister or officer under the Rules of Business is the decision of the Governor or the President as the case may be. The decision not being the result of delegation of power, once an order is issued on behalf of the Governor or the State or Government of State of Jammu and Kashmir, it is to be treated as a decision of the Governor/Government and the controversy, therefore, that the approval of the Cabinet was not taken under rule 8 read with entry 38 of the Second Schedule pales into insignificance, even if it were to be held that the proposal was covered by entry 38 of the Schedule. 27. We also do not think that it was the selective decision of the Chief Minister to hand over the power house to the respondents. While considering this aspect, it is to be kept in mind that it is not the case of the appellants that the earlier decision was actuated by malafide or extraneous considerations. 27. We also do not think that it was the selective decision of the Chief Minister to hand over the power house to the respondents. While considering this aspect, it is to be kept in mind that it is not the case of the appellants that the earlier decision was actuated by malafide or extraneous considerations. It is further to be kept in mind that no competitor or any person came forward with a rival competing claim. The background in which respondents came forward has been briefly noticed above. We shall come to it again a little later. We would at this stage like to observe that on the materials brought on record, it does not appear to be a case of misfeasance in public office on the part of the then Chief Minister. The term `misfeasance in public office came up for consideration in a case titled Common Cause, A registered Society v. Union of India and Ors., (1999) 6 SCC 667. Earlier the Supreme Court had awarded exemplary damage to the Petroleum Minister for making arbitrary, discriminatory and malafide allotment of petroleum outlets. While considering review of the judgement, the Court explained the term `misfeasance to mean deliberate, dishonest, malicious, unlawful act of the person(s) holding public office. Such an act should not be an act of the State. However, there must be an identifiable plaintiff whose interest was damaged or injured by such action of the public officer. In the instant case, the Chief Minister approved the proposal in anticipation of the Cabinet proposal. It is true that without waiting for the Cabinet decision, the order was issued on 30-1-2002 and power house was handed over to respondents, but if under the Business Rules it was not essential to obtain the Cabinets approval, not much would turn on this. We would nevertheless express our reservations about the propriety of handing over of the power house without finalizing terms and conditions. We shall come to this aspect later. 28. The question which we next propose to consider is whether the decision of the then Government to hand over the power house without issuing advertisement, inviting tenders etc. was bad on that score. In the matter of distribution of largesse, advertisement is a general rule but not an inflexible rule. We shall come to this aspect later. 28. The question which we next propose to consider is whether the decision of the then Government to hand over the power house without issuing advertisement, inviting tenders etc. was bad on that score. In the matter of distribution of largesse, advertisement is a general rule but not an inflexible rule. The rule was laid down with remarkable erudition, if we may say so with respect, by Justice Bhagwati in Ramana Dayaram Shetty v. International Airport Authority of India and Ors., 1979 (3) SCC 489, wherein it was observed that the Government is not free like an ordinary individual to select the recipients for its largesse and cannot choose to deal with any person it pleases in its absolute and unfettered discretion. The government need not deal with any one, but if it does so, it must do so fairly without discrimination and without unfair procedure whether in giving jobs or entering into contracts or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like an ordinary individual deal with any person it pleases, its action must be in conformity with standard or norms which is not arbitrary, irrational, capricious or irrelevant, it must be based on some principle which meets the test of reason and relevance. This rule was enunciated as a rule of administrative law and a part of doctrine of equality enshrined in Article 14 of the Constitution of India. 29. In the case of M/s Kasturi Lal Lakshmi Reddy v. State of J&K and Ors., (1980) 4 SCC 1, the same learned Judge (Bhagwati, J) elaborating the law observed that the discretion of the government in the matter of grant of largesse was subject to two limitations; (a) the terms of grant; and (b) recipient of the grant. As regards the first limitation it was observed that where government action fails to satisfy the test of reasonableness and public interest, it would be liable to be struck down as invalid. As a necessary corollary, the government can not act in the manner it may benefit a private individual at the cost of the state, such action would be both unreasonable and arbitrary and contrary to public interest. As a necessary corollary, the government can not act in the manner it may benefit a private individual at the cost of the state, such action would be both unreasonable and arbitrary and contrary to public interest. The court, however, stated in this connection: -- "..there is always a presumption that governmental action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest. This burden is a heavy one and it has to be discharged to the satisfaction of the court by proper and adequate material. The court cannot lightly assume that the action taken by the government is unreasonable or without public interest because, as we said above, there are a large number of policy considerations which must necessarily weigh with the government in taking action and, therefore, the court would not strike down governmental action as invalid on this ground, unless it is clearly satisfied that the action is un-reasonable or not in public interest." 30. Dealing with the second limitation regarding choice of the recipient, the court reiterated the observations in Ramana Dayaram Shetty case (supra) to the effect that while it is open to the private individual to part with his property to his detriment, the government is not free to select the recipients in the manner it likes, it has to do so without making discrimination and in a fair manner. 31. Having made these general observations and stated the law, the Supreme Court took up for consideration the dispute involved in the case. Briefly stated, the Government of Jammu and Kashmir by the impugned order had awarded contract to 2nd respondent for tapping of 10 to 12 lacs blazes annually for extraction of resin form the inaccessible chir forests in the State for a period of 10 years. In accordance with government policy of industrialization, it was agreed that part of the resin so extracted would be delivered to the State for running state owned in industry and the rest would be retained by the 2nd respondent for establishing and running its own factory in the State. In accordance with government policy of industrialization, it was agreed that part of the resin so extracted would be delivered to the State for running state owned in industry and the rest would be retained by the 2nd respondent for establishing and running its own factory in the State. The grant was challenged as being arbitrary, malafide and not in public interest inasmuch as it allegedly conferred huge benefit on the 2nd respondent at the cost of the State; that the grant was without affording an opportunity to others to obtain such contract; and that it created monopoly in favour of the 2nd respondent and unreasonable restriction on the rights of the petitioners to carry on tapping contract business. Rejecting the contentions, the Supreme Court observed that tapping contract was given by way of allocation of raw material for feeding the factory to be set up by 2nd respondents. The predominant purpose of the transaction was to ensure setting up of a factory by the 2nd respondent as part of the process of industrialization of the State. It would be useful to quote the relevant observation in extenso as under: -- " If the State were giving tapping contract simpliciter there can be no doubt that the State would have to auction or invite tenders for securing the highest price, subject to, of course, to any other relevant over-riding considerations of public weal or interest, but in a case like this where the State is allocating resources such as water, power, raw materials etc. for the purpose of encouraging setting up of industries within the State, we do not think the State is bound to advertise and tell the people that it wants a particular he State may choose to do so, if it thinks fit and in a given situation, if may even turnout to be advantageous for the State to do so, but if any private party comes before the State and offers to set up an industry, the State would not committing breach of any constitutional or legal obligation if it negotiates with such party and agrees to provide resources and other facilities for the purpose of setting up the industry. The State is not obliged to tell such party: "Please wait I will first advertise, see whether any other offers are forthcoming and then after considering all offers, decided whether I should let you set up the industry". It would be not unrealistic to insist on such a procedure, particularly in an area like Jammu and Kashmir which on account of historic, political and other reasons, is not yet industrially developed and where entrepreneurs have to be offered attractive terms in order to persuade them to set up and industry. The State must be free in such a case to negotiate with a private entrepreneur with a view to inducting him to set up an industry within the State and if the State enters into a contract with such entrepreneur for providing resources and other facilities for setting up an industry, the contract can not be assailed as invalid so long as the State has acted bonafide, reasonably and in public interest. If the terms and conditions of the contract or the surrounding circumstances show that the State has acted malafide or out of improper or corrupt motive or in order to promote the private interests of some one at the cost of the State, the court will undoubtedly and strike down State action as arbitrary, unreasonable or contrary to public interest. But so long as the State action is bonafide and reasonable, the court will be interfere merely on the ground that no advertisement was given or publicity made or tenders invited." 32. In para 23 of judgement, the Supreme Court noted that though no advertisements were issued by the State, the Chief Minister of Jammu and Kashmir had in course of three speeches delivered by him at Bombay, Calcutta and New Delhi invited entrepreneurs to set up industries within the State with a view to bringing about rapid industrialization and economic development of the State. These speeches were widely advertised in the newspapers and it was therefore known to the entrepreneurs that the State would be willing to provide resources and other facilities to those who are interested in setting up industries within the State. In fact the State was anxious to invite entrepreneurs to start industries. 33. These speeches were widely advertised in the newspapers and it was therefore known to the entrepreneurs that the State would be willing to provide resources and other facilities to those who are interested in setting up industries within the State. In fact the State was anxious to invite entrepreneurs to start industries. 33. In the instant case too, as seen above, the then Chief Minister of the State had invited private entrepreneurs to come forward and make investments and participate in the industrialization of the State. The appeal unfortunately fell flat and outside agencies/entrepreneurs did not respond to the call presumably on account of the disturbed conditions in the State of which judicial notice can be taken. In the circumstances, the Chief Minister approached the Chamber of Commerce and on the motivation of Chamber of Commerce, the respondent made an offer to set up the project for renovation and modernization of Canal Power House, Jammu. 34. Though the facts of the present case are not identical to those of Kasturi Lals case (supra), a common feature of both the cases is that contract was awarded without issuing an advertisement notice as such or inviting tenders, but after open invitation to the entrepreneurs at large in the State of Jammu and Kashmir, and, therefore, it cannot be said that it was a case of back door selection or selection on pick-and-choose basis. As a matter of fact, the appellants admitted in their affidavit that Power Development Corporation had been asked to enter into Memorandum of Understanding with the respondents and one M/S Shakti Hydro Electric Co. for renovation and modernization of the Canal Power House, Jammu and Mohra Power Project, respectively. The respondents thus were not birds of season getting entry by back door method. In the premises, neither of the two limitations indicated in the case of Kasturi Lal (supra) would seem to apply. 35. The moot question is whether the decision to hand over the power house was in public interest. There being no challenge by any individual with any rival claim, the onus is on the State, which is virtually challenging the action of the previous government, to prove that the decision was contrary to public interest. 35. The moot question is whether the decision to hand over the power house was in public interest. There being no challenge by any individual with any rival claim, the onus is on the State, which is virtually challenging the action of the previous government, to prove that the decision was contrary to public interest. It may be useful to refer to R. T. Rangachari v. Secretary of State, AIR 1937 Privy Council 27, wherein the Judicial Committee observed that: "In a case in which after Government officials, duly competent and duly authorized in that behalf, have arrived honestly at one decision, their successors in office, after the decision has been acted upon and is in effective operation, cannot purport to enter upon a reconsideration of the matter to arrive at another and totally different decision." 36. Reference may also be made to a recent decision in State of Haryana v. State of Punjab, (2002) 2 SCC 507, wherein the Apex Court observed: ".The decision taken by the government level should not be so easily nullified by a change of Government and by some other political party assuming power, particularly when such a decision affects some other State and the interest of the nation as a whole. It cannot be disputed that so far as policy is concerned, a political party assuming power is entitled to engraft the political philosophy behind the party, since that must be held to be the will of the people, but in the matter of governance of a State or in the matter of execution of a decision taken by a previous Government, on the basis of a consensus arrived at which does not involve any political philosophy, the succeeding government must be held duty bound to continue and carry on the unfinished job rather than putting a stop to the same." 37. Coming to the instant case, as seen above, at the instance of the authorities of the State, the respondents submitted a detailed project report and, later, in the light of the suggestions/objections by the Central Electricity Authority, a revised project report in conformity with the suggestions. The matter was processed at different levels and the Project received the approval of the Chief Minister in anticipation of the Cabinets approval. We do not find any violation of the laid down procedure. The matter was processed at different levels and the Project received the approval of the Chief Minister in anticipation of the Cabinets approval. We do not find any violation of the laid down procedure. We do not also think that the manner of consideration suffered from any apparent error. We are conscious of the fact that the writ petition arises from an order reversing the earlier decision/order and therefore, what the court primarily has to see is whether the present impugned order is arbitrary and illegal but, as noticed above, the submissions of the counsel revolved mostly around correctness of the earlier decision. 38. Another way of looking at the case is that setting aside of the impugned order ordinarily results in revival of the earlier order and, therefore, the court is required to satisfy itself about the correctness or otherwise of the earlier order so that illegality or wrong is not perpetuated. The procedural and Constitutional aspects apart, the crux of the matter is whether earlier decision was in public interest or contrary to public interest. It may be that by submitting the revised project report, the respondents made their offer in consonance with the suggestions of the Central Electricity Authority, this, however, is not conclusive of the matter. The terms and conditions, as seen above, remained un-finalized. The Committee later considered the matter but the terms and conditions finalized by it were never approved. Having regard to the technical aspects involved, it may be difficult for the Court to arrive at any conclusion on merit of the proposal/terms and conditions. In case of this nature, we do not want to take a legalistic view. What is important is the public interest involved in the project. There is dispute about the quantum of work done by the respondents. But there appears to be little dispute about the respondents making large investment, entering into agreement with third parties and so on. By doing so, they had substantially altered their position. If so, some rights had certainly accrued to them. It is seen that no opportunity of hearing was given to the respondents before taking the impugned decision. 39. In these circumstances, we are of the view that it would be appropriate that the respondents are given opportunity of hearing by an independent Committee of Experts constituted by the State Government to go into the entire gamut of the dispute. It is seen that no opportunity of hearing was given to the respondents before taking the impugned decision. 39. In these circumstances, we are of the view that it would be appropriate that the respondents are given opportunity of hearing by an independent Committee of Experts constituted by the State Government to go into the entire gamut of the dispute. On receipt of the report, fresh decision shall be taken by the Government. In case of disagreement, it shall briefly spell out the reasons. This exercise should be completed within three months. In the meanwhile status quo shall be maintained. 40. In the result, direction of the learned Single Judge to implement the earlier decision is modified to this extent. With this modification, the appeal is dismissed and the writ petition is accordingly disposed of. There will be no order as to costs.