The judgment behind the scandal

by Animesh Sharma | December 25, 2011

At the centre of a storm - Justice Mohinder Pal

Image above and on article thumbnail is from the website of the Punjab and Haryana High Court here.

My last post was about the Indian Express investigation to unearth the reasons behind Justice Mohinder Pal’s transfer to the Gujarat High Court, and the report on the investigation that featured the unprecedented interviews with sitting judges of the High Court. The exposé revealed that the real reason behind Justice Pal’s transfer was the judgment he delivered in the case of Orchid Infrastructure Development Limited v. Haryana Urban Development Authority, (R.S.A. No. 14 of 2011, decided on January 17, 2011). The Indian Express story left little to the imagination in indicating that there were glaring irregularities in the manner in which Justice Pal had gone about delivering the judgment. The Orchid Infrastructure judgment has opened Pandora’s box, but the merits of the judgment have not been explored in detail.

Orchid Infrastructure’s claim pertained to 9.527 acres of prime land in Sector 29, Urban Estate, Gurgaon. The Haryana Urban Development Authority (“HUDA”) issued advertisements to auction this prime property on May 24, 2004. The auction was to be held under the chairmanship of the Administrator, HUDA. The Chief Administrator of HUDA approved the reserved price, which was fixed by HUDA as Rs.106.65 crores. Various bidders, after completing the necessary formalities, participated in the auction. Orchid Infrastructure emerged as the highest bidder of the suit property at a bid amount of Rs.111.75 crores.

Orchid’s offer was accepted and it deposited Rs.11,17,50,000/- as ten per cent of its bid amount. Instead of issuing a formal allotment letter to Orchid despite various requests however, the Administrator of HUDA instead wrote to them on September 24, 2004, seeking to cancel the bid and refund the amount paid by stating that Orchid’s bid had been rejected as the property could fetch a higher price in case of a re-auction. Orchid approached the trial court by filing a civil suit for a declaration to the effect that the cancellation of its bid was completely illegal, as well as a permanent injunction restraining HUDA from re-auctioning the property.

Orchid contended that the memo dated September 24, 2004 was illegal, as it had been issued by the Administrator, HUDA, Gurgaon, who was not competent to do so as per Regulation 6 of the Haryana Urban Development (Disposal of Land and Buildings) Regulations, 1978 (“the Regulations”), which gave such a power only to the Chief Administrator, HUDA, Panchkula (the first defendant-respondent) to accept or reject the bid. Orchid also contended that it was being victimised at the behest of its rivals in the real estate industry as its bid had been well above the reserved price of the suit property.

HUDA in its reply admitted that Orchid was the highest bidder but claimed that the auction was subject to the provisions of the Haryana Urban Development Authority Act, 1977 (“the Act”) and the byelaws framed under it, which gave the competent authority powers to reject the bid. HUDA contended that the price fetched in the auction was not commensurate with the prevalent market price and was also not in consonance with the price fetched in respect of similar properties in other urban estates like Faridabad and Panchkula.

On these contentions, the trial court decreed the suit vide judgment and decree dated October 14, 2010. The lower appellate court, however, accepted HUDA’s appeal and dismissed the plaintiff’s suit vide judgment and decree dated November 29, 2010, leading to the filing of the Regular Second Appeal in the High Court. The timing is interesting because the time taken to decide the matter eventually became such a contentious issue. The period of one and a half months taken by the Lower Appellate Court to accept HUDA’s appeal was equally incongruous. The lower appellate court does not regularly decide cases in such a small duration.

In my experience, most Regular Second Appeals, especially where both lower courts have differed in their opinion and judgment, are complicated and contentious briefs. Once the high court issues notice in the second appeal, the regular course followed is that the matter would be adjourned for anywhere between a month and three months, and on the next date, if service has been completed, the respondents would first enter an appearance and seek another date, and only then would the matter come up for arguments. This entire process would, on a conservative estimate, take at least six months. This period may be shorter if the respondents are on caveat or are already present in court to receive the notice issued.

In the instant case, Justice Mohinder Pal heard the arguments of the appellant and the respondent, narrowed the controversy involved to a technical issue, and then proceeded to decide the matter in thirteen days. The Indian Express investigation emphasised this irregularity and haste. The question before the Court was whether the Chief Administrator, HUDA, could on his own, delegate his powers to the Administrator, HUDA, without any notification having been issued in this regard by the State Government, as stipulated under Section 51(4) of the Act.

To decide this question, Justice Pal referred to correspondence between the Administrator and Chief Administrator, HUDA dated June 2, 2004 and July 28, 2004 vide which the Chief Administrator had informed the Administrator that the Administrator was competent to decide the question regarding the acceptance of the bid and decide the matter at his level. Orchid argued that once ten per cent of the bid amount had been accepted at the time of auction, only the Chief Administrator, HUDA was competent to take a final decision and that this power could not be delegated to the Administrator, HUDA.

Rule 6(2) of the Regulations indicated that the Chief Administrator, HUDA alone was the competent authority to take the final decision on the bid. This power could only have been delegated if the State Government under Section 51(4) of the Act had issued a notification to this effect. HUDA failed to produce any document on record to show that the State Government had issued any notification directing that the Administrator could exercise any power exercisable by the Chief Administrator under the Act. During the course of arguments, counsel for the respondents stated that the State Government had not issued a notification delegating the powers of the Chief Administrator, HUDA to any other HUDA officer.

Justice Pal came to the conclusion that the Chief Administrator, HUDA alone was the competent authority to confirm or reject Orchid’s bid. HUDA’s admission that there was no notification under Section 51(4) of the Act weighed heavily with Justice Pal. The delegation of authority to the Administrator in the absence of a notification under Section 51(4) of the HUDA Act was held illegal and the Lower Appellate Court’s finding that the delegation by the Chief Administrator was valid was found to be incorrect. The Court also concluded that in the absence of any irregularity in the auction process, the Chief Administrator, HUDA ought to have accepted Orchid’s bid and that the letter conveying the acceptance of the bid ought to have been issued in its favour.

A perusal of the judgment indicates that Justice Pal has decided the issue at hand in a technical manner. The Indian Express has not, perhaps in the misguided spirit of what interesting investigative journalism should be, touched on the main reasons given by Justice Pal. As far as the merits of the case are concerned, and Justice Pal’s view on the validity of the delegation of powers by the Chief Administrator in view of the concession made by HUDA, this decision will finally be tested at the doors of the Apex Court. Arriving at an incorrect view on an erroneous interpretation of the law is no sign of judicial impropriety. What remains nebulous however, is the haste with which the matter was decided. The judgment, Justice Pal’s query regarding the reasons of his transfer, Chief Justice Gogoi’s public interview and the Indian Express report, have undoubtedly given us our scandal of the season.

Animesh Sharma is an advocate at the Punjab and Haryana High Court.