1. This is a petition under Article 226 of the Constitution of India.
2. The petitioner wanted to give a tender for construction of tube-wells, the last date for which was 6-12-1972. For giving tender, solvency certificate of Rs. 1,00,000/- (One lac) was required by the petitioner. He, therefore, filed an application on 9-11-1972 accompanied by certain documents vide Annexures A, B, C to the Collector, Hoshangabad who was the competent authority to grant the certificate. The said application was rejected by the Collector on 7-12-1972 vide Annexure 'D'. The contention of the petitioner is that the rejection of his application was mala fide due to personal grudge against Shri Ramlal Sharma, the natural father of the petitioner and that it was wholly unjustified. He has, therefore, filed this petition, praying that the order of the Collector, Hoshangabad be quashed and an appropriate writ be Issued directing the respondent to issue a solvency certificate for Rs. 1,00,000/-(One Lac) to the petitioner.
3. In the return filed by the respondent it is denied that the action of the Collector was mala fide or due to personal grudge. The case of the respondent is that solvency certificate was refused because it was found from the record that the petitioner did not own any immovable property and grant of solvency certificate on the basis of movable property is prohibited.
4. Learned counsel for the respondent raised a preliminary objection that this petition is not maintainable because the grant of solvency certificate is regulated by Government instructions which are non-statutory. In support of his contention he relied on two decisions of the Supreme Court, namely: the State of Assam v. Ajit Kumar Sharma, AIR 1965 SC 1196 and G.J. Fernandez v. State of Mysore, AIR 1967 SC 1753. It was held in these cases that mere administrative instructions confer no right on any member of the public to ask for a writ against the Government to enforce them.
5. It is no doubt true that grant of a solvency certificate is not regulated by any statutory provision but a Government Officer is expected to exercise hisadministrative functions bona fide with a fair mind. If he acts arbitrarily and abuses his administrative powers to the prejudice of a party, his action is open to challenge by the party adversely affected on the ground that it is discriminatory. The discrimination in such cases arises out of malice or personal bias and as such it offends Article 14 of the Constitution of India.
6. Whenever a discretion is vested in a public body or other authority, the discretion must be exercised fairly and honestly with due regard to the purpose for which it is vested and not arbitrarilywith an ulterior purpose. In Susannah Sharp v. Wakefield, 1891 AC 173, Lord Halsbury L.C. observed as under while dealing with the exercise of discretion by Magistrates in the matter of grant of licences under the Licensing Act:
'An extensive power is confided to the justices in their capacity as justices to be exercised judicially: and 'discretion' means when it is said that something is to be done within the discretion of the authorities that something is to be done according to the rules of reason and justice, not according to private opinion: Rooke's case 5 Rep 100 a: according to law, and not humour. It is to be, not arbitrary, vague, and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man competent to the discharge of his office ought to confine himself. Wilson v. Rastall, (1792) 4 TR 753 at p. 757.'
7. In S. Pratap Singh y. State of Punjab, AIR 1964 SC 72 their Lordships in paragraph 6 emphasised the rule that every power vested in a public body or authority has to be used honestly, bona fide and reasonably. Their Lordships also quoted with approval the following observations of Pollock M. R. in Short v. Poole Corporation, (1926) 1 Ch 66 at p. 85:
'Where an authority is constituted under statute to carry out statutory powers with which it is entrusted ......if an attempt is made to exercise those powers corruptly -- as under the influence of bribery or mala fides -- for some improper purpose, such-an attempt must fail and it is null and void.'
8. Their Lordships further quoted with approval the following observations of Warrington L. J. in the aforesaid cases
'No public body can be regarded as having statutory authority to act in bad faith or from corrupt motives and any action purporting to be that of the body, but proved to be committed in bad faith or from corrupt motives, would certainlybe held to be inoperative.'
9. The plea of mala fides has, therefore, always been considered as a relevant plea for determining the validity of the action of the Government of any other public authority. In this connection reference may also be made to the decisions of the Supreme Court in C.S. Rowjee v. State of Andhra Pradesh, AIR 1964 SC 962 and Mohammad Ibrahim v. The State of Andhra Pradesh, AIR 1970 SC 1399 where such a plea was considered. In Union of India v. Anglo Afghan Agencies, AIR 1968 SC 718 their Lordships, while dealing with the right of the petitioner to import licence, held that the Court was competent to grant relief where the departmental authority acted arbitrarily.
10. Thus it is clear that any action or order passed by an authority whether in exercise of its judicial, quasi judicial or administrative powers is vitiated and is liable to be struck down as null and void at the instance of the party adversely affected thereby if it amounts to an abuse of the power and is mala fide or for some improper purpose.
11. The Government usually insist upon a solvency certificate before accepting a tender of a party. Thus a solvency certificate is essential for a party, who wants to engage in a contract or other business activity with the Government. An arbitrary refusal of the solvency certificate therefore infringes upon the fundamental right of the party to carry on trade or business guaranteed by Article 19 of the Constitution of India.
12. The simple point for consideration, therefore is whether the action of the Collector, Hoshangabad, in rejecting the application of the petitioner for a solvency certificate was arbitrary and mala fide.
(After discussing the evidence in paragraphs 13 to 15 the judgment proceeded).
It is always difficult to prove bias of mala fides by direct evidence. It has to be inferred from the conduct of the authorities in the light of the fact and circumstances of each case. After taking into account all the facts and circumstances of this case it appears to us that the action of the Collector was not fair but was arbitrary and mala fide and as such is liable to be quashed.
16. We, therefore, allow the petition and quash the order of the Collector, Hoshangabad. Annexure 'D' rejecting the application of the petitioner for solvency certificate. The application of the petitioner shall be considered afresh by the Collector, Hoshangabad on the basis of the material on record and suchother material as may be placed by the petitioner before him in support of his title to the house. We do not, however, make any order as to costs, in the circumstances of this case. The outstanding security amount shall be refunded to the petitioner.