State said 'absolute discretion.' Court said it's not a blank cheque.

Two refusals, one question: can the State say no without a reason that holds up in court?

M/s. Jagruti Foundation and Sanjay Modak Education Society wanted to set up new colleges in Taluka Haveli, Pune. The University of Pune recommended them. The State of Maharashtra refused them — twice. On the first refusal, the Bombay High Court quashed the decision because the State gave no reasons at all. On remand, the State gave reasons. But the petitioners came back to court, arguing those reasons were arbitrary, irrelevant, and not traceable to the law. At stake: the right to establish an educational institution, the meaning of "absolute discretion" in a statute, and the limits of judicial review when a government says no.

The first round: a refusal without reasons

In 2017, Jagruti Foundation and Sanjay Modak Education Society applied for Letters of Intent (LOIs) to start new colleges. The University recommended them. But on 28 February 2018, the State issued a Government Resolution (GR) granting LOIs to three other institutions — Respondents 6, 7, and 8 — and refused the petitioners. No reasons were given.

The petitioners moved the Bombay High Court in Writ Petition No. 4805 of 2018. On 2 December 2021, the Court quashed the GR. The message was clear: a decision that affects rights cannot be a blank wall. The matter was remanded to the State for fresh consideration, with a direction to pass a reasoned order.

The second round: reasons, but the wrong ones?

The State complied. On 20 April 2022, it issued a fresh GR. This time, it attached a tabular statement explaining why the petitioners were refused and the three respondents were granted LOIs. The petitioners were back in court — this time with Writ Petition No. 6256 of 2022 and Writ Petition No. 9694 of 2022 — arguing that the reasons given were not reasons at all. They were, the petitioners said, a smokescreen for arbitrariness.

What the petitioners argued

The petitioners' case rested on three pillars. First, they said the State applied criteria that had no basis in the governing statute — Section 109(3)(d) of the Maharashtra Public Universities Act, 2016 (MPU Act). The State had considered factors like "financial viability" and "infrastructure readiness" in a way that was not traceable to the law. Second, they argued that the State ignored the University's recommendation, which was a relevant factor under the statute. Third, they contended that the State's decision was discriminatory, violating Article 14 of the Constitution. They relied on Ramana Dayaram Shetty v. International Airport Authority of India (1979) 3 SCC 489, where the Supreme Court held that the State cannot arbitrarily choose between persons; it must act on a standard of reasonableness and non-discrimination.

The petitioners also cited Valsala Kumari Devi v. Director, Higher and Secondary Education & Ors. (2007) 8 SCC 533 to argue that "suitability" under Section 109(3)(d) must be interpreted in the context of educational institutions, not as a vague, catch-all term.

What the State and the private respondents argued

The State and the three private respondents (Respondents 6-8) took a different line. They pointed to the language of Section 109(3)(d), which says the State Government "may grant LOI...in its absolute discretion." The word "absolute," they argued, meant the State's decision was not open to scrutiny. The State had considered the relevant factors, applied its mind, and given reasons. That, they said, was enough. The Court should not substitute its own judgment for the State's on the merits of who gets an LOI.

The provision at the heart of the dispute

Section 109(3)(d) of the MPU Act reads: "State Government may grant LOI...in its absolute discretion, taking into account relevant factors, suitability of management, state level priority..." The phrase "absolute discretion" is the kind of language that makes a lawyer's ears perk up. It sounds like a blank cheque. But the Bombay High Court, in a judgment authored by Justice Jitendra Jain (with Justice A. S. Chandurkar concurring), held that it is not.

The doctrine: "absolute discretion" is not unbridled power

The Court turned to State of Gujarat v. M/s. Krishna Cinema & Ors. AIR 1971 SC 1650. In that case, the Supreme Court held that the phrase "absolute discretion" does not invest an authority with arbitrary power that destroys the inherent limitations of the statute. The Bombay High Court applied this principle directly to Section 109(3)(d). The "absolute discretion" is circumscribed by the qualifying words that follow: "taking into account relevant factors, suitability of management, state level priority." These words are not decorative. They are the boundaries of the discretion.

The Court also examined the scheme of the MPU Act. Section 107 requires the University to prepare a Perspective Plan. Section 108 lays down conditions for affiliation and recognition. Section 109(3)(e) deals with the validity of LOIs, and Section 109(3)(g) with final approval. The Court noted that even the proviso to Section 109(3)(d), which deals with proposals not recommended by the University, requires the State to record reasons. This, the Court observed, shows an in-built mechanism to control the State's actions.

THE TEST: When a statute says "absolute discretion," ask: what are the qualifying words that follow? Those words are not surplusage. They are the legal leash on the discretion.

The scope of judicial review: what the court can and cannot do

The Court was careful to define its own role. It held that under Article 226 of the Constitution, a court exercising judicial review cannot substitute its opinion on the merits of granting or refusing an LOI. But it can — and must — examine whether the decision-making process is vitiated by arbitrariness, illegality, irrationality, or unreasonableness. This is a classic administrative law framework, applied to the specific context of educational institution approvals.

The Court then applied this framework to the facts. It found that the criteria applied by the State in the tabular statement were not traceable to Section 109(3)(d) or to any GR issued under the Act. The State had considered factors that were extraneous to the statutory scheme. This, the Court held, vitiated the decision. The State had not merely exercised its discretion; it had exercised it on the wrong basis.

Why this matters in practice

For advocates, this judgment is a reminder that the phrase "absolute discretion" is not a magic wand. It must be read in the context of the entire provision. For CFOs and founders of educational institutions, the takeaway is practical: if you are applying for an LOI, the State must give reasons that are connected to the statute. If the reasons are generic, irrelevant, or not traceable to the law, you have a case for judicial review.

The judgment also clarifies the role of University recommendations. While the State is not bound by them, ignoring them without a reason that is anchored in the statutory criteria may be seen as arbitrary. The Court did not say the University's recommendation is final. It said the State's departure from it must be explained in terms that the statute recognises.

The bottom line

When the State says "absolute discretion," the Court will look at what the statute actually says — and if the State applies criteria that are not in the law, the decision will not stand.