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Jagmohan Bhola And Others v. The Vice Chairman Ghaziabad Development Authority And Anr. - WRIT - C No. 34190 of 2000  RD-AH 5944 (18 November 2005)
Civil Misc. Writ Petition No. 34190 of 2000
Jagmohan Bhola and others Versus Vice-Chairman, Ghaziabad Authorit
Hon. R.K. Agrawal, J.
Hon. (Mrs.) Saroj Bala, J.
( Delivered by Hon. (Mrs.) Saroj Bala, J.)
This writ petition under Article 226 of the Constitution of India has been filed for quashing the orders dated 3.7.2000(Annexure-5 to the writ petition) and dated 5.6.2000 (Annexure-5-A to the amendment application) and further for a direction to the respondents to allot the plot and to pay compensation for the loss suffered due to their illegal action. The petitioners also seek a direction to the respondents to deposit the amount of Rs.7.20 lacs deposited as earnest money in a fixed deposit scheme of a nationalized bank.
A brief resume of the facts leading to the writ petition is that pursuant to the advertisement published in the newspaper dated 22.3.2000 by the Ghaziabad Development Authority for auction of certain plots on 30.3.2000, the petitioners submitted an application for participat0ion in the auction in respect of plot measuring 711.70 sq. meters situated at Kaushambi. A sum of Rs. 7.20 lacs was deposited on 30.3.2000 as earnest money before participating in the auction. The relevant terms and conditions of allotment by auction of commercial plot on free hold basis (Annexure-SA-2 to the supplementary affidavit) are as follows:
"2. Registration for bidding:
i) No person shall be permitted to participate in the bid unless he deposits earnest money and gets himself registered for participating in the auction by filling an application form duly filled by the person concerned.
3.Bidding at auction :
i) The Vice Chairman or the officer conducting the auction may without assigning any reason, withdraw all the plots or any one or more of them from the auction at any stage.
ii) The bid shall be for the amount of the premium offered for the free hold rights in the plots.
iii) No person whose bid has been provisionally accepted by the officer conducting the auction shall be entitled to withdraw his bid.
iv) The officer conducting the bid shall provisionally accept the bid at the fall of hammer and shall submit a report with his recommendation for acceptance or rejection to the Vice Chairman.
v) The Vice Chairman may accept or reject any bid including the highest bid after considering the recommendations of the Auctioning Committee and his decision in this behalf shall be conclusive and final which shall not be questioned by any auction purchaser. Vice Chairman shall not be bound to accept the recommendations of the officer concerned.
vi) The size of the plots announced by the G.D.A. being only approximate, the bidders whose bids are accepted shall have to accept variation upto 15% either way in the area of the plot and consequently in the total permissible covered area for which the bid has been offered and accepted, subject of course, to proportionate increase or decrease of auction sale price for the purpose of payments or refunds as the case may be. The auction price for all purpose shall be calculated by multiplying the highest auction bid by the total area of the plot actually made available consequent upon acceptance of the bid."
The bid of the petitioners who had offered at the rate of 13,450/- per sq. meter was the highest in respect of the plot measuring 711.70 sq. meter situated at Kaushambi. The petitioners were informed by a letter dated 3.7.2000 that the auction held on 30.3.2000 has been cancelled by order dated 5.6.2000. The petitioners were called upon to take back the earnest money after depositing the token.
On behalf of the respondents counter affidavit has been filed by Sri Anil Agarwal, Assistant Engineer, Ghaziabad Development Authority, Ghaziabad admitting that a sum of Rs.7.20 lacs was deposited by the petitioners as earnest money for participating in the auction and the petitioners had offered a bid of Rs.13,450/- per square meter in respect of the disputed plot. The respondents have denied that there was provisional acceptance of the bid. The contention of the respondents is that the bid was to be approved by the Vice Chairman of the Ghaziabad Development Authority and the decision of the Vice Chairman is final under the terms and conditions of the tender. The respondents have stated that the earnest money is deposited against the token and the petitioners having not deposited the token the earnest money could not be refunded. According to the respondents the auction bid offered by the petitioners and other bidders being lower than the earlier auction bids, which were rejected, the auction was cancelled by the Vice Chairman. In paragraphs 20 and 24 of the counter affidavit it has been stated that the bid offered by the petitioners being lesser than the highest bid offered in the auction dated 29.1.1998, the bid offered by the petitioners was not approved by the Vice-Chairman.
We have heard Sri Ravi Kiran Jain, learned senior counsel for the petitioners and Sri A.K.Misra, learned counsel for Ghaziabad Development Authority and have perused the materials available on the record.
The learned counsel for the petitioners submitted that the highest bid has been cancelled by an order dated 5.6.2000 in an arbitrary manner without giving an opportunity of hearing. The learned counsel laid emphasis that the respondents were under an obligation to allot the plot in favour of the petitioners who were the highest bidders and their offer was over and above the reserved price fixed by the Ghaziabad Development Authority. The learned counsel argued that in view of the directions of the State Government contained in the communication dated 6.2.1997 the Ghaziabad Development Authority was bound to accept the bid of the petitioners, which was higher than the reserved price. The learned counsel placing reliance on the judgment dated 8.5.1992 in Civil Misc. Writ Petition No.34190 of 2000-M/S Uttam Properties Limited and another Versus Ghaziabad Development Authority, argued that the respondents in rejecting the highest bid have abused the powers vested in it. The learned counsel submitted that the respondents have exercised their administrative power arbitrarily, whimsically and capriciously.
The learned counsel for the Ghaziabad Development Authority submitted that in the present case the bid of the petitioners has not been accepted. He further submitted that clause 3.0 of the terms and conditions of the auction provides that the Vice Chairman may accept or reject any bid including the highest bid after considering the recommendations of the auctioning committee and his decision in this behalf shall be conclusive and final which shall not be questioned by any auction purchaser. The learned counsel canvassed that the Vice Chairman had given valid reasons for not accepting the bid of the petitioners. According to the learned counsel the price offered by the petitioners being lesser than the highest auction bid offered in the auction of the same plot held on 29.1.1998, the order dated 5.6.2000 cancelling the auction cannot be said to be arbitrary .It was argued on behalf of the Ghaziabad Development Authority that the directions of the State Government contained in the communication dated 6.2.1997 do not confer any right upon the petitioners to claim any relief as has been held in Civil Misc. Writ Petition No.22772 of 2004-M/s Madhyan Housing Private Limited and another Versus State of U.P. and others, decided on 21.12.2004 and Civil Misc. Writ Petition No. 36763 of 2005- M/s A.H. S. Projects Private Limited Versus State of U.P. and others, decided on 18.7.2005. The learned counsel placing reliance on the decision in M/s A.H. S. Projects Private limited Versus State of U.P. and others reported in 2005 (4) ESC (Allahabad) 2460, argued that it is in the larger public interest that plots auctioned should fetch the maximum price and for that purpose to hold a fresh auction.
We have given our thoughtful consideration to the arguments advanced on behalf of both the parties.
A perusal of the order dated 5.6.2000 (Annexure-SA-2 to the amendment application) indicates that the reasons for not accepting the petitioners' auction bid of Rs.13,450/- per square meter have been assigned by the Vice Chairman of Ghaziabad Development Authority. The reason for not accepting the auction bid of the petitioners, as given by the Vice Chairman, is that the bid offered is lesser than the highest bid, which was offered in auction held on 29.1.1998. In paragraphs 20 and 24 of the counter affidavit filed on behalf of the respondents it has been specifically stated that the bid offered by the petitioners being lesser than the bid offered in the auction held on 29.1.1998, was not approved by the Vice Chairman. The petitioners in the rejoinder affidavit have not specifically denied the averments made in paragraphs 20 and 24 of the counter affidavit by stating that no such auction of plot in question was held on 29.1.1998. The rejection of the highest bid of the petitioners on the ground that the price offered was lesser than the earlier auction held on 29.1.1998, was a valid reason. In these circumstances, the Vice Chairman recommended a fresh auction to fetch the price equivalent to the price offered in the auction held on 29.1.1998 or a price higher than the said price.
The contention of the learned counsel for the petitioners is that an opportunity of hearing should have been afforded to the petitioners before declining to accept their auction bid. Clause 3.0(v) of the terms and conditions provided that the Vice Chairman may accept or reject any bid including highest bid after considering the recommendation of the auctioning committee and its decision in this behalf shall be conclusive and final which shall not be questioned by any auction purchaser. The final decision regarding the auction bid was to be taken by the Vice Chairman. The Vice Chairman has cancelled the auction, disapproving the highest bid of the petitioners, by a reasoned order. The decision with regard to the acceptance or rejection of the bid including the highest bid taken by the Vice Chairman being conclusive and final, no right accrued to the petitioners, though they were highest bidders. On the face of these facts, the petitioners were not entitled to any opportunity of hearing by the Vice Chairman of the Ghaziabad Development Authority before taking the decision.
The learned counsel for the petitioners, placing reliance on the communication dated 6.2.1997 containing the directions of the State Government, argued that the bid of the petitioners being the highest, it could not have been rejected and no fresh auction in relation to the plot could be held. The learned counsel for the respondents submitted that the effect of the Government Order dated 6.2.1997 can be treated as guidelines but the directions contained therein do not carry mandate of a statutory provision. The Government Order dated 6.2.1997 desires that to ensure transparency in auction proceedings and to stop corruption, the officers should have no discretion in refusing the bid higher than the reserved price. The government communication dated 6.2.1997 has not been brought on the record of the writ petition. The copy of the communication dated 6.2.1997 was supplied to the Court during the course of the arguments whereby denying an opportunity to the respondents to file counter affidavit in relation to the submission made with regard to the said document. Moreover, the submission raised with regard to the government communication has been considered and rejected by this Court in the cases of M/s Mandhyan Housing Private Limited and another Versus State of U.P. and others and M/s A.H. S. Projects Private Limited (supra). The Apex Court in the case of Eastern Industries Limited Versus U.P. State Electricity Board (1996) 11 SCC 199, has held that such directions do not clothe a litigant with a right for issuance of a writ in his favour. Agreeing with the reasons given by the Division Bench in the case of M/s Mandhyan Housing Private Limited and another Versus State of U.P. and others and M/s A.H. S. Projects Private Limited (supra), we are of the view that the administrative instructions having no statutory force cannot form the basis for issuance of a writ.
The learned counsel for the petitioners submitted that the reasons assigned in the order dated 5.6.2000 for the rejection of highest bid are not sound and valid reason. Clause 3.0 of the terms and conditions of the auction gave a conclusive right to the Vice Chairman, Ghaziabad Development Authority, to reject the highest bid. The petitioners have not challenged the said condition in the present writ petition. Moreover, the fact that the price offered by the petitioners was lower than the highest bid price offered in the auction held on 29.1.1998, has not been controverted by the petitioners in the rejoinder affidavit. The facts of Civil Misc. Writ Petition No.34190 of 2000- M/s Uttam Properties Limited Versus Ghaziabad Development Authority, decided on 8.5.1992 are distinguishable. In that case the respondents had failed to establish that the price offered in the earlier auction was higher. In the present case there is no denial that the price of plot in question offered in the previous auction was higher than the auction bid of the petitioners.
At this juncture, we are confronted with the question of the extent and scope of the power of judicial review permissible in contractual matters. It is well settled that the Court can scrutinize the award of the contracts by the Government or its agencies in exercise of their power of judicial review to prevent arbitrariness or favouritism. The question as to the extent of judicial review permissible in contractual matters while inviting the bids by issuing tenders, was examined in minute details by the Apex Court in the case of Tata Cellular Versus Union of India AIR 1996 SC 11 and following principles have been laid down :
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness ( including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fide.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
In Sterling Computers Limited Versus M.N. Publications Limited AIR 1996 SC 51 it was held as under :
"While exercising the power of judicial review, in respect of contract entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the "decision making process". By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State Court have inherent limitations on the scope of any such enquiry. But at the same time the Courts can certainly examine whether " decision making process" was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available, taking into account the interest of the State and the public, then Court cannot act as n appellate authority by substituting its opinion in respect of selection made for entering into such contract..........."
In Air India Limited Versus Cochin International Airport Limited (2000) 2 SCC 617 the Apex Court has observed:
" The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation of tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedure laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness".
This principle was reiterated in Monarch Infrastructure (P) Ltd. Versus Commr. Ulhasnagar Municipal Corporation (2000) 5 SCC 287, and it was held that the terms and conditions in the tender are prescribed by the Government bearing in mind the nature of contract and in such matters the authority calling for the tender is the best judge to prescribe the terms and conditions of the tender. It is not for the court to say whether the conditions prescribed in the tender under consideration were better than the ones prescribed in the earlier tender invitations.
In the Indian Railway Construction Co. Ltd. Versus Ajay Kumar (2003) 4 SCC 579 the Supreme Court has held as follows:
" It is trite law that exercise of power, whether legislative or administrative, will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary..... If a power (whether legislative or administrative) is exercised on the basis of facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated ."
After considering the decisions in Tata Cellular Versus Union of India (supra) and Air India Ltd. Versus Cochin International Airport Ltd. (supra) it has been held in Directorate of Education and others Vs. EDUCOMP DATAMATICS Ltd. and others (2004) 4 SCC 19, as follows :
" It has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny, the same being in the realm of contract. That the Government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory mala fide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide."
The Supreme Court has restated the same principles in M/s Master Marine Services Pvt. Ltd. Versus Metealfe and Hodgkinson Pvt. Ltd. and another 2005 AIR SCW 2189
In State of U.P. and others Versus Vijay Bahadur Singh and others AIR 1982 SC 1234 the decision of this Court was challenged and it has been held as follows:
" It appears to us that the High Court had clearly misdirected itself. The conditions of auction made it perfectly clear that the Government was under no obligation to accept the highest bid and that no rights accrued to be bidder merely because his bid happened to be the highest. Under Condition No. 10 it was expressly provided that the acceptance of bid at the time of auction was entirely provisional and was subject to ratification by the competent authority, namely, the State Government. Therefore, the Government had the right, for good and sufficient reason, we may say, not to accept the highest bid but even to prefer a tenderer other than the highest bidder. The High Court was clearly in error in holding that the Government could not refuse to accept the highest bid except on the ground of inadequacy of the bid. Condition No. 10 does not so restrict the power of the Government not to accept the bid. There is no reason why the power vested in the Government to refuse to accept the highest bid should be confined to inadequacy of bid only. There may be a variety of good and sufficient reasons, apart from inadequacy of bids, which may impel the Government not to accept the highest bid."
Examining the impugned order dated 5.6.2000, on the anvil of the principles laid down by the Supreme Court, the Vice Chairman of the Ghaziabad Development Authority, having vested with the power to accept or reject the bids including the highest bid has recorded specific reasons for the rejection of the bid. The price offered in the earlier auction held on 29.1.1998 was higher than the auction bid of the petitioners. The Vice Chairman cancelled the auction in public interest and directed that a fresh auction be held to fetch the price equivalent to the price offered in the earlier auction or the price higher than that. The petitioners have not challenged condition no. 3.0(v), which gave an absolute right to the Vice Chairman of Ghaziabad Development Authority to reject the bids. The fact that in the earlier auction the price offered was higher than that of the petitioners, has not been specifically denied. The highest bid offered by the petitioners was subject to rectification by the competent authority who had conclusive power for sufficient reasons not to accept the highest bid. The highest bid offered by the petitioners being inadequate its acceptance would have caused loss of revenue to a public body. It is in the larger public interest that the plot auctioned by a public body should fetch the maximum price. It would be appropriate to quote here few observations made by the Supreme Court in the case of Tata Cellular Versus Union of India AIR 1996 SC 11 :
" Government is the guardian of finance of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government."
In view of the forgoing discussions, we do not find any merits in the contentions advanced on behalf of the petitioners. The writ petition fails and is dismissed with no order as to costs. The interim stay order is hereby vacated.
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