Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
CASE NO.:
Appeal (civil) 4608 of 2006
PETITIONER:
Rajasthan Housing Board and another
RESPONDENT:
G.S. Investments and another
DATE OF JUDGMENT: 31/10/2006
BENCH:
G.P. Mathur & A.K. Mathur
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 4608 OF 2006
(Arising out of SLP (C) No. 17916 of 2006)
(CC 4919/05)
G.P. Mathur, J.
Leave granted.
2. This appeal, by special leave, has been filed challenging the
judgments and orders dated 4.8.2004 of a learned single Judge of
Rajasthan High Court by which the writ petition filed by respondent
No. 1 M/s. G.S. Investments was disposed of with certain directions
and also the order dated 23.9.2004 passed by the Division Bench by
which the special appeal preferred by the appellants against the said
order was dismissed at the admission stage. The appellants have also
challenged the order dated 4.4.2005 which was passed in the contempt
petition initiated by the respondent No. 1.
3. The appellant No. 1 Rajasthan Housing Board published an
auction notice on 3.2.2002 for auction of 50 commercial plots in the
Mansarovar Scheme, which was followed by another auction notice
dated 19.2.2002. The auction was conducted on 20.2.2002 in which
M/s. G.S. Investments (respondent No. 1) made the highest bid @
Rs.5750/- per square meter. A news item was published in some
newspaper that large scale bungling had been done in the auction due
to which the price fetched for the plots in question was much below
the market rate. The State Government issued a direction on
22.2.2002 summoning the records and staying all further proceeding
relating to auction of the plots. Thereafter, an order was passed by the
State Government on 20.3.2002 directing that the officers of the
Rajasthan Housing Board, who were responsible for conducting the
auction, be placed under suspension and in future no auction shall be
conducted through the agency of Satish Auction House which had
conducted the auction on 20.2.2002 or through any other auction
agency. After a detailed consideration of the matter, including the
report of the Financial Commissioner which showed that in the past
plots in the said area had fetched a price of Rs.10,000/- per square
meter, the State Government passed an order on 3.4.2002
disapproving the auction held on 20.2.2002 and a further direction
was issued for holding a fresh auction. On 23.4.2002 the appellant
No. 1 sent a communication to respondent No. 1 that the auction held
on 20.2.2002 had been cancelled and it may produce the original
receipt regarding deposit of the amount so that the same may be
refunded to it. Feeling aggrieved by the aforesaid communication, the
respondent No. 1 M/s. G.S. Investments filed a writ petition in the
High Court which was admitted by a learned single Judge on
29.5.2002 and an interim order was passed that in the meanwhile no
order prejudicial to the writ petitioner shall be passed. The writ
petition was contested by the appellant on various grounds by filing a
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
counter affidavit. The learned single Judge by a short order dated
4.8.2004 disposed of the writ petition and the relevant portion of the
order is being reproduced below:
"I have carefully examined the orders impugned. It
appears that no opportunity of hearing was given to the
petitioner by the respondents whereas the petitioner is
willing to deposit the balance amount according to the
terms and conditions. Consequently, the impugned
orders dated 23.4.2002 and 2.5.2002 are hereby quashed
and set aside. The petitioner is directed to file fresh
representation before the respondents. The respondents
are directed to consider the representation of the
petitioner and shall issue the demand note of balance
amount after filing of representation by the petitioner
within a period of one month.
With the aforesaid observation, the writ petition
stands disposed of."
The appellant preferred a special appeal against the order of the
learned single Judge before the Division Bench of the High Court
which dismissed the same at the admission stage on 23.4.2004
observing as under: -
"Considering the fact that the direction was given on the
facts that there was open auction wherein the writ
petitioner was highest bidder and he had deposited initial
amount. There is no allegation of the appellant that
auction in question was in collusion with the officers,
who conducted auction proceedings and the writ
petitioner. In absence of such allegation and material to
support that there was collusion between the authorities
who conducted the auction proceeding, we do not find
any justification to interfere with the impugned order of
the learned single Judge.
Consequently, this special appeal is dismissed at
admission stage."
4. Learned counsel for the appellant Rajasthan Housing Hoard has
submitted that the respondent M/s. G.S. Investments had merely made
the highest bid in the auction held on 20.2.2002 and a highest bidder
in an auction does not acquire any legal right to have the auction
concluded in his favour. Serious allegations were made of unholy
alliance between the officers of the Housing Board, the auctioning
agency and the respondent No. 1 and taking notice of the same the
State Government had stayed further proceedings in the matter and
after consideration of the report of the Financial Commissioner which
showed that in the past plots in the said area had fetched the price of
Rs.10,000/- per square meter, which was almost double of the price
which had been offered by the contesting respondent and also other
material, the State Government had issued a direction for initiating
disciplinary proceedings against the concerned officers and had also
passed an order disapproving the auction held on 20.2.2002. The
State Government had taken the said action in exercise of power
conferred by Section 60 of the Rajasthan Housing Board Act, 1970.
In view of the order passed by the State Government a communication
was sent to the contesting respondent on 23.4.2002 that the auction
held on 20.2.2002 had been cancelled and it was asked to produce the
original receipt so that the amount deposited by it may be refunded.
Learned counsel has further submitted that auction of plots by the
Housing Board was purely a commercial transaction and the State
Government having come to the conclusion that the auction had not
been conducted in a fair manner and the price fetched in auction was
very low, a decision had been taken to cancel the auction which was
held earlier and to hold a fresh auction. The decision having been
taken in the interest of public revenue, there was hardly any occasion
to interfere with the said decision under Article 226 of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
Constitution as the scope of interference in such a case is very limited,
the court being concerned not with the decision itself but with the
process of making the decision. Learned counsel for the contesting
respondent has, on the other hand, submitted that the auction had been
fairly conducted and the respondent having made the highest bid and
having deposited 25% of the amount within 24 hours, it had acquired
a right to have the auction concluded in its favour and the cancellation
of the auction was wholly illegal. Learned counsel has further
submitted that the Chairman of the Housing Board having made a
proposal on 25.2.2002 for confirmation of the auction, the subsequent
order passed by the Rajasthan Housing Board on 23.4.2002 cancelling
the auction is wholly illegal.
5. We have given our careful consideration to the submissions
made by the learned counsel for the parties. As mentioned earlier,
after getting report of the bungling done in the auction, the State
Government had passed an order on 22.2.2002 staying all further
proceedings in connection with the auction. On 20.3.2002
disciplinary proceedings had been initiated against the concerned
officers and they were placed under suspension and a further direction
was issued that in future no auction shall be held through any agency
including Satish Auction House, which had conducted the auction in
question. A specific order was passed on 3.4.2002 disapproving the
auction held on 20.2.2002 and it was mentioned in the order that the
same was being done in exercise of powers conferred by Section 60 of
the Rajasthan Housing Board Act. Section 60 of the said Act reads as
under: -
"Government’s power to give directions to the Board \026
The State Government may give the Board such
directions as in its opinion are necessary or expedient for
carrying out the purposes of this Act, and it shall be the
duty of the Board to comply with such directions."
The language of the provision is very clear and it empowers the State
Government to give directions to the Housing Board as in its opinion
are necessary or expedient for carrying out the purposes of the Act.
The section further enjoins that it shall be the duty of the Board to
comply with such directions. The section is couched in very wide
language and the Housing Board has to comply with the directions
issued by the State Government. Therefore, the State Government
was fully empowered to issue the directions whereby it disapproved
the auction held on 20.2.2002 and no exception can be taken to such a
course of action. The directions have been issued in the interest of the
Housing Board to generate revenue and to augment its finances, it
cannot be faulted with on any ground.
6. The auction notice dated 3.2.2002 contained a condition to the
effect that the Chairman of the Housing Board shall have the final
authority regarding acceptance of the bid. The second auction notice
issued on 19.2.2002 mentioned that the conditions of the auction will
be same as mentioned in the earlier auction notice. In view of this
condition in auction notice it is obvious that a person who had made
the highest bid in the auction did not acquire any right to have the
auction concluded in his favour until the Chairman of the Housing
Board had passed an order to that effect. Of course the Chairman of
the Housing Board could not exercise his power in an arbitrary
manner but so long as an order regarding final acceptance of the bid
had not been passed by the Chairman, the highest bidder acquired no
vested right to have the auction concluded in his favour and the
auction proceedings could always be cancelled. What are the rights of
an auction bidder has been considered in several decisions of this
Court. However, we will refer to only one such decision, viz.,
Laxmikant vs. Satyawan 1996 (4) SCC 208 which is almost identical
on facts as it related to auction of a plot by Nagpur Improvement
Trust. The auction notice in this case contained a condition that the
acceptance of the highest bid shall depend upon the Board of Trustees
and further the person making the highest bid shall have no right to
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
take back his bid and the decision of the Chairman of the Board of
Trustees regarding acceptance or rejection of the bid shall be binding
on the said person. After taking note of the aforesaid conditions it
was held:-
"From a bare reference to the aforesaid conditions, it is
apparent and explicit that even if the public auction had
been completed and the respondent was the highest
bidder, no right had accrued to him till the confirmation
letter had been issued to him. The conditions of the
auction clearly conceived and contemplated that the
acceptance of the highest bid by the Board of Trustees
was a must and the Trust reserved the right to itself to
reject the highest or any bid. This Court has examined
the right of the highest bidder at public auctions in the
cases of Trilochan Mishra, etc. v. State of Orissa (1971) 3
SCC 153, State of Orissa v. Harinarayan Jaiswal (1972) 2
SCC 36, Union of India v. Mis. Bhim Sen Walaiti Ram
(1969) 3 SCC 146 and State of Uttar Pradesh and Ors. v.
Vijay Bahadur Singh (1982) 2 SCC 365. It has been
repeatedly pointed out that State or the authority which
can be held to be State within the meaning of Article 12
of the Constitution is not bound to accept the highest
tender or bid. The acceptance of the highest bid is subject
to the conditions of holding the public auction and the
right of the highest bidder has to be examined in context
with the different conditions under which such auction
has been held. In the present case no right had accrued to
the respondent either on the basis of the statutory
provision under Rule 4(3) or under the conditions of the
sale which had been notified before the public auction
was held."
This being the settled legal position, the respondent acquired no right
to claim that the auction be concluded in its favour and the High Court
clearly erred in entertaining the writ petition and in not only issuing a
direction for consideration of the representation but also issuing a
further direction to the appellant to issue a demand note of the balance
amount. The direction relating to issuance of the demand note for
balance amount virtually amounted to confirmation of the auction in
favour of the respondent which was not the function of the High
Court.
7. The other question which requires consideration is what are the
contours of power which the High Court would exercise in a writ
petition filed under Article 226 of the Constitution where the
challenge is to cancellation of an auction held by a public body where
the prime consideration is fairness and generation of public revenue.
This question has been examined by a catena of decisions of this
Court. In a recent decision rendered in Master Marine Services (P)
Ltd. Vs. Metcalfe and Hodgkinson (P) Ltd. (2005) 6 SCC 138, where
after consideration of several earlier decisions, the Bench to which
one of us was a party, summarized the legal principle as under in
paragraphs 11 to 15 of the said reports: -
"11. The principles which have to be applied in judicial
review of administrative decisions, especially those
relating to acceptance of tender and award of contract,
have been considered in great detail by a three Judge
Bench in Tata Cellular v. Union of India AIR 1996 SC
11. It was observed that the principles of judicial review
would apply to the exercise of contractual powers by
Government bodies in order to prevent arbitrariness or
favouritism. However, it must be clearly stated that there
are inherent limitations in exercise of that power of
judicial review. Government is the guardian of the
finances of the State. It is expected to protect the
financial interest of the State. The right to refuse the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
lowest or any other tender is always available to the
Government. But, the principles laid down in Article 14
of the Constitution have to be kept in view while
accepting or refusing a tender. There can be no question
of infringement of Article 14 if the Government tries to
get the best person or the best quotation. The right to
choose cannot be considered to be an arbitrary power. Of
course, if the said power is exercised for any collateral
purpose the exercise of that power will be struck down.
(See para 85 of the reports, SCC para 70)
12. After an exhaustive consideration of a large
number of decisions and standard books on
Administrative Law, the Court enunciated the principle
that the modern trend points to judicial restraint in
administrative action. The Court does not sit as a court
of appeal but merely reviews the manner in which the
decision was made. 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. The Government
must have freedom of contract. In other words, fairplay
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 principles of reasonableness but also must
be free from arbitrariness not affected by bias or actuated
by mala fides. It was also pointed out that quashing
decisions may impose heavy administrative burden on
the administration and lead to increased and unbudgeted
expenditure. (See para 113 of the reports, SCC para 94.)
13. In Sterling Computers Ltd. v. M/s M.N.
Publications Ltd. AIR 1996 SC 51 it was held as under:
(SCC p. 458, paras 18-19)
"18. While exercising the power of judicial
review, in respect of contracts 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.
19. 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 an appellate authority by substituting
its opinion in respect of selection made for
entering into such contract."
14. In Raunaq International Ltd. v. I.V.R. Construction
Ltd. 1999 (1) SCC 492 it was observed that 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 of paramount importance are commercial
considerations, which would include, inter alia, the price
at which the party is willing to work, whether the goods
or services offered are of the requisite specifications and
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
whether the person tendering is of ability to deliver the
goods or services as per specifications.
15. The law relating to award of contract by State and
public sector corporations was reviewed in Air India Ltd.
v. Cochin International Airport Ltd. 2000 (2) SCC 617
and it was held that the award of a contract, whether by a
private party or by a State, is essentially a commercial
transaction. It can choose its own method to arrive at a
decision and it is free to grant any relaxation for bona
fide reasons, if the tender conditions permit such a
relaxation. It was further held that the State, its
corporations, instrumentalities and agencies have the
public duty to be fair to all concerned. Even when some
defect is found in the decision making process, the Court
must exercise its discretionary powers under Article 226
with great caution and should exercise it only in
furtherance of public interest and not merely on the
making out of a legal point. The Court should always
keep the larger public interest in mind in order to decide
whether its intervention is called for or not. Only when
it comes to a conclusion that overwhelming public
interest requires interference, the Court should interfere."
8. The sale of plots by the Rajasthan Housing Board by means of
an auction is essentially a commercial transaction. Even if some
defect was found in the ultimate decision resulting in cancellation of
the auction, the court should exercise its discretionary power under
Article 226 of the Constitution with great care and caution and should
exercise it only in furtherance of public interest. The court should
always keep the larger public interest in mind in order to decide
whether it should interfere with the decision of the authority. In the
present case there was enough material before the State Government
to show that in the past plots in the area had fetched a price of
Rs.10,000/- per square meter and the highest bid made by the
respondent in the present case was nearly half, i.e., Rs.5750/- per
square meter, which clearly indicated that the auction had not been
conducted in a fair manner. If in such a case the State Government
took a decision to disapprove the auction held and issued a direction
for holding of a fresh auction, obviously the said decision was taken
in larger public interest. In these circumstances there was absolutely
no occasion for the High Court to entertain the writ petition and issue
any direction in favour of the contesting respondent. The orders
passed by the learned single Judge on 4.8.2004 and the order passed
by the Division Bench of the High Court on 23.9.2004 are clearly
erroneous in law and are liable to be set aside.
9. It appears that the respondent initiated contempt proceedings
against the appellants in which a learned single Judge passed an order
on 4.4.2005 observing that the order passed by the court on 4.8.2004
had not been complied with in letter and spirit and a further direction
was issued to comply with the said order within two weeks. The
material placed before us shows that the appellant No. 1 had issued a
notice to the respondent on 15.3.2005 and after giving a personal
hearing on the next day, had rejected its representation by the order
dated 18.3.2005. In these circumstances there was no occasion for
initiating any contempt proceedings against the appellants.
10. In the result the appeal is allowed with costs. The order dated
4.8.2004 passed by the learned single Judge and the order dated
23.9.2004 passed by the Division Bench of the High Court are set
aside and the writ petition filed by the respondent is dismissed. The
order dated 4.4.2005 passed by the learned single Judge in contempt
proceedings is also set aside and the contempt petition filed by the
respondent is dismissed. The money deposited by the respondent No.
1 shall be refunded to it forthwith.
28162