IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C) No. 1982 of 2007(J)
1. DR.T.P. SUNILKUMAR,
... Petitioner
Vs
1. THE STATE OF KERALA, REPRESENTED BY
... Respondent
2. THE KERALA STATE HOUSING BOARD
3. THE REGIONAL ENGINEER,
For Petitioner :SRI.GEORGE THOMAS (MEVADA)
For Respondent :POOVAPPALLY M.RAMACHANDRAN NAIR,SC.KSHB
The Hon'ble MR. Justice ANTONY DOMINIC
Dated :04/01/2008
O R D E R
ANTONY DOMINIC, J.
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W.P.(C) NO. 1982 OF 2007 J
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Dated this the 4TH day of January, 2008
J U D G M E N T
The second respondent had published Ext.P1 notice inviting
tender for the disposal of 25 cents of land and a three storied
building situated in Changampuzha Nagar, South Kalamassery.
Responding to Ext.P1 tender notice, petitioner submitted tender
along with an Earnest Money Deposit of Rs.1,00,000/- offering
Rs.1,01,00,013/-. The tender was opened on 15/6/05 and as
compared to the offer made by the only other tenderer, the
petitioner’s offer was the highest. In the Board meeting held on
23/6/05, as is seen from Ext.P4 minutes of the meeting, the
Board resolved to accept the bid and 3rd respondent was
authorised to take necessary action in that behalf. Thereafter,
the 2nd respondent by Ext.P5 letter sought the permission of the
1st respondent for confirming their decision to accept the
petitioner’s tender.
2. Although few months had elapsed, as his bid was not
confirmed, the petitioner submitted representations and
eventually filed WP(C) No.27758/06 before this court. When that
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writ petition came up for consideration, the standing counsel for
the Board made available Government Order dated 16/11/06
cancelling the tender. Thereupon the learned Single Judge heard
the writ petition and disposed of the case by Ext.P7 judgment
directing that the Earnest Money Deposit made by the petitioner
be returned with 12% interest. Ext.P7 judgment was challenged
by the petitioner in WA 2273/06. That appeal was considered by
the Division Bench and was disposed of by Ext.P8 setting aside
the judgment of the learned Single Judge and dismissing the writ
petition as infructuous with liberty to the petitioner to challenge
the Government order dated 16/11/06 relied on by the Board.
Thereafter, producing the Government order dated 16/11/06 as
Ext.P9, this writ petition was filed by the petitioner on 16/1/2007
praying for quashing Ext.P9 and to direct the respondents 2 and
3 to execute the sale deed in favour of the petitioner in
pursuance to Ext.P4 resolution.
3. The 2nd respondent filed a counter affidavit, in which it
is stated that in response to Ext.P1, two bids were received of
which the petitioner’s was the higher one. It is stated that the
matter was placed before the Board Meeting held on 23/6/05 and
the Board approved the quotation. Thereafter, the Board by
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Ext.P5 sought the permission of the 1st respondent. According to
the 2nd respondent, such permission was necessary in terms of
the procedure followed by the Board, as the cost of the
Commercial Complex, as on 30/6/05 was Rs.132.67 lakhs and
the highest bid received was for a much lower amount. It is also
stated that it was imperative on their part to have obtained prior
approval of the 1st respondent for any disinvestment. According
to the respondent, it was on account of the aforesaid
requirements that the Board had not issued any confirmation
accepting the offer made by the petitioner.
4. Answering the contention that the bid was concluded
in favour of the petitioner, it is stated that the auction sale was
not concluded in the name of the highest bidder and that no part
of the sale consideration was remitted by the petitioner to
complete the auction procedure. It is stated that the Board had
also reserved its right to accept or reject any or all the quotations
without assigning any reasons.
5. In paragraph 9 of the counter affidavit it is also stated
that as per the recent assessment , the cost of land with building
was above Rs.1,58,95,000/- and that the Board had reviewed the
decision taken on 26.06.2005 and decided to re-auction the
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building in its meeting held on 22.11.2006.
6. The petitioner filed IA No.10268 of 2007 stating that
the Board had caused the publication of notification dated
14.07.2007 proposing to auction the property again and that the
additional 4th respondent had bid the property on 20.07.2007 for
Rs.4.10 crores. Alleging that the notification (Ext.P10) and the
auction held are illegal, petitioner sought stay of confirmation of
the auction sale in favour of the additional 4th respondent. Along
with this IA petitioner also filed IA No.10269 of 2007 seeking to
amend the writ petition incorporating a challenge to Ext.P10
notification referred to above and also IA No.10270 for
impleading the successful bidder in the re-auction as additional
4th respondent.
7. Counter affidavits have been filed by the Board and in
the counter filed in IA No. 10268 of 2007, it is stated that
notification dated 14.07.2007 was published in leading dailies
and that vide publicity was also given through electronic media
regarding the re-auction of the property in question. It is also
stated that in response to the notification, 6 persons/ firms had
submitted tenders and 5 of them participated in the auction and
that Sri.Viji P. Isaac was the highest bidder with an offer of
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Rs.4.10 crores. Ext.R2(a) is the auction proceedings of
20.07.2007. The Board has also produced Ext.R2(b), the
temporary confirmation letter issued to the successful bidder and
Ext.R2(c), sanction for confirmation of the auction.
8. By order dated 01.08.2007, the additional 4th
respondent was impleaded and the writ petition was also allowed
to be amended as prayed for in IA No.10269 of 2007.
Considering the prayer for confirmation of the auction sale in
favour of the additional 4th respondent, this court directed in IA
No.10268 of 2007 that the 4th respondent shall not alienate the
property purchased by him in the auction held. Subsequently,
the petitioner filed IA No.13936 of 2007 praying for amending
the writ petition seeking to quash Ext.P11dated 04.06.2007
returning the Earnest Money Deposit made by the petitioner and
also Ext.P12 dated 20.07.2007 temporarily confirming the
auction in favour of the additional 4th respondent. However, no
orders have been passed on IA No. 13936 of 2007. Petitioner
has also filed a reply affidavit dated 05.11.2007, in reply to the
counter affidavit filed by the Board.
9. In view of the nature of the controversy that is raised
in this writ petition, the question that arises for consideration is
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whether the decision of the Board in cancelling the auction in
which the petitioner was the highest bidder is illegal for any
reason. As already noticed petitioner made an Earnest Money
Deposit of Rs.1 lakh and participated in the auction. As can be
seen from Ext.P3, the Board had reserved “the right to accept
or reject any or all quotations without assigning any
reasons thereof”. It is also provided in Ext.P3 that “All other
conditions prevailing in KSHB regarding quotations will
also be applicable”. In the auction that was held subject to the
aforesaid conditions, petitioner was the highest bidder who had
offered Rs.1,01,00,013/-, which was resolved to be accepted in
the Board Meeting held on 23.06.2005 the minutes of which is
Ext.P4. Ext.P4 also shows that the 3rd respondent was authorized
to take necessary action. In pursuance thereof, the 2nd
respondent addressed the 1st respondent by Ext.P5, seeking
sanction to the decision of the Board to confirm the auction in
favour of the petitioner. It was in these circumstances that the
petitioner was informed by Ext.P6 that a final decision regarding
confirmation of rates can be taken only after hearing from higher
authorities. It is also to be noted that although the 2nd
respondent had taken a decision as reflected in Ext.P4, no
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decision accepting his offer has been formally conveyed to him
nor has the petitioner made deposit of any amount towards the
sale consideration.
10. The Government’s decision pursuant to Ext.P5 is
Ext.P9 dated 16.11.2006, wherein it is stated as follows:
“The amount quoted by the higher bidder is far below the
present market value as the land prices have shot up
during the last two years. The latest market rate in 2005
June is not seen ascertained before auction. The publicity
given is not seen sufficient as only two bidders have
participated in the auction. This building being located by
the side of N.H at Kalamassery should certainly fetch a
much higher amount in auction. Hence the sale at the
rate obtained in auction will leave to much loss to the
Board.
In this circumstances, re-auction after cancelling the
auction appears to be the reasonable course of action”.
11. It is true that in an auction or tender, the 2nd
respondent being an instrumentality of State has to act fairly and
reasonably. Subject to this, when the state or its
instrumentalities deal with its assets, it has to be guided by
commercial considerations which require the authorities
concerned to ensure that maximum returns are obtained. In this
case, although it is the petitioner’s case that the 2nd respondent
need not have sought or obtained sanction of the 1st respondent
for confirming the auction in his favour, I am not in a position to
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agree with the counsel. As already noticed, in Ext.P3 tender
conditions, the Board had reserved unto themselves their right to
accept or reject any or all quotations without assigning any
reasons and made applicable all other conditions prevailing in the
2nd respondent regarding quotations. These conditions have been
accepted by the petitioner when he submitted the bid in response
to Exts.P1 to P3. The Board in its affidavit has stated that it is
their usual procedure to obtain sanction of the Government and
according to the Board for any disinvestment, Government
approval is necessary. That apart, since the Board is dealing with
public money and that too, advanced mostly by the Government
itself, one cannot find any fault with the procedure adopted by
the Board in addressing Ext.P5. The fact that such procedure is
not specifically mentioned in Ext.P3 is immaterial. In view of this
I do not find any illegality in the Board seeking approval of the 1st
respondent.
12. I am also not satisfied that Ext.P9 is invalid for any
reason. The 1st respondent has given very valid reasons for
deciding that re-auction is the best option. Ext.P9 itself shows
that the 1st respondent was satisfied that the price of the
property had appreciated much and that response to Exts. P1 to
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P3 was very poor. These are certainly matters, which are
relevant and I cannot find fault with the 1st respondent for its
conclusions in Ext.P9. If Ext.P9 is not invalid, necessarily Ext.P10
by which his EMD has been returned also has to be upheld.
13. As already found by me, subject to its obligation be
fair and reasonable to a citizen dealing with it, the Board has to
be guided by commercial considerations when it deals with its
assets. The petitioner cannot complain that the Board has acted
unfairly or unreasonably in as much as petitioner does not allege
any procedural irregularities on the part of the Board in deciding
to cancel the auction and to go in for re-auction. If that be so,
the question that survives is whether on commercial
considerations the Board was justified in deciding to cancel the
auction. For an answer to this question, one need not labour
much. While the petitioner was the highest bidder with the offer
of Rs.1,01,00,013/-, in the re-auction that was held, not only
that the response was much better with the participation of 5
persons, but also that the highest offer received was for Rs.4.10
crores. The difference of more than Rs.3 crores itself justifies the
decision of the Board in cancelling the auction.
14. I should also bear in mind that repeatedly the
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Supreme Court has held that in matters of this nature,
interference of the Court is justified only when public interest
demands such interference. In its judgment in Air India Ltd v.
Cochin International Airport Ltd. (AIR 2000 SC 801), the
Supreme Court has summarised the law as follows:
“The law relating to award of a contract by the State, its
corporations and bodies acting as instrumentalities and
agencies of the Government has been settled by the
decision of this Court in R.D.Shetty v. International
Airport Authority (1979) 3 SCC 498: (AIR 1979 SC 1628);
Fertilizer Corporation Kamgar Union v. Union of India,
(1981) 1 SCC 568: (AIR 1981 SC 844); Asstt. Collector,
Central Excise v. Dunlop India Ltd., (1985) 1 SCC 260:
(AIR 1985 SC 330); Tata Cellular v. Union of India,
(1994) 6 SCC 651: (1994 AIR SCW 3344: AIR 1996 SC
11); Ramniklal N. Bhutta v. State of Maharashtra, (1997)
1 SCC 134: (1997) AIR SCW 1281: AIR 1997 SC 1236)
and Raunaq International Ltd. v. I.V.R. Construction Ltd.,
(1999) 1 SCC 492: (1999 AIR SCW 53 : AIR 1999 SC
393). The award of 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 are
commercial considerations. The State can choose its own
method to arrive at a decision. It can fix its own terms of
invitation to 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 bonafide
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, is corporations,
instrumentalities and agencies are bound to adhere to the
norms, standards and procedures laid down by them and
cannot depart from them arbitrarily. Though that
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decision is not amenable to judicial review, the Court can
examine the decision making process and interfere if it is
found vitiated by malafides, unreasonableness and
arbitrariness. The state, is 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 power 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 intervene”.
15. From the above judgment it is evident that this court
can interfere in matters of this nature only when public interest
warrants it and not on the making of a legal point. I am satisfied
that in this case not only that none of the legal rights of the
petitioner are not violated but also that the Board has by deciding
to re-tender, safeguarded public interest by realizing a far higher
value for the property that is sought to be disposed of.
16. The counsel for the petitioner made reference to the
judgment of the Supreme Court in the case of M/s.
Puravankara Projects Ltd. v. M/s. Hotel Venus
International and Others (2007 (2) KLT 943) and contended
that appreciation in price of the property cannot be a reason for
cancellation of the tender. On reading the aforesaid judgment, I
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am not in a position to hold that the Apex Court has held as
contended by the learned counsel for the petitioner. In the
judgment referred to by the counsel, the Supreme Court was
concerned more with the adherence of the tender conditions and
the case was decided on that basis. Although it considered a
belated appeal filed by the Kerala State also pleading that the
prices have gone up and therefore the property shall not be
allowed to be given to the appellant matching the highest offer,
that issue is not seen decided to be followed in this case as a
precedent. In this case, not only that there was enhancement in
price, but also there are other vitiating circumstances pointed out
in Ext.P9 and justifying cancellation of the auction. Therefore, I
do not think that the judgment relied on by the counsel for the
petitioner, is relevant for deciding this case.
In the result, I am satisfied that the petitioner is not
entitled to any relief and the writ petition deserves to be
dismissed and I do so.
ANTONY DOMINIC, JUDGE.
Rp