JUDGMENT
Govindan Nair, C. J.
1. This is a petition praying for the issue of a writ of certiorari cancelling the auction conducted by the 1st respondent, the District Collector, Kozlikode, on the 19th March, 1975 of the arrack shops of Calicut taluk for the year 1975-76. There are incidental prayers for a direction requiring the 1st respondent, the 2nd respondent, the Board of Revenue, and the 3rd respondent, the State of Kerala, to conduct a resale of the arrack shops in Calicut taluk and for the grant of such other consequential and incidental reliefs.
2. The main points raised in the petition are that the solvency certificate produced before the 1st respondent by the petitioner, Ext. P-1, was wrongly and arbitrarily rejected by the 1st respondent and that the 1st respondent has arbitrarily and illegally excluded the petitioner from the auction that took place on the 19th March, 1975 of the arrack shops in Calicut taluk. It was suggested in paragraph 5 of the petition that the petitioner was excluded and his solvency certificate rejected by the 1st respondent because of the backing of the present Minister for Excise to the 4th respondent, one of the persons alleged to be interested in taking the shops.
3. There are four ranges in the Calicut taluk Calicut, Kunnamangalam, Thamarassery and Feroke. In the previous year, 1974-75, the four ranges were separately auctioned and the highest bids accepted for the four ranges were respectively of Rupees 4,29,000/-, Rs. 1,42,000/-, Rs. 1,35,000/-and Rs. 95,000/- totalling Rs. 8,01,000/-. The averment in the petition is that the 4th respondent was the successful bidder of the Calicut range in the previous years and that he "has been retaining Calicut as a monopoly range" and that the "auctioning Officer and other officials associated with the auction are hand in glove with the 4th respondent." 4. According to the averments in the petition, the successful bidder for the year 1975-76 was also the 4th respondent. The events that led up to the acceptance of the highest bid of Rs. 13,11,000/- of the 4th respondent for all the four ranges in the Calicut taluk taken as one lot are narrated in the petition in the following manner.
The petitioner having deposited the earnest money of Rs. 200/- and having obtained a receipt which served as a Hall ticket for admission to the auction room submitted a written otter of Rs. 15,00,000/-for all the shops in the Calicut range taken as one lot, to the 1st respondent, the District Collector, who was the officer authorised to conduct the auction. A copy of the offer has been produced as Ext. P3. According to the petitioner, the 1st respondent informed him that his offer of Rs. 15,00,000/- could not be accepted and he could not be allowed to bid in the auction “on the ground that Ext. P1 Solvency Certificate did not contain the words ‘free from encumbrances’. “Thereafter it is alleged that the 1st respondent did not put the arrack shops individually or even range-wise to auction and there were no bidders to take the entire taluk in one lot. The 1st respondent then, it is said, sent for the petitioner and asked him whether he would take the arrack shops in the Calicut range for Rs. 8,00,000/- after depositing 70% thereof in cash. It is averred that the petitioner readily agreed to the same but that the 1st respondent went back upon the offer and “turned round and asked the petitioner whether he would deposit 70 per cent of the bid amount fixed by the Department, namely Rs. 13,10,000/- (Rupees Thirteen Lakhs and ten thousand only) for all the arrack shops in the 4 ranges of Calicut Taluk.” The petitioner has further stated that “before the petitioner could consider the offer and consult his partners the 1st respondent accepted and knocked down the bid of the 4th respondent for Rs. 13,11,000/-” and there are further averments that the 1st respondent did not want to secure large amounts in the auction. His idea and desire was to confer the right to vend arrack in Calicut Range at as Tow a rental as possible on the 4th respondent.”
5. After making the above averments there are the further statements in the petition that as soon as the bid of the 4th respondent was accepted, the petitioner sent a telegram to the 2nd respondent, the Board of Revenue offering Rs. 16,11,000/- for all the shops in the Calicut taluk and that the telegram was followed by a letter of confirmation to the Excise Commissioner. Copies of the telegram and the letter are produced as Exts. P4 and P5. It is said that a further telegram was sent to the Chief Minister complaining of the irregularities at the auction held on 19th March 1975. It is said that there has been loss of revenue and the 1st respondent deliberately tried to exclude the petitioner by rejecting the solvency certificate and thus enabled the 4th respondent to be the successful bidder,
6. These averments have been denied by the 1st respondent. The 1st respondent has filed a counter affidavit dated 27th of March, 1975 in answer to C. M. P. No. 4532 of 1975 which prayed for the stay of confirmation of the sale of the arrack shops in Calicut taluk for the year 1975-76 by the Board of Revenue, the 2nd respondent. In answer to the Original petition another counter affidavit has also been filed on the 4th day of April, 1975 by the 1st respondent. The 2nd respondent has supported the stand of the 1st respondent by a counter affidavit dated 1st April, 1975 and has produced along with that affidavit the form in which solvency certificates should be issued, as Ext. R1, and also a brief affidavit by tie Minister for Revenue dated 31st March, 1973, Ext. R2, in which the Minister denied the allegation in paragraph 3 the Original Petition that the 4th respondent is backed by the Minister and that it is on a tacit understanding and unwritten instructions that arrack shops in Calicut taluk are always given to the 4th respondent. Respondents 4 and 5 have also filed counter affidavits. The 4th respondent has stated that he did not bid at the auction on the 19th March, 1975 and the 5th respondent has stated that it was he and his partners and associates who made the bid of Rupees 13,10,000/- and that bid was on their own behalf and not on behalf of the 4th respondent.
7. In answer to the specific contentions of the petitioner that the solvency certificate Ext. P1 was arbitrarily rejected and that the petitioner was excluded from the auction on the 19th March, 1975, the 1st respondent has stated that the solvency certificate Ext. P1 was not in accordance with the form in which such certificates should be issued and that there was no statement that the properties mentioned therein are free from encumbrances, a state-ment which should be contained in such a certificate. The encumbrance certificates of the properties were also not produced. It is further averred that considering the total value for which the four ranges in the Calicut taluk were sold for the previous year, the 1st respondent felt that a bid of Rs. 15,00,000/- for the Calicut range alone was a speculative one. The solvency certificate being unacceptable, the 1st respondent asked the petitioner whether he was prepared to furnish cash security of an amount not less than 20% of the bid amount over and above the usual deposit of 30% in addition to offering cash security of 20% of the offered amount in lieu of solvency. The petitioner being not prepared for that, it is said, that his bid contained in Ext. P3, the written offer, was rejected. It is further averred that the petitioner was not exclued from the auction. In fact, it is the case of the 1st respondent that the petitioner was invited to bid at the time of the auction more than once but that the petitioner declined either to bid for the shops in the Calicut range or for all the shops together in the Calicut taluk.
8. A point was made by counsel for the petitioner on an alleged discrepancy between the averments in me counter affidavit dated 27th March, 1975 filed by the 1st respondent in answer to C. M. P. No. 4532 of 1975 and the averments in the counter affidavit of the 1st respondent to the Original Petition dated 4th April, 1975, According to counsel the earlier affidavit states that the petitioner was asked to deposit 50% of the bid amount and not 70% as asserted in the later counter affidavit by the 1st respondent. There does not seem to be much of a point in the submission on behalf of the petitioner for, when the last sentence in paragraph 2 of the counter affidavit of the 1st respondent dated 27th March, 1975 is read with the last sentence in paragraph 4 it is clear that the 1st respondent’s case even then was that he wanted 70% the whole being deposited by the petitioner. When the solvency certificate was found by the 1st respondent to be not acceptable, it is said in paragraph 2, that the petitioner was requested “to offer cash security of 20 per cent of the offered amount in lieu of solvency.” and at the end of paragraph 4, there is the further averment that “This respondent therefore directed the Writ Petitioner to deposit an amount of 20 per cent over and above and usual deposit of 30 per cent.” When the averments in paragraphs 2 and 4 of the counter affidavit dated 27th March, 1975 are read with the provisions in Rule 5 (1) of the Kerala Abkari Shops (Disposal in Auction) Rules 1974, for short, the Rules, it is clear that the 1st respondent was relying on the sub-rule for a guideline in demanding a cash deposit of 50% as well as a further 20% of the bid amount in lieu of solvency certificate. It is evident therefore that even according to the averments in paragraphs 2 and 4 of the counter affidavit dated 27th March, 1975 the 1st respondent required in all a deposit of 70% of the bid amount of Rs. 15,00,000/-. This is what is stated in the later counter affidavit dated 4th April, 1975. We are thus unable to see any discrepancy.
9. In the reply affidavit the petitioner has urged new points relying on a letter No. XA1-21000/74 dated 12-3-1975 addressed to the District Collectors by a Member of the Board of Revenue. Relying on this letter it was contended that the shops should have been put up to auction in the order given in the schedule of abkari shops indicated in the sale notification for 1971-73. According to the petitioner this had not been done. It was further contended that cash security can be demanded only after a bid has been accepted and at the time of the execution of the agreement as envisaged by Sub-rule (10) of Rule 5 of the rules and not before acceptance of the bid as the highest bid.
10. The Rules have been framed in exercise of the powers conferred by Sections 18-A and 29 of the Abkari Act, I of 1077. Section 29 embodies the power to frame rules. Section 18A is in these terms:–
“18A, Grant of exclusive or other privilege of manufacture, etc., on payment of entals.– (1) It shall be lawful for the Government to grant to any person or persons on such conditions and for such period as they may deem fit, the exclusive or other privilege–
(i) of manufacturing or supplying by wholesale; or
(ii) of selling by retail; or
(iii) of manufacturing or supplying by wholesale and selling by retail, any liquor or intoxicating drugs within any local area on his or their payment to the Government of an amount as rental in consideration of the grant of such privilege. The amount of rental may be settled by auction, negotiation or by any other method as may be determined by the Government, from time to time, and may be collected to the exclusion of, or in addition to, the duty or tax leviable under Sections 17 and 18.
(2) No grantee of any privilege under Sub-section (1) shall exercise the same until he has received a licence in that behalf from the Commissioner.
(3) In such cases, if the Government shall by notification so direct, the provisions of Section 12 relating to toddy and toddy producing trees shall not apply.”
11. It is clear from Section 18-A that the amount of rental may be settled by auction. The Rules are therefore applicable when the rental is to be settled by auction. Rule 3 in Chapter II gives the Collector of the District the power to put up by public auction the privilege of vending toddy, arrack and foreign liquor, shop by shop, or in a lot. Clearly therefore the District Col-lector has the authority to direct that the auction should be shop by shop or in a lot or lots. Rule 5 (3) (b) gives the officer conducting the sale the liberty to exclude any intending bidder on the ground that the bidder is of doubtful solvency and he is unwilling to deposit such sum as is ordered to be deposited by the said officer. The officer has also the discretion to refuse or to accept the bid of any person on the ground that the bid is clearly speculative and he has the power to fix an upset price for a shop or shops. Further he can close the auction if he is satisfied that there has not been sufficient or fair competition.
12. According to the 1st respondent the petitioner was not excluded from the auction. He has repeatedly stated so in the counter affidavits. From the fact that Rule 5 (3) (b) (vii) has been referred to it was contended that the petitioner was excluded from the auction. This contention cannot be accepted for even according to the petitioner he was asked by the Collector during the course of auction to deposit 70% of Rs. 8,00,000 for the Calicut range and 70% of RS. 13,10,000/- for the entire Cali-cut taluk. The 1st respondent has stated that the petitioner was invited specifically gain and again to bid. We see no reason to disbelieve these averments of the 1st respondent. So what has been done was only to reject the specific written offer contained in Ext. P-3. It has to be said that in a public auction, to make a written offer which was not apparently known to the other persons who had gone to the place to bid, at the time the offer contained in Ext. P-3 was made, is a somewhat peculiar procedure. A written offer handed over to the officer conducting the auction could not be known to the other bidders who were present at the place of auction. Why the petitioner has resorted to such a course instead of making an open bid is not known. Apparently this offer was made at the beginning of the auction before the Collector had determined whether there should be a shop by shop auction or an auction rangewise or an auction for the whole taluk. The amount offered was substantially above the total rental for the entire taluk for the previous year. It was therefore not arbitrary on the part ot the 1st respondent to have scrutinised that offer and to have scrutinised the solvency certificate, Ext. P-1 produced by the petitioner. There was nothing wrong also in having asked the petitioner whether he was prepared to deposit 50% of the total amount as well as another 20% in lieu of a solvency certificate. The 1st respondent has asserted that the rejection of the bid and the reasons thereof were announced at the public auction and thereafter he proceeded to auction the shops in the Calicut range shop-wise. There were no bidders and therefore all the shops in the Calicut range were put for auction in one lot and the upset price was reduced to as low a figure as Rupees 8,00,000/-. According to the 1st respondent, nobody bid the shops in the Calicut range even for Rs. 8,00,000/-, not even the petitioner who was prepared according to Ext. P-3 to pay Rs. 15,00,000/- for those shops. The petitioner does not say either in his petition or in his reply affidavit that he offered any bid other than what is contained in Ext. P-3. His only case is that the 1st respondent sent for him, and asked him whether he was willing to deposit 70% of Rs. 8,00,000/- and that he agreed to deposit 70 percent, of Rs. 8,00,000/-. The 1st respondent however denies in para. 8 of the counter affidavit dated 4th April, 1975 that he asked the petitioner “whether he would take, the arrack shop in Calicut range for 8 lakhs after depositing 70%”. The 1st respondent also denied having asked the petitioner whether he would deposit 70% of the bid amount of Rs. 13,10,000/- for all the arrack shops in the four ranges of Calicut taluk.
13. In the light of the above averments and counter averments certain facts clearly emerge. The only bid made by the petitioner at the auction is that contained in Ext. P-3. The petitioner did not make any further bids during the course of the auction. He was not actually excluded from the auction. According to the 1st respondent he had been repeatedly invited to bid which he declined to do. Even according to the petitioner he was asked by the 1st respondent whether he would accept the Calicut range for Rs. 8,00,000/- and the shops in the entire Calicut taluk for Rs. 13,10,000/-indicating by that that he was not excluded though this version of his cannot be accepted for, it is most unlikely that the 1st respondent would have asked the petitioner whether he would take the Calicut range or on the Calicut taluk when he had declined to make any bid after handing over Ext. P-3. It is more probable that what transpired was in accordance with the version given by the 1st respondent that the petitioner was asked to bid but he did not. The bid that was accepted was that of the 5th respondent. There is nothing to indicate that this bid was on behalf of the 4th respondent.
The position being as stated above the only question that arises is whether the Collector was justified in not accepting Ext. P-1 solvency certificate and whether he was justified in demanding a deposit of 70% of the offer contained in Ext. P-3 with a view to ascertain whether the bid contained in Ext. P-3 is a speculative bid or not. A perusal of Ext. R-1 produced by the 2nd respondent along with the 2nd respondent’s counter-affidavit would show that Ext. P-1 is not in accordance with the form prescribed for solvency certificates. A statement that ‘there are no encumbrances in the property’ is a vital one. Without knowing whether there are encumbrances and the extent of the encumbrances it would be impossible to ascertain the real value of the properties offered as security. The 1st respondent, we think, has also the authority to determine whether any particular bid is speculative one or not. Rule 5 (5) of the Rules specifically gives the power to the authority conducting the auction to reject any speculative bid. To test whether the bid is speculative or not, we conceive, the 1st respondent can ask a bidder whether he would be prepared to deposit a larger percentage of the bid amount. These powers, we think, are implied from those specifically contained in the Rules. There is nothing therefore illegal in the 1st respondent not accepting the solvency certificate Ext. P-1 and in not accepting the bid of Rs. 15,00,000/- contained in Ext. P-3. No doubt, there is no specific provision in the Rules other than what is contained in Rule 5 (5) which enables the 1st respondent to reject the bid but what has been done would fall within Rule 5 (5) of the Rules. The 1st respondent has a large discretion in the matter. It is not for this Court to substitute its assessment of the situation by an assessment of what this Court may consider to be more proper or more advantageous to the revenue. It the officer had acted within his authority and in a bona fide manner and in accordance with the Rules which has the force of law (vide Section 69 of the Abkari Act, 1 of 1077 the auction cannot be set aside by this Court in proceedings under Article 226 of the Constitution.
14. The petitioner normally ought not to be allowed to raise additional points in a reply affidavit in support of his prayers in the Original Petition. However for the sake of completion we shall deal with the additional contentions as well. The reliance by the petitioner in the reply affidavit on the letter dated 12-3-1975 addressed to the District Collectors by a Member of the Board of Revenue does not advance his case. As we pointed out the officer conducting the auction has a discretion to determine the manner in which the auction should be conducted. We have already referred to Rule 3. Sub-rule (5) of Rule 5 also enables the officer conducting the sale to put up to auction separately or if necessary in lot or lots the several items in the notice of sale. What is restricted is only clubbing of shops in more than one taluk and clubbing of different categories of shops. These rules must have precedence over the letter addressed by the Board of Revenue and as long as the 1st respondent has not violated the Rules even assuming there has been any violation of the terms of the letter, that would not be a sufficient ground to set aside the auction in proceedings under Article 226 of the Constitution.
15. Counsel for the petitioner relying on the second contention raised in the reply affidavit referred to, relied on Sub-rule (10) of Rule 5 and emphatically contended that the demanding of the 70% security for the offered amount of Rs, 15,00,000 for the shops in the Calicut range even before the bid contained in Ext. P-3 was accepted and he was asked to execute an agreement, was unwarranted by the Rules, and that if there were no proper bidders, the procedure adopted in other cases of auction conducted on the same day of adjourning the sales, should have been followed. Sub-rule (10) of Rule 5 no doubt enables the officer conducting the sale to demand 30% cash deposit of the bid amount or such other higher amount as being fixed by the officer conducting the sale in addition to the requirement that the bidder shall furnish personal surety if so required by the officer. This rule further insists that the successful bidder shall produce a solvency certificate for an amount not less than 20% of the bid amount or in lieu of solvency certificate shall furnish additional cash security for an amount not less than 20% of the bid amount. What the 1st respondent did in this case apparently was to test the speculative nature or otherwise of the bid in Ext. P-3 by relying on the principles contained in Sub-rule (10) of Rule 5. There must be some means of ascertaining whether the bid was of a speculative nature or not. It appears to us that there was nothing wrong in the first respondent having tested whether the petitioner would be in a position to honour the obligations that would arise if his bid of Rupees 15,00,000/- for the Calicut range was accepted by asking him whether he was in a position to deposit in all 70% of Rupees 15,00,000/-. That step was necessary to find out whether the bid was speculative. We may mention here that the successful bidder for Rs. 13,11,000/- had been asked and it is averred had deposited 70% of that bid amount.
16. Whether the sale should have been adjourned is, we think, a matter within the discretion of the officer conducting the auction and this Court will not be justified, in proceedings under Article 226 of the Constitution, in substituting its discretion for that of the officer conducting the auction.
17. The averment in paragraph 5 of the affidavit about the directions from the Minister for Revenue have been denied by the Minister himself by an affidavit and we are not prepared to act on the averment of the petitioner. We accept the statement contained in the affidavit of the Minister for Revenue.
18. Counsel for the petitioner relied on the decision of the Madras High Court in P. Ansari Doraiswamy v. The Union Territory of Pondicherry Administration Locale, represented by its Asst. Secy., Pondicherry, AIR 1964 Mad 437 and contended that though the High Court would not be justified in interfering under Article 226 of the Constitution, interference could be had where the Court is satisfied, “not merely that a party to an auction has been improperly excluded, but that conceivably there has been a detriment to public revenue by this act”. With great respect we are unable to agree with this decision. It is for the officer conducting the auction to determine whether conceivably there has been a detriment to public revenue. If a bid of a particular person is rejected because it was felt by the officer that his bid was speculative this Court cannot substitute its judgment and reach a conclusion that public revenue had been lost and so the bid should not have been rejected, unless there are material to show that the rejection was mala fide or arbitrary or perverse or was as a result of bias. We must emphasise that this is not a case of exclusion as we have found but only of rejection of a bid. With great respect we are unable to agree with the general propositions laid down in AIR 1964 Mad 437. We think that the observations in the decisions of the Supreme Court in Purxotoma Ramanata Quenim v. Makan Kalyan Tandel, AIR 1974 SC 651 and in the State of Orissa v. Harinarayan Jaiswal, AIR 1972 SC 1816 are more appropriate. In the decision in AIR 1974 SC 651, a passage from an earlier decision of the Supreme Court in Trilochan Mishra v. State of Orissa, AIR 1971 SC 733 was referred to with approval. The observation is in these terms:–
“With regard to the grievance that in some cases the bids of persons making the highest tenders were not accepted, the facts are that persons who had made lower bids were asked to raise their bids to the highest offered before the same were accepted. Thus there was no loss to Government and merely because the Government preferred one tenderer to another no complaint can be entertained. Government certainly has a right to enter into a contract with a person well known to it and specially one who has faithfully performed his contracts in the past in preference to an undesirable or unsuitable or untried person. Moreover, Government is not bound to accept the highest tender but may accept a lower one in case it thinks that the person offering the lower tender is on an overall consideration to be preferred to the higher tenderer.”
In AIR 1972 SC 1816, it is laid down that the power retained by the Government “to accept or to reject any bid without assigning any reason therefor” is not violative Article 14 of the Constitution. After referring to this decision, the Supreme Court in AIR 1974 SC 651 reiterated the same view.
19. We notice that the Board of Revenue has fully supported the action of the 1st respondent and that it may not therefore refrain from confirming the sale. As to what transpired at the time of the auction, slightly different versions have been given by the 4th and 5th respondents in their counter affidavits. The Board of Revenue have the power to scrutinise all the facts contained in these affidavits as well as the averments in the petition and the reply affidavit and to determine whether there has been detriment to the revenue and whether the confirmation of the auction should be made or not. We are sure that this will be done by the Board of Revenue before confirming the sale. These are matters which must be left to the Board of Revenue an the State Government. There is also the power conferred on the Government suo mutu to revise the orders of the Board of Revenue. The Government too can consider the question in the light of the averments in the petition whether there has been a real loss or detriment to the revenue and set aside the order of confirmation of the Board of Revenue. The powers of thec Board of Revenue and the Government in this regard conferred by the Rules, we conceive, are much wider than that of this Court in proceedings under Article 226 of the Constitution. To these authorities we must leave the responsibility and the duty either to revise, confirm or set aside the auction if found to be detrimental to the revenue. As far as this Court is concerned it can only find out whether there has been lack of jurisdiction or excess of jurisdiction or violation of statutory rules or mala fides or even lack of bona fides on the part of the officer conducting the auction or that he had acted arbitrarily or perversely or with bias. We have not been able to discern any such flaw or any such defect in the procedure adopted by the 1st respondent as would justify interference in proceedings under Article 226 of the Constitution and we have therefore to decline jurisdiction, and refuse to interfere with the auction and with the acceptance of the highest bid of Rs. 13,10,000/- for all the shops in Calicut taluk by the 1st respondent. We dismiss this Writ Petition. There will be no order as to costs.
