- (1.) The writ petition contains a challenge to the decision taken by the Government directing the annulment of sale effected by the Improvement Trust, Ropar for sale of property for commercial purpose for construction of a restaurant in an auction that was held on 24.1.1986. The petitioner was declared the highest bidder at Rs.1,75,260/- on the same day. As per the terms of the auction the petitioner had paid 25% of the amount. The petitioner paid first installment within the time stipulated, namely, before 23.7.1986, by sending a Demand Draft of Rs.31021.92. This was returned by the Improvement Trust on 7.8.1986, on the ground that the Government had imposed some restrictions and the sale of the above site was being withdrawn. Significantly, the initial deposit of 25% of the amount had not been given back. The petitioner gave a representation in the year 1986 and the petitioner filed writ petition when the Improvement Trust was putting the property in the auction on 15.6.1990. The complaint in the writ petition was that the Improvement Trust had concluded sale in his favour and the action of the respondents in notifying the property for auction afresh was not in accordance with law. The respondents joined issue on the contention of a concluded sale by stating that the Government had passed an order on 21.10.1988, cancelling the auction amongst several grounds stating that the action was vitiated by formation of a cartel which prevented competitive bid and hence secured a price which was grossly below the market price. The petitioner contended that he had not been made aware of this order till the reply was filed by the Government and therefore, moved a petition before this Court for amendment to the prayer in the writ petition and included with the permission of the Court a prayer for quashing the proceedings of the Government.
(2.) I have no doubt in my mind that auctions or sales of property belonging to Government are governed by the principles of fair play and justice and what sub-serves to public interest, shall at all times stand scrutiny with Article 14 of the Constitution, In the matter of sale through auction of public property, it is invariably an expectation for a private bidder to be awarded the contract, if the bid is the highest, but the State is required to protect public interest by insuring that adequate competition exists to prevent loss and optimize the price. Three principles of law emerge from the situation which are as under:- (i) Public Interest overrides any Private Legitimate Expectations: In Ram Pravesh Singh v. State of Bihar, 2006 8 SCC 381, it has been held that: A legitimate expectation, even when made out, does not always entitle the expectant to a relief. Public interest, change in policy, conduct of the expectant or any other valid or bonafide reason given by the decision-maker, may be sufficient to negative the 'legitimate expectation'. In Union of India and others v. Hindustan Development Corporation and others, 1994 AIR(SC) 988 the Supreme Court held as follows: The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words where a person's legitimate expectation is not fulfilled by taking a particular decision then decision-maker should justify the denial of such expectation by showing some overriding public interest. In Food Corporation of India v. Kamdhenu Cattle Food Industries, 1993 AIR(SC) 1601 it has been held by the Supreme Court: "Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent." (ii) The availability of the best price is in Public Interest, and hence the absence of competitive bids and optimum price is evidence of damage to Public Interest In Ram & Shyam Company v. State of Haryana and others, 1985 AIR(SC) 1147 the Supreme Court observed that: "The marked difference lies in this that while the owner of private property may have a number of considerations which may permit him to dispose of his property for a song. On the other hand, disposal of public property partakes the character of a trust in that in its disposal there should be nothing hanky panky and that it must be done at the best price so that larger revenue coming into the coffers of the State administration would serve public purpose viz. the welfare State may be able to expand its beneficent activities by the availability of larger funds. This is subject to one important limitation that socialist property may be disposed at a price lower than the market price or even for a token price to achieve some defined constitutionally recognised public purpose, one such being to achieve the goals set out in Part IV of the Constitution. But where disposal is for augmentation of revenue and nothing else, the State is under an obligation to secure the best market price available in a market economy. An owner of private property need not auction it nor is he bound to dispose it of at a current market price. Factors such as personal attachment, or affinity, kinship, empathy, religious sentiment or limiting the choice to whom he may be willing to sell, may permit him to sell the property at a song and without demur. A welfare State as the owner of the public property has no such freedom while disposing of the public property. A welfare State exists for the largest good of the largest number more so when it proclaims to be a socialist State dedicated to eradication of poverty. All its attempt must be to obtain the best available price while disposing of its property because the greater the revenue, the welfare activities will get a fillip and shot in the arm." In Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir and another, 1980 AIR(SC) 1992, The Supreme Court observed as under: "Where any governmental action fails to satisfy the test of reasonableness and public interest discussed above and is found to be wanting in the quality of reasonableness or lacking in the element of public interest, it would be liable to be struck down as invalid. It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party' at the cost of the State; such an action would be both unreasonable and contrary to public interest. The Government, therefore, cannot for example give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations which render it reasonable and in public interest to do so." In the case of Food Corporation of India v. Kamdhenu Cattle Food Industries , it was again stated that: "The object of inviting tenders for disposal of a commodity is to procure the highest price while giving equal opportunity to all the intending bidders to compete. Procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund. Accordingly, inadequacy of the price offered in the highest tender would be a cogent ground for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price. The inadequacy may be for several reasons known in the commercial field. Inadequacy of the price quoted in the highest tender would be a question of fact in each case. Retaining the option to accept the highest tender, in case the negotiations do not yield a significantly higher offer would be fair to the tenderers besides protecting the public interest. A procedure wherein resort is had to negotiations with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the tenders only in the event of a significant higher bid being obtained during negotiations would ordinarily satisfy this requirement. This procedure involves giving due weight to the legitimate expectation of the highest bidder to have his tender accepted unless outbid by a higher offer, in which case acceptance of the highest offer within the time the offers remain open would be a reasonable exercise of power for public good." (iii) Public Interest is to be the guiding principle. Thus, there may be a case where the highest bid is rejected, and a fresh auction/call for tenders effected, if it be the requirement of Public Interest In Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal Corporation and others, 2000 5 SCC 287, the Court stated: "There have been several decisions rendered by this Court on the question of tender process, the award of contract and have evolved several principles in regard to the same. Ultimately what prevails with the courts in these matters is that while public interest is paramount there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike. We may sum up the legal position thus: (i) The Government is free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest; (ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate; (iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons." In the case of Plantation Corporation Ltd. v. M/s P.L. Agro Technologies Ltd,1995 2 PunLJ 696 - a Division Bench of this Court held as follows: "The public authority should act fairly in granting assignment of its work, and unjust preference for entrusting the work is unsupportable in law. But public authority is not nailed to the option of choosing one of the tenderers merely because tenders were once invited. The authority has the right to entrust it to any one if that is found to be necessary to serve the best interest of it. Public interest should be the guiding principle".
(3.) The cancellation of auction could not have been done, as rightly contended by the petitioner, without adequately giving an opportunity to the affected party to explain the grounds which were taken as a basis for cancellation of the auction. Even absence of notice before cancellation of auction may not at all times be necessary. I had an occasion to consider such a situation in Col. Prithi Pal Singh Gill v. Municipal Corporation, Chandigarh through its Commissioner, 2010 159 PunLR 338. That was in the context of sale being held under times when the market was damp due to certain situations and the sale was subject to conformation by a higher official and the bidder knew that the sale could be confirmed or rejected for appropriate reasons. In the same judgment I have observed, "If the auction had been set aside attributing any practice of fraud or collusion against any of the petitioners, they would be justified in stating that decision (to cancel) without putting them on notice of such decision was illegal" (para 15). If the grounds mentioned in the impugned order are true, there definitely existed a valid justification for its cancellation. The impugned order is purported to have been passed on a report given by the Executive Magistrate. A reliance on a report behind the back of the petitioner without putting the petitioner on notice of what the Government was relying on, was certainly bad in law and the auction could not have been cancelled without notice to the petitioner. I am informed that the property is still remaining vacant and it is appropriate that the decision is taken only after giving notice to the petitioner and calling upon him to show cause against such cancellation.;