K.S. Abdul Majeed and Faisal P.A. v Beeru P.K and others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE THURSDAY, THE 1ST DAY OF AUGUST 2013/10TH SRAVANA, 1935 WA.No. 1171 of 2013 IN WP(C).16197/2013 -------------------------------------------JUDGMENT IN WP(C) 16197/2013 of HIGH COURT OF KERALA DATED 12-07-2013 ## APPELLANTS/THIRD PARTIES: -------------------------------------------- 1. K.S.ABDUL MAJEED, AGED 61 YERS, - S/O.K.SAIDMOHAMMED, PALLYVASAL HOUSE, THIRUVILWAMALA P.O., THRISSUR-680588. 2. FAISAL P.A., AGED 34 YEARS, S/O.ALI, CHALIL HOUSE, KADEEPPURAM P.O., CHAVAKKAD-680514. BY ADVS.SRI.P.B.SURESH KUMAR (SR.) SRI.P.M.ZIRAJ ## RESPONDENTS/PEITIONER & RESPONDENTS: ------------------------------------------------------------------- 1. BEERU.P.K - S/O.MOIDEENKUTTY, PIKINITAKATH HOUSE, PONNANI SOUTH, POST PUTHUPONNANI, MALAPPURAM. 2. STATE OF KERALA REPRESENTED BY THE SECRETARY TO GOVERNMENT, DEPARTMENT OF PORTS, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001. 3. THE DIRECTOR OF PORTS OFFICE OF THE PORT DIRECTOR, PUDIYATHURA P.O., THIRUVANANTHAPURAM-695226. 4. THE CONSERVATOR OF PORTS PONNANI PORTS, POST PONNANI, MALAPPURAM-679577. 5. P.M.ASHRAF - S/O.LATE MUSTHAFA, PUTHUKKADAN HOUSE, WEST VENGOLA P.O., PERUMBAVOOR, ERNAKULAM-683556. R1 BY ADV.SRI.S.SREEKUMAR (SR.) BY ADV. SRI.C.M.MOHAMMED IQUABAL R2 TO R4 BY SR. GOVT. PLEADER MR.P.I.DAVIS THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 01-08-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **MANJULA CHELLUR, C.J. & A.M.SHAFFIQUE, J. ---------------------------------------------------W.A. No.1171 of 2013 ---------------------------------------------------Dated this the 1[st] day of August, 2013** ## **Judgment** ## **Manjula Chellur, C.J.** Heard learned Senior Counsel appearing for the appellants, so also appearing for the first respondent and learned Government Pleader for respondents 2 to 4. 2. It is necessary to put on record relevant facts that led to the present situation: In response to Ext.P1 tender notice, several persons including the 2[nd] appellant and 5[th] respondent along with others offered tenders for the sale of approximately 60,000 (Sixty Thousand) tons of sand removed after dredging at Ponnani Harbour Channel. As per the terms of Ext.P1, unless approval of the Director of Ports is taken, confirmation will not be issued accepting the highest bid. It is not in dispute that one Mr.Ashraf, 5[th] respondent herein, approached this Court in W.P.(C) No.6083 of 2013 impleading several officials as parties along with the writ petitioner. However, these appellants were not parties to the said W.A.No.1171/13 2 proceedings. The contention of the writ petitioner, 5[th] respondent herein, was that he was unable to submit demand draft along with tender form on account of agitation of public, therefore, his demand draft must be allowed to be accepted. 3. However, the learned Single Judge opining that it is only a limited relief, directed the 2[nd] respondent, the Director of Ports, to consider Ext.P6 representation and pass appropriate orders, after giving an opportunity to 5[th] respondent, Mr.Beeru, the writ petitioner in the present writ petition. Ext.P9 is the result of directions issued at Ext.P6 wherein the Director of Ports by order dated 22.06.2013 after discussing the entire material thread bare opined, accepting the tender as recommended by the tender committee would result in loss amounting to lakhs of rupees as the material involves 60,000 tons of sand which became better quality after being washed in rains with the removal of dust etc. While considering Ext.P9, the recommendation of the committee referred to at Ext.P3 also came to be considered, therefore, Ext.P9 reflects compliance of not only the direction issued by the Court at Ext.P6 but also deciding approval of confirmation of bid as indicated in the tender document at Ext.P1. W.A.No.1171/13 3 4. The 3[rd] respondent being the authority who had to approve the confirmation of the auction and who was also directed by this Court as per Ext.P6 judgment, ultimately opined, the claim of Mr.Ashraf was not justified as other participants could furnish demand draft along with auction applications, further the demand draft enclosed by Mr.Ashraf was not issued by a nationalised bank as specified in the tender document. The reason for not approving the tender was clearly indicated at clause (d) of Ext.P9 which reads as under: “d) Whether accepting the tender of the 5[th] respondent is in the best interest of the Government even though it is the highest tender among all valid tenders. The answer is 'no' as there is a possibility of getting a higher amount as disclosed through the petitioner's representation. Accepting the tender as recommended by the tender committee would result in a loss of lakhs of rupees as there is a stock of about 60000 tons of sand which is washed in rains and hence valuable and its price through purity will improve as more rains fall on it.” Aggrieved by the order at Ext.P9, the present writ petitioner approached the learned Single Judge. Surprisingly, Mr.Ashraf, W.A.No.1171/13 4 whose representation came to be considered by the 3[rd] respondent, did not challenge the opinion expressed against him at Ext.P9 by the 3[rd] respondent. The learned Single Judge, however, incidentally opined, going by the pleadings and proceedings, the alleged hardship and other mitigating circumstances expressed by Mr.Ashraf preventing him from submitting a demand draft along the tender were not correct and sustainable. 5. Then coming to the relief/challenge raised by the writ petitioner that once Ashraf's bid is not accepted, the next highest bidder being the writ petitioner, his bid ought to have been accepted and approved by the respondent authorities, therefore, there was no justification asking for re-tender as expressed at Ext.P9 by the third respondent. The learned Single Judge, so far as this aspect of the matter, discusses and opines at paragraphs 9 and 10 that whatever loss that would occur on account of not accepting Ashraf's amount was voluntarily offered by the writ petitioner, i.e. at Rs.2451/- metric ton, therefore, in the absence of any participation on the part of the writ petitioner in any negotiation after Ext.P3, the offer made by the writ petitioner W.A.No.1171/13 5 deserves to be accepted and accordingly directions were issued at para 10. 6. Aggrieved by this, the two appellants are before us. Though they were not parties either to the first litigation at Ext.P6 or the present writ petition, they have approached this Court on the ground that if the directions at Ext.P9 to re-tender the material of sand was allowed, the revenue of the Government would be enhanced, which would be more than the amount offered by the writ petitioner. The first appellant even went to the extent of offering Rs.One crore over and above the amount offered by the writ petitioner at Rs.2451/- metric ton. 7. The entire question now revolves around whether the learned Single Judge could have overruled the opinion of the authority who had to approve the confirmation of the auction, i.e., the Director of Ports (3[rd] respondent), in the absence of any malafides or arbitrary exercise of power on his part. Admittedly, the 3[rd] respondent is the final authority who had to approve and confirm the auction as recommended by the committee constituted for the purpose. Ext.P3 was before said authority and said authority had considered every aspect while disposing of W.A.No.1171/13 6 representation of Mr.Ashraf as indicated at Ext.P9. The only expression or opinion which the 3[rd] respondent had expressed at Ext.P9 are the circumstances prevailed at that relevant point of time which persuaded him to opine that the material would fetch more revenue and therefore, in order to prevent loss to the Government revenue, he opined that the approval of confirmation of auction should be rejected. 8. The learned Single Judge never discussed how this opinion of the 3[rd] respondent at Ext.P9 was either malafide or result of arbitrary exercise of power. Ext.P1 clearly indicates the confirmation of auction is subject to approval of the Director of Ports. In the absence of any malafides being ascribed against the third respondent when the intention of the third respondent was only to secure highest price possible for the sand in question, can anyone declare his decision as illegal and unsustainable? In order to answer this question, one has to see what exactly is the right of the writ petitioner to assert that he alone must be given the tender in question. 9. Learned Senior Counsel arguing for the appellants contending that till approval of auction amount by the third W.A.No.1171/13 7 respondent confirming the auction is given, no right would accrue to the writ petitioner, therefore, there was no justification on the part of the writ petitioner to seek confirmation of auction in his favour. He places reliance on the decision of the Apex Court in **Rajasthan Housing Board and another v. G.S.Investments and another** [ (2007) 1 S.C.C. 477]. Paragraphs 8, 9 and 11 are relevant which read as under: “8. 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 W.A.No.1171/13 8 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 onle such decision viz. _Laxmikant v. Satyawan_ which is almost identical on facts as it related to auction of a plot by the 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 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: (SCC pp.211-12, para 4) “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 _Trilochan Mishra v. State of Orissa, State of Orissa v._ W.A.No.1171/13 9 _Harinarayan Jaiswal, Union of India v. Bhim Sen Walaiti Ram and State of U.P. v. Vijay Bahadur Singh._ 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.” 9. 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. W.A.No.1171/13 10 11. 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 metre and the highest bid made by the respondent in the present case was nearly half i.e. Rs.5750 per square metre, 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 W.A.No.1171/13 11 Court on 23-9-2004 are clearly erroneous in law and are liable to be set aside.” The principle laid down in the above decision is, can the Court interfere even if there are technical deficits in the acceptance of tender? Ultimately, Their Lordships opined that the Courts should always keep the larger public interest in mind whenever they intend to interfere with the decision of the authority. In other words, whether the Court can sit in the armchair of the authority who has to accept and say what would be the best decision in a given circumstances. It is well settled that it is not the decision which has to be enquired into in judicial review, but it is the decision making process that alone has to be seen. 10. He also relies upon another decision of the Apex Court in **Natural Resources Allocation, In Re, Special Reference No.1 of 2012** [ (2012) 10 S.C.C. 1]. Paragraphs 184 and 186 are relevant which read as under: “184. Another aspect which emerges from the judgments (extracted in paras 159 to 182, above) is that, the State, its instrumentalities and their functionaries, while exercising their executive power in matters of trade or business, etc. including making of contracts, should be mindful of public interest, W.A.No.1171/13 12 public purpose and public good. This is so, because every holder of public office by virtue of which he acts on behalf of the State, or its instrumentalities, is ultimately accountable to the people in whom sovereignty vests. As such, all powers vested in the State are meant to be exercised for public good and in public interest. Therefore, the question of unfettered discretion in an executive authority, just does not arise. The fetters on discretion are clear, transparent and objective criteria or procedure which promotes public interest, public purpose and public good. A public authority is ordained, therefore to act, reasonably and in good faith and upon lawful and relevant grounds of public interest. 186. Based on the legal/constitutional parameters/requirements culled out in the preceding three paragraphs (i.e. Paras 183 to 185), I shall venture an opinion on whether there are circumstances in which natural resources ought to be disposed of only by ensuring maximum returns. For this, I shall place reliance on a conclusion drawn in the main opinion, namely, “Distribution of natural resources is a policy decision, and the means adopted for the same are thus, executive prerogatives. However, when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial W.A.No.1171/13 13 pursuits of profit maximising private entrepreneurs, adoption of means other than those that are competitive and maximise revenue, may be arbitrary and face the wrath of Article 14 of the Constitution” (refer to para 149 of the main opinion, above). I am in respectful agreement with the aforesaid conclusion, and would accordingly opine, that when natural resources are made available by the State to private persons for commercial exploitation exclusively for their individual gains, the State's endeavour must be towards maximisation of revenue returns. This alone would ensure that the fundamental right enshrined in Article 14 of the Constitution of India (assuring equality before the law and equal protection of the laws), and the directive principle contained in Article 39(b) of the Constitution of India ( that material resources of the community are so distributed as best to subserve the common good), have been extended to the citizens of the country.” From reading of the above two paragraphs, it is clear that an authority which deals with natural resources or for that matter public money, are held in the nature of trust and are answerable to the public, therefore, their duty of accountability to the public W.A.No.1171/13 14 must be in the direction of taking decisions which may maximize the revenue. In other words, if the authority takes decision in order to secure as maximum amount as possible for the material (natural resources) belonging to the public only with a view to safeguard and enhance the revenue to the best possibility, the Court should be reluctant to interfere in such decisions. 11. Even otherwise, the material on record clearly indicates the writ petitioner had come up to Rs.2451/- per metric ton, though initially offered Rs.2405/- per metric ton. The amount offered by Mr.Ashraf, i.e., Rs.2451/- per metric ton, being the highest, however, for some deficiency, his bid was not considered. In that view of the matter, the decision of the third respondent to procure maximum price possible for the natural resources cannot be found fault with. Even if re-tender process is done as directed at Ext.P9, everyone is entitled to participate in accordance with the terms and conditions of tender and it is for the authorities to see that what best price they could secure for the natural resources which is under their control. 12. For the reasons mentioned above, we are of the opinion, the judgment of the learned Single Judge deserves to be W.A.No.1171/13 15 set aside so far as directing the third respondent to confirm auction in favour of the writ petitioner as successful bidder. It is brought to our notice, re-tender process already commenced in pursuance of Ext.P9, but there was Court interference at the stage of receiving the tender pursuant to Ext.P7, therefore, though the last date was fixed for receiving application, nothing proceeded further. The respondent authorities are directed to proceed with the proceedings by fixing a convenient date as the last date for submission of tender along with other documents as indicated in the tender notification and proceed with the same in accordance with the procedure contemplated. The Writ Appeal is allowed as indicated above. **MANJULA CHELLUR, CHIEF JUSTICE.** ## **A.M.SHAFFIQUE, JUDGE.** srd