A.R. Safiullah vs The Managing Director and The Executive Engineer and Administrative Officer, Tamil Nadu Housing Board

D. Murugesan, J.—Both these appeals are directed against the common order dated 25.9.2008 dismissing the writ petitions filed by the

respective appellants.

The Tamil Nadu Housing Board (hereinafter referred to as ''the Board'') developed a comprehensive self contained, composite scheme in three

stages. Besides the scheme, it developed residential flats and plots for all categories of people. The Executive Engineer and Administrative Officer,

Tiruchirappalli Housing Unit, the second respondent herein, called for sealed tenders for allotment of the public purpose site at Pudukottai

Neighbourhood Scheme in an extent of 39772 sq. ft. of land [as Item No. 5 (a)] and a commercial site in an extent of 3,909 sq. ft. The upset price

of the properties were fixed at Rs. 83,79,943/- and Rs. 7,81,800/-. Both the appellants submitted their respective bids for separate plots and

were the highest bidders in the auction. As per the auction notification, 15% of the amount offered should be deposited on the same day, 35% of

the remaining amount should be deposited within a period of three weeks from the date of confirmation and the balance 50% should be deposited

within six weeks from the date of confirmation. The appellants had deposited 15% of the amount within time and were waiting to pay the balance

amount after confirmation. Even before such confirmation, it appears, the tenders were cancelled by the Executive Engineer and Administrative

Officer, the second respondent herein, vide orders dated 06.10.2004. Those orders were questioned by the appellants unsuccessfully. The writ

petitions came to be dismissed on the ground that inasmuch as there was no confirmation made, no right had accrued on the bidders and therefore,

they cannot question the order of cancellation. Thereafter, those plots, for which the appellants had bid, were allotted to third parties by the

Government in G.O. Ms. 364, Housing and Urban Development (HB5 (1)) Department dated 28.10.2004.

We have heard Mr.A.L.Somayaji, learned senior counsel appearing for the appellant in W.A. No. 1139 of 2008, Mr. S. Parthasarathy, learned

senior counsel appearing for the appellant in W.A. No. 1140 of 2008 and Mr. Kasi kumar, learned Counsel for the respondents.

The question as to whether the action of the State in cancelling the tenders is fair and reasonable must be considered with reference to the right

of a person to question the same. In this case, both the appellants, though were highest bidders and had also deposited 15% of the bid amount on

the same day, they could not pay the balance amount, as there was no confirmation. Whether confirmation could be made or not would be the

discretion of the authority concerned and so long as such confirmation of the bid is not made, no right is accrued to the bidders and this law is well

settled.

In this context, we may refer to the judgment of the Apex Court in Valji Khimji and Company Vs. Official Liquidator of Hindustan Nitro

Product (Gujarat) Ltd. and Others, , wherein the Apex Court observed that where the auction is not subject to confirmation by any authority, the

auction is complete on the fall of the hammer and certain rights accrue in favour of the auction-purchaser. However, where the auction is subject to

subsequent confirmation by some authority, the auction is not complete and no rights accrue until the sale is confirmed by the said authority. In view

of the said judgment of the Supreme Court, so long as the confirmation was not made, the appellants cannot make any grievance that their bid

should be confirmed as a matter of right. But, it does not mean that a bidder whose tender has not been confirmed cannot question the action of

the authority on any justifiable ground, in the sense that he is prevented from even approaching the Court questioning such action.

6.1. This takes us to the next question as to whether the cancellation of the tenders is justifiable. In this context, we may refer to the various

judgments of the Apex Court with regard to the arbitrariness and the scope of judicial review. In Mahabir Auto Stores and others Vs. Indian Oil

Corporation and others, , it has been observed that every action of the State or instrumentality of the State in exercise of its executive power must

be informed by reason and in appropriate cases, actions un-informed by reasons may be questioned arbitrary. However, judicial review is

permissible in cases where an arbitrariness and unfairness is pleaded by the person in either cancelling the bid or accepting the bid of others, as the

case may be.

6.2. In Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, , the Apex Court held as follows:

Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making

of a contract in exercise of the excessive power being beyond dispute, can it be said that the State can thereafter cast off its personality and

exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by

private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more? We have no

hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not

undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not

as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co-exist.

6.3. In Food Corporation of India Vs. M/s. Kamdhenu Cattle Feed Industries, , the Apex Court observed in paragraph 7 as follows:

In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which

non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for

public good. This imposes the duty to act fairly and to adopt a procedure which is �fairplay in action�. Due observance of this obligation as a

part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its

instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of

non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the

persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart

from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness.

Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial

review.

In the above judgment, the Apex Court further observed that even though the highest tenderer cannot claim more right to have his tender accepted,

there being a power while inviting tenders to reject all the tenders, yet the power to reject all the tenders cannot be exercised arbitrarily and must

depend for its validity on the existence of cogent reasons for such action.

6.4. Further, in Union of India and Others Vs. Dinesh Engineering Corporation and Another etc., , the Apex Cour ruled as under:

But then as has been held by this Court in the very same judgment that a public authority even in contractual matters should not have unfettered

discretion and in contracts having commercial element even though some extra discretion is to be conceded in such authorities, they are bound to

follow the norms recognised by courts while dealing with public property. This requirement is necessary to avoid unreasonable and arbitrary

decisions being taken by public authorities whose actions are amenable to judicial review. Therefore, merely because the authority has certain

elbow room available for use of discretion in accepting offer in contracts, the same will have to be done within the four corners of the requirements

of law, especially Article 14 of the Constitution.

6.5. For the satisfaction of reasonableness, the State is obviously expected to place all the facts before the Court, so as to enable the Court to

consider the issue and to take an appropriate decision in accordance with law, as has been held in Atma Linga Reddy and Others Vs. Union of

India (UOI) and Others, . In the event, the Court comes to the conclusion that the action of the State is violative of Article 14 of the Constitution of

India, as being wholly unfair and unreasonable, the writ Court would not hesitate to grant relief in favour of the person. This law has been laid

down by the Apex Court in M.D., H.S.I.D.C. and Ors. v. Hari Om Enterprises and Ors. 2008 (9) Scale 241.

The law as culled out from the above judgments of the Apex Court would show that if the State acts in an arbitrary manner even in a matter of

contract, any aggrieved person can approach the Court for redressal of his grievance invoking Article 226 of the Constitution of India and the

Court, depending upon the facts of the said case, is empowered to grant leave. In this context, we may also refer to the judgment of the Apex

Court in ABL International Ltd. and Another Vs. Export Credit Guarantee Corporation of India Ltd. and Others, . The arbitrary action may be

either failure to perform public function or doing any act in an unfair manner. In such event, the only remedy available to such aggrieved person is to

approach this Court invoking Article 226 of the Constitution of India. The principle of judicial review cannot be denied even in exercise of powers

of the Government bodies, if such exercise is without any acceptable reason or unreasonable, resulting in arbitrariness. This law is also reiterated in

Tata Cellular v. Union of India (1994) 6 SCC 651.

Keeping the above in mind, the facts of the case must be considered. Both the appellants submitted their respective bids pursuant to the

notification. The appellant in W.A. No. 1139 of 2008 submitted tender for a vacant site of an extent of 39772 sq.ft and he offered a sum of Rs.

84,50,000/- in the auction. His bid was accepted and he had also deposited a sum of Rs. 12,67,500/-, being 15% of the bid amount. Similarly, the

appellant in W.A. No. 1140 of 2008 submitted his tender for purchase of an extent of 3,909 sq.ft. and the upset price fixed was Rs. 7,81,800/-.

He was the successful bidder and he offered a sum of Rs. 7,84,000/-. He deposited the sum of Rs. 1,17,600/- being 15% of the bid amount. Both

the appellants deposited 15% of the respective bid amount on the same day. The further payment of 35% and 50% of the bid amount, depends

upon the confirmation of the auction.

It is true that the confirmation was not made and therefore, the appellants were unable to deposit the said balance amount. Equally, it is true that

so long as the confirmation is not made, the appellants are not entitled to seek for confirmation as such and that does not mean that they are

disentitled from questioning the action of the State in cancelling the tender. The impugned order dated 06.10.2004 merely states that the tender is

cancelled and the appellants can collect their deposited amount representing 15%. Except the said reason, there is no reason adduced in the said

order. In the counter-affidavit, the Board made an attempt to explain the reason as to why the tenders were cancelled, viz., that the Government,

later on, decided to allot those plots to the Special Task Force personnel. It is to be noted here that the vacant site to an extent of 39,772 sq. ft.,

to which the appellant in W.A. No. 1139 of 2008 had submitted tender and the same was also accepted, was earmarked for a store shed and

similarly, the site to an extent of 3,909 sq. ft. which the appellant in W.A. No. 1140 of 2008 became the successful bidder, was also a commercial

site. Both the sites were converted into residential plots contrary to the lay out drawn for the scheme, for being allotted to individuals as house

sites. The order of cancellation was on 06.10.2004 and the Government Order allotting those plots to Special Task Force personnel was dated

28.10.2004 and that Government order was not available with the Board when the orders of cancellation were made. This, in our considered

view, has resulted in arbitrariness and there was no reason available with the Board on the date when the cancellation was made. In that view of

the matter, we are of the view that in the absence of any explanation whatsoever to justify the order of cancellation except the justification that was

sought to be made by way of the subsequent G.O., the impugned order of the second respondent dated 06.10.2004 is liable to be set aside. To

this extent, the order of the learned Judge is also to be set aside and accordingly, the same is set aside.

Coming to the relief portion, we are informed that there are still some plots available for allotment. If that be so, the respondents are directed to

allot the plots in consultation with the appellants, of course, as per the rates in respect of the plots sold by the Tamil Nadu Housing Board under

the same scheme. This order shall be complied with in a period of two months from the date of receipt of the same. With this direction, the writ

appeals are allowed. No costs. Consequently, connected M.Ps. are closed.