G. Kishore vs Government of A.P. and others

A. Lakshmana Rao, J.—In this writ petition, the validity of the orders passed by the State Government in G.O. Rt. No. 485 Transport, Roads & Buildings (R.II/1) Department, dated May 21, 1991 entrusting the toll gate of "Kanakadurgamma Varadhi" to Sri V. Madhusudhana Rao, the fourth respondent in the writ petition, who is the appellant in the writ appeal for collection of toll-fee for the period from May 1, 1991 to March 31, 1992 after accepting the offer of Rs. 80,00,000/-, is questioned. The writ petitioner, who is the first respondent in the writ appeal, filed W.P.M.P. No. 10008 of 1991 seeking suspension of operation of the orders passed by the State Government in G.O. Rt. No. 485, dated May 21, 1991, pending disposal of the writ petition. The learned single Judge granted interim suspension of operation of the orders passed by the State Government on October 21, 1991. The Executive Engineer, Roads & Buildings, National Highways, Mangalagiri, Guntur District, the third respondent in the writ petition was directed to take steps to collect the toll-fee. The interim order was made absolute on October 29, 1991 subject to the following condition:

".....the fourth respondent is permitted to keep any of his authorised representatives at the toll gate to make a note of the collections made by the third respondent pending disposal of the writ petition so that in the event of his success, he shall be entitled to deduct the amount from the monthly instalments payable by him."

Aggrieved by this order, the present writ appeal has been preferred. For the sake of convenience, the parties are referred to in the manner in which they are arrayed in the writ petition.

The Executive Engineer, (R & B) National Highways Division, Mangalagiri, Guntur District, the third respondent herein issued a notification for sale by public auction on February 21, 1991 of the leasehold right for collection of toll-fee on "Kanakadurgamma Varadhi" across the river Krishna at Vijayawada for the period from May 1, 1991 to March 31, 1992. The notification was got published in the local daily newspaper. The auction notification provides that the person intending to participate in the auction shall make an application to the Executive Engineer along with a Bank Guarantee for Rs. 7.5 lakhs Income Tax Clearance Certificate for the year 1991 and a Demand Draft for Rs. 1,00,000/- towards earnest deposit. Nine persons including the fourth respondent submitted the applications. The fourth respondent filed W.P. No. 2112 of 1991 in this court on February 14, 1991 questioning the auction notification. He sought for a direction to the State Government to consider his request to extend the lease in his favour for one more year from April 1, 1991. It may be mentioned here that the fourth respondent was granted lease of the right to collect the toll-fee on "Kanakadurgamma Varadhi" for the period from May 1, 1990 to March 31, 1991 for a sum of Rs. 80,00,000/-. It is stated that he had submitted representations to the State Government that he had incurred loss during the lease period for the year 1990-91 due to various reasons mentioned therein. Therefore, he requested the State Government to grant him remission and to extend the lease beyond April 1, 1991. The writ petition was disposed of on February 15, 1991 with a direction to the State Government to dispose of the representations made by the fourth respondent within a period of fifteen days from the date of receipt of a copy of the order. Thereafter, the State Government stayed the auction scheduled to be held on February 21, 1991. The stay was vacated in the last week of March 1991. The third respondent intimated the nine intending bidders including the fourth respondent that the auction will be held on April 15, 1991. Accordingly, the third respondent conducted the auction on April 15, 1991. The highest bid for Rs. 73,64,000,/-was knocked down in favour of the fourth respondent. In accordance with the conditions incorporated in the sale notification, the fourth respondent approached the third respondent for deposit of monthly amount within three days from the date of auction. The third respondent rejected the bid and issued a fresh notification dated April 19, 1991 for the sale of the leasehold right by public auction on May 15, 1991. This notification was got published in the local daily newspaper "Eenadu" and it contains the same clauses referred to above relating to the filing of applications by intending bidders. The applications shall be submitted before 5.00 p.m. on May 14, 1991.

While so, the fourth respondent approached the State Government and offered to pay Rs. 80,00,000/- towards the lease amount instead of Rs.73,64,000/- for the period from May 1, 1991 to March 31, 1992. At this stage, he filed W.P. No. 7039 of 1991 on the file of this court on May 13, 1991 questioning the validity of the notification dated April 19, 1991 issued by the third respondent for sale of the leasehold right on May 15, 1991. This court had not passed any interim order granting stay of auction. How- ever, the State Government sent telegraphic communication to the third respondent on May 14, 1991 cancelling the auction scheduled to be held on May 15, 1991. Thereafter, on May 21, 1991 the impugned order was passed by the State Government accepting the offer made by the fourth respondent and granting leasehold right in his favour for the year 1991-92 at the rate of Rs. 80,00,000/- for eleven months. In view of the impugned order, the fourth respondent had withdrawn W.P. No. 7039 of 1991 on June 11, 1991. While so, the present writ petition was filed on June 19, 1991.

The main contention advanced by Mr. A. Ramakrishna, the learned counsel for the petitioner is that the action of the State Government in entering into negotiation only with the fourth respondent, accepting his negotiated offer without providing similar opportunity to the other bidders and cancelling the auction fixed by the third respondent, is arbitrary and detrimental to the interest of public revenue. On the other hand, it is submitted by Mr. P. Ramachandra Reddy, the learned counsel for the fourth respondent that the writ petition is not maintainable as the petitioner was neither a bidder at the auction held on April 15, 1991 nor was he an applicant for being considered as an intending bidder at the auction scheduled to be held on May 15, 1991. The learned counsel has stressed that the action of the third respondent in fixing the re-auction on May 15, 1991 without assigning any reasons and without providing reasonable opportunity to the fourth respondent before rejection of the highest bid offered by him at the auction held on April 15, 1991 and without informing him about the cancellation of the auction held on April 15, 1993, is illegal and improper. In any event, it is stated that the action of the third respondent is subject to ratification by the State Government. As the State Government cancelled the auction scheduled to be held on May 15, 1991 and accepted the offer of the fourth respondent, the impugned order passed by the State Government is quite legal and valid. The learned Government Pleader appearing for the respondents 1, 2 and 3 has urged that the petitioner has no locus-standi to question the impugned order passed by the Slate Government as he is neither a bidder at the auction held on April 15, 1991 nor an intending bidder at the auction scheduled to be held on May 15, 1991. He pleads that the action of the State Government is quite justified in view of the fact that the fourth respondent was the highest bidder at the auction held on April 15, 1991 and he had voluntarily agreed to pay something more than the bid amount.

In order to appreciate the contentions advanced on behalf of the parties, it would first be necessary to refer to some of the terms and conditions relating to the powers of the officer conducting the auction, incorporated in the sale notification. They provide that the sale shall be by public auction. The Executive Engineer (R & B) National Highway Division, Mangalagiri, Guntur District or any other officer authorised by him is competent to conduct the auction. Such officer is empowered either to cancel the auction or to reject any bid or to make a recommendation to the State Government. One of the clauses provides that if the highest bid has been recommended for acceptance to the State Government, the highest bidder shall deposit the lease amount payable for one month within three days from the date of auction and that he shall pay a further sum equivalent to one month lease amount after confirmation by the State Government. It also contains a provision that after compliance with the requirements as mentioned above, a lease deed has to be entered into by the highest bidder with the Department and get it registered. There is no dispute that the officer who had conducted the auction on April 15, 1991 and who was authorised to conduct the auction on May 15, 1991 was the Executive Engineer (Roads & Buildings), National Highways Division, Mangalagiri. At the auction held on April 15, 1991, the highest bid was Rs.73,64,000/- offered by the fourth respondent. On a perusal of the relevant record relating to the auction produced by the learned Government Pleader, we find that the Executive Engineer had informed the Superintending Engineer (Roads & Buildings), National Highway Circle, Vijayawada through his letter dated April 18, 1991 about the auction held on April 15, 1991 giving all the relevant particulars relating to the bids offered by the different participants and why the highest bid cannot be accepted. He specified that the highest bid amount of Rs.73,64,000/- was less than the lease amount of Rs.80,00,000/- collected for eleven months during the previous year. He further mentioned that from April 1, 1991 the collection of toll-fee when the Department had undertaken the work was Rs. 32,000/ - to Rs. 33,000/- per day, thus amounting to about Rs. 10,00,000/- per month. Therefore, he had expressed his opinion that it would be better to conduct re-auction. The Superintending Engineer agreed with the views expressed by the Executive Engineer. Accordingly, the Executive Engineer rejected the highest bid and ordered for re-auction. He accordingly issued the notification dated April 19, 1991 for re-auction on May 15, 1991. Therefore, he refused to receive the deposit from the highest bidder, the fourth respondent herein.

The question for consideration is whether the action on the part of the Executive Engineer in rejecting the highest bid and ordering re-auction is valid or not. As per the terms and conditions of the auction notification, the Executive Engineer is competent either to cancel the auction before it is held, or to reject or accept the highest bid. It is a settled principle of law that a highest bidder has no right to claim that his bid shall be accepted. For valid reasons a highest bid can be rejected and a lower bid can be accepted. II the highest bid is rejected for valid reasons and a re-auction is ordered, question of giving notice before such rejection, to the highest bidder does not arise. Therefore, we have to ascertain in this case what the reason is for not accepting the highest bid and decide whether it is a valid reason or not. The Executive Engineer has categorically stated in his letter dated April 18, 1991 written to the Superintending Engineer that as per the departmental collections of toll-fee from April 1, 1991, the total collection would work out to Rupees 1,10,00,000/- for eleven months. He also pointed out that the lease amount for eleven months during the previous year collected from, the contractor, who incidentally happens to be the fourth respondent, was Rs. 80,00,000/-. Therefore, he said that the highest bid amount cannot be accepted, These reasons cannot be said to be either unreasonable, or irrelevant, or extraneous. Therefore, the rejection of the highest bid by him was quite justified and proper, consequently, the re-auction ordered by him becomes valid. In such circumstances, the State Government cannot enter into negotiation with the highest bidder and accept the negotiated offer made by him over and above the bid amount. This is invalid for more than one reason. In the first instance, when the officer who has been authorised to conduct the auction has for valid reasons, rejected the highest bid, it is not open to the State Government to interfere with the ordering of re-auction. Even otherwise, when a number of persons participated n the public auction and offered their bids, it would be improper on the part of the State Government to enter into negotiation only with one of the participant and grant the lease in his favour.

It is, however, submitted by Mr. P. Ramachandra Reddy, the learned counsel for the fourth respondent that the acceptance by the State Government of the negotiated offer, made by the fourth respondent meets the test of reason and relevance and the action of the State Government cannot be described as the one tainted with the vice of other discrimination or extraneous consideration inasmuch as the fourth respondent happens to be the highest bidder at the public auction held on April 15, 1991. In support of his contention, the learned counsel has drawn our attention to some of the passages in the judgments of the Supreme Court in Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, and Star Enterprises and Others Vs. City and Industrial Development Corporation of Maharashtra Ltd. and Others, .

It would be apposite in this context to refer to some of the relevant observations of the Supreme Court, which we have to bear in mind in deciding a case relating to public revenue. In The State of U.P. Vs. Raj Narain and Others, , the Supreme Court pointed out:

"In a government of responsibility like ours, where all the agents of the public must be responsible for their conduct, there can be but few secrets. The people of this country have a right to know every public act, everything that is done in a public way, by their public functionaries. They are entitled to know the particulars of every public transaction in all its bearing. The right to know, which is derived from the concept of freedom of speech, though not absolute, is a factor which should make one wary, when secrecy is claimed for transactions which can, at any rate, have no repercussion on public security. To cover with veil of secrecy, the common routine business is not in the interest of the public."

In Ram and Shyam Company Vs. State of Haryana and Others, , Justice D.A. Desai, speaking for the Bench of the Supreme Court has explained the approach to be adopted in the disposal of public property, in the following terms:

".....public property has to be dealt with for public purpose and in public interest ..... 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 ...... 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...... 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, Represented by its Partner Shri Kasturi Lal, Jammu and Others Vs. State of Jammu and Kashmir and Another, , it was observed (at page 2000):

"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 light of the principles enunciated by the Supreme Court, if we have to decide the validity of the reasons assigned by the Executive Engineer for rejecting the highest bid of the fourth respondent, it cannot be said that the rejection of the highest bid is either illegal or improper. If for valid reasons the authorised officer has ordered re-auction, it would not be proper for the State Government to interfere with the process of re-auction and grant the lease in favour of a party by entering into negotiation.

Yet another point that requires consideration is whether the writ petition filed by a party, who has neither participated in the auction held on April 15, 1991 nor intended to participate in the auction scheduled to be held on May 15, 1991 by making an application, can be entertained and relief be granted. The plea of the petitioner is that he had obtained Bank Guarantee for Rs. 7,50,000/- on May 13, 1991 and a Demand Draft for Rs. 1 lakh for making an application to the Executive Engineer on May 14, 1991 in compliance with the requirements under the sale notification. It is stated that when he approached the Executive Engineer on May 14, 1991 to submit the application, he had refused to receive the same saying that the auction was cancelled. This averment of the petitioner is strongly refuted by the fourth respondent stating that the petitioner did not mention in his affidavit that he approached the Executive Engineer for submitting the application and that the Executive Engineer refused to receive the same. The Executive Engineer has stated in his counter-affidavit that the State Government had issued a telegram on May 14, 1991 cancelling the auction. From the relevant records produced before us by the learned Government Pleader, it is evident that on May 14, 1991 itself the Executive Engineer had received the telephomic communication from the State Government and consequently he cancelled the auction to be held on May 15, 1991. According to the sale notification, the application by the intending bidder has to be submitted before 5 P.M. on May 14, 1991. The petitioner had obtained a Bank Guarantee for Rs.7,50,000/-on May 13, 1991 and he had also obtained a Demand Draft for Rs. 1 lakh for enclosing the same to the application. If the auction was cancelled on May 14, 1991 itself, the question whether the Executive Engineer refused to ''receive the application or the petitioner himself did not consider it necessary to submit the application when the auction was already cancelled, will not be of much relevance. But, it can be inferred from the existing facts that the petitioner obtained a demand draft and a bank guarantee before May 14, 1991 to enable himself to file the application before the Executive Engineer.

A few days back-when the writ appeal was posted before us for hearing, we directed that the petitioner/ first respondent shall be in a position to deposit the amount which we may direct him to deposit in order to test his bona fides in pursuing this litigation. Accordingly, he produced before us on 5th November 1991, three demand drafts for a total sum of Rs: 19 lakhs and we directed him to deposit the same with the Registrar (Judicial), High Court of Andhra Pradesh. He deposited the same accordingly. He has expressed his willingness to pay at the rate of Rs. 93 lakhs per year towards lease amount. This is higher than the amount of Rs. 80 lakhs for which the lease was granted in favour of the fourth respondent for a period of eleven months, Even though the petitioner was not one of the bidders who participated in the auction held on April 15, 1991, he cannot be precluded from questioning the cancellation of the auction scheduled to be held on May 15, 1991 if he intended to participate in that auction. From the material on record, we are inclined to hold that the petitioner intended to participate in the auction to be held on May 15, 1991 and for that purpose he had taken steps to comply with the requirements in that regard. We are also satisfied that he is bona fide interested in questioning the impugned order of the State Government.

For the reasons staed above, we quash the impugned order of the State Government in G.O. Rt. No. 485 Transport, Roads & Buildings (R. II/l) Department, dated May 21, 1991. We direct the Executive Engineer (Roads & Buildings), National Highway Division, Mangalagiri, Guntur District, the third respondent herein to forthwith issue not later than one week from to day a fresh notification for sale by public auction within ten days from the date of notification of the leasehold right for collection of toll-fee on "Kanakadurgamma Varadhi" across the river Krishna at Vijayawada for the period till March 31, 1992. The petitioner shall submit his application complying with the requirements of the sale notification within the stipulated time. However, he need not furnish Bank Guarantee for Rs. 7,50,000/- and deposit Rs. 1,00,000/- towards earnest money. If he makes the application, he is entitled to participate in the auction. The minimum bid amount in the auction shall be at the rate not less than Rs.93 lakhs for twelve months which the petitioner has agreed to pay as per his oral undertaking given to this Court. If higher bid amount is not fetched, the bid offered by the petitioner at the rate of Rs. 93 lakhs for twelve months shall be accepted subject to the terms and conditions referred to in the sale notification. The amount of Rs. 19 lakhs deposited by the petitioner with the Court by way of demand drafts shall be kept in deposit with the Executive Engineer (Roads & Buildings), National Highway Division, Mangalagiri, Guntur District, the third respondent herein, pending the auction. If the petitioner is declared to be the highest bidder, the amount deposited by him shall be adjusted in accordance with the conditions of the sale notification towards the deposits to be made by him and the balance of the amount if any, shall be refunded to him. On the other hand, if the petitioner either does not participate in the auction or refuses to take the lease at the rate of Rs. 93 lakhs for twelve months for the period till March 31, 1992, the shortfall if any between the bid accepted by the Executive Engineer and lease amount calculated at the rate of Rs. 93 lakhs for a period of twelve months shall be adjusted out of the sum of Rs. 19 lakhs deposited by the petitioner and the balance shall be refunded to him. However, if any other person bids at a higher rate than that offered by the petitioner and if the same is accepted, the entire amount of Rs. 19 laksh shall be refunded to him. The sum of Rs. 19 lakhs deposited by the petitioner in this Court by way of demand drafts shall be paid to the Executive Engineer (Roads & Buildings), National Highway Division, Mangalagiri, Guntur District, the third respondent herein, who shall deal with the same as directed above.

The Executive Engineer (Roads & Buildings), National Highway Division, Mangalagiri, Guntur District, the third respondent herein, shall forthwith take all consequential steps to collect the toll-fee till the auction is held and the toll gate is entrusted to the highest bidder.

The writ petition is allowed to the extent indicated above. In view of the orders passed in the writ petition, no further orders need be passed in the writ appeal. It is accordingly disposed of. No costs in each.

Order accordingly.