K. Kasilingam vs The District Collector and Others

K.K. Sasidharan, J.

Introductory:

The attempt of a local body to award the State largesse to a chosen few, at the cost of public revenue, is the sum and substance of the issue

which arises for determination in these two Writ Petitions.

W.P. (MD) No. 13584/2010:

The Petitioner challenges the Resolution No. 122 dated 22.10.2010 on the file of the Devakkottai Municipality and the consequential orders of

allotment, whereby and where under the bids submitted by the Respondents 4 to 11 for allotment of the shops in the newly constructed shopping

complex of the Municipality were accepted.

Background Facts:

The Petitioner is a Class-I Contractor registered with the Devakkottai Municipality. The second Respondent issued a tender notification dated

28.09.2010 inviting applications for allotment of 8 shops constructed in the Municipal Bus stand. The notification was published in a local Tamil

daily ""Tamil Chudar"", which has no wide circulation at Devakottai. As per the tender notification, the intending participants were required to

deposit a sum of Rs. 1,00,000/- by way of demand draft and in case they were not in possession of Solvency Certificates, another sum of Rs.

1,00,000/- has to be deposited before 05.00 p.m. on 20 October 2010. The earnest money deposit has to be made in the office of the second

Respondent. The tender notification further contains a statement that the sealed tenders would be received on 21 October 2010 between 11.00

a.m. and 11.30 a.m., from those who have made the earnest money deposit and obtained endorsement on 20 October 2010 and all such tenders

would be opened at 11.40 a.m. on 21 October 2010.

The Petitioner has taken demand drafts for a sum of Rs. 16,00,000/- at the rate of Rs. 2,00,000/- per shop. The Petitioner approached the

office of the Devakkottai Municipality on 20 October 2010 and submitted his application along with the demand drafts and Solvency Certificates.

Large number of intending participants were waiting there, as the second Respondent or his authorized representatives were not available on 20

October 2010 till 06.00 p.m., to receive the tenders. Since there was nobody to receive the earnest money deposit, the Petitioner and other

tenders were not in a position to comply with the tender conditions. The Petitioner has informed the matter to the District Collector and

accordingly, the Tahsildar, Devakkottai has conducted an enquiry and he was convinced that the responsible officers of the second Respondent

Municipality were not available in the office of the Municipality on 20 October 2010. The Petitioner and the other participants have assembled in

the office of the Municipality on 21 October 2010. In the meantime, they came to know that the Municipality has convened a meeting of the

Municipal Council on 22 October 2010 to confirm the bids alleged to have been submitted by Respondents 4 to 11. The Petitioner was convinced

that the attempt of the Municipality was to allot the shops to their own men and as such, he filed a Writ Petition before this Court on 22 October

2010 in W.P.(MD) No. 13042 of 2010.

The said Writ Petition was taken up by this Court on 22 October 2010 and an interim stay of confirmation was issued indicating that the stay

would be in operation, in case there was no confirmation till 01.15 p.m. The order was communicated to the Municipality by wire. However, the

second Respondent received several demand drafts from Respondents 4 to 11 even after 03.00 p.m., on 22.10.2010 and hurriedly concluded the

matter. Even though electricity supply was not given to the shops, records were created as if possession was given on 22.10.2010 itself, after

collecting the rent for a period of six months. The Municipal Council passed a resolution bearing No. 122 on 22.10.2010, confirming the bids

submitted by Respondents 4 to 11 and consequential orders of allotment were issued on the very same day allotting the shops to the successful

bidders. Feeling aggrieved by those proceedings, the Petitioner has filed the Writ Petition in W.P.(MD) No. 13584 of 2010.

The Defence:

The Commissioner, Devakkottai Municipality filed a counter denying the allegations and averments contained in the affidavit filed in support of

the Writ Petition. The material contentions read thus:

(a) The Municipality has decided to issue a notification calling for tenders for the purpose of giving municipal shops on lease and as such,

notification was published in the local newspaper on 12.10.2010.

(b) The Commissioner was not available at the Municipality on 20.10.2010, as he was away at Madurai on official duty. However, there was no

difficulty for depositing the earnest money, as the office was functioning on 20 October 2010.

(c) The Municipality received as many as 16 bids and for the purpose of confirming the bids, the meeting of the Municipal Council was convened

on 22 October 2010. The notice of such meeting was issued on 21 October 2010 intimating the members that the meeting would be held at 10.00

a.m. on 22 October 2010.

(d) Since there were disturbances in the Municipal Office on 22.10.2010, the meeting was held only at 11.30 a.m., with police protection. Except

three Councilors, all the other Councilors participated. Resolution No. 122 was passed by majority of the members, allotting the shops to the

successful bidders for a period of three years.

(e) The interim order passed by this Court on 22 October 2010 was received by the Municipality only on 23.10.2010. By that time, the entire

tender process was completed and as such, there was no occasion for the Municipality to postpone the tender confirmation.

(f) Though the Petitioner has submitted a representation on 22.10.2010, intimating that he was willing to offer 20% more than the bid amount

quoted by the successful bidders, he has not made the required deposit and as such, the request was not considered.

(g) On 22 October 2010, a group of 50 persons caused disturbance and entered the Chamber and the Commissioner was forced to write a letter

to the effect that the Municipal Council meeting scheduled for 22.10.2010 at 10.00 a.m. was postponed. The said letter was written under threat.

The Municipal Commissioner is not the authority to convene, postpone or cancel the Council meeting.

(h) The tender was finalized in a very transparent manner and as such, no interference is called for in the matter.

The tenth Respondent has filed a counter, wherein it was indicated that he has submitted his tender pursuant to the notification issued by the

second Respondent. According to him, since there was some disturbance, auction was conducted at 11.30 a.m. and he submitted the tender form

to the second Respondent. His tender was confirmed on the same day and he took a demand draft for a sum of Rs. 22,200/- and deposited the

same before the second Respondent. He was declared as the successful bidder with respect to shop No. 7 and after passing the resolution, six

months rent was deposited and an order of allotment was given. Immediately, he took possession of the shop and he is running a paint shop at

present.

Summary of Submissions:

The learned Senior Counsel for the Petitioner would contend thus:

(a) The intention of the Municipality to grant lease to their own people is evident from the background facts commencing from the issuance of

notification. Even though the Municipality was earlier publishing all the notifications in Dinathanthi, Dinamalar and Dinamani, the tender notification

was purposefully published only in a local newspaper, which has no wide circulation.

(b) The Petitioner has taken a demand draft for a sum of Rs. 16,00,000/- and he approached the office of the Municipality on 20 October 2010

for the purpose of making the earnest money deposit. There were 48 others present in the office and they were also not in a position to submit their

bids, as there was nobody in the office to receive the earnest money deposits.

(c) The Petitioner and others have submitted representations through fax to the District Collector on 20 October 2010 and as per the direction of

the District Collector, the Tahsildar, Devakkottai visited the Municipality. The report submitted by the Tahsildar, Devakkottai to the District

Collector gives a clear indication that there was utter chaos in the office of the Municipality on 20 October 2010, as there was nobody present in

the Municipality to receive the earnest money and to make necessary endorsement so as to enable the participants to submit their tenders on 21

October 2010.

(d) The interim order granted by this Court was communicated to the Municipality on 22 October 2010 and the confirmation was made only

subsequently. The second Respondent has received the rent and completed the formalities only after receipt of information about the stay granted

by this Court.

(e) The counter-affidavit proceeds as if there were 16 participants. However, the minutes gives a clear indication that there were only 12

participants. Tmt. Kaliammal, who is none other than the wife of the Vice Chairman, was the bidder in respect of four shops and as such, virtually,

there was no competition for allotment of the shops.

(f) The Commissioner has given a letter intimating the Petitioner and others that the Council meeting was postponed. However, the records were

fabricated later to appear as if meeting was conducted subsequently and the bids were confirmed.

The learned Senior Counsel for the second Respondent would submit thus:

(a) The Petitioner has given two complaints to the District Collector. The first complaint proceeds as if he has handed over the earnest money to

the Collector and he was not prepared to accept the deposit. The subsequent complaint proceeds as if the Commissioner was not available in the

office of the Municipality. Therefore, the initial case of the Petitioner was contradictory in nature and as such, no credence could be given to his

version that there was nobody available in the office to receive the earnest money deposit.

(b) The notification shows that the earnest money could be deposited before the office of the Commissioner. Therefore, nothing prevented the

Petitioner from handing over the earnest money to the other officials of the Municipality.

(c) The Commissioner was not the authority to convene or cancel the Council meeting. The letter was forcibly obtained by the Petitioner and

others and as such, no weight could be attached to the letter given by the Commissioner postponing the meeting.

(d) The report submitted by the Tahsildar was behind the back of the Municipality. Therefore, no reliance could be placed on the said report to

arrive at a conclusion that there was nobody in the office of the Municipality to receive the earnest money on 20 October 2010.

(e) The Petitioner has got an alternative remedy by initiating proceedings before the District Collector to cancel the resolution and, therefore, the

very Writ Petition is not maintainable.

The learned Counsel for the Respondents 4 to 11 contended thus:

(a) The tenth Respondent and other bidders have acted in a bona fide manner and as such, there are no reasons to set aside the order of

confirmation.

(b) The very fact that the Petitioner and 48 others approached the Municipality with their offers shows that the newspaper was having wide

circulation in the area. Therefore, there are no materials to substantiate the contention that the intention of the Municipality was to give the lease to

their own people.

Analysis:

The Devakottai Municipality has issued a notification dated 28.09.2010 calling for tender -cum-auction for granting the licence to carry on

business in 8 newly constructed shops in the Devakottai bus stand. The notification was published in ""Tamil Chudar"" on 12.10.2010. The bidders

have to deposit a sum of Rs. 1,00,000/- as earnest money deposit, besides production of Solvency Certificates. In case they were not able to

obtain Solvency Certificate, they have to deposit a sum of Rs. 2,00,000/- . As per the scheme of the notification, the bidders have to pay the

earnest money before the Municipality during the working hours on 20 October 2010. The tenders would be received from those who have made

the deposit on 20 October 2010. The sealed tenders have to be submitted between 11.00 a.m. and 11.30 a.m. on 21.10.2010 before the

Commissioner or his authorized agent. It would be followed by an auction at 11.40 a.m. on the very same day.

The tender notification contains a clear stipulation that only those tenderers, who have deposited the earnest money on 20.10.2010, alone

would be permitted to take part in the tender process on 21 October 2010. Therefore, one of the important acts pertaining to the tender has to be

performed on 20 October 2010.

There is no dispute that the Petitioner has taken demand drafts for a sum of Rs. 16,00,000/- . The question is as to whether the Petitioner has

approached the Municipality on 20 October 2010 for the purpose of depositing the earnest money. Since there are only affidavits and counter-

affidavits filed by the parties, the issue has to be decided on the basis of materials available on record.

According to the Petitioner, he approached the office of the second Respondent on 20 October 2010 for the purpose of depositing the earnest

money. However, there was no authorized representative available in the office to receive the earnest money. In addition to the Petitioner, there

were about 48 other persons who also wanted to pay the earnest money. The Commissioner or other authorized officers were not available in the

Municipality and as such, they were not in a position to make the earnest money deposit.

Since the Commissioner in his affidavit has denied the allegation that there was nobody in the Municipality to receive the earnest money, the

surrounding facts had to be taken note of to decide this issue.

The Petitioner has submitted a complaint to the District Collector on 20 October 2010 itself. A copy of the fax message is available in the

typed-set of papers. The District Collector, in turn, deputed the Tahsildar, Devakkottai to visit the office of the Municipality and to submit his

report. The Tahsildar along with police visited the municipal office on 20 October 2010 and his enquiry revealed that there was utter confusion in

the office of the Commissioner. There were no responsible officers available in the Municipality to receive the tenders. The officials, who were

available in the office, were not prepared to receive the tenders, as they were not authorized. The report submitted by the Tahsildar is a valuable

piece of evidence to decide the Writ Petition. The translated version of the report reads thus:

From To

Thiru.M.Selvanathan, B.Sc., The District Collector,

Tahsildar, Sivagangai.

Devakkottai.

P/Ve/A7/62/2010 Dated: 20.10.2010

Sir,

Sub.: Law and Order - Devakkottai Taluk-Devakkottai Municipal Office-Issuance of tender -cum-auction notification on 20.10.2010 for

allotment of 8 shops belonging to the Municipality-Reg.

***

Based on the complaint given for not receiving the tenders in the office of the Devakkottai Municipality, I submit my report regarding issuance of

tender -cum-auction for allotment of eight shops newly constructed in the Municipal Bus Stand belonging to the Devakkottai Municipality on

20.10.2010.

The Devakkottai Municipality has issued a paper publication in Dinasari Daily for inviting tenders for allotment of eight shops belonging to

Devakkottai Municipality. The intending participants have to submit their tenders before 05.00 p.m. on 20.10.2010. However, the officers of the

Municipality refused to receive the demand drafts from 10.00 a.m. Therefore, based on the information given by the District Collector, I visited the

office of the Municipality along with Deputy Superintendent of Police and police force. The Municipal Engineer of the Devakkottai Municipality

informed that the Municipal Commissioner went to Madurai, Municipal Manager went to Sivagangai, Concerned Writer and Municipal Revenue

Officer went on leave. I asked the grievances of the tenderers who gathered in the office with demand drafts. They have informed that the officers

of the Municipality refused to receive the tenders. I have asked details from the Municipal Engineer, who informed that he was not authorized to

receive the tenders and thereafter, he left from the office. While I was trying to contact the Municipal Commissioner over cell phone, the same was

switched off. There were 49 tenderers available in the office. I advised the tenderers to appear before the District Collector at 10.00 a.m. on

21.10.2010 in person and submit a representation in this regard. The tenderers said that since the officers of the Municipality did not receive the

tenders from them and nobody was prepared to receive the demand drafts, in the auction to be held on 21.10.2010, if it is informed that the

tenders were received, there will be a law and order problem arise in Devakottai. Thereafter, the tenderers left from the office at 06.50 p.m. Law

and order is being observed.

Sd/...

Tahsildar,

Devakkottai.

Copy to:

1.The Revenue Divisional Officer,

Devakkottai

2.The Superintendent of Police,

Devakkottai.

Sd/.General Information Officer

Devakkottai

Dated. 21.10.2010 (Seal Affixed)

Hqrs. Dy.Tahsildar,

Devakkottai.

The learned Senior Counsel for the second Respondent contended that no reliance could be placed on the report, as it was made without

notice to the Municipality. There is no merit in the said contention. The Tahsildar was authorized by the District Collector to visit the office of the

Municipality and to submit a report. There is no allegation made against the Tahsildar that he has created a report with a view to help the

Petitioner. The report of the Tahsildar contains details about the state of affairs on 20 October 2010. The averments in the report supports the

case pleaded by the Petitioner.

Though the Municipal Commissioner, in his counter-affidavit, took a contention that the earnest money could have been deposited with the

available staff in the Municipality, the counter does not contain any whisper as to the officers entrusted to receive the earnest money. In case the

contention of the Municipal Commissioner is read in the light of the report submitted by the Tahsildar, the same would prove the falsity of the case

pleaded by him.

The learned Senior Counsel for the second Respondent, during the course of his arguments, contended that the Petitioner has given two

different version in respect of his submission of earnest money deposit on 20 October 2010. Even if both the complaints preferred by the Petitioner

are ignored, still there is a report submitted by the Tahsildar and the same would prove that none of the officers available in the Municipality were

prepared to receive the earnest money deposit. The report also shows that the Commissioner was not available and even his mobile was switched

off. The learned Senior Counsel would be justified in his contention, in case the Petitioner has not taken the demand drafts. In fact, he has taken

demand drafts for a sum of Rs. 16,00,000/- and it was taken on 18 October 2010 and 20 October 2010. When the Petitioner has taken demand

drafts for a sum of Rs. 16,00,000/- , it cannot be said that he was not prepared to deposit the earnest money or he has not come to the

Municipality on 20 October 2010.

The Petitioner has taken a definite stand that there was no submission of bids on 21 October 2010 as contended by the Municipality. The

second Respondent has not produced any material much less the minutes of the tender committee dated 21 October 2010 to prove their case that

Respondents 4 to 11 and 8 others have submitted their bids on 21 October 2010.

The Petitioner has filed a Writ Petition before this Court on 22 October 2010. This Court was pleased to pass an interim order restraining the

second Respondent form confirming the bid, in case the same has not been confirmed before 01.15 p.m. on 22 October 2010. The second

Respondent has taken up a contention that the interim order was served only on 23 October 2010 and by that time, the entire tender process was

completed.

The third Respondent has convened a meeting of the Municipal Council on 22 October 2010 at 10.00 a.m. The notice of meeting was issued

on 21 October 2010. The notice contains the Agenda for the meeting. Item No. 122 of the Agenda shows that Respondents 4 to 11 along with

others have submitted their bids and the same has to be confirmed in the name of the highest bidders. As per the tender schedule, the auction

would be at 11.40 a.m. on 21 October 2010. Therefore, the convening of the meeting can only be after 11.40 a.m. on 21 October 2010. It was

an emergent meeting.

The core question is as to what made the third Respondent to send the notice calling for an emergent meeting after 11.40 a.m. on 21 October

2010, convening the meeting to be held at 10.00 a.m. on 22 October 2010.

The notice contains various Agendas including the confirmation of bids pertaining to the subject shops. The name and address of the bidders

are found mentioned in the notice issued by the Chairman convening the meeting.

Section 25 of the Tamil Nadu District Municipalities Act, 1920 provides for making rules to regulate the proceedings of the Council. Schedule

III contains details about the mode of transacting business. Clause 2 Sub-clause 1 reads thus:

2.(1) No meeting shall be held unless notice of the day and time when the meeting is to be held and of the business to be transacted thereat has

been given at least three clear days before the day of the meeting.

In cases of urgency, the chairman may convene a meeting on giving shorter notice than that specified in Sub-rule (1).

Clause 2(1) gives a clear indication that minimum 3 days time has to be given for convening the meeting of the Municipal Council. It is true that

the Chairman is given authority to convene a meeting after giving shorter notice. The issue is as to whether there was a real necessity to convene an

emergent meeting on 21 October 2010.

The learned Senior Counsel for the second Respondent contended that only the Councilors can raise an objection that statutory notice was not

given and it was not open to a private party, like the Petitioner to raise the issue regarding short notice. The said argument is liable to be rejected

for more than one reason. The question here is not as to whether 3 days notice has to be given for convening the meeting. The question has to be

answered in the light of the background facts, commencing from the orders passed by this Court on 22 October 2010, granting stay of

confirmation and ending with the delivery of possession of shops on 22 October 2010 itself.

The second Respondent has contended that there were 16 participants for the 8 shops. However, the list of bidders produced by the second

Respondent shows that there were only 12 bidders. The bidder G. Murugesan submitted his bid for shop Nos. 1 and 4. Similarly, the wife of the

Vice Chairman, by name Kaliammal submitted her bid in respect of Shop Nos. 5,6,7 and 8. Therefore, it is evident that the claim of the second

Respondent that there were altogether 16 participants for the 8 shops appears to be a false averment without verifying the fact that two persons

competed for different shops. So, there were only 12 participants for the 8 shops in question.

The urgency shown by the Municipality to confirm the bid, to communicate the confirmation, to collect six months rent and to hand over

possession on 22.10.2010 itself speaks volumes about the mala fides. The interim order of this Court was given at 1.15 p.m. and it was a

conditional order that in case the confirmation was not made before 1.15 p.m., there will be an order of stay of confirmation. The condition as

contained in the stay order was made use of by the second Respondent to appear as if everything was done before 1.15 p.m.

The Petitioner has obtained details from the bank regarding the time at which and date on which, the demand drafts were taken by the

successful bidders. The details furnished by the City Union Bank, Devakottai shows that at least four demand drafts were taken between 01.42

p.m. and 3.33 p.m. on 22.10.2010.

The file produced by the second Respondent shows that 3 days time was given to the successful bidders to remit the rent for a period of six

months. However, it is a matter of record that the rent was deposited immediately on 22.10.2010 itself. The counter-affidavit filed by the second

Respondent is silent on the aspect as to whether the successful bidders were waiting in the Municipal Office on 22.10.2010 so as to enable them

to receive the confirmation and to comply with the other requirements immediately. The second Respondent has not explained as to why there was

such an urgency to accept the confirmation, to give information about the confirmation to the successful bidders, accept the six months rent and

give possession of shops, all before the working hours on 22.10.2010. Therefore, a careful consideration of the entire factual matrix clearly gives

an idea that it was only to overcome the order passed by this Court that the bids were confirmed urgently and culminated in handing over the shops

to Respondents 4 to 11.

The Petitioner has submitted a representation before the second Respondent on 22 October 2010 agreeing to pay 20% more than the offer

made by Respondents 4 to 11. The said representation was rejected on the sole ground that he has not enclosed 20% of the bid amount, which

was a condition precedent for entertaining such request. While rejecting the said request, the second Respondent conveniently omitted the fact that

the Petitioner has already deposited a sum of Rs. 16,00,000/- and the said amount was very much available with the second Respondent.

The second Respondent was dealing with a public property. The Municipality has constructed 8 shop rooms. The shop rooms are situated in

the bus stand complex. It is a very covetable place. Therefore, the attempt of the second Respondent should have been to obtain the maximum

offers. The facts of this case clearly shows that the Municipality was more concerned about the interest of private parties than the public interest.

This is evident from the fact that the publication itself was made only in a local newspaper having a very less circulation. The Tahsildar, in his

report, very categorically stated that there were large number of persons assembled in the Municipality to submit their tenders. According to the

second Respondent, there were only 16 bidders. Some of the bidders are the kith and kin of the administrators of the Municipality. Ultimately, it

has turned out that there were only 12 bidders. It is very difficult to believe that there were only 12 people, who have come forward to submit their

bids. The mala fides on the part of the second Respondent is apparent. The second Respondent and the Municipal Council were determined to

give the licenses in favour of Respondent 4 to 11 to the detriment of the Municipality. Private interest appears to have outweighed the public

interest.

The second Respondent has made an endorsement indicating that the meeting scheduled to be held at 10.00 a.m., on 22.10.2010 has been

postponed. However, in his counter-affidavit, he has come out with a case that under threat, he was made to write the endorsement. The falsity of

the said case is writ large. The counter-affidavit was sworn to on 20 November 2010. The endorsement regarding postponement of meeting was

made on 22 October 2010. In case such an endorsement was made under threat by the Petitioner and others by using force, the second

Respondent could have very well preferred a complaint before the police. During the course of arguments, by way of a factual clarification, I have

asked the learned Senior Counsel for the second Respondent as to whether he has preferred any complaint. The learned Senior Counsel, on

instructions from the second Respondent, confirmed the fact that no such compliant was preferred by the second Respondent. The second

Respondent, in his counter-affidavit, has stated that the meeting was conducted on 22.10.2010 with the help of police. Therefore, it is evident that

the police was also present in the office of the Municipality on 22 October 2010. In case the Petitioner and others have indulged in unlawful acts,

constituting an offence under the Indian Penal Code, nothing prevented the second Respondent from preferring a complaint against the Petitioner.

Therefore, the present version that the statement was obtained by coercion is clearly an afterthought.

Clause 2 of Schedule III shows that the Agenda for the meeting shall be prepared by the Commissioner in consultation with the Chairman.

Therefore, necessarily, the agenda for the meeting on 22.10.2010 would have been prepared only by the Commissioner. The Commissioner is the

Chief Administrative Officer of the Municipality and he is the authority to implement the decision of the Council. Therefore, the endorsement dated

22.10.2010 is also a basic material to arrive at a conclusion that everything was not well in the Municipality and it was only out of compulsion and

opposition from the local public, that the meeting was adjourned.

The Decided Cases:

In Meerut Development Authority Vs. Association of Management Studies and Another, , the Supreme Court considered 31 the scope of

judicial review in contractual matters. The Supreme Court observed that the authorities owe a duty to act fairly and their actions are required to be

free from arbitrariness and favoritism. The relevant paragraph reads thus:

In Tata Cellular (supra) this Court observed that ""Judicial quest in administrative matters is to strike the just balance between the administrative

discretion to decide matters as per government policy, and the need of fairness. Any unfair action must be set right by judicial review.

In Chief Constable of the North Wales Police v. Evans Lord Hailsham stated: ""The underlying object of judicial review is to ensure that the

authority does not abuse its power and the individual receives just and fair treatment, and not to ensure that the authority reaches a conclusion

which is correct in the eyes of the court.

A large number of authorities have been cited before us in support of the submission that even in contractual matters the State or ""other

authorities"" are bound to act within the legal limits and their actions are required to be free from arbitrariness and favoritism. The proposition that a

decision even in the matter of awarding or refusing a contract must be arrived at after taking into account all relevant considerations, eschewing all

irrelevant considerations cannot for a moment be doubted. The powers of the State and other authorities are essentially different from those of

private persons.

The action or the procedure adopted by the authorities which can be held to be ""State"" within the meaning of Article 12, while awarding contracts

in respect of properties belonging to the State, can be judged and tested in the light of Article 14. Once the State decides to grant any right or

privilege to others, then there is no escape from the rigor of Article 14. These principles are settled by the judgments of this Court in Ramana

Dayaram Shetty v. International Airport Authority of India, Kasturi Lal Lakshmi Reddy v. State of J&K, Ram and Shyam Co. v. State of

Haryana, Mahabir Auto Stores v. Indian Oil Corpn., Sterling Computers Ltd. v. M&N Publications Ltd. and A.B. International Exports v. State

Corporation of India. Executive does not have an absolute discretion, certain principles have to be followed, the public interest being the

paramount consideration.

It has been stated by this Court in Kasturi Lal case (supra): (SCC p.13, para 14)

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.

The law has been succinctly stated by Wade in his treatise, Administrative Law:

The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights

of his dependants, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his

exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or,

where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things

unless it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. So a city council acted unlawfully when it

refused unreasonably to let a local rugby football club use the city''s sports ground, though a private owner could of course have refused with

impunity. Nor may a local authority arbitrarily release debtors, and if it evicts tenants, even though in accordance with a contract, it must act

reasonably and ''within the limits of fair dealing''. The whole conception of unfettered discretion is inappropriate to a public authority, which

possesses powers solely in order that it may use them for the public good.

There is no difficulty to hold that the authorities owe a duty to act fairly but it is equally well settled in judicial review, the court is not concerned

with the merits or correctness of the decision, but with the manner in which the decision is taken or the order is made. The court cannot substitute

its own opinion for the opinion of the authority deciding the matter. The distinction between appellate power and a judicial review is well known

but needs reiteration.

By way of judicial review, the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or

the State. The courts have inherent limitations on the scope of any such enquiry. If the contract has been entered into without ignoring the

procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest

of the State and the public, then the court cannot act as an appellate court by substituting its opinion in respect of selection made for entering into

such contract. But at the same time the courts can certainly examine whether the ""decision-making process"" was reasonable, rational, not arbitrary

and violative of Article 14. [See Sterling Computers Ltd. (supra)]

The Supreme Court in Brihan Mumbai Electric Supply Transport Undertaking and Another Vs. Laqshya Media P. Ltd. and Others, ,

observed thus:

17....In all these cases, this Court has emphasized that the public property owned by the State or by any instrumentality of the State should be

generally sold by public auction or by inviting tenders. This Court has been insisting upon that rule, not only to get the highest price for the property

but also to ensure fairness in the activities of the State and public authorities. It also emphasizes that the authority should justify the action assailed

on the touchstone of justness, fairness, reasonableness and as a reasonable prudent owner.

The Supreme Court in Jespar I Slong v. State of Meghalaya and Ors. JT 2004(5) SC 107, indicated that the transactions involving the

Government should not be arbitrary, irrational or irrelevant. The observation reads thus:

It goes without saying that the government while entering into contracts is expected not to act like a private individual but should act in

conformity with certain healthy standards and norms. Such actions should not be arbitrary, irrational or irrelevant...

In Noble Resources Ltd. Vs. State of Orissa and Another, , the Supreme Court observed that contractual matters are not beyond the realm of

judicial review. The relevant paragraph reads thus:

The Respondent No. 2 is a ""State"" within the meaning of Article 12 of the Constitution of India. Its conduct in all fields including a contract is

expected to be fair and reasonable. It was not supposed to act arbitrarily, capriciously or whimsically.

It is trite that if an action on the part of the State is violative the equality clause contained in Article 14 of the Constitution of India, a writ

petition would be maintainable even in the contractual field. A distinction indisputably must be made between a matter which is at the threshold of a

contract and a breach of contract; whereas in the former the court''s scrutiny would be more intrusive, in the latter the court may not ordinarily

exercise its discretionary jurisdiction of judicial review, unless it is found to be violative of Article 14 of the Constitution. While exercising

contractual powers also, the government bodies may be subjected to judicial review in order to prevent arbitrariness or favouritism on its part.

Indisputably, inherent limitations exist, but it would not be correct to opine that under no circumstances a writ will lie only because it involves a

contractual matter.

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Contractual matters are, thus, not beyond the realm of judicial review. Its application may, however, be limited.

Although the terms of the invitation to tender may not be open to judicial scrutiny, but the courts can scrutinize the award of contract by the

Government or its agencies in exercise of their power of judicial review to prevent arbitrariness or favouritism.

28....

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Another field where judicial review is permissible would be when mala fide or ulterior motive is attributed...

The Supreme Court in Bahadursinh Lakhubhai Gohil Vs. Jagdishbhai M. Kamalia and Others, quoted an earlier judgment in Dr. S.P. Kapoor

Vs. State of Himachal Pradesh and Others, and observed that when a thing is done in a hasty manner, mala fide would be presumed. The

observation reads thus:

In S.P. Kapoor (Dr) v. State of H.P., this Court held that when a thing is done in a post-haste manner, mala fide would be presumed, stating:

(SCC p.739, para 33)

...The post-haste manner in which these things have been done on 3.11.1979 suggests that some higher-up was interested in pushing through

the matter hastily when the Regular Secretary, Health and Family Welfare was on leave.

The Municipality has taken steps to conduct an auction and the decision to fix the market rate was taken as early as on 17.05.2010.

Subsequently, they have decided to call for tenders and to conduct an auction to give the shops on licence. Therefore, they have taken about five

months to conduct the auction and as such, there was no real urgency to confirm the bid, to intimate the confirmation to the successful bidders, to

accept the half early rent and to hand over the possession all within hours on 22.10.2010. This urgency clearly gives an indication that the intention

was to give licence to Respondents 4 to 11 at any cost.

The Petitioner, in his affidavit filed in support of the Writ Petition in W.P.(MD) No. 13584 of 2010, contended that even electricity connection

was not given to the shops as on 22 October 2010. The said contention has not been disputed by the second Respondent. This also shows that it

was only to favour Respondents 4 to 11, everything was completed on 22.10.2010 itself. The plea that possession was given on 22.10.2010 itself

was made with a calculated motive to project the case that the tender process was completed even before receiving the interim order from this

Court.

In the light of the facts culled out above, I am of the considered view that the tender -cum-auction conducted by the second Respondent was

nothing, but a fraudulent, collusive, unfair, mala fide and a colorable exercise of power, besides a clear case of favoritism. The minutes of the

Municipal Council clearly gives an indication that hitherto all the advertisements including the reception given to the Legislative Assembly member

were published in Dinamalar and Dinathanthi and other leading newspapers. However, when it comes to the tender notification, which should

attract more bidders, the Municipality has resorted to a novel idea of publication in a newspaper having less circulation in the area.

The report submitted by the Tahsildar, Devakkottai to the District Collector alone is sufficient to arrive at a conclusion that the entire tender

process was a camouflage to award the licence in favour of Respondents 4 to 11. The mala fides could be inferred from the established

surrounding factors, which proceeded the transaction.

The Petitioner has shown his willingness to take the shops by paying 20% more than the bids offered by Respondents 4 to 11. The shops are

situated in a commercial locality. In case wide publicity was given, it would have fetched more amount than the amount offered by Respondents 4

to 11. In any case, there is no question of allotting the shops to the Petitioner by accepting 20% more than the amount offered by Respondents 4

to 11. Since the interest of the Municipality is paramount and the said interest was not taken note of, while giving licence to Respondents 4 to 11, I

am of the view that the confirmation made by the Municipality as per Resolution No. 122 should be set aside. Accordingly, the impugned

resolution No. 122, dated 22.10.2010 is quashed and the consequential orders of allotments are set aside.

The second Respondent is directed to conduct a fresh tender -cum-auction. The notification should be published in anyone of the leading Tamil

newspapers, like Dinathanthi and Dinamalar. The proceedings should be conducted in a transparent manner with opportunity to all the intending

participants to submit their bids. Such exercise should be completed within three months from today.

W.P.(MD) No. 13042 of 2010:

The Petitioner challenges the impugned notice dated 21.10.2010 insofar as item No. 122 is concerned. This Writ Petition has become in

fructuous, in view of the subsequent developments culminated in passing a resolution. The said resolution has already been quashed in W.P.(MD)

No. 13584 of 2010. Therefore, this Writ Petition has become in fructuous.

Outcome:

In the result,

(i) W.P.(MD) No. 13584 of 2010 is allowed as indicated above. Consequently, the connected miscellaneous petitions are closed. No costs.

(ii) W.P.(MD) No. 13042 of 2010 is dismissed as infructuous. Consequently, the connected miscellaneous petition is also dismissed. No costs.