M/s National Construction And Developers & Others vs State of Uttarakhand And Others

Rajiv Sharma, ACJ.

Since, common questions of law and fact are involved in these appeals, hence, are being taken up together and are being decided by this common

judgment. However, for the sake of clarity, facts of Special Appeal No.662 of 2018 have been taken into consideration.

Appellants filed writ petitions challenging the order dated 03.05.2018 passed by Director, Mining, whereby the process of e-auction for grant of

mining rights in Tehsil Sitarganj of District Udham Singh Nagar was cancelled with a further direction to lodge F.I.R. against the bidders, with the

Cyber Crime Cell under relevant provisions of law. By the said order, it was further provided that till completion of inquiry by the Cyber Crime Cell,

the earnest money deposited by the bidders shall not be released and further that they shall not be permitted to participate in the e-auction of mining

lots, till completion of inquiry.

The stand taken by the State Government before learned Single Judge was that there is reasonable apprehension that the bidders had formed cartel

to defraud public exchequer, as in other districts the price offered for similar mining lots was 4 to 9 times higher than the reserve price, while in the

present case it was only 1.1 to 1.4 times higher than the reserve price. It was further contended on behalf of the Authorities that very few bids were

received for mining lots in Tehsil Sitarganj, District Udham Singh Nagar as compared to the number of bids received in other parts of the State, which

indicates presence of cartelization.

Learned Single Judge heard the writ petitions together and decided them by a common judgment dated 6. 08.2018, which is under challenge in these

appeals. The operative portion of the impugned judgment is extracted below:-

“8. After hearing the learned counsels for the parties, this Court is of the view that admittedly the e-auction process has been adopted in order to

check the formation of cartel, to control formation of monopolies and in order to have a fair and transparent procedure. On the other hand, if there are

still unscrupulous elements in the State, who are bent upon defeating this process, as it is presently alleged, then it becomes an extremely serious

matter. It is also an admitted fact that e-auction process has been adopted in the State of Uttarakhand for the first time and therefore the State may

have teething problems, as it is dealing with this procedure for the first time, as this Court has been informed.

On the other hand, it is also true, and which is evident from the impugned orders, itself that as of now there is no conclusive evidence with the State

Government to establish that the petitioners have actually formed a cartel. Considering that in the impugned order it has been categorically stated that

the final decision will be taken on the completion of inquiry by the cyber crime cell, this Court orders as following.

Inquiry to the cyber crime cell was referred to in May, 2018 and it is now more than three months and the cyber crime cell is still seized with the

matter. By this time inquiry could have been completed. The petitioners allege that they have been doubly punished as of now. Firstly, they cannot

participate in any further biding process and secondly, the earnest money which each of the petitioners have deposited has already been withheld. It is,

therefore, directed that the cyber Crime Cell must complete its enquiry within one month i.e. on or before 06.09.2018, and thereafter further decision

be taken by the State Government, after giving proper notice to the petitioners within two weeks thereafter i.e. on or before 21.09.2018. Till such a

decision is taken, the restrictions imposed by the State Government shall remain, however, it is made clear that in case the State Government does not

complete its inquiry on or before 06.09.2018, the petitioners would be at liberty to seek refund of the amount deposited by them as the earnest money,

which shall then be refunded. By order of this Court dated 20.07.2018 the earnest money deposited by the petitioners have already been kept in a

fixed deposit so that it may earn interest.â€​

Learned counsel for the appellants submit that the appellants fulfilled all conditions of eligibility for participating in the e-auction and being the

highest bidder, they were entitled to grant of mining rights. Thus, according to them, the decision to cancel the auction process is arbitrary, as the price

offered by the appellants was more than the reserve price fixed by the authorities.

We are not impressed by the argument made on behalf of the appellants. Merely by offering highest price for the mining lots, no indefeasible right

for grant of mining rights is created in favour of the appellants. The price quoted by the appellants is merely an offer and till it is accepted, it does not

give rise to a binding contract. Clause 13(14) of the Notification dated 30.01.2018, whereby bids were invited, contains a stipulation that the Director,

Mining shall have the right to cancel the process of e-auction, at any stage. We, therefore, concur with the view taken by learned Single Judge.

It has come on record that based on complaints received against the process of e-auction of mining lots in District Udham Singh Nagar, State

Government had ordered an inquiry. Accordingly, the Inquiry Officer / Deputy Director, Mining issued letter dated 20.03.2018 to the appellants calling

upon them to submit the following information on or before 22. 03.2018:-

(i) I.P. Address of the computer/laptop used for submitting e-bid alongwith name of internet connection service provider.

(ii) The cellular phone number used at the time of submitting e-bids alongwith I.M.E.I number of the hand phone and name of the connectivity service

provider.

(iii) location of the appellant at the time when process of e-auction was in progress.

Appellants furnished the desired information to the Deputy Director, Mining, in response to the aforesaid letter dated 20.03.2018. The Deputy

Director after holding inquiry came to the conclusion that the bidders had formed cartel to keep the prices low and accordingly, issued show cause

notice to the appellants on 10. 04.2018.

In the show cause notice, it was stated that the I.P. address supplied by the appellants did not match with the I.P. address of the computer used by

them, for submitting e-bids. It was further stated that the price offered by the highest bidder in respect of mining lots of Tehsil Sitarganj, District

Udham Singh Nagar was only 1.1 times higher than the reserve price, whereas in other districts, the price offered was up to 9 times higher than the

reserve price. Accordingly, the appellants were called upon to show cause as to why (i) their earnest money be not forfeited, (ii) their registration for

participating in e-auction be not cancelled and (iii) their names be not blacklisted for furnishing false information and also for defrauding the public

exchequer by forming a cartel.

Appellants replied to the show cause notice and the Director, Mining ultimately passed the order dated 03.05.2018, which was challenged by the

appellants before learned Single Judge.

It is settled position in law that in commercial and contractual matters, State Government is free to act in the best interest of the revenue / public

exchequer and interference with the decision taken by the State Government in such matters can be made only when it is proved that the same is

capricious, arbitrary or infected with malice.

Scope of judicial review of administrative action, that too in tender matters has been considered by Hon’ble Supreme Court in the case of Tata

Cellular Vs. Union of India reported in (1994) 6 SCC 651. Paragraph No. 70 of the said judgment is extracted below:-

“70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to

prevent arbitrariness or favoritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review.

Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or

any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while

accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best

quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the

exercise of that power will be struck down.â€​

Hon’ble Supreme Court in the case of Meerut Development Authority Vs. Association of Management Studies reported in (2009) 6 SCC 171

has summarized the law regarding disposal of public property by an instrumentality of the State. Paragraph Nos.26 to 29 of the said judgment are

extracted below:-

“26. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated it must be unconditional; must be

in the proper form, the person by whom tender is made must be able to and willing to perform his obligations. The terms of the invitation to tender

cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. However, a limited judicial review may be available in

cases where it is established that the terms of the invitation to tender were so tailor-made to suit the convenience of any particular person with a view

to eliminate all others from participating in the bidding process.

The bidders participating in the tender process have no other right except the right to equality and fair treatment in the matter of evaluation of

competitive bids offered by interested persons in response to notice inviting tenders in a transparent manner and free from hidden agenda. One cannot

challenge the terms and conditions of the tender except on the above stated ground, the reason being the terms of the invitation to tender are in the

realm of the contract. No bidder is entitled as a matter of right to insist the authority inviting tenders to enter into further negotiations unless the terms

and conditions of notice so provided for such negotiations.

It is so well settled in law and needs no restatement at our hands that disposal of the public property by the State or its instrumentalities partakes

the character of a trust. The methods to be adopted for disposal of public property must be fair and transparent providing an opportunity to all the

interested persons to participate in the process.

The Authority has the right not to accept the highest bid and even to prefer a tender other than the highest bidder, if there exist good and sufficient

reasons, such as, the highest bid not representing the market price but there cannot be any doubt that the Authority's action in accepting or refusing

the bid must be free from arbitrariness or favouritism.â€​

Similar view was expressed by Hon’ble Supreme Court in the case of Arun Kumar Agarwal Vs. Union of India reported in (2013) 7 SCC 1.

Paragraph No.70 of the said judgment is extracted below:-

“70. In such circumstances, we find no merits in the writ petition which was filed without appreciating or understanding the scope of the decision or

the decision-making process concerning economic and commercial matters which gives liberty to the State and its instrumentalities to take an

appropriate decision after weighing the advantages and disadvantages of the same and this Court sitting in this jurisdiction, as already indicated, is not

justified in interfering with those decisions, especially when there is nothing to show that those decisions are contrary to law or actuated by mala fide

or irrelevant considerations. The writ petition, therefore, lacks merits. Hence, the same is dismissed.â€​

While considering a similar issue regarding cancellation of tender process, Hon’ble Supreme Court in the case of Rishi Kiran Logistics Private

Limited Vs.Board of Trustees of Kandla Port Trust and Others reported in 2015(13) SCC 233 held as under:-:-

“20. It is more than obvious that larger public interest demanded a fresh tender process in order to receive maximum amount as the premium of

Rs. 612/- per sq. mtr. originally fixed and even the quotation of Rs. 3,000/- and odd of the appellant which were found to be the highest, was far below

the market rate. Further, even when total premium amount to be paid by the appellant was to the tune of several crores for each plot at which LOI

was issued in the year 2006, the appellant had paid only Rs. 3 lakhs by way of EMD in each case. No further amount was paid for want of final

allotment letter. However before taking a final decision in the matter, the Port Trust sought legal opinion specifically on the point as to whether it

would be prudent to cancel 2005 tender process and start fresh process so as to fetch the realistic marked price in accordance with present market

value of the land. Based upon the expert legal opinion i.e. there was no legal impediment in cancellation of the tender process, the decision was taken

by the Port Trust to cancel the earlier tender process and to start fresh process.

On the aforesaid facts there is hardly any scope for argument that the decision of the Port Trust is arbitrary. It is based on valid considerations.

We have to keep in mind that while examining this aspect we are in the realm of administrative law. The contractual aspect of the matter has to be

kept aside which would be examined separately while dealing with the issue as to whether there was a concluded contract between the parties. This

distinction is lucidly explained in Kisan Sehkari Chini Mills & Ors. v. Vardan Linkers . Keeping in mind this distinction between the two, we are not

required to bring in the contractual elements of the case while dealing with the administrative law aspects.â€​

In the case of Gohil Vishvaraj Hanubhai and Others Vs. State of Gujrat and Others reported in (2017) 13 SCC 621, Hon’ble Supreme Court

has reiterated that while exercising the power of judicial review, the Courts would only examine the decision making process of the administrative

authorities, but not decision itself. Paragraph Nos.15 and 16 of the said judgment are extracted below:-

“15. The basic principles governing the judicial review of administrative action are too well settled. Two judgments which are frequently quoted in

this regard are - Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation[2] and Council of Civil Service Unions v. Minister for Civil

Service[3].

Lord Diplock in his celebrated opinion in Council of Civil Service Unions summarised the principles as follows:

“… Judicial review has I think developed to a stage today when without reiterating any analysis of the steps by which the development has come

about, one can conveniently classify under three heads the grounds upon which administrative action is subject to control by judicial review. The first

ground I would call “illegality,†the second “irrationality†and the third “procedural impropriety.†That is not to say that further

development on a case by case basis may not in course of time add further grounds. I have in mind particularly the possible adoption in the future of

the principle of “proportionality†which is recognised in the administrative law of several of our fellow members of the European Economic

Community; but to dispose of the instant case the three already well-established heads that I have mentioned will suffice. By “illegality†as a

ground for judicial review I mean that the decision-maker must understand correctly the law that regulates his decision-making power and must give

effect to it. Whether he has or not is par excellence a justiciable question to be decided, in the event of dispute, by those persons, the judges, by whom

the judicial power of the state is exercisable. By “irrationality†I mean what can by now be succinctly referred to as “Wednesbury

unreasonableness†(Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 KB 223). It applies to a decision which is so

outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could

have arrived at it. Whether a decision falls within this category is a question that judges by their training and experience should be well equipped to

answer, or else there would be something badly wrong with our judicial system. To justify the court's exercise of this role, resort I think is today no

longer needed to Viscount Radcliffe's ingenious explanation in Edwards v. Bairstow [1956] AC 14 of irrationality as a ground for a court's reversal of

a decision by ascribing it to an inferred though unidentifiable mistake of law by the decision-maker. “Irrationality†by now can stand upon its own

feet as an accepted ground on which a decision may be attacked by judicial review. I have described the third head as “procedural improprietyâ€

rather than failure to observe basic rules of natural justice or failure to act with procedural fairness towards the person who will be affected by the

decision. This is because susceptibility to judicial review under this head covers also failure by an administrative tribunal to observe procedural rules

that are expressly laid down in the legislative instrument by which its jurisdiction is conferred, even where such failure does not involve any denial of

natural justice. But the instant case is not concerned with the proceedings of an administrative tribunal at all.†It can be seen from the above extract,

Lord Diplock identified three heads under which judicial review is undertaken, i.e., illegality, irrationality and procedural impropriety. He also

recognised the possibility of new heads such as ‘proportionality’ being identified in future. He explained the concepts of the three already

identified heads. He declared that the head ‘irrationality’ is synonymous with ‘Wednesbury unreasonableness’.â€​

Hon’ble Supreme Court in the case of Anil Kumar Srivastava Vs. State of U.P. and Another reported in (2004) 8 SCC 671 approved the view

taken in a case reported in AIR (1970) Mad. 357. Paragraph No.13 of the judgment rendered by Madras High Court is extracted below:-

“13. notwithstanding the fixation of upset price and notwithstanding the fact that a bidder has offered an amount higher than the reserve / upset

price, the sale is still open to challenge on the ground that the property has not fetched the proper price and that the sale be set aside.â€​

The judgment rendered in the case of Anil Kumar Srivastava Vs. State of U.P. and Another reported in (2004) 8 SCC 671, has been relied upon

in a recent judgment in the case of State of Punjab Vs. Bandeep Singh, reported in (2016) 1 SCC 724.

It is settled position in law that the bid submitted in a public auction is an offer, which can be withdrawn before it is accepted. Thus, appellants

could have withdrawn their bids before its acceptance. Likewise, the State Government was well within its right to cancel the auction process, if it had

reasons to believe that the property offered for sale could have fetched much higher price than what was being offered. In such view of the matter,

claim of the appellants for grant of mining rights merely because they were the highest bidder, is legally not sustainable.

We have carefully perused the cancellation order dated 03.05.2018. It is a reasoned order and the reasons assigned for cancellation of auction

process cannot be said to be arbitrary or capricious. It is not the case of the appellants that the decision to cancel the auction is actuated with malice,

in fact or in law. Their only contention is that auction process has been cancelled at the instance of an M.L.A. When valid reasons have been given in

the cancellation order, then it becomes wholly irrelevant as to whether it was passed on a complaint of an M.L.A or a common man. Moreover, the

M.L.A. has not been impleaded as respondent in the writ petitions.

We have been informed that the method of e-auction for settlement of mining rights was adopted for the first time this year, to check the growing

tendency of cartelization amongst bidders. Cartelization by contractors has very adverse affect upon public exchequer. Huge funds are needed by the

State Government for developmental activities and also for running various welfare schemes. Therefore, like every prudent person, State Government

is also entitled to protect its interest.

Since, the State Government has an apprehension that bidders have formed cartel, which cannot be said to be unfounded at this stage, therefore,

the State Government is justified in getting the matter investigated through the Cyber Crime Cell to ascertain whether any malpractice was adopted

and also to identify the loopholes, if any, in the auction process so that a fool proof system is evolved.

The other grievances raised by the appellants in their writ petitions have been taken care of by learned Single Judge by fixing a deadline for the

State Government to take final decision in the matter. It is provided in the impugned judgment that in case of failure on the part of the State

Government to take final decision on or before 21.09.2018, appellants would be at liberty to seek refund of the earnest money deposited by them,

which has been invested in interest bearing securities.

In view of the aforesaid discussion, we find no error or perversity in the judgment rendered by learned Single Judge. Thus, there is no scope for

interference with the judgment impugned in these appeals.

Accordingly, these appeals are liable to be dismissed and are hereby dismissed. No order as to cost.