The Union of India (UOI) and Others vs K. Venu and Others

Gokualakrishnan, J.—Union of India represented by the Union Territory of Pondicherry represented by the Deputy Commissioner (Excise),

Pondicherry, is he Appellant in all these writ appeals. In all these writ appeals the respective Respondents are he persons who did at the first

auction. They filed various writ petitions questioning the validity of the cancellation of the auction which way bid by them. Since the facts involved in

all these writ appeals are identical, we will broadly narrate the facts and circumstances which led to the filing of the writ petitions by the respective

Respondents therein and the necessity for the Government of Pondicherry to file the present writ appeals.

The grant of privilege of vending of arrack and toddy in the Union Territory of Pondicherry consisting of Pondicherry, Karaikal, Mahe and

Yanam is governed by the statutory rules known as Pondicherry Excise Rules, 1970, Such Privileges are granted by the Government by putting

them to auction year to year. For the period from 1st July, 1982 to 30th June, 1983, the said right and privilege was notified to be auctioned in

public by the Union of India, represented by the Union Territory of Pondicherry, represented by the Secretary to Government Revenue and Excise

Department in he Gazette of Pondicherry, Part I Extraordinary, dated 31st May 1982. As per the Gazette notification, the auction for the various

shops were originally announced to be held on 10 th June, 1982. There were no bidders because he upset price fixed was very high and was

identical to that of last lease i.e., 1981-82 and since the licences during the said lease period 1981-82 incurred heavy loss. The Government

considering that there were no bids due to the fact that the upset price fixed was high, modified the notification and issued a fresh gazetted,

Extraordinary, dated 15th June 1982. The upset price was modified by the said gazette notification and was fixed as it was for the period 1980-

Even for this upset price, for many shops there were no bidders. Consequently, in the auction held on 16th June 1982, bids for only about 45

shops were concluded on of the total of 62 shops in the Pondichery region alone. For the remaining 17 shops auctions were held on 22nd, 26th

and 28th of June and 1st of July, 1982. Even then, he auction for only seven shops were concluded. The Respondent herein are successful bidders

in the auctions held on various dates. The highest bids were accepted by the Deputy Commissioner (Excise) Pondicherry. He did as per Rule 7(2)

of the Pondicherry Excise Rules. Whileso, the Respondents her in received separate communication stating that their offers in respect of heir

respective shops bid at by them in the auction have been rejected by the Government. Questioning such rejection, he Respondents herein

independently filed a number of writ Petitions.

In hair writ petitions the Respondents herein questioned the authority of rejection made by the Government and said that in he absence of any

patent irregularity or impropriety in the conduct of the auction, there can be absolutely no justification for such a wholesale cancellation of he

concluded bids in so far as the various Respondents herein are concerned. It has been further stated in the grounds that since the Respondents

have complied with the various formalizes contemplated under the Pondicherry Excise, Rules, there is absolutely no justification for issuing the

cancellation order by the Government but that the Government ought to have given reasons, at least on the principles of natural justice, as to why

the bids at the auctions held on the various dates have been summarily cancelled or rejected. The Government has adopted different standards in

respect of different shops, to name it, Shop No. 1 in Pondicherry town and such a different treatment and observance of different standard is

opposed to all Cannons of fair play and natural justice. It will be clear from the scheme of the Act and the Rules framed thereunder, that the power

of confirmation given to the Government is more procedural and administrative in nature and is intended more for the purpose of checking any

irregularity in a particular auction in a particular place and certain it could not have been intended to be used arbitrarily in such a wholesale manner

cancel ling all the bids for a particular area and further without any valid reason. It is further submitted that such a rule which confers such an

arbitrary power in the Government, must be deemed to be totally without jurisdiction and is opposed to the very scheme of the Act. With these

allegations, the Respondents in the writ appeals prayed for the calling for of records of the Appellants in their respective communications and to

quash the same by issuing a writ of certiorarified mandamus and also prayed for a direction to the Appellant herein to confirm the highest bid

offered by the Respondents herein for the lease period from 1st July 1982 to 30th June 1983.

Along with the writ petitions, the Respondents herein have also filed petitions for a temporary injunction restraining the Appellant herein from

holding a fresh auction in respect of their respective shops pending disposal of he writ petitions.

The Appellant herein, inter alia contended that the Government of Pondicherry, in exercise of the powers conferred by Rule 143 of the

Pondicherry Excise Rules, by notification of the Revenue Department dated 21st April 1982 published in the Gazette of Pondicherry dated; 4th

May 1982, specified that the right of retail vending of arrack and toddy in the regions of Pondicherry, Karaikal, Mahe and Yanam in the Union

Territory of Pondicherry for the period from 1st July 1982 to 30th June 1983, shall be disposed of by public auction. As contemplated under Rule

144 of the Rules, the Excise Commissioner issued a notification containing the terms and conditions of the sale as well as other particulars

regarding the disposal of the right of retail vend of arrack. Accordingly, the Deputy Commissioner (Excise), Pondicherry, conducted the auction for

the disposal of the right of retail vend of arrack in the Pondicherry region for the period from 1st July 1982 to 30th June 1983, on 10th June 1982

at 9-15 a.m. in the Office of the Deputy Commissioner (Excise), Pondicherry. Though there were 200 persons assembled outside the office, they

did not participate in the auction on 10 th June 1982. Instead, the President of the arrack and toddy shops Owner''s Association in Pondicherry,

presented a copy of the Memorandum dated 8 th June 1982 addressed to the Lieutenant Governor of Pondicherry, setting forth certain demands

including reduction of upset price and also stipulated that unless the demands made therein were met with, they would not participate in the auction.

The Government, after reducing the upset price, notified the auction date and the auction was held by the Deputy Commissioner (Excise),

Pondicherry, on 16th June 1982. In that auction, the Deputy Commissioner,. (Excise) was able to dispose of about 39 shops, and the auction in

respect of the rest of the shops had to be postponed for the reason that there were no bidders. The Deputy Commissioner (Excise), Pondicherry,

held the auction in respect of these shops on 22nd, 26th and 29th of June and 1st of July, 1982. During these auctions, the Deputy Commissioner

(Excise) was able to dispose of 13 shops in Pondicherry region and the rest of the shops still remained to be disposed of. In so far as the 52

shops, which were disposed of by auction, are concerned, the Deputy Commissioner (Excise) has provisionally accpected the highest bidsoffered

as contemplated under Rule 151(7) of the Rules and forwarded forthwith all the proceedings to the Government. The Appellant herein, in the

Counter affidavit has further stated that in the mean time, the Government received complaints from the public alleging certain irregularities in the

conduct of auction, that the Government considered all the representations received by it, that in fact, the total bid amount realised for 52 shops is

approximately Rs. 1.20 crores, which is roughly 1/3 rd of the bid amount of last year, that the Government considered also the fact that there has

been a fair amount of public criticism alleging loss of revenue to the Government and that the Government have also considered the fact that the

question of not confirming he highest bids need not be based only on the legality or the propriety of the auction but on the assessment whether

there was any possibility of the having colluded or used some other tactics to artificially depress bidders the bids resulting in possible loss of

revenue. It has further stated that she Government have already taken note of the offers subsequently made privately for a highest amount than that

for which a particular shop has been bid and decided to refuse confirmation of the bids and to re-auction all the shops in Pondicherry region. The

decision of the Government was immediately communicated by the Deputy Commissioner (Excise), Pondicherry to the Respondents herein. It is

only at this stage the Respondents herein have filed the writ petition referred to above.

The Appellants further contended that the bid at the auction is only an offer and until it is accepted by the Government, there is no concluded

contract in it. If so, the Respondents herein could not have acquired any vested right. In such circumstances it is not correct on the part of the

Respondents to invoke the extraordinary jurisdiction of his Court under Article 226 of the Constitution of India. In fact the Government are

exclusive owners of the privilege and it is open to the Government to part with these rights for consideration. The Respondents herein cannot have

any fundamental right to carry on business in the property of rights belonging to the Government nor could there be any infringement of Article 14

of the Constitution of India while the Government tries to get the best available amount for its valuable rights.

It is further contended that it is open to the Government either to confirm or refuse to confirm the bid, that no one can be compelled to enter into

a contract and as such the Government cannot be compelled to enter into a contract by issuance of a writ of certiorari or mandamus. There is no

compellable duty cast on the part of the Government to accepting the highest bid nor can it be compelled to enter into a contract by accepting the

highest bid and as such, the writ petitions are not maintainable. The Appellant once again reintegrated the reasons for cancelling the provisional

confirmation by stating (1) he alleged irregularities in the conduct of the auction; (2) disposal of shops at a lessor price and consequential loss of

revenue; 3 disposal shops in favour of the relatives of he Revenue Minister; and (4) pendency of the writ petition with specified allegation that while

there was an offer for a sum of Rs. 1,75,200 the shop was disposed of at a price of Rs. 68,750 in favour of Thiru Swaminathan, the son-in-law of

the Revenue Minister, decided to refuse confirmation of the bids and the re-auction the shops.

It is further contended that in fact, the lease for the current period viz., for the year 1982-83, was to commence from 1st July 1982. Since the

previous period had expired on 30th June, 1982 the Government had to take immediate decision as to whether the bids are to be confirmed or all

he shops are to be disposed of by re-auction so that there may not be any loss of revenue to the Government and the shops could be opened

without any further delay. It is further submitted by the Appellant that the Secretary to Lieutenant Governor contacted the Lieutenant Governor

through phone for he purpose of cancelling the first auction and to hold a fresh auction. This was done because of the fact that the Lieutenant

Governor was on camp at Kerala and decision have to be taken immediately in order to save revenue for the State. Hence, telephonically the

Secretary to the Lt. Governor con acted the Lt. Governor. The Lt. Governor ordered re-auction as proposed which was noted immediately on the

file by he Secretary'' to the L. Governor. Consequent by the Deputy Commissioner (excise) communicated the order of the Government rejecting

the confirmation of the bids to the Respondents herein and others. Immediately on his return the L. Governor signed the file confirming the earlier

order communicated by him over telephone. According to the Appellant the L. Governor had actually applied his mind before communicating he

order through phone to his Secretary and the allegations hat the Lt. Governor of Pondicherry has not passed orders could not have passed orders,

has not applied his mind, etc., are without any basis and the allegations to that effect are not correct and they are completely a falsehood. In this

connection, the Appellant has also contended that the Minister in charge of Revenue Department and the Chief Minister, after considering the facts

and circumstances, had also sent the proposal to the Lt. Governor, who has in urn accepted the proposal to re-auction all the shops. Thus, it is

clear, according to the Appellant, the Respondents bids were rejected only after due consideration by the Lt Governor. It may be relevant to state

that as per the provisions contained in Rule 155(2) of the Pondicherry Excise Rules as well as condition No. 13 of the Sale Conditions, it is not

necessary that the reasons for rejection should be communicated to the authorities concerned and as such, the allegation that the order is arbitrary

and violative of Article 14 of the Constitution of India, according to the Appellant, has no substance.

It is further contended by the Appellant that inasmuch as the Respondents herein have participated in the subsequent second auction, they are

estopped from questioning the second auction held by the Government It is also contended by the Appellant that it is manifest from the result of the

re-auction that the previous auction fetched only a lessor price than that was fetched in the re-auction and that in fact the inadequacy of price was

one of the factors that was considered by the Government to order re auction As regards Shop No. 1 of the Pondicherry region, he Appellant has

stated that shop was taken originally by one Swaminathan, who is the son-in-law of the Revenue Minister, for Rs. 68,750. There was a re-auction

for this shop also. In that re-auction, the said shop was bid by a third person for a higher price.

It is further contended by the Appellant that the Government can refuse to confirm the bids without assigning any reason. It may be considered

that the highest bids are not automatically Confirmed by the Excise Commissioner but it is a paramount power that vests with the Government

either to confirm or to refuse to confirm the highest bid. It is further reiterated by the Appellant that the Government have held re-auctions for bona

fide reasons after observing all the formalizes as contemplated under the provisions of the Pondicherry Excise Rules as well as the terms and

conditions of the sale, that there is no illegality nor is there any irregularity alleged by the Respondents herein, that if there is any further delay in

permitting the highest bidders to run the shop it would lead to further loss to the Government which would also vitally affect the public interest.

With these allegations, the Appellant prayed for the dismissal of all the writ petitions with costs.

The learned Single Judge who heard and disposed of the writ petitions, after referring to Section 2(a), Section 46(1) and Section 46(3) of the

Government of Union Territories Act, 1963, came to the conclusion that the Lt. Governor himself has to take the decision and the failure to apply

his mind as regards the re-auction to be held, has vitiated the order made for re-auctioning the shops. In this connection, the learned Judge also

referred to the Pondicherry Excise Rules and in particular to Rules 154 and 155 besides other relevant Rules to show that the Lt. Governor ought

to have given reasons for cancelling the original auction and ordering fresh auction of the shops. According to the learned Judge, inasmuch as the

Lt. Governor has failed to take a decision after referring to the relevant particulars himself, the whole proceeding for conducting a fresh auction has

become invalid. Since no valid decision was taken by the Lt. Governor, according to the learned Judge, the decision of the Government to have a

fresh auction for arrack shops is invalid. The learned Judge also held that inasmuch as the order for fresh auction itself is void, there is no question

of ratifying the same by the Lt. Governor by subscribing his signature to the file on 8th July 1982, which was five days after the issue of the

impugned communication. As regards the contention that the impugned order cannot the questioned by those who have bid at the second auction

the earned Judge held there is no question of any acquiescence arising in this case since the writ Petitioners bid at the second auction without

prejudice to their contentions against holding the second auction. The learned Judge further held that once statutory rules are framed relating to

auctioning rights pertaining to intoxicants, the State has to abide by such Rules. The learned Judge was categoric in his finding that when the

Government passes an order under Rule 155(2) it should take into account only relevant materials and give reasons for the decision arrived by it.

The learned Judge further held that the cancellation affected was not done after consideration of relevant points pertaining to each one of the shops

which have been auctioned that the Lt. Governor has not applied his mind to find out whether all the Shops fall under the same category or whether

any illegality was committed in the auction of the shops, that there is failure on the part of the Lt. Governor to discharge his statutory functions and

that therefore the impugned order is liable to be set aside. During the course of his judgment, the learned Judge has referred to various decisions

cited by the respective Counsel appearing for the parties in the writ petitions. As a result of his findings, the learned Judge quashed the impugned

order.

It is as against the common judgment rendered by the learned Single Judge these writ appeals have been preferred.

Mr. K. Parasaran, learned Solicitor-General, on behalf of the Appellant viz., the Union of India represented by the Union Territory of

Pondicherry represented by the Deputy Commissioner (Excise) Pondicherry, contended that the order of the Government to re-auction the shops

is the exercise of only the executive function and not quasi-judicial function, that the purpose of public auction is to get utmost revenue, and that bid

in the auction is only an offer and that it may be rejected or accepted. The learned Solicitor-General further argued that there is no concluded

contract in this case and therefore the bid can be rejected even without assigning any reason, especially in cases of auctioning liquor shops. The

learned Solicitor-General invited our attention to Rules 154 and 155 of the Pondicherry Excise Rules and contended that no reasons need be given

to re-auction, toddy and arrack shops. It was further contended that there is no question of the right of the party being affected in cases of this

nature, when especially there is only an offer by the party concerned in the auction and therefore, the previsions of Article 14 of the Constitution

are not attracted.

Mr. K.K. Venugopal, learned Counsel appearing for some of the Respondents in these writ appeals, contended that the decision to be taken

by the Sate under Rule 155(2) is referreable only to the decision that has to be taken by the Lt. Governor. If the Lt. Governor had not applied his

mind and taken the decision as required by the provisions of the Constitution and other relevant enactments, the impugned order rejecting the

original bid cannot stand. The learned Counsel further contended that there is violation of statutory rules, inasmuch as-

(a) The Lt. Governor had not perused the records before he passed the impugned order under Rule 155(2);

(b)That Lt. Governor has failed to deal with the highest bid offered for every shop and confirmed provisionally by the Deputy Commissioner, and

this failure on the part of the Lt. Governor to pass order independently and separately for each of the shops, has vitiated the impugned order for

re-auction, and

(c) There are no reasons given for setting aside the auction and ordering re-auction.

We will presently look into the authority who can order auction, and also re-auction, under the provisions of the Pondicherry Excise Act and

the Rules made there under read with the Government of Union Territories Act and the Constitution of India, Article 166 of the Constitution of

India reads as follows:

Conduct of Government Business,

166 (1) All executive action of the Government of a State shall be expressed to be taken in the name of the Governor;

(2) Orders and other instruments made and executed in the name of the Governor shall be authenticated in such manner as may be specified in

rules to be made by the Governor, and the validity of an order or instrument which is so authenticated shall not be called in question on the ground

that it is not an order or instrument made of executed by the Governor.

(3) The Governor shall make rules for the more convenient transaction of the business of the Government of the State and for the allocation among

Ministers of the said business in so far as it is not business with respect to which the Governor is by or under this Constitution required to act in his

discretion.

Article 239 of the Constitution deals with Administration of Union Territories. The same reads as follows:

239(1) Save as otherwise provided by Parliament by law, every Union Territory shall be administered by the President acting, to such extent as he

thinks fit, though an administrator to be appointed by him with such designation as he may specify;

(2) Notwithstanding anything contained in part VI, the President may appoint the Governor of a State as the administrator of an adjoining Union

Territory, and where a Governor is so appointed, he shall exercise his functions as such administrator independently of his council of Ministers.

Section 2(a) of the Government of Union Territories Act, 1963, defines administrator as meaning-

The administrator of a Union Territory appointed by the President under Article 239.

Section 2(14) of the Pondicherry Excise Act, 1970 states-Government means the Administrator of the Union territory appointed by the President

of India, under Article 239 of the Constitution of India.

Rule 2(2) of the Pondicherry Excise Rules, 1970 states-

Government means the Administrator appointed by the President of India under Article 239 of the Constitution.

From the foregoing definitions it is clear that Government means the Administrator. In terms of Article 239 of the Constitution, the President of

India can call such Administrator with such designation as he may specify. In this case, the President of India acting through the Administrator, has

specified the designation of the Administrator of Pondicherry State as Lt. Governor.

Section 44 of the Government of Union Territories Act deals with Council of Minister. It reads:

44(1). There shall be a council of Ministers in each Union Territory with the Chief Minister as the head to aid and advise the Administrator in the

Exercise of his functions in relation to matters with respect to which the Legislative Assembly of the Union Territory has power to make laws

except in so far as he is required by or under this Act, to act in his discretion or by or under any law to exercise any judicial or quasi-judicial

functions.

Provided that in case of difference of opinion between the Administrator and his ministers on any matter the administrator shall refer it to the

President for decision and cat according to the decision given thereon by the President, and pending such decision it shall be competent for the

Administrator in any case where the matter is in his opinion so urgent that it is necessary for him to take immediate action, to take such action or to

give such direction, in the matter as he deems necessary:

(3) If and in so far as any special responsibility of the Administrator is involved under this Act, he shall, in the exercise of his functions, act in his

discretion.

(4) If any question arises as to whether any matter is or is not a matter as respects which the Administrator is by or under this Act required to act in

his discretion, the decision of the Administrator thereon shall be final.

(5) If any question arises as to whether any matter is or is not a matter as respects which the Administrator is required by any law to exercise any

judicial or quasi-judicial functions, the decision of the Administrator thereon shall be final.

(6) The question whether any, and if so what, advice was tendered by Ministers to the Administrator shall not be inquired into in any Court.

We can compare these provision''s of the Government of Union Territories Act with Article 163 of the Constitution, which has its marginal note to

the following effect:

Council of Ministers to aid and advise Governor, Article 163 reads as follows:

163(1) There shall be a Council of Ministers with the Chief Minister at the head to aid and advice the Governor in the exercise of his functions,

except in so far as he is by or under this Constitution required to exercise his functions or any of them in his discretion.

(2) If any question arises whether any matter is or is not a matter as respects which the Governor is by or under this Constitution required to act in

his discretion, the decision of the Governor in his discretion shall be final, and the validity of anything done by the Governor shall not be called in

question on the ground that he ought or ought not to have acted in his discretion.

(3) The question whether any, and if so what, advice was tendered by Ministers to the Governor shall not be inquired into in any Court.

From the provisions of Section 44 of the Government of Union Territories Act and Article 163 of the Constitution, as noticed above it is clear,

in our opinion, that where the Governor or the Lt. Governor concurs with the advice of the Council of Ministers, the procedure to be adopted is

the same and there seems to be no divergence between the two provisions. However, there is a proviso to Section 44 of the Government of Union

Territories Act. By this proviso to Section 44(1), it has been made clear that the Lt. Governor, who is the Administrator, has power to differ from

the opinion given by his Council of Ministers. If the Administrator or the Lt. Governor differs from the opinion given by his Council of Ministers, he

has no other option except to refer to the President of India for decision and act according to the decision given thereon by the President. The

proviso further gives to the Lt. Governor this way; pending the decision of the President it shall be competent for the Lt. Governor or the

Administrator in any case where the matter, is, in his opinion, so urgent that it is necessary for him to take immediate action, to take such action or

to give such direction in the matter as he deems necessary, Reading Sections 44 to 74 and 163 of the Constitution, the difference between the

position of the President and the Governor on the one hand and he Administrator of the Union Territory on the other becomes manifest. The first

difference is that the Administrator is similarly situate as the Governor, but not as the President when he is to act in his discretion under the Act.

Further, the Administrator has to act on his own unaided by the Council of Ministers when he is to exercise any judicial or quasi-judicial functions.

The Administrator even in matters where he is not required to action his discretion under the Act or where he is not exercising any judicial or quasi-

judicial functions, is not bound to act according to the advice of the Council of Ministers. This becomes manifest from the proviso to Section 44(1).

It transpires from the proviso that in the event of a difference of opinion between the Administrator and his Ministers on any matter, the

Administrator shall refer the matter to the President for deciding according to the decision given thereon by the President. If the President in a given

situation agrees with what the Administrator opines contrary to the advice of the Council of Ministers, the Administrator would be able to override

the advice of the Council of Ministers and on a reference to the President under the proviso, obviously the President would act according to the

advice of the Council of Ministers given under Article 74. Virtually, therefore, in the event of a difference of opinion between the council of

Ministers of the Union Territory and the Administrator, the right to decide would vest in the Union Government and the Council of Ministers of the

Union Territory would be bound by the view taken by the Union Government. Further, the Administrator enjoys still some more power to act in

derogation of the advice of Council of Ministers. Further under the second limb of the proviso to Section 44(1), the Administrator has net only

power to differ from the advice given by the Ministers but also can take action in his individual capacity curing the interregnum period when be

refers the matter to the President of India, Neither the Governor nor the President enjoys that power. Hence, we cannot hold that the

Administrator is purely a Constitutional functionary bound to act on the advice of the Council of Ministers and cannot act on his own. This

interpretation is fortified by the decision reported in Devji Vallabhbhai Tandel v. Administrator (1982) 3 S.C.C. 222,

The learned Solicitor-General then submitted that there cannot be any fundamental right as such to deal in liquor; nor can the action be

characterised as a judicial or quasi judicial act it is the executive function if the State and it cannot be subject-matter of judicial review. To

substantiate this contention, the learned Solicitor-General drew our attention to the decision reported in State of Orissa and Others Vs.

Harinarayan Jaiswal and Others, . In that case, the Bihar and Orissa Excise Act was tie subject of scrutiny There was a highest bid at the auction

for sale of country liquor shops. That was rejected by the Government. Such rejection was held to be not violative of Article 14 and 19(i)(g) of the

Constitution, nor can it be subjected to judicial review. The Supreme Court states as follows in the above decision (at page 1821):

Even apart from the power conferred on the Government u/s 22 and 29, we fail to see how the power retained by the Government under

Clause (6) of its order dated January 6, 1971 can be considered as unconstitutional As held by this Court in Cooverjee B. Bharucha Vs. The

Excise Commissioner and the Chief Commissioner, Ajmer and Others, . one of the important purposes of selling the exclusive right to sell liquor in

wholesale or retail is to raise revenue. Excise revenue forms an important part of every State''s revenue. The Government is the guardian of the

finances of the State It Is expected to protect the financial interest of the State Hence quite naturally the legislature has empowered the Government

to see that there is no leakage in its revenue. It is for the Government to decide whether the price offered in an auction sale is adequate. While

accepting or rejecting a bid, it is merely performing an executive function. The correctness of its conclusion is not open to judicial review. We fail to

see how the plea of contravention of Article 19(1)(g) or Article 14 can arise in these cases. The Government''s power to sell the exclusive

privileges set out in Section 22 was not denied. It was also not disputed that those privileges could be sold by public auction. Public auctions are

held to get the best possible price. Once, these aspects are recognised, there appears to be no basis contending that the owner of the privileges in

question who had offered to sell them cannot decline to accept the highest bid he thinks that the price offered is inadequate. There is no concluded

contract till the bid is accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids-Section Union of India

(UOI) and Others Vs. Bhim Sen Walaiti Ram, . by merely giving bids the bidders had not acquired any vested rights. The fact that the Government

was the seller does not change the legal position once its exclusive right to deal with these privileges is conceded. If the Government is the exclusive

owner of those privileges reliance on Article 19(1)(g) or Article 14 becomes irrelevant. Citizens cannot have any fundamental right to trade or

carry on business in the properties or rights belonging to the Government-nor can there be any infringement of Article 14, if the Government tries to

get the best available price for its valuable rights. The High Court was wholly wrong in thinking that purpose of Sections 22 and 29 of the Act was

not to raise revenue. Raising revenue as held by this Court in Cooverjee B. Bharucha Vs. The Excise Commissioner and the Chief Commissioner,

Ajmer and Others, was one of the important purposes of such provisions. The fact that the price fetched by the sale of country liquor is an excise

revenue does not change the nature of the right. The sale in question is but a mode of raising revenue. Assuming that the question of arbitrary or

unguided power can arise in a case of this nature it should not be forgotton that the power to accept or reject the highest bid is given to the highest

authority in the State i.e. the Government which is expected to safeguard the finances of the State. Such a power cannot be considered as an

arbitrary power. If that power is exercised for any collateral purposes the exercise of the power will be struck down. It may also be remembered

that herein we are not dealing with a delegated power but with a power conferred by the legislature.

This decision was followed in Purxotoma Ramanata Quenim Vs. Makan Kalyan Tandel and Others, .

The learned Solicitor-General next cited the decision reported in Samsher Singh Vs. State of Punjab and Another, in order to spell out the

powers of the President and the Governor in our constitutional set up. In this case the Supreme Court, speaking through Krishna Iyer, J., states as

follows (at page 2230):

We declare the law of this branch of our constitution to be that the President and Governor, custodians of all executive and other powers under

various Articles, shall by virtue of these provisions, exercise their formal constitutional powers only upon and in accordance with the advice of their

Ministers save in a few well known exceptional situations. Without being dogmatic or exhaustive, these situations relate to (a) the choice of Prime

Minister (Chief Minister), restricted though this choice is by the paramount consideration that he should command a majority in the House ; (b) the

dismissal of a Government which has lost its majority in the House but refuses to quit office; (c) the dissolution of the House where an appeal to the

country is necessitous, although in this area the Head of the State should avoid getting involved in politics and must be advised by his Prime

Minister (Chief Minister) who will eventually take the responsibility for the step. We do not examine in detail the constitutional properties in these

predicaments except to utter the caution that even here the action must be compelled by the peril to democracy and the appeal to the House to the

country must become blatantly obligatory....

It is clear from the above Supreme Court pronouncements that except in a few well known exceptional situations the Governor the President

exercise his formal constitutional powers upon and in accordance with the advice of his Ministers. From the above decisions, we have also seen

that auction of arrack shop is relatable neither to the judicial function nor quasi-judicial function, but to the executive function of the State. It is also

seen that the Government is the, exclusive owner of there privileges such as sale of indicant drinks and no citizen could claim any fundamental right

to trade or carry on business in the properties or rights belonging to the Government. Nor can it be said to be any infringment of Article 14 of the

Constitution if the Government tries to make the best available price for its valuable rights.

Keeping the above principles in mind, we can now look into the facts of the case to decide as to how the re-auction was directed to be held.

The records produced go to show that on 1st July 1982 the Chief Secretary of Pondicherry Government had prepared a note and solicited

directions, on which, on 2nd July 1982, the Public Works Minister of Pondicherry has stated All the arrack shops may be re-auctioned

immediately as already stated by him. This was signed by the Chief Minister. Below their signatures, a noting had been made by the Secretary to

the Lt. Governor to the following effect:

In view of the urgency of the matter I have discussed the matter with L.G. on phone. He has ordered as follows:

Approved as proposed

Any how, after taking necessary action, the file may be resubmitted to L.G.

Later, on arrival, the Lt. Governor has written seen and put his signature on 8th July, 1982 in the file. Lower down, further nothings have been

made seeking for permission to re-auction the shops, and, on 8th July, 1982, as proposed, he approved the re-auction of the shops. The entries

found in the file go to show that on 3rd July, 1982 when the impugned communication was sent, the Lt. Governor, who is the Government under

Rule 2(e) of the Pondicherry Excise Rules, 1970, has not recorded his decision to cancel all the highest bids received for all the shops.

According to Mr. K.K. Venugopal, learned Counsel appearing for some of the Respondents, any decision of the Government which requires

to be taken under the constitutional provision or under any statutory enactment, could be acted upon only after the constitutional functionary

subscribed his decision in the record under his signature. The learned Counsel further submitted that since the impugned communication proceeds

on the basis that on 3rd July 1982 itself the Government had decided when in fact no such decision known to law had been taken, the impugned

communication on this sole ground, will have to be quashed. Mr. Parasaran, the learned Solicitor-General, appearing for the Appellant, contended

that when the records show that the Lt. Governor had been contacted and apprised of the decision taken by the Council of Ministers and who in

turn approved as proposed such decision could be put into force and there is no need to defer the implementation of the decision taken by him,

because he has not subscribed his signature in the relevant file and that later on he could as he has done in this case, ratify his consent to what has

been done.

In the Judges'' Transfer case, S.P. Gupta Vs. President of India and Others, the Supreme Court had occasion to consider consultation,

between the Chief Justice of India and the transferring authority, it has been held thus (para 675 and at page 435):

From the material produced on record, therefore it is abundantly clear that there was full and effective consultation between the transferring

authority on the one hand and the Chief Justice of India on the other in regard to the impugned transfer as contemplated by Article 222(1) before

the effective decision thereon was taken, and if the consultation has been full and effective as contemplated by Article 222(1), as is shown by the

material produced on record, the contention that the normal procedure ought not to have been reversed and the proposal should have emanated

from the President and not from the Chief Justice of India as is the case here loses its significance. Moreover, there is no hard and fast rule as to

from whom a proposal for transfer should emanate.

It has been further held in that decision that even after the last discussion between the Chief Justice of India and Shri K.B.N. Singh was ever there

was ample time and opportunity for the Chief Justice of India to put across all that transpired between him and Shri K.B.N. Singh together with his

reaction thereon either to the Union Law Minister or the Prime Minister or to froth orally either in a meeting or on the telephone before the final and

effective decision on the impugned transfer was taken by the Prime Minister. In the above cast, it has been presumed that there ought to have been

discussed on either in person or through phone before the Prime Minister had taken the decision to transfer Shri K.B.N. Singh, Chief Justice of

Patna as Chief Justice of Madras. It has been further held in that decision (para 1242):

In the course of the discussion referred to above all matters which had Come to the knowledge of the Chief Justice of India must have been placed

before the person with whom the discussion had taken place. All official acts must be deemed to have been done in accordance with law. There is,

therefore, no merit in this contention also.

In Bhagwandas Goverdhandas Kedia Vs. Girdharilal Parshottamdas and Co. and Others, the Supreme Court, dealing with offer and

acceptance over telephone, while interpreting the Indian Contract, Act, Sections 2, 3 and 4, came to the conclusion that acceptance given over

telephone was governed by the principles applicable to oral acceptance where the parties were in the presence of each other and that the analogy

of letters sent by post could not be applied. It has been observed therein that parties holding conversation on the telephone are unable to see each

other, they are also physically separated in space but they are in the hearing of each other by the aid of a mechanical contrivance which makes the

voice of the one heard by the other instantaneously and communication does not depend on external agency.

Mr. Parasaran the learned Solicitor-General, next referred to the decision reported in Dattatreya Moreshwar Pangarkar Vs. The State of

Bombay and Others, . In that decision the provisions of the Preventive Detention Act contained in Section 11(1) thereof came up for

consideration. Section 11(1) Contemplates, according to the Respondent therein, only the taking of an executive decision, viz., confirmation of the

detention order. The learned Attorney-General, in that case, pointed out that there is a distinction between the taking of an executive decision and

giving formal expression to the decision on the office file by way of nothings or endorsements made by the appropriate Minister or officer, and that

if every executive decision has to be given a formal expression the whole Government machinery will be brought to a standstill. The Supreme Court

agreed that every executive decision need not be formally expressed and his particularly so when one superior officer directs his subordinate to act

or forbear from acting in a particular way, but when the executive decision affects an outsider or is required to be officially notified or to be

communicated it should normally be expressed in the form mentioned in Article 166(1) i.e. in the name of the Governor. In that case, the learned

Attorney-General contended that omission to make and authenticate executive decision in the form mentioned in Article 166 does not make the

decision itself illegal, for the provisions of that Article, like their counterpart in the Government of India Act, are merely directory and not

mandatory. In J.K. Gas Plant Manufacturing Co. (Rampur) Ltd. v. King Emperor (1947) F.C.R. 141 154, 159 it was held that provision in the

Government of India Act which was the counterpart of Article 166 of the Constitution was directory and not mandatory. Approving this principle,

the Supreme Court held in the above case.-

It is well settled, that generally speaking the provisions of a statute creating public duties are directory and those conferring private rights are

imperative. When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in

neglect of this duty would work serious general inconvenience or injustice to person who have no control over those entrusted with the duty and at

the same time would not promote the main object of the legislature it has been the practice of the Courts to hold such provisions to be directory

only, the neglect of them not affecting the validity of the acts done. The considerations which weighed with their Lordships of the Federal Court in

the case referred to above in the matter of interpretation of Section 40(1) of the 9th Schedule to the Government of India Act, 1935 appear to me

to apply with equal cogency of Article 166 of the Constitution. The fact that the old provisions have been split up into two clauses in Article 166

does not appear to me to make any difference in the meaning of the Article.

Continuing, the Supreme Court observed-

The position, therefore, is that while the Preventive Detention Act requires an executive decision call it an order or an executive action, for the

confirmation of an order of detention u/s 11(1) of the Act does not itself prescribe any particular form of expression of that executive decision.

Article 166 directs all executive action to be expressed and authenticated in the manner therein laid down but an omission to comply with these

provisions does not render the executive action a nullity. Therefore all that the procedure established by law requires is that the appropriate

Government must take a decision as to whether the detention order should be confirmed or not u/s 11(1). That such a decision has been in fact

taken by the appropriate Government is amply proved on the record. Therefore, there has been, in the circumstances of this case, no breach of the

procedure established by law and the present detention of the Petitioner cannot be called in question.

In Ujagar Singh Vs. The State of The Punjab, the Supreme Court had occasion to consider Section 3 of the Preventive Detention Act. It was

contended in that case quoting Article 166 of the Constitution, that the Governor had not communicated the grounds of detention as enjoined by

the provisions of the Constitution and the Preventive Detention Act. Referring to the contention put foreword by the Petitioner concerned, the

Supreme Court held-

Under Section 3, Preventive Detention Act, the authority to make the order is the State Government. Section 166(1) of the Constitution provides

that all executive action of the Government of a State shall be expressed to be taken in the name of the Governor. The orders of detention

expressly state that the Governor of Punjab was satisfied of their necessity and that they were made by his order. The orders are signed no doubt

by the Home Secretary but this is no defect. The communication of the grounds need not be made directly by the authority making the order

Section 7 does not require this. The communication may be through recognized channels prescribed by the administrative rules of business.

Mr. Parasaran, the learned Solicitor-General, next cited the decision reported in The State of Bihar Vs. Rani Sonabati Kumari, . In paragraph

39 of the judgment, the principles have been succinctly stated by the Supreme. Court as follows:

The submission of learned Counsel is correct to this extent that the process of making an order proceeds and is different from the expression of it,

and that while Article 166(1) merely prescribes how orders are to be made the authentication referred to in Article 166(2) indicates the manner in

which a previously made order should be embodied. As observed by the Privy Council in AIR 1945 156 (Privy Council) -with reference to the

term ""executive power"" in Chapter 2 of part 3 of the Government of India Act 1935 (corresponding to Part VI, Chapter II of the Constitution- the

term ""executive"" is used in the broader sense as including both a decision as to action and the carrying out of the decision.

Mr. Parasaran the learned Solicitor-General next contended that simply because there was a highest bid, it need not be said that the bidder has

acquired a vested right in the contract and that until the bid is accepted by the authority concerned, there is no concluded contract. For this

proposition, the learned Solicitor-General cited the decisions reported in Union of India (UOI) and Others Vs. Bhim Sen Walaiti Ram, State of

Orissa and Others Vs. Harinarayan Jaiswal and Others, , Purxotoma Ramanata Quenim Vs. Makan Kalyan Tandel and Others, and HarShankar

v. Dy. E and T Commr. 4 and the judgment of this Court in S.P. Muthu v. State of Tamil Nadu represented by Revenue Secretary and another in

Writ Petition No. 3549 of 1981 and batch dated 12th Novemeber 1981 (to which one of us was a party). We do not think it necessary to state

the facts in those decisions except to mention that it is clear from those decisions that until a bid is accepted by the authority concerned the bidder

cannot have any vested right therein nor can he plead any concluded, contract. It is also clear that auction a special of nexotic drinks is only to

secure the maximum revenue for the State. If the state Government is satisfied that the highest bid does not reflect the proper revenue, it can go on

holding further auctions to resort to other methods in order to secure maximum revenue. So long as it does not violate the constitutional guarantee

of equality auction is only made to ascertain in the best obtainable price. This position has been made very clear in Har Shankar and Others Vs.

The Dy. Excise and Taxation Commr. and Others, , Purxotoma Ramanata Quenim Vs. Makan Kalyan Tandel and Others, and Rajamallaiah and

Another Vs. Anil Kishore and Others, Especially in auctions where sale of nexotic drinks is put up the Government has the power to reject offeres

without as signing reason, This has been made clear in Lakhanlal and Others Vs. The State of Orissa and Others, . It has been held by the

Supreme Court in so many cases, that the power of auction exercised is only an executive function not open to judicial review.

Mr. Parasaran, the learned Solicitor-General further contended that in view of the decision reported in State of Orissa and Others Vs.

Harinarayan Jaiswal and Others, and Purxotoma Ramanata Quenim Vs. Makan Kalyan Tandel and Others, the finding of the learned Single Judge

to the effect that the power exercised by the governor is a quasi-judicial one cannot be sustained since the decisions lay down that the exercise of

such a power is an executive junction of the state. The learned Solicitor-General further submitted that the statute of statutory rules, in this case, do

not require reasons to be recorded in writing for refusing confirmation c f the bid and the bid can be rejected without, giving any reasons. On the

facts of the case, the learned Solicitor-General Mr. Parasaran, submitted that the Government, in this case, acted in the best interests of securing

the maximum revenue and that is manifest from the fact that in the subsequent auction the State was able to get better price than the one obtaining

in the previous. The learned Solicitor-General further submitted that in as much as there is no concluded contract nor is there any vested right in a

hidden at the auction unless it is confirmed by the appropriate authority, there is no question of violation of any fundamental right of any person. If

so, according to the learned Solicitor-General, Article 14 of the Constitution cannot come into play.

The main contention that was taken by Mr. K.K. Venugopal the learned Counsel appearing for the Respondents, is that the decision taken by

the State Government in this case under Rule 155(2) is the decision taken by the Lt. Governor since he is the State Government in the centrally

administered territory of Pondicherry. If so, according to the learned Counsel, the impugned order rejecting the Respondents bids has been rightly

struck down by the learned Single Judge. The learned Counsel further submitted that there is violation of statutory rules, since

(a) The Lt. Governor had not perused tire records as provided under Rule 155(2);

(b) the Lt. Governor had not dealt with each shop separately but has passed a general order rejecting all offers made in the auctions by the

Respondents; and

(c) the Lt. Governor has not given valid reasons for rejecting the highest bid.

Mr. Venugopal submitted that the Lt. Governor had gone on official duty to Kerala between 25th June, 1982 and 8th July, 1982, that the bids

of the Respondents were provisionally accepted on 1st July, 1982, that on 3rd July,1982 orders rejecting the bids were communicated to the

Respondents and that there was no application of the mind on the part of the Lt. Governor who is the State for the purpose of Rule 155(2). Mr.

Venugopal further submitted that the alleged telephonic conversation of the Secretary concerned, with the Lt. Governor would not have been on

effective communication of all the details and as such it cannot be said that the Lt. Governor, after applying his mine, has rejected all the bids.

According to the learned Counsel, the Lt. Governor is the State as contemplated by the Rules and also under the provision of the Government of

Union Territories Act, 1963. According to the learned Counsel, constitutional decision cannot be taken orally and it should be after perusing the

file and application of the mind and should be in writing. Learned Counsel further submitted that the reasons ought to have been given before

rejecting the bids.

From the pleadings in this case, we can gather that in so far as the 52 shops which were disposed of by auction, the Deputy Commissioner

(Excise) had provisionally accepted the highest bids offered, as contemplated under Rule 151(7) of the rules and forwarded forthwith all the

proceedings to the Government. In the meantime the Government received complaints from the public, alleging certain irregularities in the conduct

of auction. The Government considered all the representations received by it. In fact the total bid amount realised for 52 shops was approximately

Rs. 1-20 crores, which was roughly one-third of the bid amount of last year. The Government considered also the fact that there has been a fair

amount of public criticise alleging loss of revenue to the Government. The Government also considered the fact that the question of not confirming

the, highest bids need not be based only on the legality or propriety of the auction, but on the assessment whether there is any possibility of the

bidders having colluded or used some other tactics to artificially decrease the bids resulting in possible loss of revenue. The Government took note

of the writ petition filed by one Kanaga-sabapathy and the allegations made therein with reference to the conduct of the auction of arrack shops

and also of the specific after made by him for a sum of Rs. 1,75,290 in respect of shop No. 1, Pondicherry, against the highest bid of Rs. 68,750.

After examining all the complaints and other facts the Government decided to refuse the confirmation of the bids and to re-auction all the shops in

Pondicherry region. Immediately thereafter the Deputy Commissioner (Excise) forthwith communicated the above order of the Government to the

Respondents herein as well as other successful bidders whose bids were provisionally accepted. It was only at that stage, the Respondent have

filed the writ petitions for issue of writ o certirarified mandamus to quash the order E/1.4658/82, dated 3rd July 1982 of the Government and to

direct the Appellant herein to confirm the bids of Respondents herein in respect of their respective shops for which they bid at the auction.

It is the case of the Appellant that the Government after considering several factors, i.e. (1) the alleged irregularities in the conduct of the

auction, (2) disposal of shops at a lessor price and consequential loss of the revenue (3) disposal of shops in favour of the relatives of the Revenue

Minister and (4) the pendency of the, writ petition with specific allegation that while there was an offer for a sum of Rs. 175,200 the shop was

disposed of at a prices of Rs. 68,750 in favour one Swaminathan, the son-in-law of the Revenue Minister decided to refuse confirmation of the bid

and to re-auction the shops. In fact the lease for the year 1982-83 was to commence with effect from 1st July, 1982. Since the previous lease

period had expired on 30th June 1982, the Government had to take immediate decision as to whether the bids were to be disposed of by re-

auction so that there may not be any loss of revenue to the Government and the shop could be opened without any further delay.

It has been clearly stated in the counter that on 2ad July 1982 the Government decided to dispose of the arrack shops to Pondicherry region

by re-auction. In view of the fact that any further delay would cause further loss of revenue to the State Secretary to the Lt. Governor contacted

the Lt. Governor who was away from the headquarters over phone and discussed the matter with him. Thereupon, the Lt. Governor ordered re-

auction, as proposed, which was noted immediately on the file by the Secretary to the Lt. Governor. Consequently the Deputy Commissioner

(Excise) Communicated the order of the Government rejecting the confirmation of the bids to the Respondents herein and others. Immediately on

return the Lt. Governor signed in, the File confirming the earlier orders communicated by him over telephone.

The specific averment in the counter-affidavit filed on behalf of the State is that the entire facts and circumstances had been brought to the

knowledge of the Lt. Governor on 2nd July 1982 itself and the Lt. Governor after considering the facts and circumstances approved the proposal

and this fact had been recorded on the File by the Secretary to the Lt. Governor on 2nd July 1982 itself. If is clear from the averments in the

counter-affidavit that the Minister in charge of the Department who is also responsible for the transaction of the business of the Particular

department as well as the Chief Minister after considering the facts and circumstances had also sent the proposal to the Lt. Governor who in turn

has approved the proposal to re-auction all the shops.

Under Rule 52 of the Pondicherry Excise Rules the Deputy Commissioner of the region where the right of retail vend of liquor is to be

disposed of by auction shall cause the sale notification to be read out and explained in the regional language on the date and at the time, specified in

the notification under Rule 144. As per Rule 152(3), after all the shops are auctioned the Deputy Commissioner may in his opinion accept

provisionally the most acceptable amount offered at the auction and announce the same. Rule 154(1) states that the Deputy Commissioner may for

reasons to be recorded in writing, postpone the auction to any other day notified by him, and under Rule 154(2), he may reject any bid submitted

to him for any reason as he record in writing. It is thus seen that under Rule 154(2) the Deputy Commissioner if he decides to reject any bid, must

give reasons in writing for such rejection Rule 155 deals with confirmation of bid by the State Government, under. Rule 155(2) the Government on

a consideration of the records under Sub-rule (1) of that rule pass an order confirming the disposal of the right to retail vend of liquor or refusing to

confirm it and the order is to be communicated forthwith to the person concerned.

We have already noticed the provisions of Section 46 of the Government of Union Territories Act which deals with allocation of business to

the Ministers and have found that it. Is analogous of Article 166(2) of the Constitution of India. We have also found earlier in the judgment that

there is no fundamental right involved in the auction of noxotic drinks State of Orissa and Others Vs. Harinarayan Jaiswal and Others, as we have

already seen clearly is to the effect that the decision taken by the Government in respect of confirmation or refusal to confirm auction in noxotic

drinks is only an executive action of the State. The facts of the case also clearly reveal that there was no difference of opinion as between the

Ministers and the Lt. Governor in refusing to confirm the auction and ordering re-auction in these cases. As seen clearly, under Rule 154 of the

Pondicherry Excise Rules the Deputy Commissioner had to give reasons in writing for rejecting a bid made in the auction that, however, is not the

case with the Government. This is because of the fact that such an executive power is vested in the highest authority of the State.

The counter-affidavit filed by the State clearly discloses that the Lt. Governor had applied his mind after getting all the particulars through

phone from his secretary, and that, on arrival from tour, has subscribed his signature to the file for the decision taken which decision he himself had

communicated over phone to his Secretary earlier. There was absolutely no conflict of opinion as between the Ministers and the Lt. Governor on

this aspect. The decision of the Supreme Court in S.P. Gupta Vs. President of India and Others, is an authority for the position that telephonic

communication in given circumstances is a vaild consultation for obtaining consent. The Secratary to the Lt. Governor has made a noting in the file

saying in view of the urgency of the matter, I have discussed the matter with Lt. G. on phone. He has ordered as follows ; approved as proposed.

Any official action taken must be presumed as done in conformity with the statute. Further, the Lt. Governor, on arrival, has subscribed his

signature to the file on 8th July 1982 with the endorsement seen . The file also contains endorsement seeking for permission to re-auction the

shops, and on 8th July 1982 the Lt. Governor has also approved the re-auction of the shops. These are all clear and positive pieces of evidence to

spell out that the Lt. Governor had applied his mind for the decision taken by him, who, according to Mr. K.K. Venugopal, is the competent

person to apply mind and take decision in such matters as per the provisions of the Government of Union Territories Act, 1963, and the

Pondicherry Excise Rules.

We have already found that there is no fundamental right for the Respondents to compel the authorities concerned to confirm the auction in

their favour in cases of this nature.

For all these reasons, we hold that the Lt. Governor had applied his mind before refusing to confirm the auction in favour of the Respondents

and. that was effectively done through telephonic conversation between Secretary to the Lt. Governor and the Lt. Governor that it is not necessary

for the highest authority of the State, viz., the Lt. Governor, to give reasons for setting aside the auction for vend, in noxotic drinks. Further, the

Pondicherry Excise Rules do not contemplate cither for giving reason for refusal or confirmation of bid, or for passing independent and separate

order for each of the liquor shop in regard to which confirmation was refused by the Lt. Governor.

In these circumstances, all the writ appeals filed by the Union Territory of Pondicherry are allowed with costs throughout, with the result the

writ petitions filed by the Respondents herein will stand, dismissed. In view of the order allowing the writ appeals filed by the State of Pondicherry

the writ appeals Nos. 143 to 152 of 1983 will stand dismissed. There will be no order as to costs.