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CASE NO.: Appeal (civil)  2549 of 2008

PETITIONER: The Haryana State Agricultural Marketing Board and Ors

RESPONDENT: Sadhu Ram

DATE OF JUDGMENT: 08/04/2008

BENCH: TARUN CHATTERJEE & HARJIT SINGH BEDI

JUDGMENT: J U D G M E N T REPORTABALE

CIVIL APPEAL NO.    2549 OF 2008 (Arising out of SLP (C) 17473 of 2006) WITH CIVIL APPEAL NO.    2550 OF 2008 (Arising out of SLP (C) 17594 of 2006)   The Haryana State Agricultural   Marketing Board and Ors.                         \005Appellants    VERSUS   Ramesh Mittal                                           \005Respondent  WITH  CIVIL APPEAL NO.    2551 OF 2008   (Arising out of SLP (C) 17552 of 2006)  The Haryana State Agricultural  Marketing Board and Ors.                             \005Appellants   VERSUS  Preet Bansal and Anr.                               \005Respondents   WITH  CIVIL APPEAL NO.     2552 OF 2008  (Arising out of SLP (C) 17675 of 2006)   The Haryana State Agricultural   Marketing Board and Ors.                          \005Appellants    VERSUS   Shish Pal Garg and Others                         \005Respondents   WITH     CIVIL APPEAL NO.  2553 OF 2008    (Arising out of SLP (C) 17686 of 2006)     The Haryana State Agricultural   Marketing Board and Ors.                          \005Appellants     VERSUS   Mangat Ram & Ors.                                \005Respondents     WITH    CIVIL APPEAL NO.  2554 OF 2008    (Arising out of SLP (C) 17693 of 2006)       The Haryana State Agricultural     Marketing Board and Ors.                           \005Appellants         VERSUS     Ashok Mittal                                              \005 Respondents    WITH     CIVIL APPEAL NO. 2555 OF 2008    (Arising out of SLP (C) 17712 of 2006)

The Haryana State Agricultural                 Marketing Board and Ors.                               \005Appellants         

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VERSUS Rajinder Pal Mittal                                  \005Respondents WITH CIVIL APPEAL NO.   2556 OF 2008 (Arising out of SLP (C) 17840 of 2006)

The Haryana State Agricultural Marketing Board and Ors.                               \005Appellants

VERSUS Darshan Lal & Anr.                                          \005Respondents

WITH

CIVIL APPEAL NO.  2557 OF 2008 (Arising out of SLP (C) 3347 of 2007)

The Haryana State Agricultural Marketing Board and Ors.                               \005Appellants

VERSUS Charanjit Singh Gujral                                \005Respondent

TARUN CHATTERJEE, J.

1.      Leave granted. 2.      These bunch of appeals have arisen from a  common judgment and order dated 27th of April, 2006 of  the High Court of Punjab & Haryana at Chandigarh  whereby the High Court had allowed a bunch of writ  petitions filed by the respondents challenging an order  dated 17th of December, 2004 canceling the allotments of  Plots in their favour in an open auction. Since common  questions of law and fact arise in the disposal of these  bunch of appeals and the High Court has disposed of the  entire bunch of writ petitions following the judgment  passed in Mangat Ram & Ors. Vs. State of Haryana &  Ors. [CWP No. 213 of 2005 decided on 27th of April,  2006], we take up the facts leading to the filing of these  appeals from the judgment dated 27th of April, 2006  passed in CWP No. 213 of 2005 of the High Court of  Punjab and Haryana at Chandigarh, which are as under: -  3.      The appellants are statutory authorities under the  Punjab Agricultural Produce Markets Act, 1961 (in short  "the Act"). A public notice was issued by the office of  Market Committee, Panchkula, Haryana, appellant no.2  inviting traders and general public to purchase  commercial sites in an open auction to be held on 8th of  July, 2004 in the New Grain and Vegetable Market,  Panchkula. By this auction, Shop plots (62 Nos.) and  Booth plots measuring 20’ X 50’ were to be auctioned. On  16th of May, 2003, the High Powered Committee  constituted by an office order recommended that the  reserve price for a plot measuring 20’ X 50’ be fixed at  Rs. 33,91,391/- which was approved at the level of the  Chief Administrator of the Board. However, the reserve  price so fixed was neither mentioned in the public notice  nor was the same announced before the start of the  auction. The auction of the plots was held as per  schedule. The respondents were declared to be the  highest bidders for the plots who deposited 25% of the bid  money as per the requirement of law. On 24th of July,

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2004, the auction committee report of the aforesaid  auction held on 8th of July, 2004 was put up before the  Market Committee, Panchkula, which by a resolution  dated 24th of July, 2004 recommended the confirmation of  the auction bids and resolved that the approval of the  Chief Administrator, Haryana State Agricultural Marketing  Board be taken under Section 18 of the Act. On 30th of  November, 2004, a letter was sent on behalf of the Chief  administrator to the Executive Officer-cum-Secretary,  Market Committee, Panchkula by which some  discrepancies were conveyed. On 6th of December, 2004,  the Executive Officer addressed a letter to the Chief  Administrator informing him that the discrepancies  pointed out have been attended to and requested for  approval. The Chief Administrator, on 15th of December,  2004 conveyed his approval in respect of the bids given  for plot No. 1 measuring 20’ X 50’ and three booths  bearing Nos. 149, 150, 152 measuring 12’ X 27 =’. The  auction of all the other plots was rejected and it was  directed to refund the amounts to the respondents and to  put the plots in open auction on 20th of December, 2004.  On 17th of December, 2004, the respondents received a  communication from the Market Committee that since the  auction in their favour had not been approved by the  Chief Administrator, 25% of the bid money deposited by  them was being refunded. The second public auction, as  scheduled, was held on 20th of December, 2004, and a  price higher than that of the earlier price was fetched from  the auction purchasers.  4.      On 4th of January, 2005, the respondents filed a  batch of writ petitions seeking quashing of the order dated  17th of December, 2004 canceling the allotments of plots  in their favour. The batch of writ petitions filed by the  respondents before the High Court were taken up for  hearing and the main judgment that was passed was in  the case of Mangat Ram & Ors. Vs. State of Haryana &  Ors., CWP No. 213 of 2005 decided on 27th of April, 2006  and thereafter, following the same judgment, all the  remaining writ petitions were disposed of by holding that  the respondents were entitled to be allotted alternative  plots. It is against these judgments of the High Court that  separate appeals have now been filed by the  respondents, in respect of which leave has already been  granted. As noted herein earlier, the High Court, while  deciding the bunch of writ petitions, had taken into  consideration the facts from one of the writ petitions  bearing CWP No. 213 of 2005 on the ground that the writ  petitions involved common questions of law and fact. That  being the stand taken by the High Court, we also,  therefore, at this stage look at the findings of the High  Court in CWP No. 213 of 2005, which are as under: - i)      In view of non-disclosure of the reserve price  to the auction purchasers, the auction proceedings  in their favour could neither be cancelled nor the  approval be denied on the ground that the bid price  offered by them was lower than the reserve price; ii)     The non-disclosure of the reserve price  amounted to an unfair practice; iii)    The auction in favour of the highest bidders  was subject to final approval by the Chief  Administrator but the approval could be declined  only for reasons which were relevant and could  justify the non-acceptance of highest bids of the  auction purchasers but the same could not be  arbitrary or absolute;

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iv)     The order dated 17th of December, 2004  would be quashed but it would be open to the Chief  Administrator to exercise his powers in compliance  with the terms and conditions of auction so as to  consider the question of approval of the auction in  accordance with law. v)      Mere encashing of cheques, refunding the  amount, by the auction purchasers could not be  taken to be a fact against them. 5.       The learned counsel for the appellants argued that  the auction in favour of the respondents was subject to  final approval of the Chief Administrator of the Board and  since the Chief Administrator had rejected the said  auction in their favour, the action of the appellants was  wholly justified. He further argued that the bids offered by  the respondents were lower than the reserve price, which  resulted in the rejection of the bids by the Chief  Administrator who under Section 18 of the Act had the  prerogative to accept or to reject the bids without  assigning any reason. The learned counsel for the  appellants also submitted before us that in the  subsequent auction conducted on 20th of December,  2004, a higher price was fetched in respect of the same  plots. He accordingly argued that the High Court was not  justified in invalidating the action of the appellants on the  ground of non-disclosure of the reserve price and even if  the non-disclosure of the reserve price at the time of  auction was to be treated as an irregularity or illegality,  the High Court could at the most quash the entire auction  but could not confirm the auction in favour of the  respondents and in fact, the respondents had already  received back the cheques from the Market Committee  and encashed them and therefore, had no subsisting right  qua their claim.  6.      These submissions of the learned counsel for the  appellants were hotly contested by the learned senior  counsel for the respondents. Mr. Patwalia, the learned  senior counsel for the respondents argued that since the  reserve price was not disclosed either in the Public notice  or at the time of the auction to the persons participating in  the same, the offers made by the respondents in the  auction held on 8th of July, 2004 could not be rejected by  the Chief Administrator of the Board as such rejection  mush be treated as unfair, unreasonable and illegal. The  learned senior counsel for the respondents Mr. Patwalia  further submitted that the respondents were not informed  the reason for rejection of their bids even in the letter  dated 17th of December, 2004 and that the bids offered by  them were rejected by the appellants after 6 months  without affording them any opportunity of being heard. 7.      We have examined the aforesaid submissions of  the learned counsel for the parties. We have also  examined the judgment of the High Court allowing the writ  petitions and holding that since the reserve price was not  disclosed before the auction, which was mandatory, and  the respondents proceeded to participate in the auction  without knowing such reserve price, it could not be said  that since the offer of the respondents was less than the  reserve price, the same was liable to be rejected. Having  heard the learned counsel for the parties and after  carefully examining the impugned judgment of the High  Court and also the order dated 17th of December, 2004  and other materials on record including the terms and  conditions of the auction held on 8th of July, 2004, we are  of the view that this appeal must succeed for the reasons

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stated hereinafter.   8.      Before we proceed to consider the submissions  made on behalf of the parties, at the risk of repetition, we  may keep it on record that it is not in dispute that the  reserve price for holding the auction of the plots in  question was neither shown in the Public Notice of the  appellants nor was it known to the respondents. It is also  an admitted position that the money that was deposited  by the respondents was refunded by the appellants by  account payee cheques, which were duly encashed by  the respondents. As mentioned herein earlier, the High  Court had practically allowed the writ petition on a finding  that since the reserve price was not shown in the Public  Notice, the authorities had no jurisdiction to cancel the  auction in favour of the respondents on the ground that  their offers were less than the reserve price and therefore,  the auction held on 8th of July, 2004 could not be  cancelled by the order of the Chief Administrator of the  Board. 9.      We are unable to agree with this view expressed by  the High Court in the impugned judgment.  It is true that  the reserve price was neither known to the respondents  nor was it advertised for the purpose of allotting the plots  to the respondents but that could not, in our view, permit  the High Court to direct allotment of alternative plots to  the respondents. Even assuming that there was error on  the part of the authorities in not mentioning the reserve  price in the Public Notice, then also, it was not proper for  the High Court to direct allotment of alternative plots to  the respondents on the basis of the auction held on 8th of  July, 2004.  10.         It is also not in dispute that the final authority to  approve the auction bids was the Chief Administrator of  the Board. Before proceeding further, we may refer to  Section 18 of the Act which runs as under: - "Under Section 18 of the Act all the sales of  plots whether by open auction of draw of lots,  are subject to approval by the CA of the  Board. However, he may or may not accord  such approval without assigning any reason.  In case of offer is rejected, the amount  deposited as 1/4th of the total price would be  refunded without interest by the  M.C."(Emphasis supplied)

 11.     A perusal of the provisions under Section 18 of the  Act, as quoted hereinabove, would show that the auction  would be final only after the same is approved by the  Chief Administrator of the Board. In case the Chief  Administrator of the Board rejects the auction, he may not  be required to assign any reason for such rejection. If  such rejection is made, Section 18 only provides that the  amount deposited by the bidder must be refunded without  interest by the Market Committee of the Board. Keeping  this provision in mind, it is clear that since the Chief  Administrator of the Board was the final authority to  approve the auction bids, which in his own discretion,  were not approved, it could not be said that since the  reserve price was not mentioned in the Public Notice and  was not known to the respondents, the High Court could  have directed allotment of alternative plots in the exercise  of its power under Article 226 of the Constitution.  The  scope of judicial review/interference under Article 226 in  contractual matters including Government contracts and

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auction of plots by State Government has been  extensively dealt with by this Court in a catena of  decisions.   In Tata Cellular Vs. UOI [1994 (6) SCC 651],  the principle that ought to be applied in judicial review of  decisions especially those relating to acceptance of  tender and award of contract was considered in detail and  it was held that the principle of judicial review would apply  to the exercise of contractual powers by Government  bodies in order to prevent arbitrariness or favouritism.   But it must also be kept in mind that there are inherent  limitations in exercise of the power of judicial review.  In  that decision, it was held that the right to refuse the lowest  or any tender is also available to the Government but the  principles laid down in Article 14 of the Constitution must  be kept in mind while accepting or refusing a tender.   There can be no question of infringement of Article 14 if  the Government tries to get the best quotation and also to  cancel the best quotation if it was of the view that the best  quotation also was not to the satisfaction of the  Government to get a better market price of the plots in  question.  Therefore, it was held in that decision that the  State Government and its instrumentalities cannot be said  to have exercised an arbitrary power when they found  that the best offer made by the respondents could not be  accepted because the market value of the plots in  question would fetch better than the amount offered by  the respondents. It was further held in that decision that  since the power of judicial review is not an appeal from  the decision, the court cannot substitute its own decision.  In the present case, it is not in dispute that the plots  auctioned by the appellants belonged to the  instrumentalities of the State Government, which must be  expected to protect the financial interests of the State.   In  the decision reported in [2007(1) SCC 477] Rajasthan  Housing Board and Another Vs. J.S. Investments and  Another, this Court, after thoroughly considering the  earlier decisions of this Court including the decision in  Tata Cellular Vs. Union of India [supra], considered the  contours of power which the High Court would exercise in  a writ petition filed under Article 226 of the Constitution  when the challenge was to cancellation of auction held by  a public body where the prime consideration was fairness  and generation of public revenue and held that even if  some defect was found in the ultimate decision resulting  in cancellation of the auction, the court should exercise its  discretionary power under Article 226 with great care and  caution and should exercise it only in furtherance of public  interest. It was also held in that decision that when the  Chairman of the Housing Board had the final authority  regarding acceptance of the bid, a person who had made  the highest bid in the auction did not acquire any right to  have the auction concluded in his favour until the  Chairman had passed an order to that effect.  12.     Keeping the principles laid down in the aforesaid  decisions of this Court in mind, let us, therefore, consider  whether non-disclosure of the reserve price in the Public  Notice is a ground on which the High Court could direct  the authorities to allot alternative plots in favour of the  respondents in exercise of its powers under Article 226 of  the Constitution.  At the risk of repetition, we may note  that one of the conditions in the Public Notice was that the  final authority to approve or disapprove the best offer in  the auction was that of the Chief Administrator of the  Board. It is true that the Chief Administrator of the Board  rejected the offers without assigning any reason but

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Section 18 of the Act clearly provides that such rejection  could be made without assigning any reason. Let us now  consider whether the action on the part of the Chief  Administrator of the Board canceling the auction was  unfair, arbitrary and invalid. In our view, considering the  facts and circumstances of the case, the action of the  Chief Administrator of the Board was fair and the  cancellation was not arbitrary. The second auction was  held in respect of the plots in question on 20th of  December, 2004 and from the said auction, although the  reserve price was not mentioned, much higher offers  were received by the appellants. Apart from that, we  should not keep this fact out of mind that the amounts  deposited by the respondents with the appellants were  refunded to the respondents by account payee cheques,  which were duly encashed by them. Such being the  position, we neither find any malafide, unfairness or  arbitrariness on the part of the Chief Administrator of the  Board in rejecting the offers of the respondents nor do we  find it a colourable exercise of power. That apart, in view  of the decision of this court in Rajasthan Housing Board  and another Vs. G.S. Investments and another [supra],  since the final authority to approve the bids was with the  Chief Administrator, it is obvious that a person who had  made the highest bid in the auction did not acquire any  right to have the auction concluded in his favour until the  Chief Administrator had passed an order to that effect and  the auction proceedings could always be cancelled. It is  on record that the offers made by the respondents in the  auction dated 8th of July, 2004 could not fetch the amount  expected from the said plots and that is the reason a  fresh Public Notice was issued by the appellants for a  subsequent auction.  The said auction was held and as  noted herein earlier, from the said auction, the price  fetched was much higher than the offers made by the  respondents.  That being the position and considering the  fact that a subsequent auction was held and concluded, it  was not open to the High Court to direct the allotment of  alternative plots at the rate offered by the respondents  treating the auction held on 8th of July, 2004 to be valid.   13.     Mr. Patwalia, the learned senior counsel appearing  for the respondents submitted that his clients were ready  to pay the enhanced amounts which were offered by the  bidders in the second auction and therefore, in view of  this, the decision of the High Court should be upheld with  such modification. We are unable to accept this  submission of Mr. Patwalia because at the present  moment, third party interests have also been created in  the matter and the bidders in the second auction were not  made parties to the writ petitions.   14.     Let us now take up the other aspect of the matter.   As noted herein earlier, the reserve price was not shown  in the Public Notice and therefore, the respondents had  no knowledge of the reserve price.  Even assuming that  the reserve price had to be given in the Public Notice,  then also, we are of the view that the best course for the  High Court would be to cancel the entire auction in view  of the decision of this court in Tata Cellular Vs. Union of  India [supra] rather than substituting its own opinion by  directing allotment of alternative plots. It is, therefore,  difficult to accept the views expressed by the High Court  that since reserve price was not known to the  respondents and they were found to be the highest  bidders in the said auction, they have acquired a right to  get the allotment of alternative plots and the appellants

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had no authority to reject the highest offers given by the  respondents or to cancel the auction itself.  Since the  entire auction was cancelled, we do not find any  justification how the High Court could pass an order  directing allotment of the alternative plots on the same  terms and conditions when, after cancellation, the second  auction was held in which the price fetched was much  higher than the offers made by the respondents. That  apart, we do not find anything unfair in not disclosing the  reserve price. It is common knowledge that when reserve  price is disclosed, the bidders often form cartels and bid  at or around the disclosed price, though the market price  is much higher. We, therefore, do not agree with the High  Court that the appellants had acted in an unfair manner in  not disclosing the reserve price at the time of inviting  tenders or even at the time of holding the auction.  15.     In view of the admitted fact that the money  deposited by the respondents with the appellants was  refunded to the respondents by account payee cheques  which were duly encashed by them and in view of the  admitted fact that subsequently, a second auction was  held on 20th of December, 2004 in respect of the same  plots which were put up for auction on 8th of July, 2004  and in the second auction, some other parties have now  acquired interest in the said plots, it was not open to the  High Court to direct the appellants, in the exercise of its  writ jurisdiction, to allot alternative plots to the  respondents only on the ground that the auction dated 8th  of July, 2004 could not be cancelled by the Chief  Administrator of the Board without assigning any reason  and also on the ground that the reserve price was not  disclosed in the Public Notice issued by the appellants.       16.     In this view of the matter, we are, therefore, unable  to sustain the decision of the High Court and accordingly,  the judgment of the High Court is liable to be set aside.   17.     For the foregoing reasons, the impugned judgment  of the High Court is set aside and the appeals are allowed  and the writ petitions stand rejected.  There will be no  order as to costs.