IMPORTANT POINT
Where tender invitation was given wide publicity and the financial committee recommended acceptance of bid keeping in mind the prior experience and the terms and conditions of the Board Resolution in the matter of fixation of sector price and reserve price, the Court cannot substitute its own decision as it has no expertise to correct the decision.

Headnote:Constitution of India-Article 14-Scheme for construction of Commercial Hub floated by New Okhla Industrial Development Authority (NOIDA)-Challenged as arbitrary and violative of norms resulting in loss to State exchequer-Writ petition-Allegations that impugned Scheme awards 54,320.18 sq. mtrs of prime commercial land at 1/4th of prevailing market price, by fixing reserve price at abysmally low, throw away price-Petitioner prayed for setting aside the scheme-Petitioner sought interim reliefs restraining NOIDA from giving effect to the said Scheme-Supreme Court stayed operation of impugned Scheme -Challenge to reserve price of Rs. 27,500/- per sq. mtr.-Tender price fixing Rs. 31,850/- per sq. mtr., higher than the reserve price-Tender invitation was given wide publicity-Nine bidders bought tender documents-Only respondent 3 offered its bid-Financial Commitee recommended its acceptance-Whether respondent 2 s decision in accepting bid of respondent 3 was arbitrary, unreasonable and in violation of Board Resolution-(No).
       Held : The impugned Scheme is for development of plot No. M-3 admeasuring 54,320.18 sq. mtrs. in sector 18 by constructing thereon a commercial hub consisting of a shopping mall, multiplexes, showrooms, retail outlets, hotels, restaurants and offices with matching parking facility in order to decongest the said sector which has now become a centre for small enterprises. That shopping habits have changed resulting in a demand for shopping malls and entertainment centres, which require bigger plots. That the object of the said Scheme was integrated development of the sector. The salient features of the Scheme were : 30 ground cover; 150 floor area ratio (FAR) and provision for 2800 estimated car spaces (ECS). The reserve price was fixed at Rs. 27,500/- per sq. mtr. The Scheme was kept open from 18.2.2004 up to 9.3.2004. It was widely advertised in Times of India, Hindustan Times, Economic Times, Business Standard and Amar Ujala. That nine reputed developers including MGF, Unitech, Sun City, Sahara India and Omex purchased the brochures. However, on the closing date i.e. 9.3.2004, only one tender of M/s. DLF Universal Ltd., respondent No. 3 herein, was received and evaluated by the technical committee on whose recommendation the financial tender was opened on 12.3.2004. Respondent No. 3 quoted Rs. 31,850/- per sq. mtr. in their financial tender, which was 15.81 higher than the reserve price of Rs. 27,500/- per sq. mtr. Other developers like Unitech, Sahara India, Omex, MGF, Sun City etc. also purchased the bid documents but they abstained from bidding. Since respondent No. 3 was the only bidder and since it had quoted the price which was higher than the reserve price, its tender was accepted. (Para 4)
       By the allotment letter, respondent No. 3 was informed that its bid stood accepted; that the tender price was Rs. 31,850.00 per square metre; that the total premium was Rs.173,00,97,733.00; that earnest money to be deposited was Rs. 3 crores; that the allotment money to be deposited was Rs. 43,25,24,433.25; that the balance allotment money to be deposited by 26.4.2004 was Rs.40,25,24,433.25 whereas balance premium amounting to Rs. 129,75,73,299.75 had to be deposited by 10.7.2004. It may be clarified that earnest money of Rs. 3 crores was adjustible against allotment money of Rs. 43,25,24,433.25. Till date, respondent No. 3 has deposited the earnest money of Rs. 3 crores and Rs. 40,25,24,433.25 on 23.4.2004. However, respondent No. 3 has not deposited the balance premium payable on 10.7.2004 as the Scheme was stayed by this Court. (Para 5)
       The central point which arises for determination is : whether the tender price of Rs. 31,850/- per sq. mtr. is understated. In the present case, respondent No. 2 invited offers for the plot admeasuring 54,320.18 sq. mtrs. for the shopping mall with 2800 ECS in order to decongest sector 18. Wide publicity was given. Several reputed developers bought tender documents. However, at the end of the day, there was only one bidder (respondent No. 3) in the field. In the present case, malafides have been alleged, but not pressed. Therefore, the question before us is : whether respondent No. 2 s decision in accepting the bid of respondent No. 3 was arbitrary, unreasonable and in violation of the Board Resolution dated 10.7.2003. (Para 10)
       There is no material on record to show that the tender price of Rs. 31,850/- per sq. mtr. is a low price. The entire edifice of the petition is based on the challenge to the reserve price of Rs. 27,500/- per sq. mtr. As stated above, fixation of the reserve price is to facilitate the conduct of the sale. It was open to the petitioner to challenge the tender price of Rs. 31,850/- per sq. mtr. as understated, notwithstanding the fixation of the reserve price. No comparative sales instances, with similar parameters of ground cover of 30 and 150 FAR, have been placed before us. No figures of cost of 2800 ECS have been placed before us as such costs would increase the reserve price. On the other hand, we find that the reserve price has been fixed by taking into several factors. Firstly, in the past tenders invited for relatively smaller plots with higher reserve price had failed. It is important to bear in mind that tender process is an expensive exercise. To resort repeatedly to this exercise is a costly affair. Secondly, in the present case, the reserve price is fixed by taking into account the comparative offers/sales in the adjoining sectors. That the average of such sales has been taken into account while fixing the reserve price in terms of clause 4(c) of the Resolution dated 10.7.2003. (Para 14)
       Thirtly, the developer/tenderer is obliged to construct a matching car parking facility of 2800 ECS whose cost is required to be added to the reserve price of Rs. 27,500/- per sq. mtr. Lastly, in the present case it has been submitted that under clause 2(e), reserve price had to be fixed at 1-1/2 times the sector rate which according to the petitioner was Rs. 90,000/- per sq. mtr. (Para 14)
       In the present case, undue importance has been given to the fixation of the reserve price. As stated above, notwithstanding the reserve price, the petitioner could have brought before the Court material, if any, to show undervaluation. In the present case, the tender price is Rs. 31,850/- per sq. mtr. It is higher than the reserve price. There is no material to show whether the tender price is understated. In the circumstances, there is no merit in the contention of the petitioner that the land is sold at abysmally low price. (Para 15)

Judgement Key Points

The document does not explicitly address or require any specific "consent" for accepting a bid below the reserve price. It explains that a reserve (or upset) price in a tender or auction process acts as a limit on the authority of the relevant officer or auctioneer, who cannot accept a bid below that price. [1000092250010][1000092250011]

The reserve price is described as a guideline fixed under a Board Resolution to facilitate the tender process and is not equivalent to the property's valuation; the actual tender price (above reserve) is what matters for evaluation, provided there is wide publicity and no evidence of arbitrariness. [1000092250011][1000092250012][1000092250013][1000092250014] (!) (!) (!)

JUDGMENT

Kapadia, J.-Leave granted in SLP.

2. Anil Kumar Srivastava claiming to be a public spirited citizen residing in Section 14, Noida, U.P. moved Allahabad High Court in Civil Misc. Writ Petition No. 10137 of 2004 [Transferred Case No. 54 of 2004 herein] challenging the Scheme bearing No. 2003-2004 (Commercial Hub) - Sector 18 floated by New Okhla Industrial Development Authority (NOIDA) for construction of a commercial hub on a plot bearing No. M-3 in Sector 18, Noida as arbitrary and violative of norms contained in the Board Resolution dated 10.7.2003 and the precedents with regard to size and reserve price, resulting in the loss to the State exchequer of Rs. 3.40 crores. In the writ petition, it is alleged that the impugned Scheme awards 54,320.18 sq. mtrs. of prime commercial land, without precedent, at 1/4th of the prevailing market price and by fixing the reserve price at abysmally low, throw away, price; that the said Scheme is, therefore, arbitrary and violative of Article 14 of the Constitution. In the writ petition, the petitioner prayed for setting aside the Scheme. Pending hearing and final disposal, the petitioner sought interim reliefs restraining NOIDA, respondent No. 2 herein, from giving effect to the said Scheme. By impugned order dated 12.3.2004, the High Court refused the interim relief as prayed for. Aggrieved, the original petitioner came to this Court by special leave. Vide order dated 28.4.2004, this Court stayed the operation of the impugned Scheme. By order dated 9.7.2004, the Court presided by Hon ble the Chief Justice, at the request of respondent Nos. 2 and 3 herein, directed Writ Petition No. 10137 of 2004 pending in the Allahabad High Court to be transferred to this Court under Article 139A of the Constitution.

3. By order dated 23.7.2004, the Court presided by Hon ble the Chief Justice, on the joint prayer made by all the counsel, directed the matter to be listed for final hearing and accordingly this matter has come for hearing.

4. As stated, the impugned Scheme is for development of plot No. M-3 admeasuring 54,320.18 sq. mtrs. in sector 18 by constructing thereon a commercial hub consisting of a shopping mall, multiplexes, showrooms, retail outlets, hotels, restaurants and offices with matching parking facility in order to decongest the said sector which has now become a centre for small enterprises. That shopping habits have changed resulting in a demand for shopping malls and entertainment centres, which require bigger plots. That the object of the said Scheme was integrated development of the sector. The salient features of the Scheme were : 30 ground cover; 150 floor area ratio (FAR) and provision for 2800 estimated car spaces (ECS). The reserve price was fixed at Rs. 27,500/- per sq. mtr. The Scheme was kept open from 18.2.2004 up to 9.3.2004. It was widely advertised in Times of India, Hindustan Times, Economic Times, Business Standard and Amar Ujala. That nine reputed developers including MGF, Unitech, Sun City, Sahara India and Omex purchased the brochures. However, on the closing date i.e. 9.3.2004, only one tender of M/s. DLF Universal Ltd., respondent No. 3 herein, was received and evaluated by the technical committee on whose recommendation the financial tender was opened on 12.3.2004. Respondent No. 3 quoted Rs. 31,850/- per sq. mtr. in their financial tender, which was 15.81 higher than the reserve price of Rs. 27,500/- per sq. mtr. Other developers like Unitech, Sahara India, Omex, MGF, Sun City etc. also purchased the bid documents but they abstained from bidding. Since respondent No. 3 was the only bidder and since it had quoted the price which was higher than the reserve price, its tender was accepted vide letter dated 12.4.2004 (hereinafter referred to as "the allotment letter"). In the meantime, on 10.3.2004, the petitioner herein moved the Allahabad High Court as stated above.

5. By the allotment letter, respondent No. 3 was informed that its bid stood accepted; that th

Click Here to Read the rest of this document

2004 Supreme(SC) 921

Cases Referred (2)