1. Royalty collection contract grant — Failure to deposit security by highest bidder — Grant of contract to co-operative society under Rajasthan Minor Mineral Concession Rules, 1959. (Para 1 , 2 )
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1965 Supreme(SC) 57
SUPREME COURT OF INDIA
24th February, 1965
P.B. GAJENDRAGADKAR, C.J.I., RAGHUBAR DAYAL AND V. RAMASWAMI, JJ.
Nand Kishore Saraf, Appellant
Versus
State of Rajasthan and another, Respondents.
Civil Appeal No. 79 of 1965.
Advocates Appeared
Mr. Sarjoo Prasad, Senior Advocate, (M/s. J. B. Dadachanji, O. C. Mathur & Ravinder Narain, Advocates of M/s. J. B. Dadachanji & Co., with him), for Appellant; Mr. M. M. Tewari, Senior Advocate, (M/s. K. K. Jain & R.N. Sachthey, Advocates with him), for Respondent No. 1; Mr. B. B. Tawakley, Senior Advocate, (Mr. K. P. Gupta, Advocate with him), for Respondent No. 2.
Advocates:
B.B.TAVAKLEY, J.B.DADACHAN, K.K.JAIN, K.P.GUPTA, M.M.TIVARI, O.C.MATHUR, R.N.SACH, Ravindra Narayan, SARJU PRASAD
B.B.TAVAKLEY, J.B.DADACHAN, K.K.JAIN, K.P.GUPTA, M.M.TIVARI, O.C.MATHUR, R.N.SACH, Ravindra Narayan, SARJU PRASAD
The government is not bound to accept the highest bid in an auction if the bidder fails to comply with immediate security deposit requirements. The government retains discretion to confirm bids and may prefer co-operative societies based on policy and rules allowing relaxation for mineral development.
Headnote:(A) Rajasthan Minor Mineral Concession Rules, 1959 - Rules 34, 36(5), 36(7) and 59 - Auction for royalty collection contract - Highest bidder failed to deposit 25 per cent of bid amount as security immediately after auction - Government not bound to accept highest bid - Discretion of Government to confirm or not confirm the bid - Rule 36(5) provides that no bids shall be regarded as accepted unless confirmed by Government - Failure to comply with security deposit requirements leads to loss of claim for final acceptance of bid (Paras 4, 6).
(B) Government Policy - Preference to co-operative societies of labourers - Rule 59 allows relaxation of provisions in interest of mineral development or better working of mines - Granting contract to a co-operative society to improve socio-economic conditions of workers is not arbitrary or without justification (Paras 7, 8).
(C) Writ Petition - Ineffectiveness - Where the period of the impugned contract is shortly to come to an end, it is not desirable to interfere with such contract (Paras 9, 10).
Facts of the case:
The appellant offered the highest bid at an auction for a royalty collection contract. However, the appellant failed to deposit the required 25 per cent of the bid amount as security immediately upon completion of the auction. The government subsequently granted the contract to a co-operative society of labourers, which had offered a lower bid, citing government policy to encourage co-operative societies and the appellant's failure to provide security. The appellant sought a writ of certiorari to set aside this order, arguing that the highest bid must be accepted and that security could be adjusted from a previous contract.
Findings of Court:
The government was competent to grant the contract to the co-operative society as it was not bound to accept the highest bid. The appellant's failure to deposit the security immediately as per the rules forfeited his claim. The request to adjust security from a previous contract was untenable as that contract had not yet expired, and security must remain with the government until termination.
Issues: Whether the government is legally obligated to accept the highest bid in an auction for royalty collection and whether the failure to deposit security immediately disqualifies the bidder.
Ratio Decidendi: The court held that under the relevant rules, a bid is not accepted until confirmed by the government, granting the government discretion. Compliance with the immediate deposit of security is a prerequisite for acceptance. Furthermore, the government may relax rules in the interest of mineral development to prefer co-operative societies of workers to improve their socio-economic conditions.
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether the government is mandated to confirm the highest bid at auction as a formality or possesses discretion to grant the contract to another party. (Para 3 , 5 )
3. Failure to deposit security precludes claim to bid acceptance; government possesses discretion to reject highest bids; interference is undesirable when the contract period is nearly expired. (Para 4 , 5 , 6 , 7 , 9 , 10 )
4. Government is not bound to accept the highest bid at auction and may exercise discretion to grant contracts based on policy or rule relaxation. (Para 6 , 8 )
5. Appeal dismissed. (Para 11 )
6. Is the government bound to accept the highest bid in a royalty collection auction?
No. A bid is not regarded as accepted unless confirmed by the government. The government possesses the discretion to confirm or not confirm the bid and is not legally bound to accept the highest bidder. (Para 6 , 8 )
7. What is the legal effect of failing to deposit the required security immediately after an auction?
Failure to deposit the required security amount immediately upon completion of the auction, as mandated by the applicable rules, results in the bidder losing any claim they may have had for the final acceptance of their bid. (Para 4 )
8. Can the government relax auction rules to favor co-operative societies?
Yes. The government may relax rule provisions in the interest of mineral development or better working of mines. Granting preference to co-operative societies of laborers to improve their socio-economic conditions is considered justified and not arbitrary. (Para 6 , 7 )
9. Can a bidder request the adjustment of security deposits from a previous contract for a new bid?
Such a request is unacceptable if the previous contract is still in force, as security must remain with the government until the contract terminates. Any practice contrary to the rules is not binding. (Para 5 )
Judgement
RAGHUBAR DAYAL, J.: This appeal on certificate granted by the Rajasthan High Court is against the dismissal of the appellant s writ petition under Art. 226 of the Constitution praying for the issue e of a writ of certiorari to the State of Rajasthan, respondent No. 1, for the cancelling and setting aside of its order dated April 1, 1964 granting the contract for collecting royalty on building stones excavated from certain area to respondent. No. 2, Dharti Dan Shramik Theka Sahkari Samiti Ltd., a co-operative society. The appeal arises in these circumstances.
2. The appellant offered the highest bid at the auction for the grant of royalty collection contract on 21-1-1964. Respondent No. 2 was also one of the bidders, but stopped after offering abid of Rs. 33,000. The final bid of the appellant was for Rs. 42,200. The State Government made the order in favour of respondent No. 2 on an application made by it on March 5, 1964, stating therein that the appellant had not deposited 25 per cent. of the bid amount as security immediately after the completion of the auction in accordance with R. 36 (7) of the Rajasthan Minor Mineral Concession Rules, 1959, hereinafter called the rules, and as per the terms and conditions of the Auction Notification and that it was prepared to take the royalty collection contract on the highest bid of Rs. 42,200. It was further stated in the application that respondent No. 2 was a co-operative society of the labourers who themselves worked on the mines of the area and therefore in view of Government s policy it should receive preference to an individual bidder. It was further stated that the benefit accruing out of the contract of royalty collection would be shared by the labourers and workers themselves which would go a long way to improve their socioeconomic conditions and thus ultimately would ameliorate the conditions of the workers who were working hard in quarries since long.
3. The contention for the appellant is that the Government had merely to confirm the highest bid at the auction by way of formality and was not competent to sanction the contract in favour of someone who had not offered the highest bid at the auction.
4. Rule 34 of the rules provides that royalty collection contracts may be granted by the Government by auction or tender for a maximum period of two years after which no extension was to be granted. The procedure for auction is provided by R. 36. Sub-rule 5. there of provides that no bids shall be regarded as accepted unless confirmed by Government or the competent authority and sub-rule (7) provides that on completion of the auction the result will be announced and the provisionally selected bidder shall immediately deposit 25 per cent. of the amount of bid for one year and another 25 per cent. as security for due observance of the terms and conditions of the lease or contract. It is admitted for the appellant that on completion of the auction he did not deposit 25 per cent. of the bid as security in compliance with the provisions of sub-rule (7). He therefore lost whatever claim he could have had for the final acceptance of his bid by Government and therefore cannot question the grant of the contract to any other person by the Government.
5. The appellant urges that he held such royalty collection contract for the year 1963-64 and had deposited Rs. 9,250 as security for the due performance of that contract. On February 12, 1964, over three weeks after the auction, he submitted an application to the Mining Engineer, Jaipur, stating that he had been continuously taking contract for the last three years and that he was depositing Rs. 1,300 and that the balance of the security amount required, i.e., Rs. 9,250 be adjusted against Rs. 9,250 with the Government in connection with the earlier contract. This letter was not replied to. The request made in this letter could not possibly be accepted. The earlier contract was to continue up to March 31, and the security money had to r
