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2007 Supreme(Kar) 62
Karnataka High Court
ISMAIL - Appellant
Versus
HUBLI-DHARWAD URBAN DEVELOPMENT AUTHORITY, HUBLI - Respondent
Decided On : 01-25-07
Writ Petition No. 1230 of 2007 (LB-UC).
Subject
Administrative Law - Judicial Review of Administrative Action
Act Referred
CONTRACT ACT : S.2(b), S.4, S.3
KARNATAKA URBAN DEVELOPMENT AUTHORITIES ACT : S.71
KARNATAKA URBAN DEVELOPMENT AUTHORITY DISPOSAL OF CORNER SITES AND COMMERCIAL SITES RULES : R.7, R.3
TRANSFER OF PROPERTY ACT : S.5
Headnote
Cases Referred: AIR 1972 SC 1816; AIR 1999 SC 1256; AIR 2004 SC 4299; AIR 2007 SC 119; AIR 1996 SC 11; ILR 2004 KAR 2205 (SC); 1997 (7) SCC 463; 2003 (4) SCC 579.
Indian Contract Act, 1872 - Section 8 - Sale by auction - Concluded contract - When happens - Principles. [Ram Mohan Reddy, J.]: Public auctions are held to obtain the best possible price. 2. An invitation to tender is not an offer, but an attempt to ascertain whether an offer can be obtained with a margin. 3. That the owner of the privileges who offered to sell the same is entitled to decline the price offered as inadequate. 4. That there is no concluded contract untill the bid is accepted by a communication. 5. By offering bids, the bidders did not acquire any vested rights. 6. Acceptance of bid at a public auction and deposit of 23% of the bid amount do not constitute a transfer of property. 7. The concept of "reserve price" is not synonymous with "valuation of the property", as the former is only indicative, to limit the authority of the auctioneer.
Cases Referred: AIR 1972 SC 1816; AIR 1999 SC 1256; AIR 2004 SC 4299; AIR 2007 SC 119; AIR 1996 SC 11; ILR 2004 KAR 2205 (SC); 1997 (7) SCC 463; 2003 (4) SCC 579.
Government Contract - Concluded contract - Principles as to.
Cases Referred: AIR 1972 SC 1816; AIR 1999 SC 1256; AIR 2004 SC 4299; AIR 2007 SC 119; AIR 1996 SC 11; ILR 2004 KAR 2205 (SC); 1997 (7) SCC 463; 2003 (4) SCC 579.
Constitution of India - Article 226 - Judicial review of administrative decisions - Principles. Dilatory Settled Principles: The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by government bodies are: (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness including its other facts but must be free from arbitrariness not affected by bias or actuated by mala fides.(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure [AIR 1996 SC 11].
Referred: AIR 1972 SC 1816; AIR 1999 SC 1256; AIR 2004 SC 4299; AIR 2007 SC 119; AIR 1996 SC 11; ILR 2004 KAR 2205 (SC); 1997 (7) SCC 463; 2003 (4) SCC 579.
Constitution of India - Article 226 - Administrative decision - Interference with - Mala fides - Burden of proof. Dilatory Settled Principles: Doubtness, he who seeks to invalidate or nullify any act or order must establish the charge of bad faith, an abuse or a misuse by the authority of its powers. While the indirect motive or purpose, or bad faith or personal ill-will is not to be held established except on clear proof thereof, it is obviously difficult to establish the state of a man s mind, for that is what the employee has to establish in this case, though this may sometimes be done. The difficulty is not lessened when one has to establish that a person apparently acting on the legitimate exercise of power has, in fact, been acting mala fide in the sense of pursuing an illegitimate aim. It is not the law that mala fide in the sense of improper motive should be established only by direct evidence. But it must be discernible from the order impugned or must be shown from the established surrounding factors which preceded the order. If bad faith would vitiate the order, the same can, in our opinion, be deduced as a reasonable and inescap-able inference from proved facts. It cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demands proof of a high order of credibility [ILR 2004 Kar 2205 (SC)].
Cases Referred: AIR 1972 SC 1816; AIR 1999 SC 1256; AIR 2004 SC 4299; AIR 2007 SC 119; AIR 1996 SC 11; ILR 2004 KAR 2205 (SC); 1997 (7) SCC 463; 2003 (4) SCC 579.
Auction - Of site by authority - Right to cancel sale - Reservation as to - Legality.
Cases Referred: AIR 1972 SC 1816; AIR 1999 SC 1256; AIR 2004 SC 4299; AIR 2007 SC 119; AIR 1996 SC 11; ILR 2004 KAR 2205 (SC); 1997 (7) SCC 463; 2003 (4) SCC 579.
Karnataka Transparency in Public Procurement Act, 1999 - Section 6 - Tenders - Judicial review of decisions regarding - Settled principles.
Cases Referred: AIR 1972 SC 1816; AIR 1999 SC 1256; AIR 2004 SC 4299; AIR 2007 SC 119; AIR 1996 SC 11; ILR 2004 KAR 2205 (SC); 1997 (7) SCC 463; 2003 (4) SCC 579.
Sri S.V. Shastri and Sri Ravi Hegde
Petitioners, residents of Hubli, of whom 2 and 4 claims to be housewives, while the others businessmen, responded to the public auction notice dated 8-9-2006, by depositing Rs. 5,000/- each, offering the highest bids on 14-9-2006, and depositing 25% of the bid amount on 15-9-2006, for purchase of comer sites in S.R. No. 131/2, of Mariyana Thimmasagara Taluk, Hubli. It is the assertion of the petitioners that on account of the failure on the part of the respondent in not communicating the acceptance of their bids, were unable to deposit the balance of the amount, in terms of the auction notice. According to the petitioners, their offers being fair, in excess of the value fixed by the State Government were entitled to be declared as successful bidders. It is alleged that the respondent by resolution dated 9-11-2006, Annexure-F, cancelled the auction held on 14-9-2006, on the premise, that the sites put up for auction, being valuable, would fetch more than the bids offered by the petitioners. Hence, this writ petition to quash item 15 of the resolution dated 9-11-2006, Annexure-F, and to direct the respondents to execute the sale deeds, in favour of the petitioners, conveying the comer sites, as set out in the auction notification, by accepting the balance amount.
2. Learned Counsel submits that disposal of comer sites are governed by the Karnataka Urban Development Authorities (Disposal of Comer Sites and Commercial Sites) Rules, 1991 and that Rule 3 provides for auctioning of comer sites, while Rule 7 provides for cancellation, to be preceded by assigning reasons. Learned Counsel while pointing out to Clause 7 of the auction notification, Annexure-A, reserving the right of the respondent to annul the auction, by assigning reasons, contends that mere expectation to secure a price higher than the offers made by the petitioners, is a perverse, arbitrary and irrational reason, for cancelling the auction.
3. Having heard the learned Counsel for the petitioners and perused the pleadings, the question that arises for decision making is, whether the petitioners are entitled to the reliefs sought for?
Before proceeding to consider the merits of the case, it is useful to make reference to the following reported decisions in the matter of auction/tender. In the case of State of Orissa and Others v Harinarayan Jaiswal and Others1, the rejection of the highest bid in an auction for country liquor shops, questioned as being violative of Articles 14 and 19(1)(g) of the Constitution of India, when subjected to judicial review, the Apex Court observed thus:
“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 was no basis for contending that the owner of the privileges in question who had offered to sell them could not decline that the price offered is inadequate. There was no concluded contract till the bid was accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids. By merely giving bids, the bidders had not acquired any vested rights".
(emphasis supplied)
4. In the case of Delhi Development Authority v Ravindra Mohan Aggarwal and Another1, the Apex Court observed thus:
“The acceptance of the bid recorded by the Vice-Chairman, DDA on the file was bad for two reasons. Firstly, it was so recorded after the passing of the interim order of stay by the High Court though it was in the process of being communicated. Secondly, the acceptance was not communicated by the DDA to the respondents and therefore the acceptance was not complete. Merely because the respondents gathered knowledge of the acceptance having been recorded on the file would not make any difference. Reliance on Section 43 of the Transfer of Property Act is entirely misconceived inasmuch as there was no transfer or gran
