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1993 Supreme(Pat) 218
PATNA HIGH COURT
U.P.Singh and Gurusharan Sharma JJ.
Chandra Prabhu Agency Private Limited.
Versus
Bihar Rajya Pal Nirman Limited
Civil Writ Jurisdiction Case No. 2755 of 1993 ;
Decided On : MAY 10, 1993
A public authority's decision to cancel an auction and a bidder's bid must be based on valid reasons and must be made in accordance with the principles of natural justice, including providing the bidder with an opportunity to be heard.
Headnote:
TOLLS - PUBLIC AUCTION - INDIAN TOLLS ACT, 1851 - BIHAR TOLLS RULES, 1979 - CANCELLATION OF AUCTION - ARBITRARINESS - VIOLATION OF PRINCIPLES OF NATURAL JUSTICE - QUASHING OF STAY ORDER - EXECUTION OF CONTRACT.
Fact of the Case:
The petitioner participated in a public auction for the right to collect tolls on a bridge, held by the Bihar Rajya Pul Nirman Nigam Ltd. (Nigam) under the Bihar Tolls Rules, 1979. The petitioner emerged as the highest bidder and deposited one-third of the highest bid amount as required by the rules. However, the Nigam issued a notice staying the auction and canceling the petitioner's bid, citing reasons such as lack of healthy competition and peaceful atmosphere during the auction and the bid amount being lower than the estimated reserved amount.
Finding of the Court:
The court found that the Nigam's decision to cancel the auction and the petitioner's bid was arbitrary and violative of the principles of natural justice. The court held that the Nigam did not provide any specific reasons for the cancellation and did not give the petitioner an opportunity to be heard before taking the decision. The court also found that the alleged reasons for cancellation, such as lack of healthy competition and low bid amount, were not supported by any evidence.
Issues: 1. Whether the Nigam's decision to cancel the auction and the petitioner's bid was arbitrary and violative of the principles of natural justice? 2. Whether the Nigam had sufficient reasons to cancel the auction and the petitioner's bid?
Ratio Decidendi: The court relied on the provisions of the Indian Tolls Act, 1851, the Bihar Tolls Rules, 1979, and the principles of natural justice to reach its decision. The court held that the Nigam's decision to cancel the auction and the petitioner's bid was arbitrary and violative of the principles of natural justice because: 1. The Nigam did not provide any specific reasons for the cancellation. 2. The Nigam did not give the petitioner an opportunity to be heard before taking the decision. 3. The alleged reasons for cancellation, such as lack of healthy competition and low bid amount, were not supported by any evidence.
Final Decision: The court quashed the Nigam's stay order canceling the auction and the petitioner's bid and directed the Nigam to execute the contract for the lease of the right to collect tolls on the bridge in favor of the petitioner on the basis of the highest bid accepted in the public auction.
U. P. Singh and J JJ.
1. In this writ application under Articles 226 and 227 of the Constitution of India, the petitioner has sought for a direction to be issued to the respondents to execute the agreement in respect of collection of tolls relating to Phushro Bridge in the district of Giridih on account of the highest bid accepted in the public auction held on 4th February, 1993. He has further prayed for quashing of the order dated 4-2-1993 contained in annexure 3.
2. In accordance with the provisions of the Bihar Tolls Rules, 1979, the Bihar Rajya Pul Nirman Nigam Ltd (in short nigam) issued a notice on 17th December, 1992, published in the important news papers calling for a public auction to be held on 4-2-1993 in respect of settlement of the right to collect tolls on several bridges in the State, (Annexure 1 ).
3. In exercise of the powers conferred by Sec.9 of the Indian Tolls act, 1851 as ameded by the Indian Tolls (Bihar Amendment) Act, 1962 and rules thereunder, the Government entrusted possession and management of the concerned bridges to the Nigam under the statutory scheme of collection of tolls. The Nigam is an undertaking owned and set up by the State of bihar and is entrusted with the statutory duty in the matter of collection of tolls over the concerned bridges transferred to it.
4. In pursuance of the public notice (Annexure 1 ). the intending bidders were required to purchase auctioned documents by 1-2-1993 on payment of non-refundable amount of Rs l,000/-per set of auctioned document. The earnest money, as indicated in the notice, along with certificates etc. were to be submitted by 4 P. M. on 1-2-1993 and the auction was scheduled for 4-2-1993 for settlement of right to collect tolls over the concerned bridges for a period of one year commencing from 1-4-1993 to 31-3-1994,
5. The petitioner fulfilled all the requirments for participation in the public auction. He purchased the auctioned documents for the Phushro bridge in the district of Giridih by paying rupees one thousand. He also submitted rupees two lacs by Bank Drafts as the earnest money for the said bridge along with all necessary certificates, etc. After verification and proper checking, the petitioner was issued an authority letter to participate in the auction for the said bridge.
6. As per rule 27 of the Rules, the petitioner participated in the public auction held on 4-2-1993. The auction started at 10 00 A. M and it was publicly held and peacefully conducted in respect of the said Phushro bridge. After contest with other bidders, the petitioners bid for rupees thirty three lacs, being the highest bid for the said bridge, was declared and accepted as final. In terms of the auction notice and rule 49 of the Rules, the petitioner, being the highest bidder, was rightly treated as the approved bidder and was called upon to deposit l/3rd of the highest bid amount accordingly, the petitioner made further deposits against the duly issued receipt dated 4th February, 1993, and immedliately after the close of the auction the amount of 1/3rd of the highest bid for the bridge was deposited (Annexure 2), Thus, the petitioner was prepared to execute the agreement of the contract in accordance with rule 53 of the Rules and to deposit the second instalment of further 1/3 rd of his bid amount but, to utter surprise and dismay even though the auction for some of the bridge was continuing as per annexure 1. respondent No 2, the Managing Director of the Nigam, issued a notice on 4th February.1993, stating that for undisclosed reasons the auctions have been stayed and that next date for the auction will be notified later. This impugned notice dated 4th February, 1993, contained in Annexure 3 has been challenged by the petitioner for being quashed The same has been challenged as arbitrary being violative of Article 14 of the Constitution as also in violation of the principles of natural justice.
7. It is relevant to state that the last years departmental col
