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2004 Supreme(Pat) 556
PATNA HIGH COURT
Ravi S.Dhavan and Shashank Kr.Singh JJ.
State Of Bihar
Versus
P.E.C.Ltd.
Letters Patent Appeal No. 368 of 2004 ;
Decided On : MAY 19, 2004
The main legal point established in the judgment is the importance of upholding the terms and conditions of a public auction, ensuring the completion of contracts, and maintaining stability and confidence in state contracts.
Headnote:
Public Auction - Sale of Goods - Sale of Goods Act, 1930, Section 64 - The judgment discusses the modalities of a public auction, the acceptance of bids, and the completion of a contract. It highlights the importance of following the rules of the auction and the consequences of breaching the contract. The court emphasizes the significance of upholding the terms and conditions of the auction and the need for stability and confidence in state contracts.
Fact of the Case:
The case involves a public auction for the sale of iron and steel scrap conducted by the State of Bihar. The highest bidder, P.E.C. Limited, had its bid accepted and made the required deposits. However, attempts were made to dislodge the contract, leading to political interference and the filing of a false First Information Report. The court was required to address these extraneous issues.
Finding of the Court:
The court found that the contract was complete and upheld the decision of the learned Judge, dismissing the appeal with costs throughout. It also directed the return of the security deposit to the State of Bihar.
Issues: The issues revolved around the acceptance of bids, completion of the contract, political interference, and the filing of a false First Information Report.
Ratio Decidendi: The court emphasized the need to uphold the terms and conditions of the auction, the completion of the contract, and the consequences of breaching the contract. It also highlighted the importance of stability and confidence in state contracts.
Final Decision: The appeal was dismissed, and the security deposit was directed to be returned to the State of Bihar.
Ravi S.Dhavan, J.
1. Delay condoned.
2. This letters patent appeal has been filed ostensibly on behalf of the State of Bihar. The court mentions ostensibly because this aspect may ultimately have a bearing on some other circumstances which ought not to have been raised by the appellants. The issues are to be seen as arising out of the judgment which is challenged in this letters patent appeal. The judgment is dated 14 January 2004. It was rendered on a writ petition being CWJC No. 13914 of 2003: P.E.C. Limited vs. State of Bihar & Ors.
3. Another circumstance emerged subsequently in the appeal. It is contended in this appeal that the State of Bihar was not aware as to the identity of the highest bidder, the petitioner, which filed the writ petition. This party is known as P.E.C. Ltd., (Project and Equipments Corporation Limited); a Government of India undertaking. The issues, then, are with a public sector undertaking, a state in its own right. Its shares are held by the President of India. This was not an issue in the writ petition.
4. Issues prior to the filing of the writ petition, which led to the filing of it are about the assignment of a contract to a highest bidder in a public auction. A contract was to be awarded by the State of Bihar by a public auction. An advertisement was caused to be made by the State of Bihar as a public notice. The advertisement was published on 16 September 2003 bearing no. YA-2-PRA-17/2002. It was published by the Chief Engineer, Mechanical, Water Resources Department, Bihar, Patna. It was announcing an auction (Neelam Soochna) and the conditions were given in it. Fourteen conditions were provided.
5. The date of auction set was for 23 September 2003. The subject of the contract related to four (4) lots; A, B, C & D. The goods were iron and steel scrap. It was a sale of goods by description, not by sample. The goods were to be sold by tonnage, that is, weight.
6. The issue which concerns the matter before the court in the letters patent appeal as also in the writ petition related to the four (4) lots, that is, A, B, C & D.
7. First, the parameters of a public, auction are to be understood. Then the law which governs a public auction.
8. The first aspect is about the modality of a public auction. An advertisement was not an offer. It was an invitation to make an offer. This 1s the law. An advertisement was an invitation to make an offer; to enter an arena of public auction. One needed a passport in the nature of a deposit as earnest money. This was condition no. 1. The earnest money was to represent 5% of the reserved price. Any one who did not deposit the earnest money could not enter the arena where the auction was to be held. P.E.C. Ltd., a party which filed the writ petition, had deposited the earnest money, it crossed the barrier to enter the arena of auction. The place of auction was at Bhimnagar, district Birpur (Supaul). The second condition of the auction was that the bids were to be offered per ton of the goods, that is, metal scrap. By the third condition inspection of the goods was permitted. By the fourth condition 10% of the highest accepted bid amount, in addition to the earnest money, would be deposited within 7 days and this was to be as National Saving Certificates or Bank Drafts. The additional condition was that if, upon acceptance of the auction bid, a National Saving Certificate or a Bank Draft amounting to 10% of the accepted bid amount was not deposited within the period stipulated then the earnest money could be encashed, in effect, forfeited. The fifth condition was that unsuccessful bidders would be refunded their 5% earnest money within one week from the date of the auction. The sixth condition was that if for any reason the auction bid is not accepted within the period indicated then both the earnest money and the 10% security so deposited by the highest bidder would be returned within one week of the date of rejection of the contract. The seventh condition
