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PUNJAB & HARYANA HIGH COURT
Vijender Jain, Rajive Bhalla and Surya Kant JJ.
Subhash Chand
Versus
State Of Haryana
Civil Writ Petition No. 16905 of 1991,
Decided On : MAY 30, 2007
(B) Constitution of India, 1950, Articles 298, 299, 14-Contractual matters--Executive power-State action-Is the State to be treated differently than an individual qua its rights to enter into contract in exercise of its Executive powers? NO-Held;
(i) State is free to enter into a contract just like any other individual.
(ii) The contract shall not change its legal character merely because the other party to contract is the State.
(iii) The rights of the parties shall be determined by the terms of such contract, irrespective of the fact that one of the parties to it is a State or a Statutory Authority. (Para 16)
(C) Constitution of India, 1950, Article 298 and 299-Contractual matters-State Action-Fair play & public interest-State or its instrumentalities are free to enter into a contract with any person yet they cannot act whimsically and their freedom to enter into business etc. is subject to the conditions of reason fair-play and public interest. (Para 17)
(D) Constitution of India, 1950, Articles 298, 299 & 14-Contractual matters-Executive Powers-Judicial review-Decision is assailable on the ground of arbitrariness or is de-hors of Article 14 and or is contrary to public law. (Para 17)
(E) Constitution of India, 1950, Article 226, 299-Contractual rights-State action-Auction sale--Highest bidder-State Government cannot refuse to confirm the highest bid without assigning any valid reasons. (Para 19)
(F) Constitution of India, 1950, Article 226, 299-Contractual rights-State Action-Auction sale--Judicial review-Every highest bidder has a right to assail the action of the State Government by acting upon such promise, the Government may be required to make good that promise-Held; In such like matters, heavy onus would on the petitioner to establish his allegations as the State action shall always be presumed to be in accordance with law. (Para 20)
(G) Constitution of India, 1950, Article 299-"Promissory estoppel"-Contractual rights-If the Government makes a representation-An individual alters his position by acting upon such promise by contending that his bid has been turned down for arbitrary, illegal or perverse reasons-State shall not be allowed to fall back upon the formal defect in the contract--Though subject to limitations like larger public interest. (Para 18)
(H) Displaced Persons (Compensation and Rehabilitation) Rules, 1955-Rules 5(i)-Auction sale-Reasons for acceptance or refusal-Competent authority is duty bound under the Rules to record relevant reasons for refusing to accept the highest or other bid, even though such reasons may not necessarily be disclosed to the bidders but are required to be placed before the Court in the process of judicial review. (Para 9 & 12)
(I) Displaced Persons (Compensation and Rehabilitation) Rules, 1955-Rules 5(i)-Auction sale-Highest bid-Non acceptance of-Right of Bidder--The refusal to accept the highest bid cannot foreclose the right of the highest bidder to put the action of the competent authority to judicial scrutiny. (Para 14)
(J) Displaced Persons (Compensation and Rehabilitation) Rules, 1955-Rules 5(i)-Auction sale-Highest Bidder-Non acceptance of-Reserve price was Rs.680,250/-.-Highest bid of Rs. 71,000/- not accepted as difference of reserve price and bid amount of marginal-Order challenged on discrimination as little later similar lands bid price with similar margin was accepted-Held; Every highest bidder has right to aside the order of State Government on ground it been perverse or arbitrary-Impugned order directed to be reviewed. (Para 4, 5, 20 & 22)
SURYA KANT, J.
1. The following questions of law have been referred by a Division Bench of this Court vide order dated 7th February, 1992 for adjudication by a larger Bench :-
"(1) Is the State to be treated differently than an individual qua its rights to enter into contract in exercise of its Executive powers ?
(2) Are the provisions of the Indian Contract Act applicable to the State as in case of an individual in addition to the additional safeguards provided by Article 299 of the Constitution of India, to protect the interest of the State particularly in view of the fact that the auction, subject to confirmation of the higher authorities is nothing more than inviting offers and it is only on confirmation or acceptance of auction that an enforceable agreement comes into being ?
(3) Does a person who made only an offer without it being accepted acquire any enforceable right under the law ?
(4) Does the petitioner, in the facts and circumstances of the case particularly the non-acceptance of the bid which was subject to the confirmation, has any locus standi to maintain the writ petition ?
(5) Is the State in exercise of its executive powers bound to pass a reasoned speaking order and is bound to follow the principles of natural justice like granting an opportunity of hearing ?
(6) Does a highest bidder in an auction whose bid the authorities refuse to accept acquire any right ?
(7) Does the said refusal adversely affect any right of the highest bidder ?
(8) Can the contractual rights be enforced in exercise of writ jurisdiction ?"
2. While referring these questions, the Division Bench has doubted the correctness of an earlier Full Bench judgment of this Court in the case of Surja Ram V/s. The State of Haryana, 1984 PLJ 282 : (AIR 1984 P&H 282) as according to it the view taken by the Full Bench that "non-acceptance of the highest bid amounts to taking away the Right to Property", runs contrary to the law laid down by the Apex Court in the case of M/s. Bombay Salt and Chemical Industries V/s. L. J. Johnson, AIR 1958 SC 289.
3. Before adverting to the questions under reference, the facts may be noticed briefly.
4. Plot No. 3837-42/1 measuring 210 square yard was put to auction by respondent No. 3 - Tehsildar (Sales)-cum-Managing Officer, Hisar, on 7th February, 1991 at a reserve price of Rs. 325/- per square yard, amounting to a total of Rs. 68,250/-. The said auction was held under the provisions of the Displaced Persons (Compensation and Rehabilitation) Act, 1954 and the Rules of 1955 framed thereunder. The petitioner gave the highest bid of Rs. 71,000/- and deposited the earnest money amounting to Rs. 18,000/- on the same day i.e. 7th February, 1991. Since the auction was subject to confirmation by the competent authority under Rule 90(10) of the 1955 Rules, respondent No. 3 recommended the case to the Chief Settlement Commissioner, Haryana (respondent No. 2) for acceptance of the petitioner s bid and non-confirmation of sale in his favour. The second respondent, however, vide his order dated 22nd July, 1991 declined to confirm the sale and ordered re-auction of the plot on the plea that "the difference between the reserve price and the highest bid is marginal".
5. Aggrieved the petitioner assails the aforementioned order on the ground of discrimination inter alia, alleging that on 7th February, 1991 itself, the third respondent also put another plot No. 6837-39/4 measuring 240 sq. yards to auction at a reserve price of Rs. 325/- per sq. yard, amounting to a total of Rs. 78,000/- in which the highest bid of Rs. 80,000/- i.e. Rs. 8.33/- per sq. yard more than the reserve price only, was received but the bid was accepted and sale was confirmed on the premise that the aforesaid price was fetched in the seventh attempt.
6. The petitioner appears to have relied upon the Full Bench decision of this Court in Surja Ram s case (AIR 1984 P&H 282) (supra), the correctness of which has been doubted by the Division Bench, giving
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