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T.M. Peermohamed Vs. the D.F.O., Tenmala and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKerala High Court
Decided On
Case NumberO.P. No. 3491 of 1973
Judge
Reported inAIR1974Ker192
ActsConstitution of India - Article 226
AppellantT.M. Peermohamed
RespondentThe D.F.O., Tenmala and ors.
Appellant Advocate V. Vyasan Poti, Adv.
Respondent AdvocateGovt. Pleader
DispositionPetition dismissed
Cases ReferredD.F.O. South Kheri v. Ram Sanehi
Excerpt:
.....- auction - article 226 of constitution of india - petitioner challenged order of divisional forest officer regarding cancellation of auction held by him - respondent contended that petition not maintainable - breach of executive instruction in matters concerning conduct of auction may not be sufficient for court to interfere in exercise of jurisdiction under article 226 - court not to invoke its jurisdiction under article 226 - petition liable to be dismissed. - - according to him it was also reported that if a re-auction was conducted there would be every possibility of getting a better price, more advantageous to the revenue. reference is made in paragraph 9 of the counter-affidavit to departmental instructions which provided that in order to recommend an auction sale for..........not therefore so decide. but assuming that there has been any breach that is a matter between the state government and its servant, and the state government may take disciplinary action against the servant concerned who disobeyed these instructions. but such disobedience did not confer any right on a person like the appellant, to come to court for any relief based on the breach of these instructions. it is for this reason that we are not referring to the code, though the high court did consider whether there was any breach of these administrative instructions and came to the conclusion that there was no breach. in the view we take it is unnecessary for us to consider this, for we are of opinion that no claim for any relief before a court of law can be founded by a member of the public,.....
Judgment:

P. Subramonian Poti, J.

1. The petitioner is a forest contractor. Pursuant to the notification issued by the Forest Department of the Kerala Government regarding the auction sale of the right of collection and removal of the entire tree growth except the rose wood trees standing or lying felled from the area mentioned in the notification, the petitioner participated in the auction and as he was the highest bidder the bid was knocked down in his favour. He deposited Rs. 10,000 as required by the conditions of the auction. He also executed an agreement on stamp paper to the effect that he will not withdraw from the purchase. He is also said to have signed the sale list.

2. The Divisional Forest Officer, Thenmala Range, by his order dated 28-9-1973, Ext. P-3, cancelled the auction held by him and notified a reauction to be held on 19-10-1973. The petitioner has come to this court challenging Ext, P-3 order passed by the Divisional Forest Officer as incompetent. No reasons are indicated in Ext. P-3 order for cancellation of the earlier auction. It is agreed that there was no confirmation pursuant to the auction held on 28-9-1973. Such confirmation was to be by the second respondent and there was no occasion for him to consider this matter.

2-A. Clause (v) of the conditions (as seen in Ext. P-1) of the auction specifies :

'The sale shall ordinarily be knocked down in the name of the highest bidder and confirmed by the competent authority provided that the character and financial status of the bidder is found satisfactory. But the Divisional Forest Officer reserves to himself the right to accept or reject any offer without assigning any reason therefor. The bidder shall not withdraw from his offer before receipt of final orders of the competent authority.' It may also be necessary to refer to Clause (vi) which runs as follows :

'On the date of the auction the successful bidder shall remit the full 1/3 value of the coupe or Rs. 10,000 whichever is less including earnest money deposit immediately after the auction is ever, failing which the earnest money deposited by him will be confiscated and the coupe resold at his risk and loss but he shall have no claim over the gain, if any, resulting from the reauction'

3. According to the petitioner the bid having been knocked down in his favour he was entitled to the confirmation, and consequently the right, to work under the terms of the contract and that has been taken away illegally and unreasonably by the first respondent by Pessing Ext. P-3 order. What is urged at the hearing is that though the Divisional Forest Officer reserved to himself the power to accept the highest bid or reject it, in this case the power had already been exercised when the highest bid of the petitioner was accepted. Therefore nothing remained for the Divisional Forest Officer to do. Whether the bid was to be confirmed in terms of Clause (v) of the conditions of auction or not, was for the competent authority to decide. The competent authority is the second respondent and he has not exercised his mind to cancel the auction or to direct re-auction. In short, the case of the petitioner is that having bid in auction a right has accrued to him and that would be sufficient to entitle him to challenge the act of the Divisional Forest Officer by way of cancellation, an act which could have been done only by the second respondent.

4. Counter-affidavit has been filed in this case only by the first respondent, the Divisional Forest Officer. In this counter-affidavit the first respondent mentions that the auction was knocked down in favour of the petitioner on 26-9-1973. But on the completion of the auction the first respondent is said to have found suspicious collusion and ring formation among the bidders for the purpose of keeping down the bid amount and hence on the next day he is said to have issued a secret direction to the Range Officer, Thenmala to make discreet and confidential enquiry in the matter. He further avers that as a result of the enquiry he understood that the amount fetched at the time of auction was low and this was as a result of collusion among the bidders. According to him it was also reported that if a re-auction was conducted there would be every possibility of getting a better price, more advantageous to the revenue. Reference is also made to a post offer from one Sri T. K. Vijayan, Forest Contractor, offering Rs. 10,000 more than the amount bid by the petitioner. According to the Divisional Forest Officer these are the circumstances which persuaded him not to recommend for confirmation to the competent authority and consequently he had to cancel the auction. Reference is made in paragraph 9 of the counter-affidavit to departmental instructions which provided that in order to recommend an auction sale for the confirmation of the competent authority, three conditions have to be satisfied, namely, (1) there should be wide publicity for the sale (2) there must have been keen competition among the bidders and (3) the price fetched must be most advantageous to the Government. According to the Divisional Forest Officer conditions numbers 2 and 3 were not satisfied in the present case and that was why recommendation was not made for confirmation of the sale.

5. Possibly on the merits petitioner may have a case. That is because once the bid was knocked down in the name of the petitioner, as the highest bidder, the Divisional Forest Officer could not cancel the auction by himself. If he found that the best price has not been fetched or there was collusion among the bidders at the sale and therefore confirmation was not desirable he could have reported to the competent authority who could have, on such recommendation, refused to confirm the sale. Irrespective of what the Divisional Forest Officer felt in the matter, once he had knocked down the bid in favour of the highest bidder and thus exercised his power to accept the highest bid or to reject it. he would be usurping the powers of the competent authority in cancelling the auction.

6. Several aspects as to the maintainability of the petition arise in this case from the interesting arguments addressed by both sides at the hearing. Learned Advocate-General, appearing for the State challenges the maintainability of this petition, as according to him, the petitioner had no legal right to come to this court and invoke the jurisdiction under Article 226 of the Constitution of India. What is complained of is not violation of any statute or statutory rule. According to the learned Advocate-General the petitioner could claim to have any right to the property under the contract, the infringement of which may give rise to a cause to come to this court, only when there is a binding contract between the parties. If, prior to the confirmation of the bid at the auction, one of the parties chose to back out of the contract the grievance of the other party cannot be said to be legal and such a party would have no locus standi to move this Court under Article 226 of the Constitution of India.

7. That a contract to be binding on the State must be one expressed in terms of Article 299 of the Constitution is by now well settled. In the decision of the Supreme Court in K. P. Chowdhry v. State of M. P. (AIR 1967 SC 203) it was noticed that the State too cannot rely upon such a contract unless it is in the form required by Article 299 of the Constitution of India. That there is no concluded contract in this case not only for want of execution of a formal agreement but also because there was no confirmation of the auction is undisputed. Therefore it is not on the basis that there is a breach of the contract in the conduct of the first respondent that the petitioner could come to this Court. On the other hand, the petitioner's case appears to be that he is entitled to bid at an auction held by a public authority like the Divisional Forest Officer and is entitled to seek confirmation thereof in due course and if the conduct of any public authority with such right that would be incompetent (sic).

8. Before I go into the question as to the nature of the right of the petitioner it is necessary to consider how far interference by this Court would be justified in the matter of a complaint of non-compliance by a public authority or officer with directions of an administrative nature issued by the Government or other superior authority. This question is relevant because it is not the case of either party that in conducting the auction the Divisional Forest Officer was acting pursuant to any statute or that the conduct of the auction was covered by any statutory rules. It was only an administrative act on his part and the conditions relating to auction are mere executive or administrative directions issued to him. which, as a subordinate officer, he was bound to comply with. The complaint in the petition being merely that these instructions or directions contained in the auction notice have been violated, the question is, how far the petition would be entertainable on the basis of such a complaint.

9. In the decision in Guruswamy v. State of Mysore (AIR 1954 SC 592) the appellant before the Supreme Court was the highest bidder in an excise auction and the bid had been knocked down in his favour. But that was not final because the sale was expressly subject to the formal confirmation of the Deputy Commissioner who was given a discretion to accept or reject a bid. The Deputy Commissioner did not give his sanction but equally he did not exercise his discretion to refuse confirmation. The Excise Commissioner assumed this authority. The sale was cancelled by him on the ground that another person had offered Rs. 5000/- more. The reason for the cancellation that the Government would be able to get more revenue was found by the court to be sound. The cancellation was therefore held to be proper. As the appellant there had not obtained the licence by the mere fact that the contract had been knocked down in his favour (the acceptance being subject to sanction), it was held that the appellant's right to relief of mandamus to confirm his right to, the licence cannot be granted. The Supreme Court, at the same time, did not approve the method of granting the contract in favour of another person without holding a public re-auction merely because he had offered a higher sum.

10. Where the action challengedis of a public authority invested withstatutory powers even if the right torelief arose out of an alleged breach ofcontract a resort to this Court under Article 226 of the Constitution would be justifiable under certain circumstances. That in essence was what was said in (AIR 1954 SC 592). As in this case, in the case before the Supreme Court also the petitioner complained that his bid was cancelled though it was the highest, but that contention did not succeed. Such cancellation was found to be proper in view of the circumstances that bidder obtained no right to the licence by the mere fact that the bid has been knocked down in his favour. The acceptance was subject to sanction and such sanction had not been given when his bid was cancelled. But, though the relief of mandamus to confirm his right to the licence was not granted, the Court found that the petitioner, as one of those interested in participating in the auction would have a voice in the matter of a complaint that the licence was subsequently given to another individual improperly. That was because he was interested in these contracts and therefore had necessarily a right under the laws of the State to receive same treatment and be given the same chance as anybody else. If one who was present but had not bid in the auction, with the consequences the petitioner had no occasion to outbid him. was to be preferred subsequently by private negotiations that would have essentially meant that those who were anxious to compete were to be denied the opportunity by the furtive method adopted. In the interests of eleminating favouritism, nepotism and corruption and also to secure that no loss to the State was caused the Supreme Court was of the view that in such cases interference at the instance of a person like the petitioner would be permissible. That of course is a consideration different from that which has arisen here. There has not been resort to any method other than auction or preference of any person in a manner that leaves room for doubt about the bona fides of the authority concerned.

11. Mere breach of executive instructions in matters concerning the conduct of auctions may not be sufficient for a court to interfere in exercise of the jurisdiction under Article 226. Under the executive power of the State, administrative instructions may be issued by the Government to its officers from time to time. These are instructions intended for the guidance of the officers and in case these are violated it is a matter for the Government to take appropriate action against its own servants. Instructions by themselves may not. in such matters, vest any right in the citizen to claim that on violation thereof this Court in exercise of its jurisdiction under Article 226 of the Constitution must interfere. The Supreme Court in G. J. Fernandez v. State of Mysore (AIR 1967 SC 1753) in case concerning the complaint of violation of the provisions of the instructions contained in the Public Works Department Code of the Mysore State, said--

'Before however we consider the question whether instructions in the Code have been followed or not we have to decide whether these instructions have any statutory force. If they have no statutory force, they confer no right on anybody and a tenderer cannot claim any rights on the basis of these administrative instructions. If these are mere administrative instructions it may be open to Government to take disciplinary action against its servants who do not follow these instructions but non-observance of such administrative instructions does not in our opinion confer any right on any member of the public like a tenderer to ask for a writ against Government by a petition under Article 226. The matter may be different if the instructions contained in the Code are statutory rules.'

Again Wanchoo C. J. said in the same decision--

'We are therefore of opinion that instructions contained in the Code are mere administrative instructions and are not statutory rules. Therefore even if there has been any breach of such executive instructions that does not confer any right on the appellant to apply to the court for quashing orders in breach of such instructions. It is unnecessary for us to decide whether there has been in fact a breach of any instruction contained in the Code with respect to tenders and we do not therefore so decide. But assuming that there has been any breach that is a matter between the State Government and its servant, and the State Government may take disciplinary action against the servant concerned who disobeyed these instructions. But such disobedience did not confer any right on a person like the appellant, to come to court for any relief based on the breach of these instructions. It is for this reason that we are not referring to the Code, though the High Court did consider whether there was any breach of these administrative instructions and came to the conclusion that there was no breach. In the view we take it is unnecessary for us to consider this, for we are of opinion that no claim for any relief before a court of law can be founded by a member of the public, like the appellant, on the breach of mere administrative instructions.'

12. In C. K. Achutan v. State of Kerala, (AIR 1959 SC 490) the Supreme Court held that a refusal to permit a person to work under contract with the. State Government, whether or not such refusal amounts to a breach of contract, involved no breach of any fundamental right of the person concerned. The Government may choose any person to enter into a contract and on the question of such choice there cannot be any complaint by a third party. In that respect the Government stands on no different footing from a private party. The refusal of the Government to enter into contract with any particular person may not be said to be an infringement of the right guaranteed under Article 19(1)(g) to practise any profession or to carry on any occupation, trade or business. A Full Bench of this Court in Punnen Thomas v. State of Kerala, (1968 Ker LT 800) = (AIR 1969 Ker 81 FBI applied this rule to the case of a person who was black-listed as a consequence of which he was debarred from taking any government work for a period of 10 years. The petitioner who complained against such an order having been passed against him. particularly without notice to him and without giving him an opportunity to be heard, did not succeed. Mathew J. who dissented from the majority did, of course, agree with the majority that there was no right in the petitioner. But the learned Judge was of the view that there can be no arbitrary exclusion of a person from submitting his tender which might possibly be the lowest one, as that would affect the public revenue in the same manner as the exclusion of a person from public auction would affect it. by excluding the possibility of a higher bid.

13. That, merely by bidding at an auction, the successful bidder whose bid is subject to confirmation does not acquire any right to any property or any right to compel performance of the contract, cannot be a matter on which there can be any doubt. The fact that the Government was the party who proposed to sell does not change the position in any way. That is because as observed in the decision in (AIR 1959 SC 490), the Government is free to deal with anyone it chooses and it is not for any person to complain that there has been a breach of any right because Government has chosen to deal with any particular person and not with him. Of course, there is an exception to this rule and that is when those who are acting on behalf of the Government are acting mala fide, in the sense prejudicial to the interest of the State, by causing loss of revenue or in a manner promoting nepotism or corruption. In such a case the court entertains a petition not primarily with a view to secure any rights of the petitioner alleged to have been infringed but in the larger interest of the State. Barring such few and exceptional instances there can be no case for interference. That is, of course, so when the only challenge of the petitioner is on the ground that by the conduct of the officers of the State his personal lights have been infringed. So long as there has been no concluded contract he cannot claim to have any right which could be said to have been infringed. In the decision in State of Orissa v. Harinarayan Jaiswal (1972 (1) SCWR 832) = (AIR 1972 SC 1816) Hegde J. said at page 843 thus --

'There is no concluded contract till the bid is accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids (see Union of India v. Bhimsen Walaiti Ram (1970) 2 SCR 594 = (AIR 1971 SC 2295). By merely giving bids, the bidders had not acquired any vested rights. The fact that the Government was the seller does not change the legal position once its exclusive right to deal with those privileges is conceded. If the Government is the exclusive owner of these privileges, reli-ance on Article 19(1)(g) or Article 14 becomes irrelevant. Citizens cannot have any fundamental right to trade or carry on business in the properties or rights belonging to the Government, nor can there be any infringement of Article 14, if the Government tries to get the best available price for its valuable rights.'

14. In the case before the Supreme Count in D.F.O. South Kheri v. Ram Sanehi, (AIR 1973 SC 205) the case was that certain timber which were removed by the respondent with the sanction of the Forest Officer against the tally dated 29th October. 1966 pursuant to the purchase by the respondent at an auction of the right to cut timber was to be treated as if it were removed in November, 1966 and this stand by the forest department was challenged by the respondent in a petition before the High Court of Allahabad. A Division Bench of the Allahabad High Court following the decision of the Supreme Court in (AIR 1954 SC 592) held that where a party interest-ed in a contract claims that he has not received the same treatment and he has not been given the same chance as anybody else he is entitled to move the court under Article 226 of the Constitution. This was taken up in appeal to the Supreme Court. Dealing with this, Shah J. said --

'We are unable to hold that merely because the source of the right which the respondent claims was initially in a contract, for obtaining relief against any arbitrary and unlawful action on the part of a public authority he must resort to a suit and not to a petition by way of a writ. In view of the judgment of this Court in K. N. Guruswami's case (1955) 1 SCR 305 = (AIR 1954 SC 592) there can be no doubt that the petition was maintainable, even if the right to relief arose out of an alleged breach of contract, where the action challenged was of a public authority invested with statutory power.'

15. A petition under Article 226 of the Constitution will be maintainable even in regard bo a grievance arising from a matter of contract between the State and its citizen if the State or its officers have acted in violation of the statutory provisions. But the party seeking the assistance of court must have a right to complain. If there is a concluded contract with the State, that may entitle him to come to court complaining of violation by the State or its officers of any statutory provisions they are obliged to comply with. Even when the matter is in the realms of contract the challenge being to the acts of a public authority who has a duty to act lawfully, fairly and honestly the court will be justified in setting right a wrong done. The complaint need not necessarily be one of statutory violation. Even arbitrary conduct such as passing orders involving civil consequences, in matters of contracts with citizens, in an arbitrary or unfair manner or on irrelevant grounds would be sufficient to justify the exercise of the power of the court under Article 226 of the Constitution. But where the party who comes to court is not one who can claim any right under the contract, the position would be different. It cannot be said that in such a case his rights are infringed. Of course, there may be exceptional cases where as held by the Supreme Court in AIR 1954 SC 592 the court may entertain a petition if it is satisfied that in the larger interests of the State it is necessary. It may be that the complaint is about the objectionable conduct of the State Government or any of its Officers as to the manner in which any particular citizen has been preferred. That may result in prejudice to the State and may involve loss of revenue. That may be highly objectionable as acts of favouritism, nepotism and corruption by the State. But ordinarily the petitioner cannot succeed in a challenge to the conduct of the State or its officers merely on the complaint that his right to property or his right to practise a profession or to carry on a business has been infringed when in fact he is not shown to be possessed of any right under a concluded contract.

16. As noticed earlier, the bid by the petitioner was subject to confirmation and that has not been confirmed. The complaint is that the Divisional Forest Officer has violated the administrative instructions issued to him. The action taken is only to hold a reauction. In these circumstances, I am of the view that this court is not to invoke its jurisdiction under Article 226 of the Constitution of India. In the result the Original Petition is dismissed. In the circumstances of the case, parties are directed to suffer costs.


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