A.R.Safiullah v. The Managing Director, Tamil Nadu Housing Board

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED :30.04.2010CORAMTHE HONOURABLE MR.JUSTICE D.MURUGESAN and THE HONOURABLE MR.M.SATHYANARAYANAN W.A.Nos.1139 and 1140 of 2008andM.P.1 + 1 and 2 of 2 OF 2008A.R.Safiullah.. Appellant inWA.1139/08A.Mohamed Faaizeen.. Appellant inWA.1140/08Vs1. The Managing Director, Tamil Nadu Housing Board, No.493, Anna Salai, Nandanam, Chennai.2. The Executive Engineer & Administrative Officer, Tamil Nadu Housing Board, Kajamalai Colony, Tiruchirappalli Housing Unit, Tiruchirappalli... Respondents in both PetitionsWrit Appeals against the order of this Court dated 25.09.2008made in W.P.No.30523 and 30524 of 2008. These petitions filed underArticle 226 of Constitution of India, praying for a Writ ofCertiorarifed Mandamus to call for the records of the SecondRespondent in Lr.No.Allotment 2/6787/2004 dated 06.10.2004 quash thesame and direct the first respondent to allot store shed//CodeNo.TR.020 for the extent of 39,772 Sq.ft(with a shed ) in the housingunit of periyar Nagar at Pudukottai as per the terms offered by thepetitioer and to call for the records of the Second Respondent inLr.No.Allotment 2/6787/2004 dated 6.10.2004 quash the same, anddirect the first respondent to allot commercial site S.I.CodeNo.TR.017 for an extent of 3909 sq.ft. housing unit of periyar Nagar https://hcservices.ecourts.gov.in/hcservices/ at Pudukkottai as per the terms offered by the petitionerrespectively in the above W.Ps.For Appellantsin W.A.No.1139/2008: Mr.A.L.Somayaji, S.C. For Mr.C.S.Krishnamoorthyin W.A.No.1140/2008: Mr.S.Parthasarathy, S.C. For Mr.C.S.KrishnamoorthyFor Respondents inboth appeals: Mr.S.Kasikumar for Mr.K.Chelladurai.J U D G M E N TD.MURUGESAN, J.Both these appeals are directed against the common order dated25.9.2008 dismissing the writ petitions filed by the respectiveappellants.2.The Tamil Nadu Housing Board (hereinafter referred to as 'theBoard') developed a comprehensive self contained, composite scheme inthree stages. Besides the scheme, it developed residential flats andplots for all categories of people. The Executive Engineer andAdministrative Officer, Tiruchirappalli Housing Unit, the secondrespondent herein, called for sealed tenders for allotment of thepublic purpose site at Pudukottai Neighbourhood Scheme in an extentof 39772 sq. ft. of land [as Item No.5 (a)] and a commercial site inan extent of 3,909 sq.ft. The upset price of the properties werefixed at Rs.83,79,943/- and Rs.7,81,800/-. Both the appellantssubmitted their respective bids for separate plots and were thehighest bidders in the auction. As per the auction notification, 15%of the amount offered should be deposited on the same day, 35% of theremaining amount should be deposited within a period of three weeksfrom the date of confirmation and the balance 50% should be depositedwithin six weeks from the date of confirmation. The appellants haddeposited 15% of the amount within time and were waiting to pay thebalance amount after confirmation. Even before such confirmation, itappears, the tenders were cancelled by the Executive Engineer andAdministrative Officer, the second respondent herein, vide ordersdated 06.10.2004. Those orders were questioned by the appellantsunsuccessfully. The writ petitions came to be dismissed on theground that inasmuch as there was no confirmation made, no right hadaccrued on the bidders and therefore, they cannot question the orderof cancellation. Thereafter, those plots, for which the appellantshad bid, were allotted to third parties by the Government in G.O.Ms.364, Housing and Urban Development (HB5 (1)) Department dated28.10.2004. https://hcservices.ecourts.gov.in/hcservices/

3.We have heard Mr.A.L.Somayaji, learned senior counselappearing for the appellant in W.A.No.1139 of 2008,Mr.S.Parthasarathy, learned senior counsel appearing for theappellant in W.A.No.1140 of 2008 and Mr.Kasikumar, learned counselfor the respondents.4.The question as to whether the action of the State incancelling the tenders is fair and reasonable must be considered withreference to the right of a person to question the same. In thiscase, both the appellants, though were highest bidders and had alsodeposited 15% of the bid amount on the same day, they could not paythe balance amount, as there was no confirmation. Whetherconfirmation could be made or not would be the discretion of theauthority concerned and so long as such confirmation of the bid isnot made, no right is accrued to the bidders and this law is wellsettled.5.In this context, we may refer to the judgment of the ApexCourt in Valji Khimji and Company vs. Official Liquidator ofHindustan Nitro Product (Gujarat) Limited and others, [(2008) 9 SCC299], wherein the Apex Court observed that where the auction is notsubject to confirmation by any authority, the auction is complete onthe fall of the hammer and certain rights accrue in favour of theauction-purchaser. However, where the auction is subject tosubsequent confirmation by some authority, the auction is notcomplete and no rights accrue until the sale is confirmed by the saidauthority. In view of the said judgment of the Supreme Court, solong as the confirmation was not made, the appellants cannot make anygrievance that their bid should be confirmed as a matter of right.But, it does not mean that a bidder whose tender has not beenconfirmed cannot question the action of the authority on anyjustifiable ground, in the sense that he is prevented from evenapproaching the Court questioning such action.6.1.This takes us to the next question as to whether thecancellation of the tenders is justifiable. In this context, we mayrefer to the various judgments of the Apex Court with regard to thearbitrariness and the scope of judicial review. In Mahabir AutoSpares v. Indian Oil Corporation, [(1990) 3 SCC 752], it has beenobserved that every action of the State or instrumentality of theState in exercise of its executive power must be informed by reasonand in appropriate cases, actions un-informed by reasons may bequestioned arbitrary. However, judicial review is permissible incases where an arbitrariness and unfairness is pleaded by the personin either cancelling the bid or accepting the bid of others, as thecase may be. 6.2.In Kumari Shrilekha Vidyarthi v. State of U.P., (1991) 1SCC 212, the Apex Court held as follows: https://hcservices.ecourts.gov.in/hcservices/ "Applicability of Article 14 to all executive actions ofthe State being settled and for the same reason itsapplicability at the threshold to the making of a contractin exercise of the excessive power being beyond dispute,can it be said that the State can thereafter cast off itspersonality and exercise unbridled power unfettered by therequirements of Article 14 in the sphere of contractualmatters and claim to be governed therein only by privatelaw principles applicable to private individuals whoserights flow only from the terms of the contract withoutanything more? We have no hesitation in saying that thepersonality of the State, requiring regulation of itsconduct in all spheres by requirements of Article 14, doesnot undergo such a radical change after the making of acontract merely because some contractual rights accrue tothe other party in addition. It is not as if therequirements of Article 14 and contractual obligations arealien concepts, which cannot co-exist."6.3.In Food Corporation of India v. M/s.Kamadhenu Cattle FeedIndustries, [(1993) 1 SCC 71], the Apex Court observed in paragraph 7as follows:-"7.In contractual sphere as in all other State actions,the State and all its instrumentalities have to conform toArticle 14 of the Constitution of which non-arbitrarinessis a significant facet. There is no unfettered discretionin public law: A public authority possesses powers only touse them for public good. This imposes the duty to actfairly and to adopt a procedure which is ‘fairplay inaction’. Due observance of this obligation as a part ofgood administration raises a reasonable or legitimateexpectation in every citizen to be treated fairly in hisinteraction with the State and its instrumentalities, withthis element forming a necessary component of thedecision-making process in all State actions. To satisfythis requirement of non-arbitrariness in a State action,it is, therefore, necessary to consider and give dueweight to the reasonable or legitimate expectations of thepersons likely to be affected by the decision or else thatunfairness in the exercise of the power may amount to anabuse or excess of power apart fromaffecting the bona fides of the decision in a given case.The decision so made would be exposed to challenge on theground of arbitrariness. Rule of law does not completelyeliminate discretion in the exercise of power, as it isunrealistic, but provides for control of its exercise byjudicial review." https://hcservices.ecourts.gov.in/hcservices/ In the above judgment, the Apex Court further observed that eventhough the highest tenderer cannot claim more right to have histender accepted, there being a power while inviting tenders toreject all the tenders, yet the power to reject all the tenderscannot be exercised arbitrarily and must depend for its validity onthe existence of cogent reasons for such action. 6.4.Further, in Union of India v. Dinesh Engg. Corpn., [(2001)8 SCC 491], the Apex Cour ruled as under:"16.But then as has been held by this Court in the very samejudgment that a public authority even in contractual mattersshould not have unfettered discretion and in contractshaving commercial element even though some extra discretionis to be conceded in such authorities, they are bound tofollow the norms recognised by courts while dealing withpublic property. This requirement is necessary to avoidunreasonable and arbitrary decisions being taken by publicauthorities whose actions are amenable to judicial review.Therefore, merely because the authority has certain elbowroom available for use of discretion in accepting offer incontracts, the same will have to be done within the fourcorners of the requirements of law, especially Article 14 ofthe Constitution."6.5.For the satisfaction of reasonableness, the State isobviously expected to place all the facts before the Court, so as toenable the Court to consider the issue and to take an appropriatedecision in accordance with law, as has been held in Atma Linga Reddyand others v. Union of India and Others, [(2008) 7 SCC 788]. Inthe event, the Court comes to the conclusion that the action of theState is violative of Article 14 of the Constitution of India, asbeing wholly unfair and unreasonable, the writ Court would nothesitate to grant relief in favour of the person. This law has beenlaid down by the Apex Court in M.D., H.S.I.D.C. & Ors. v. M/s.HariOm Enterprises and Ors., [2008 (9) Scale 241].7.The law as culled out from the above judgments of the ApexCourt would show that if the State acts in an arbitrary manner evenin a matter of contract, any aggrieved person can approach the Courtfor redressal of his grievance invoking Article 226 of theConstitution of India and the Court, depending upon the facts of thesaid case, is empowered to grant leave. In this context, we may alsorefer to the judgment of the Apex Court in ABL International Ltd. v.Export Credit Guarantee Corpn. Of India Ltd., [(2004) 3 SCC 553].The arbitrary action may be either failure to perform public functionor doing any act in an unfair manner. In such event, the only remedyavailable to such aggrieved person is to approach this Court invokingArticle 226 of the Constitution of India. The principle ofjudicial review cannot be denied even in exercise of powers of the https://hcservices.ecourts.gov.in/hcservices/ Government bodies, if such exercise is without any acceptable reasonor unreasonable, resulting in arbitrariness. This law is alsoreiterated in Tata Cellular v. Union of India, (1994) 6 SCC 651.8.Keeping the above in mind, the facts of the case must beconsidered. Both the appellants submitted their respective bidspursuant to the notification. The appellant in W.A.No.1139 of 2008submitted tender for a vacant site of an extent of 39772 sq.ft and heoffered a sum of Rs.84,50,000/- in the auction. His bid was acceptedand he had also deposited a sum of Rs.12,67,500/-, being 15% of thebid amount. Similarly, the appellant in W.A.No.1140 of 2008 submittedhis tender for purchase of an extent of 3,909 sq.ft. and the upsetprice fixed was Rs.7,81,800/-. He was the successful bidder and heoffered a sum of Rs.7,84,000/-. He deposited the sum ofRs.1,17,600/- being 15% of the bid amount. Both the appellantsdeposited 15% of the respective bid amount on the same day. Thefurther payment of 35% and 50% of the bid amount, depends upon theconfirmation of the auction. 9.It is true that the confirmation was not made and therefore,the appellants were unable to deposit the said balance amount.Equally, it is true that so long as the confirmation is not made, theappellants are not entitled to seek for confirmation as such and thatdoes not mean that they are disentitled from questioning the actionof the State in cancelling the tender. The impugned order dated06.10.2004 merely states that the tender is cancelled and theappellants can collect their deposited amount representing 15%.Except the said reason, there is no reason adduced in the said order.In the counter-affidavit, the Board made an attempt to explain thereason as to why the tenders were cancelled, viz., that theGovernment, later on, decided to allot those plots to the SpecialTask Force personnel. It is to be noted here that the vacant site toan extent of 39,772 sq.ft., to which the appellant in W.A.No.1139 of2008 had submitted tender and the same was also accepted, wasearmarked for a store shed and similarly, the site to an extent of3,909 sq.ft. which the appellant in W.A.No.1140 of 2008 became thesuccessful bidder, was also a commercial site. Both the sites wereconverted into residential plots contrary to the lay out drawn forthe scheme, for being allotted to individuals as house sites. Theorder of cancellation was on 06.10.2004 and the Government Orderallotting those plots to Special Task Force personnel was dated28.10.2004 and that Government order was not available with the Boardwhen the orders of cancellation were made. This, in our consideredview, has resulted in arbitrariness and there was no reason availablewith the Board on the date when the cancellation was made. In thatview of the matter, we are of the view that in the absence of anyexplanation whatsoever to justify the order of cancellation exceptthe justification that was sought to be made by way of the subsequentG.O., the impugned order of the second respondent dated 06.10.2004 isliable to be set aside. To this extent, the order of the learned https://hcservices.ecourts.gov.in/hcservices/ Judge is also to be set aside and accordingly, the same is set aside.10.Coming to the relief portion, we are informed that there arestill some plots available for allotment. If that be so, therespondents are directed to allot the plots in consultation with theappellants, of course, as per the rates in respect of the plots soldby the Tamil Nadu Housing Board under the same scheme. This ordershall be complied with in a period of two months from the date ofreceipt of the same. With this direction, the writ appeals areallowed. No costs. Consequently, connected M.Ps. are closed.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarsraTo1. The Managing Director, Tamil Nadu Housing Board, No.493, Anna Salai, Nandanam, Chennai.2. The Executive Engineer & Administrative Officer, Tamil Nadu Housing Board, Kajamalai Colony, Tiruchirappalli Housing Unit, Tiruchirappalli.2 cc To Mr.C.S.Krishnamoorthy, Advocate, SR.29115,29116 W.A.Nos.1139 & 1140 of 2008jsv(co)pmk.7.5.2010