High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 29.1.2007 CORAMTHE HON'BLE MR.JUSTICE M.JAICHANDREN Writ Petition No.26867 of 2004M/s.New City Steel Traders,rep. by Mr.S.Ashraf Ali,625/7, Mini Market,M.K.N.Road, Guindy,Chennai – 600 032... Petitioner vs. 1. The Regional Manager, M.S.T.C. Ltd.,2. The Senior Manager, M.S.T.C. Ltd., Both at Southern Regional Office, Leelavathi Building, Armenian Street, Chennai – 600 001... RespondentsWrit Petition filed under Article 226 of the Constitution ofIndia as stated therein. For petitioner : Mr.T.K.Kulasekaran For respondents : Mr.M.S.Krishnan for M/s.Sarvabhauman Associates for R1 and R2 O R D E RThe writ petition has been filed for the issuance of a writ ofcertiorarified mandamus to call for the records of the secondrespondent pertaining to his letter, bearing No.MSTC/MOFB/EF/T-014-2004-2005/1719, dated 28.6.2004, and consequently to direct therespondents to permit the petitioner to remove the Lot No.10, onpayment of the balance amount as shown in the first respondent'ssale order, dated 23.6.2004. https://hcservices.ecourts.gov.in/hcservices/ The brief facts of the case, as stated by the petitioner, areas follows:2. The petitioner is running a business under the name and style ofM/s.New City Steel Traders for over a period of eight years. He hasearned a name and reputation in the said field, in which he iscarrying on the business.3. The petitioner had participated in the auction conducted by thefirst respondent, on 18.5.2004, in respect of Lot No.10, bysubmitting a sealed tender, along with 17 other parties. Thepetitioner was declared as the successful bidder and his offer forpurchase and removal of Lot No.10 was accepted by the firstrespondent. On 23.6.2004, the first respondent had issued a saleorder/acceptance letter calling upon the petitioner to pay a totalamount of Rs.5,28,539/-, minus the Earnest Money Deposit amount ofRs.1,00,000/- already paid in respect of the said Lot. At the timeof accepting the petitioner's offer, he was required to submit ademand draft in favour of the respondents, for a sum ofRs.1,00,000/-. Accordingly, the petitioner had paid the EarnestMoney Deposit amount of Rs.1,00,000/- by way of a demand draft drawnon State Bank of India, Alandur Branch, Chennai.4. It is further submitted that the tender of M/s.Karthik TradingCo., who had quoted the highest amount in respect of the said lot inquestion was not considered on the ground that the mandatory EarnestMoney Deposit amount submitted by them was short by 48%. Therefore,the petitioner being the next highest bidder, his bid was acceptedby the first respondent and a sale order, dated 23.6.2004, had beenissued. The petitioner was making the arrangements to make paymentof the balance amount of Rs.4,28,539/- quoted in the sale orderwithin the last date for the payment being made, which was 3.7.2004.Having been issued the sale order, the petitioner had taken a demanddraft for the balance amount of Rs.4,28,539/-. However, the secondrespondent had issued a letter, dated 28.6.2004, stating that thesale order, dated 23.6.2004 in respect of lot No.10 stood cancelled.It was stated by the second respondent that the sale in favour ofthe petitioner was cancelled, since the owners of the materials inquestion, namely, Engine Factory, Avadi, had advised the secondrespondent to cancel the sale. No valid reasons had been stated bythe second respondent for the cancellation of the sale. https://hcservices.ecourts.gov.in/hcservices/

5. It has been further stated by the petitioner that there is nocondition, whatsoever, in the Tender Form stating that the tenderalready accepted could be cancelled at the intervention of theowners of the materials kept in the auction sale. The petitioner hadissued a legal notice, dated 11.8.2004, calling upon the respondentsto permit the petitioner to pay the balance amount and to remove thelot No.10 from the premises. It has also been pointed out by thepetitioner that out of the 14 lots, which had been brought forauction, all the lots had been cleared except lot No.10 for whichthe petitioner was the successful bidder.6. In the counter affidavit filed on behalf of the respondents, ithas been stated that the tenders were called for, on 18.5.2004, forthe purchase of 40,000 kgs. of MMAS scraps belonging to EngineFactory, (Ministry of Defence). Seventeen parties had participatedin all the tenders. The petitioner was one of the six participants,who had submitted their sealed Tenders for plot No.10. The highestrate for the said lot was given by M/s.Karthik Trading Co., atRs.16.72 per kg. The second highest rate was offered by thepetitioner at Rs.15.56 per kg. However, the highest offer made byM/s.Karthik Trading Co., could not be considered, as they had failedto comply with the Earnest Money Deposit requirements. Therefore,revised improved offer was made for Lot No.10, on 1.6.2004, from allthe six tenderers, who had quoted for the lot. The revised improvedoffer was opened on 10.6.2004 and only the petitioner, who was thesecond highest bidder in the earlier round, had submitted his offer.Instead of submitting a revised improved offer, they had submittedan offer for a sum of Rs.12.567 per kg. Therefore, by a letter,dated 16.6.2004, the principal had instructed the respondents toissue a sale order to the petitioner and as per their instructions,the sale order No.416, dated 23.6.2004, was issued. Further, on24.6.2004, M/s.Karthik Trading Co., which was the highest offerer inthe original tender, came forward with a renewal of their earlieroffer and had also complied with the Earnest Money Depositrequirements. A legal notice, dated 26.6.2004, had also been issuedon their behalf. Thereafter, a request had been made by thePrincipal, who had advised by a letter, dated 28.6.2004, to cancelthe sale order given in favour of the petitioner.7. Heard the learned counsel appearing on behalf of thepetitioner as well as for the respondents.8. The learned counsel appearing on behalf of the respondents hadpointed out that clause 4.5. of the General terms and conditions ofthe tender states as follows: https://hcservices.ecourts.gov.in/hcservices/ "MSTC/Owner reserves the right to withdrawfrom sale, the materials offered for sale infull or part thereof prior to or after theacceptance of the tender, without assigning anyreason whatsoever."Therefore, based on the said terms, the sale order given to thepetitioner for lot No.10 was recalled. 9. The learned counsel appearing on behalf of the respondents hadrelied on the decision in M/s.KASTURI LAL LAKSHMI REDDY ETC., Vs.THE STATE OF JAMMU & KASHMIR AND ANOTHER, AIR 1980 SC 1992, wherein,the Supreme Court has held that "every activity of the Government,has a public element in it and it must therefore, be informed withreason and guided by public interest. If the Government awards acontract or leases out or otherwise deals with its property orgrants any other largess, it would be liable to be tested for itsvalidity on the touchstone of reasonableness and public interest andif it fails to satisfy either test, it would be unconstitutional andinvalid. It must follow as a necessary corollary that the Governmentcannot act in a manner which would benefit a private party at thecost of the State; such an action would be both unreasonable andcontrary to public interest. The Government, therefore, cannot, forexample, give a contract or sell or lease-out its property for aconsideration less than the highest that can be obtained for it,unless of course there are other considerations which render itreasonable and in public interest to do so. Such considerations maybe that some Directive Principle is sought to be advanced orimplemented or that the contract or the property is given not with aview to earning revenue but for the purpose of carrying out awelfare scheme, for the benefit of a particular group or section ofpeople deserving it or that the person who has offered a higherconsideration is not otherwise fit to be given the contract or theproperty."10. Based on the rival contentions of the parties to the presentwrit petition and on a perusal of the records available, it is seenthat the respondents had issued a sale order in favour of thepetitioner, on 23.6.2004, in respect of lot No.10, which was broughtfor sale by tender. According to Clause 4.5. of the tender, theowner can withdraw from sale, the materials offered for sale, infull or part thereof, prior to or after the acceptance of thetender, without assigning any reason whatsoever. However, it doesnot go to the extent of saying that the withdrawal could be madeeven after concluding the sale finally. If that is the acceptedposition, then it is always open to the owner to cancel theconcluded sale as and when he finds it convenient to do so. In such https://hcservices.ecourts.gov.in/hcservices/ a case, there will not be a binding nature for the sale and therewill not be any finality for it. Therefore, clause 4.5. of thetender conditions should be taken to mean that the owner possessesthe power to withdraw from sale any of his materials before the saleis finally concluded by the issuing of a sale order.11. In such view of the matter, the writ petition standsallowed, quashing the impugned proceedings of the second respondent,bearing No.MSTC/MOFB/EF/T-014-2004-2005/1719, dated 28.6.2004, andby directing the respondents to permit the petitioner to remove thematerials in lot No.10 on payment of the balance amount, as shown inthe first respondent's sale order, dated 23.6.2004. No costs.LanSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Regional Manager, M.S.T.C. Ltd.,Southern Regional OfficeLeelavathi Building, Armenian Street,Chennai - 12. The Senior Manager, M.S.T.C. Ltd., Southern Regional Office, Leelavathi Building, Armenian Street, Chennai – 600 001.+ one cc to Mr. T.K. Kulasekaran, Advocate sr no. 5201+ one cc to M/s. Sarvabhauman Associates, sr no. 5090MM(CO)NM(03.02.07)W.P.No.26867 of 2004