ION Civil Appeal No 914 of 1987
From the Judgment and Order dated 2281984 of the Kerala High Court in OP No 6806 of 1984
Abdul Khader and EMS Anam for the Appellant
1081 G Vishwanath Iyer N Sudhakaran for the Respondent
The Judgment of the Court was delivered by JAGANNATHA SHETTY J
A tea estate of 100 acres with some buildings machinery and equipments was given as security to the Kerala Financial Corporation The Corporation against the loan taken by the appellant
A part of the loan remained outstanding and the appellant could not clear it
The Corporation thereupon filed OA No 864 before the District Court of Kottayam for recovery of the arrears and obtained decree for an amount of Rs120000
In execution of the decree the said tea estate was brought for sale by court auction
On November 5 1969 the auction sale was held
There was no bidder
So the Corporation itself had to purchase the property for about Rs165000
There was long standing dispute between the workmen of the estate and the previous management relating to payment of their wages
The Corporation therefore could not take possession of the estate
An extent of 85 acres out of 100 acres of the estate was in possession of the workmen as per settlement arrived at between the Labour Commissioner and the District Collector
The workmen used to collect the income therefrom towards their wages
This arrangement continued for about thirteen years
On January 7 1982 the Corporation got possession of the entire estate
The Corporation wanted to recover its amount
It was not interested in the property
It therefore invited tenders for the sale of the estate
On March 19 1982 a tender notification was published in dailies like Malayala Manorama Mathrubhoomi and Deepika newspapers
In response to the notification the daughter in law of the appellant was the only tenderer
She offered Rs510505
The Corporation accepted the tender
It was subsequently found that the daughter in law was no better than the appellant
She also could not pay any amount
On January 18 1983 the Corporation again invited tenders for the sale of the property
The notification was published in the said newspapers as it was done earlier
This time the Corporation received these tenders i TM Hassan Rawther Appellant before us for Rs six lakhs ii PM Jacob for Rs415550 and iii KK Mathew for Rs207451
Since the appellant submitted the highest offer the Corporation naturally had to accept it
On March 2 1983 the acceptance was communicated to the appellant
He must have thanked his stars for getting back his family property which was so dear to him or which was according to him so valuable
But there was no such anxiety shown
He did not pay anthing except the earnest money of Rs40000
1082 The Corporation however extended the time for payment again and again
The Corporation also gave him instalments for payment of the balance price
All the efforts of the Corporation failed to induce the appellant
The Corporation wanted to get back its money
It was not interested in retaining the property
So it negotiated with PM Jacob who had submitted his tender alongwith the appellant in response to the notification dated January 18 1983
He had then offered Rs416550
His tender was the next best
After negotiation he enhanced the offer to Rs four and a half lakhs
The Corporation accepted it and decided to sell the property to PM Jacob
The property however was sold to Ms Gumraj Plantations at the request of PM Jacob
Ms Gumraj Plantations is a partnership firm in which PM Jacob is one of the partners
The appellant who could not purchase the said property by any means filed suit OS No 22984 before the Munsif Court Thidupuzha to restrain the Corporation from selling the property
He could not get relief in the suit since by then the sale deed was executed in favour of Ms Gumraj Plantations
Subsequently he moved the High Court of Kerala complaining that the Corporation while selling the property for Rs four and a half lakhs to Ms Gumraj Plantations had deviated from the normal practice of inviting tenders from the public
He contended that the Corporation being a public authority was bound to act reasonably and fairly and it ought not to have arbitrarily selected the purchaser
The High Court found no substance in those submissions
The High Court observed The submission made by the petitioner s counsel is that the decision to sell the property by private negotiations is arbitrary and is therefore liable to be interfered with by this court
This is clearly a case where in execution proceedings the decreeholder has purchased the property and thereafter the property was sold in public auction to the petitioner who purchased it for Rs six lakhs but failed to pay the sale amount in spite of the fact that this court and afterwards the corporation had shown great indulgence towards the petitioner
This is not at all a fit case for interference under article 226 of the Constitution Being aggrieved by the judgment of the High Court the appellant has preferred the present appeal
On May 18 1985 this Court 1083 while entertaining the appeal issued notice limited to the question whether the sale of the property should be made by general auction
This Court further directed that in any event the appellant will not be allowed to participate in the auction
Very interesting turn of events
The appellant who miserably failed to secure the property for himself is now interested in securing the best price for the Corporation
He says that this is a public interest litigation
His case is that the Corporation in all fairness must dispose of the property by public auction
It could not have bargained with PM Jacob and sold the property to Ms Gumraj Plantations
Before the High Court the appellant attacked the sale also on the ground that it was actuated by extraneous considerations
He alleged that the corporation had succumbed to the pressure of some influential persons for the sale of the property in favour of Ms Gumraj Plantations
The appellant made these allegations but did not substantiate it
He did not give the names of influential persons who had brought pressure on the Corporation
He did not even state as to how the Corporation officials had shown undue interest with PM Jacob or with the other partners of Ms Gumraj Plantations for sale of the property
It is not proper to make such light hearted and vague allegations against the statutory authorities
These allegations in our opinion are uncharitable and unfounded
The only question that arises for consideration is whether on the facts and in the circumstances the Corporation was not justified in selling the property by private negotiations in favour of Ms Gumraj Plantations at the instance of PM Jacob
It is needless to state that the Government or public authorities should make all attempts to obtain the best available price while disposing of public properties
They should not generally enter into private arrangements for the purpose
These principles may be taken as well established by the following decisions of this Court i KN Guruswamy vs The State of Mysore and others  at 312 ii Mohinder Singh Gill  Anr
vs The Chief Election Commissioner New Delhi and others  iii RD Shetty vs The International Airport Authority of India and Ors   iv Kasturi Lal Lakshmi Reddy vs State of Jammu and Kashmir and Anr   v Fertilizer Corporation Kamagar Union vs Union of India   vi Ram and Shyam Company vs State of Haryana and Ors
1985 Supp
SCR 541 and vii Shri Sachidanand Pandey vs State of WB  1084 In RD Shetty vs The International Airport Authority of India and Ors
 at 1041 Bhagwati J speaking for the Court observed Now obviously where a corporation is an instrumentality or agency of Government it would in the exercise of its power or discretion be subject to the same constitutional or public law limitations as Government
The rule inhibiting arbitrary action by Government which we have discussed above must apply equally where such corporation is dealing with the public whether by way of giving jobs or entering into contracts or otherwise and it cannot act arbitrarily and enter into relationship with any person it likes at its sweetwill but its action must be in conformity with some principle which meets the test of reason and relevance
This rule also flows directly from the doctrine of equality embodied in Art 14
It is now well settled as a result of the decisions of this Court in EP Rayappa vs State of Tamil Nadu and Maneka Gandhi vs Union of India that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment
It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non discriminatory it must not be guided by any extraneous or irrelevant considerations because that would be denial of equality
The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non arbitrariness is protected by article 14 and it must characterise every State action whether it be under authority of law or in exercise of executive power without making of law
The State cannot therefore act arbitrarily in entering into relationship contractual or otherwise with a third party but its action must conform to some standard or norm which is rational and non discriminatory
 In Kasturi Lal Lakshmi Reddy vs State of J  K  at 1355 Bhagwati J again speaking for the Court reiterated what he said earlier to RD Shetty case
The learned Judge went on to state 1085 Every action taken by the Government must be in public interest the Government cannot act arbitrarily and without reason and if it does its action would be liable to be invalidated
If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess it would be liable to be tested for its validity on the touch stone of reasonableness and public interest and if it fails to satisfy either test it would be unconstitutional and invalid
 The learned Judge continued at p 1357 But one basic principle which must guide the Court in arriving at its determination on this question is that there is always a presumption that the Governmental action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest
This burden is a heavy one and it has to be discharged to the satisfaction of the Court by proper and adequate material
The Court cannot lightly assume that the action taken by the Government is unreasonable or without public interest because as we said above there are a large number of policy considerations which must necessarily weigh with the Government in taking action and therefore the Court would not strike down governmental action as invalid on this ground unless it is clearly satisfied that the action is unreasonable or not in public interest
But where it is so satisfied it would be the plainest duty of the Court under the Constitution to invalidate the governmental action
This is one of the most important functions of the Court and also one of the most essential for preservation of the rule of law
 In Fertilizer Corporation case  at 350 this Court speaking through Chandrachud CJ observed We want to make it clear that we do not doubt the bona fides of the authorities but as far as possible sales of public property when the intention is to get the best price ought to take place publicly
The vendors are not necessarily bound to accept the highest or any other offer but the public at least gets the satisfaction that the Government has 1086 put all its cards on the table
In the instant case the officers who were concerned with the sale have inevitably though unjustifiably attracted the criticism that during the course of negotiations the original bid was reduced without a justifying cause
We had willy nilly to spend quite some valuable time in satisfying ourselves that the reduction in the price was a necessary and fair consequence of the reduction in the quantity of the goods later offered for sale on March 31 1980
One cannot exclude the possibility that a better price might have been realised in a fresh public auction but such possibilities cannot vitiate the sale or justify the allegations of malafides
 In Shri Sachidanand Pandey vs State of West Bengal  at 1133 O Chinnappa Reddy J after considering almost all the decisions of this Court on the subject summarised the propositions in the following terms On a consideration of the relevant cases cited at the bar the following propositions may be taken as well established State owned or public owned property is not to be dealt with at the absolute discretion of the executive
Certain percepts and principes have to be observed
Public interest is the paramount consideration
One of the methods of securing the public interest when it is considered necessary to dispose of a property is to sell the property by public auction or by inviting tenders
Though that is the ordinary rule it is not an invariable rule
There may be situations where there are compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination
Appearance of public justice is as important as doing justice
Nothing should be done which gives an appearance of bias jobbery or nepotism After applying these tests the learned Judge finally upheld the action of West Bengal Government in not inviting tenders or in not holding a public auction but negotiating straightway at arms length with Taj Group of Hotels for giving about four acres of land for establishing a five star hotel
The public property owned by the State or by any instrumentality of the State should be generally sold by public auction or by inviting 1087 tenders
This Court has been insisting upon that rule not only to get the highest price for the property but also to ensure fairness in the activities of the State and public authorities
They should undoubtedly act fairly
Their actions should be legitimate
Their dealings should be above board
Their transactions should be without aversion or affection
Nothing should be suggestive of discrimination
Nothing should be done by them which gives an impression of bias favouritism or nepotism
Ordinarily these factors would be absent if the matter is brought to public auction or sale by tenders
That is why the Court repeatedly stated and reiterated that the State owned properties are required to be disposed of publicly
But that is not the only rule
As OChinnappa Reddy J Observed that though that is the ordinary rule it is not an invariable rule
 There may be situations necessitating departure from the rule but then such instances must be justified by compulsions and not by compromise
It must be justified by compelling reasons and not by just convenience
What is the position in the present case
Here is a case where the Corporation invited tenders for the sale of the property under notification dated January 18 1983
The appellant submitted the highest tender in response to the said notification
He was given all concessions for payment of the tender amount
But he did not
He negotiated with the Managing Director of the Corporation for facilities for payment by instalments
That was also granted to him
There again he failed
If the appellant could not act according to his tender we fail to see why the property should not be offered to the person who was next in order
The Corporation in our opinion did not do anything unfair with PMJacob
The Corporation got the tender amount raised from Rs416550 to Rs450000
It shows the fairness with which the Corporation dealt with the property
On a consideration of all the facts and circumstances of the case we are satisfied that the action of the Corporation in offering the property to PMJacob and selling the same at his request to Ms Gumraj Plantations was perfectly justified and cannot be found fault with In the result the appeal fails and is dismissed
In the circumstances however we make no order as to costs
PSS Appeal dismissed


Summary:
 The appellant joined the service of a Commercial Bank on July 12 1974 and was confirmed on October 1 1974
His services were terminated by the Bank on February 10 1975 without assigning any reason
On an industrial dispute being raised the Central Government by its order dated July 9 1975 referred the dispute as to whether the Bank was justified in terminating his services and if not what relief the workman was entitled to to the Central Government Industrial Tribunal for adjudication
The claim made by the appellant was disputed by the management
In the course of the trial the appellant examined himself and was cross examined
His evidence was closed on 21576
On July 25 1976 the Bank entered into an agreement with the first respondent Bank where under all the assets and liabilities of the erstwhile Bank were taken over by the respondent Bank
The employees of the erstwhile Bank became the employees of the first respondent Bank by virtue of cl 20 of the said agreement
On August 1 1976 the erstwhile Bank totally merged with the first respondent Bank
Thereafter on behalf of the former Bank five witnesses were examined
On an application made by the appellant first respondent Bank was impleaded as a party in view of the merger which had taken place
Thereafter the first respondent Bank examined its Personnel Officer and formally closed the evidence
On October 3 1978 the first respondent Bank submitted an application for cross examining the appellant whose evidence had been 1089 closed on May 21 1976
The Tribunal dismissed the application on the ground that since no new plea had been taken there was no ground to recall the appellant and subject him to further cross examination
The Tribunal made the award on January 30 1981 holding that the termination of the service of the appellant was not justified and was bad illegal and not enforceable
The first respondent Bank filed a writ petition before the High Court
A Single Judge set aside the award on the ground that when once a person was impleaded as a party to the proceedings principles of natural justice required that he should be given an opportunity to crossexamine those witnesses whose evidence had been recorded earlier and since the Tribunal had rejected first respondent Bank s prayer to crossexamine the appellant whose evidence had been closed on May 21 1976 the award was liable to be quashed
It however remanded the case to the Industrial Tribunal to decide the case again after giving an opportunity to the first respondent Bank to cross examine the appellant and other witnesses
The Letters Patent Appeal filed by the appellant was dismissed by the Division Bench holding that the first respondent Bank had the right to cross examine the appellant on the sole ground that it had been impleaded as a party after the merger of the erstwhile Bank with the first respondent Bank
Allowing the appeal  HELD11 There is no express provision corresponding to Rule 10 Order 22 of the Code of Civil Procedure 1908 providing that in cases of an assignment creation or devolution of any interest during the pendency of a suit the suit may by leave of the court be continued by or against the person who or upon whom such interest has come or devolved which is applicable to the proceedings before the Industrial Tribunal
1095B C 12 In every case of transfer merger takeover or scheme of amalgamation the rights and liabilities of the transferee Company or Corporation shall be the same as that of the tansferor company or corporation and subject to the terms and conditions of the contract of transfer or merger the scheme of amalgamation and the legal provisions as the case may be under which such a transaction may have taken place the transferee company or corporation becomes liable to be impleaded or becomes entitled to be impleaded in place of or in addition to the transferor company or corporation in any action suit or proceeding 1090 filed against or by the transferor company or corporation by or against a third party and that whatever steps have already taken place in those proceedings will continue to operate against and be binding on such parties in any of the ways mentioned in Rule 10 Order 22 of the Code of Civil Procedure 1908
1095F H 1096A B 13 Generally speaking an assignee cannot set up a case inconsistent with the one put forward by his assignor and it is only in exceptional cases that an assignee could be permitted to raise any new plea and that too only for avoiding multiplicity of the proceedings
1097B In the instant case by reason of impleading the first respondent as a party there was no change in the character of the proceedings pending before the Tribunal
The respondent Bank only stepped into the shoes of the erstwhile Bank and all the proceedings that had gone on till the date on which the respondent Bank was so impleaded were binding on the respondent Bank
It was bound by the proceedings which had taken place till then and could not go back on the proceedings
1096G H 1097A The Single Judge was in error in taking the view that the first respondent Bank was appearing before the Tribunal in its own right and was entitled to protect its own interest
The proceeding pending before the Tribunal on the date of merger could not be considered as a new proceeding instituted against the respondent Bank on its being impleaded
It was the same old proceeding to which the erstwhile Bank was a party and the rights of the respondent Bank in the conduct of the proceedings could not be larger than the rights which the erstwhile Bank itself possessed
1097D E There were no such exceptional circumstances which entitled the respondent Bank to put up a plea different from the pleas which had already been taken up by the erstwhile Bank and there was also no need to permit it to reopen the proceedings which had gone on till then
Therefore in the absence of any exceptional circumstances which would have entitled the party to a proceeding to recall a witness whose evidence had already been completed for further cross examination the first respondent Bank could not make such a claim at all
The Single Judge who set aside the award and the Division Bench which merely affirmed the decision have erred in overlooking the true legal position
1097BG 1091 On the facts and in the circumstances of the case the respondent Bank was therefore not entitled to recall any of the witnesses examined on behalf of the appellant for further cross examination particularly after both the parties had closed their respective cases before the Tribunal
The dismissal of the application made by the respondent for recalling the appellant for further cross examination in the absence of any exceptional circumstances could not be considered as a ground for setting aside the award
The principles of natural justice had not therefore been violated by the Tribunal in passing the award
1097H 1098A B The judgment of the Division Bench as also of the Single Judge set aside
However as the respondent Bank had some other grounds to urge before the Single Judge the case is remanded to the Single Judge to consider any other relevant ground that may be urged by the respondent Bank and to dispose of the writ petition
1098B C