IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD WEDNESDAY, THE TWENTY NINTH DAY OF DECEMBER TWO THOUSAND AND FOUR PRESENT THE HON'BLE SRI JUSTICE B. SUDERSHAN REDDY and THE HON'BLE SRI JUSTICE C.V.RAMULU W.A.Nos.1848, 1884 and 1910 OF 2004 WRIT APPEAL No.1848 of 2004 (Writ Appeal under Clause 15 of the Letters Patent against the Order dated 18/11/2004 in WP NO : 20121 OF 2004 on the file of the High Court) Between: Mullapudi Srinivas Kumar Choudary, S/o. Krishna Rao, R/o. Purushothapalli, West Godavari District. ..... APPELLANT AND 1 The Government of A.P., rep by its Secretary, Industries and Commerce Department, Secretariat, Hyderabad. 2 The District Level Committee, rep by its Chairman, West Godavari District. 3 The District Panchayat Officer, West Godavari District, at Eluru. 4 Sai Babu Reddy, S/o. Jagadhal Reddy, R/o. Pekeru, Eragavaram Mandalam, W.G. District. .....RESPONDENTS Counsel for the Appellant: Smt.N.SHOBA Counsel for Respondent Nos.1to3: GP FOR PANCHAYAT RAJ & RURAL DEV. Counsel for Respondent No.4 Sri C.V.MOHAN REDDY WRIT APPEAL NO : 1884 of 2004 (Writ Appeal under Clause 15 of the Letters Patent against the Order dated 18/11/2004 in WP No.19747 OF 2004 on the file of the High Court) Between: Kundula Ganapathy Rao, S/o. Narasimha Murthy, R/o. Teeparu Village, W.G.District. ..... APPELLANT AND 1 The Govt of A.P., rep. by its Secretary, I&C., Dept., Secretariat, Hyderabad. 2 The District Level Committee, rep. by its Chairman, W.G.District. 3 The District Panchayat Officer, W.G.District at Eluru. 4 Sai Baba Reddy, S/o. Jagadhal Reddy, Pekeru, Eragavaram Mandalam, W.G.District. .....RESPONDENTS Counsel for the Appellant: Smt.N.SHOBA Counsel for Respondent Nos.1to3: GP FOR PANCHAYAT RAJ & RURAL DEV. Counsel for Respondent No.4 : Sri C.V. MOHAN REDDY WRIT APPEAL No.1910 of 2004 (Writ Appeal under Clause 15 of the Letters Patent against the Order dated 18/11/2004 in WP NO : 19735 OF 2004 on the file of the High Court.) Between: K.V.V. Satyanarayana, S/o Narasimha Murthy, R/o Teeparu village, Peraveli Mandal, W.G.District ..... APPELLANT AND 1 The Govt. of A.P. Rep.by its Secretary, Industries and Commerce Department, Secretariat, Hyderabad. 2 The District Level Committee, rep.by its Chairman, West Godavari District. 3 The District Panchayat officer, West Godavari District, at Eluru. 4 Sai Baba Reddy, S/o.Jagadhal Reddy, R/o.Pekeru, Eragavaram Mandalam, W.G.District. .....RESPONDENTS Counsel for the Appellant: Smt. K.N.VIJAYA LAXMI Counsel for Respondent Nos.1to3: GP FOR INDUSTRIES & COMMERCE Counsel for Respondent No.4 : SRI C.V. MOHAN REDDY The Court made the following : THE HONOURABLE SRI JUSTICE B.SUDERSHAN REDDY AND THE HONOURABLE SRI JUSTICE C.V. RAMULU W.A.Nos.1848, 1884 and 1910 OF 2004 COMMON JUDGMENT: (Per C.V.RAMULU, J ) These three Writ Appeals arise out of a common Judgment of the learned single Judge in W.P.Nos.19735 of 2004 and batch, dated 18-11-2004, wherein ten writ petitions filed by various individuals and Societies seeking almost the same relief were dismissed. The writ petitions were filed seeking a Mandamus declaring the action of respondents 1 to 3 in confirming the auctions held on 20-10-2004 in favour of the 4th respondent in pursuance of the Notification dated 3-10-2004 for West Godavari district and not confirming the same in favour of the petitioners-appellants as illegal, arbitrary, unjust and contrary to Rule 9 of the A.P. Minor Mineral Concession Rules,1966 (for short ‘the Rules’). The District Level Committee of West Godavari District notified sand bearing areas and issued auction Notification Nos.4040/04, 5101/04 and 5102/04, dated 3-10- 2004 proposing to conduct auction to the sand bearing reaches – reach-wise, package-wise and district-wise -respectively on 20-10-2004. The appellants-writ petitioners had participated in the auction. All the 22 reaches as a single package fetched bid amount of Rs.2,73,50,000/-, 6 packages fetched Rs.1,87,63,639/- and 22 reaches independently put together fetched Rs.2,80,98,692/-. The bidders had to pay 25% of the knocked down amount on the immediate next working day i.e. 23-10- 2004, since 21st and 22nd of October,2004 were public holidays. Auctions were knocked down in respect of 18 bidders where 22 reaches were independently auctioned. Since only 8 bidders came forward to pay 25% of the knocked down amount and the remaining bidders had not turned up, the bidder, who offered Rs.36,50,000/- against the minimum amount/upset price of Rs.2,50,000/- to the Parikkilanka reach, submitted a letter dated 23-10-2004 stating that he participated in the auction and his companion raised bid upto Rs.36,50,000/- without his knowledge, but expressed inability to pay the knocked down amount and requested for cancellation of auction. As the individual bidders have not come forward to deposit 25% of the knocked down amount till 5.00 p.m. on 23-10-2004, the District Level committee, after reviewing the matter, called upon the highest bidder in respect of the district package i.e. 4th respondent herein, whether he could enhance the bid amount equal to the amount of all the 22 reaches independently fetched. Respondent No.4 accepted the same and deposited 25% of the knocked down amount on 24-10-2004. On such deposit, confirmation was issued in his favour – District Package - which led to filing of the writ petitions. Learned single Judge after elaborate consideration of the matter, came to the conclusion that there is no material on record to show that the bid amount fetched in the third method was low and would fetch higher amounts, if re-auctioned. The entire edifice of the writ petitions is based on the challenge to the increase of bid amount fetched in District Package amounts to negotiation with respondent No.4, who failed to deposit 25% of bid amount on the next day. There was no material to show that the tender price was understated and Respondent No.4’s bid was knocked down on 20-8-2004. Thus, the learned single Judge held that in the absence of the same, it is not possible for the Court to accept that the authorities acted unfairly or irrationally in confirming the highest bid fetched in the District Package increasing the bid amount to that of individual reaches. At the outset, it may be noted that Writ Appeal No.1848 of 2004 is filed against W.P.No.20121 of 2004, W.A.No.1884 of 2004 against W.P.No.19747 of 2004 and W.A.No.1910 of 2004 against W.P.No.19735 of 2004. Learned counsel for the appellants mainly challenged the orders impugned in the writ petitions on the ground that the auction was knocked down on 20-10-2004 in favour of the 4th respondent, but he did not pay 25% of the knocked down amount as required under the Rules on the next day and paid only on 23-10-2004. On 24-10-2004, when the bid was offered to the 4th respondent, all the bidders participated in the District package could have been invited for negotiations and negotiating with the 4th respondent exclusively was bad in law. Sri D. Prakash Reddy, learned senior counsel appearing for the appellant in W.A.No.1910 of 2004, submitted that the tender-cum-auction notification dated 3-10- 2004 is a composite notification contemplating three methods of auctioning 22 reaches in the district; the first method was auctioning all the 22 reaches independently, the second was auctioning them in six packages and the third was auctioning all the 22 reaches as single package. The District Level Committee in its meeting held on 21-10-2004 resolved to ask the 18 bidders, who participated in the bidding of individual reaches through the first method, to pay 25% of the knocked down amount before 5.00 p.m. on 23-10-2004, since the total bid amount derived in this method was the highest one. Therefore, it must be deemed that only the first method was favoured and insofar as the other two methods was concerned, the tenders were rejected. Therefore, the question of passing another resolution on 24- 10-2004 for issuance of confirmation in favour of the highest bidder of the District package after payment of 25% of the knocked down amount does not arise. Once there was a rejection of the individual packages, the revival of District package does not arise. The District Level Committee ought to have reauctioned the whole thing inviting fresh tenders. It is also stated by the learned senior counsel that the auctions were deemed to have been knocked down on 20-10-2004 itself and the question of postponing and taking a decision to invite the 4th respondent for negotiations does not arise. It must be deemed that the auction was knocked down in favour of the 4th respondent on 20-10-2004 and he was supposed to pay 25% of the bid amount on or before 23-10-2004. Since he had not paid the amount within that time, the appellant in W.A.No.1910 of 2004 would have been offered to pay 25% of the amount being the next highest bidder. Not accepting such a plea was bad in law. Even if the 4th respondent was called to accept the bid by offering highest amount, which would have fetched in the first method of individual reaches, opportunity should have been given to all the 8 bidders, who participated in the third method of district as one package and offering it only to the 4th respondent is arbitrary and illegal. Smt. N. Shobha, learned counsel for the appellants in Writ Appeal Nos.1848 and 1884 of 2004, stated that the appellants have participated in the first method of auctioning 22 reaches separately. Of course, only 18 bidders have participated and for 4 reaches, nobody participated in the auction. Among 18 bidders, only 8 have deposited 25% of the knocked down amount. The appellants have also deposited the amounts against their respective reaches. Therefore, the same could have been confirmed in their favour, since they have also deposited 25% of the amount as required under the Rules. But, such course of action was not adopted and the official respondents have taken a decision to switch over to the third method of district as a unit and offered it to the 4th respondent herein by way of negotiations with him. Firstly, the very switching over to the district as one package method was illegal, since the appellants have offered 25% of the bid amount, may be a few of the bidders have not participated or they have inflated the bid amount and they have not come forward to pay 25% of the knocked down amount. If that is so, they could have finalized the bids in favour of the appellants, who had paid 25% of the amount promptly and insofar as rest of the reaches was concerned, the auction could have been cancelled and the authorities could have called for fresh tenders. Instead of this, they have switched over to the third method and by way of negotiations with the 4th respondent, it was finalized in his favour. If really they were interested in fetching more revenue to the State, they could have invited one and all, if necessary the bidders of all reaches of all methods for negotiations along with the 4th respondent and there could have been a many bidding and whoever offer more amount would have been successful. This method was not followed and there was something like a private negotiations with the 4th respondent and since the 4th respondent offered the amount, which was equivalent to the amount offered by the bidders for all the 22 reaches separately put together, the auction was confirmed in his favour. Such a course of action is not permissible under the Rules. Whereas, the learned Government Pleader appearing for the official respondents submitted that the composite method of inviting tenders as notified is permissible under Rule 9-B (2) of the Rules and it was followed for augmenting the revenues of the State. For the previous 3 to 4 years, the Government was getting revenue of only Rs.80.00 lakhs for the entire district i.e. for the 22 individual reaches put together. By the present method, Rs.2,80,00,000/- is the income for the State, since the first method of 22 individual reaches failed in view of the fact that for 4 of the reaches, there was no bidding and though there were bidders for the other 18 reaches, some of them have inflated the amounts only to frustrate the tenders and only a few of them numbering 8 had paid 25% of the bid amount. Thus, the first method became unworkable and as such, the district level committee had taken a decision on 24-10- 2004 to switch over to the third method of district package and invited the highest bidder - 4th respondent herein – and only to ensure for maximum amount as was being quoted for the individual reaches put together i.e. Rs.2.80 crores, the 4th respondent was asked to pay that amount and he readily accepted. Therefore, it was offered to him on 24-10-2004 and he had paid 25% of the knocked down amount within 24 hours thereafter. As such, the procedure followed by the official respondents was neither arbitrary nor illegal and there were no negotiations as such. Only to ensure the maximum amount, the 4th respondent was asked to raise the amount and he readily accepted and none of the provisions of the Rules were violated as stated by the learned counsel for appellants. Sri C.V. Mohan Reddy, learned counsel appearing for the 4th respondent, contended that absolutely there is no illegality or irregularity committed by the learned single Judge in coming to the conclusion that the writ petitions are devoid of merits and liable to be dismissed. It is not the case of the appellants that there was any procedural lacuna in publishing the notification or there was no transparency in conducting the auction. Therefore, it is not available for the appellants to argue that the notification was issued contrary to the Rules or the procedure adopted by the official respondents is bad in law, particularly having participated in the tenders, the appellants could not have complained saying that the notification and the procedure followed were ultra vires of the Rules, especially at this stage. The notification was issued in consultation with the District Level Committee as per the Rules. Even if the same is ultra vires, at this point of time, the appellants-writ petitioners cannot raise such an issue, since they participated in the auction with full knowledge. Even if there are certain irregularities in conducting the auction, the only thing that this Court can examine is as to whether there was any prejudice caused to the public interest. Switching over from one method to other method is contemplated in the notification itself. Therefore, the official respondents have followed the method, which is advantageous and which was fetching more revenue to the State. In fact, the very notification itself contemplates that best of the modes can be followed to protect the revenue of the State. Under Rule 9-B(2)(b) of the Rules, the District Level Committee is the ultimate authority and it had taken decision in the best interest of the State. Absolutely, there is no scope for any negotiations in this case. The 4th respondent being the highest bidder and to protect the revenue of the State, the official respondents asked him to deposit the amount as was being fetched for the 22 individual reaches put together. Thus, no prejudice was caused either to the public interest or to the appellants. The minor infractions, if any, cannot be taken into consideration for the purpose of issuance of a writ. Only when the first method of bidding failed, the 4th respondent was invited to accept the bid and he accepted the same readily. Nothing prevented the appellants to offer more in their bids. Now, their complaint that they could have offered more than the 4th respondent is imaginative and speculative. Further, while refuting the allegations of the appellant in W.A.No.1910 of 2004 that though the auction was knocked down on 20-10-2004 and it was offered to the 4th respondent on the very same day, he failed to deposit 25% of the bid amount on the next working day i.e., 23-10-2004 (21st and 22nd being public holidays) and offering the same in favour of the 4th respondent on 24-10-2004 was bad, learned counsel stated that till 23-10-2004 no decision was taken by the authorities for switching over to the third method of district as one package. Since the first method of 22 individual reaches failed, the authorities switched over to the third method on 24-10-2004 and the bid was knocked down in favour of the 4th respondent and the same was informed to the 4th respondent on 24-10-2004 and he deposited 25% of the knocked down amount on the same day. Therefore, the contention of the learned counsel for the appellants that having finalized the auction in the first method, it must be deemed that the other two methods were cancelled, is untenable. Learned counsel further contended that this is not the purport of the very notification. The notification contemplates three methods of bidding and clause (4) of the Note thereof makes it abundantly clear that the district level committee is empowered to follow any one of the methods, which would fetch more Revenue to the State. This is known to one and all, who participated in the auction. In this case, admittedly, when the first method failed, the authorities switched over to the third method, which would fetch more revenue to the State. The appellants had accepted all the conditions of the notification with eyes wide open and now it does not lie in their mouth to complain as to the methodology followed by the District Level Committee. In support of his contentions, the learned counsel relied upon the decisions of the Apex Court reported in TATA CELLULAR v. UNION OF INDIA and AIR INDIA LTD. v. COCHIN INTERNATIONAL AIRPORT LTD. In TATA CELLULAR case (1 supra), it was held as under: “85. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. 86. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justiciable and the need to remedy any unfairness. Such an unfairness is set right by judicial review. 93. The duty of the court is to confine itself to the question of legality. Its concern should be : 1. Whether a decision-making authority exceeded its powers? 2. Committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision, which no reasonable tribunal would have reached or, 5. abused its powers.” In AIR INDIA’s case ( 2 supra), it was observed as under: “7. The law relating to award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the Government has been settled by the decision of this Court in Ramana Dayaram Shetty v. International Airport Authority of India 1, Fertilizer Corpn. Kamgar Union (Regd.) v. Union of India 2, CCE v. Dunlop India Ltd. 3, Tata Cellular v. Union of India 4, Ramniklal N. Bhutta v. State of Maharashtra 5 and Raunaq International Ltd. v. I.V.R. Construction Ltd. 6 The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.” We have given our anxious consideration to the various contentions raised by either side and perused the entire material on record including the impugned Judgment. Admittedly, none of the appellants have questioned the notification dated 3- 10-2004 or the procedure followed thereafter in knocking down the bids. All the appellants had participated in the process, subject to the conditions laid down in the notification. In fact, even before conducting the auctions, on 27-9-2004, the District Level Committee held a meeting with the contractors. The contractors suggested that it is better to conduct auctions by clubbing certain reaches as packages. After having discussions with the contractors, the Committee proposed to conduct auctions to the sand bearing reaches situated in West Godavari District in the aforesaid three methods. Thus, the procedure followed by the Committee in conducting the auctions was within the knowledge of each and every appellant herein. The notification contemplates three methods of inviting tenders and it also gives powers to the Committee to decide to knock it down in favour of any one of the methods, which fetches more revenue to the State. In this case, admittedly, the following bid amounts were fetched under the three methods in the auction that was conducted on 20-10-2004. (1) 22 reaches separately Rs.2,80,98,692/- (2) 22 reaches as six packages Rs.1,87,63,639/- (3) 22 reaches as single package Rs.2,73,50,000/- Therefore, on 21-10-2004, the District Level Committee met and resolved to ask the 18 highest bidders in the auction conducted in the first method i.e. reach-wise, to pay 25% of the knocked down amount before 5.00 p.m. of 23-10-2004, since the total bid amount derived in this method was the highest one. This method failed. The highest bidders of 22 individual reaches were asked to pay 25% of the bid amount, a meeting was also convened with 13 bidders and requested them to see that all the bidders pay 25% of the amount. Only 8 highest bidders of individual reaches came forward for payment of the amount, one Kakarla Ramaiah, highest bidder of Prakkilanka reach submitted a representation stating that he was not able to pay the bid amount and requested for cancellation and ten highest bidders failed to pay 25% of the bid amount, which reduced the amount nearly to Rs.1.20 crores; therefore, the matter was placed before the District Level Committee for its decision. The District Level Committee on 24-10-2004 in view of the failure of the first