IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM FRIDAY, THE 23RD DECEMBER 2011 / 2ND POUSHA 1933 WP(C).No. 5541 of 2011(P) ------------------------- PETITIONER: --------------- ANNAM STEELS (PVT) LTD., NO.3/3-2ND LANE, TH ROAD, WASHERMENPET, CHENNAI-6000 21. BY ADVS. SRI.K.RAMAKUMAR (SR) SRI.TITUS MANI VETTOM SRI.R.N.AMARNATH SRI.VINO JOSE RESPONDENT: --------------- THE FERTILISERS AND CHEMICALS TRAVANCORE LTD. (FACT), COCHIN DIVISION, AMBALAMEDU, KOCHI-682303. BY ADV. SRI.E.K.NANDAKUMAR THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19.12.2011, THE COURT ON 23.12.2011 DELIVERED THE FOLLOWING: VK WP(C).No. 5541 of 2011(P) --------------------------------- APPENDIX ------------- PETITIONER' EXHIBITS --------------------------- EXT.P1. COPY OF SPECIAL TERMS AND CONDITIONS EXT.P2. COPY OF E-MAIL DT. 22.09.2010 EXT.P3. COPY OF ACCEPTANCE LETTER DT. 10.01.11 EXT.P4. COPY OF E-MAIL DT. 14.01.11 BY RESPONDENT EXT.P5. COPY OF E-MAIL T. 25.01.11 BY RESPONDENT EXT.P6. COPY OF E-MAIL DT. 25.01.11 BY RESPONDENT EXT.P7. COPY OF BANK GUARANTEE DT 27.01.11 EXT.P8. COPY OF E-MAIL DT. 28.01.11 BY RESPONDENT EXT.P9. COPY OF E-MAIL DT. 29.01.11 BY RESPONDENT EXT.P10. COPY OF E-MAIL DT. 31.01.11 BY RESPONDENT EXT.P11. COPY OF E-MAIL DT. 05.02.11 BY PETITIONER EXT.P12. COPY OF INTRODUCTORY PAGE OF MSTC WEBSITE (WWW.MSTCINDIA.COM). RESPONDENT'S EXHIBITS ------------------------------- EXT.R2 (A). COPY OF STATEMENT OF SHARE HOLDING OF PETITIONER IN THE 2ND RESPONDENT COMPANY AS ON 30.07.2011. EXT.R2 (B). COPY OF DETAILS OF BY PRODUCT FROM THE SECOND RESPONDENT COMPANY AT UDYOGAMANDAL PUBISHED IN THE INTERNET. EXT.R2 (C). COPY OF PAPER REPORT OF THE PROGRESS PUBLISHED IN HINDU NEWSPAPER DATED 16.08.2011 EXT.R3 (A). COPY OF THE RECEIPT ISSUED BY THE ANNAM STEELS PVT. LTD. EXT.3 (B). COPY F THE PHOTOS OF THE PLANT VK WP(C).No. 5541 of 2011(P) --------------------------------- EXT.R3 (C). COPY OF THE COMPLAINT FILED BY THE PETITIONER IN THE IA NO.17417/2011. EXT.R3 (D). COPY OF THE BANKER'S CHEQUE FOR RS. 5 CRORES IN FAVOUR OF THE FACT ISSUED BY THE ING VYSYA BANK, BANGALORE. EXT.R4. (A). LETTER OF AUTHORIZATION GIVEN BY ARPIT PRABHUNE DATED 12.11.2011 EXT.R4 .(B). COPY OF THE CHEQUE BEARING NO.030193 DATED 11.11.2011 FOR AN AMOUNT OF RS.52.11 CRORES IN FAVOUR OF FACT AND DRAWN ON THE AXIS BANK, VIDYADHAR NAGAR, JAIPUR BRANCH. / TRUE COPY / P.A. TO JUDGE VK C.K.ABDUL REHIM,J. ------------------------------- WP(C).NO. 5541 of 2011 --------------------------------- Dated this the 23rd day of December, 2011 JUDGMENT The petitioner is a private company incorporated, who had participated in an E-auction conducted for sale of the scrapped Ammonia and Urea Plants belonging to the respondent, which is a public sector undertaking. Challenge is against Exts.P8 and P10 letters, through which the petitioner was intimated that subsequent proceedings on the basis of the sale, is put under hold. Petitioner is also challenging action of the respondent in refusing to accept the Bank Guarantee furnished as 'Performance Bond'. 2. History of the case is that, the Ammonia and Urea Plants of the respondent, situated at its Cochin Division, had stopped production during the year 2003 since the company found it not feasible to continue with the plants. It became not economically viable to run the units with the obsolete technology which is more energy intensive, which is the technology of early sixty's. In the year 2009 the respondent conducted a detailed WP(C).5541/11-P 2 study through an expert agency, M/s. Project Development (India) Ltd., a Government of India undertaking, who had recommended for scrapping of the plants. On the basis of the decision taken for selling the plants, M/s. Metal Scrap Trading Corporation Ltd., (MSTC), again another Government of India undertaking, was appointed as agent for conducting the sale, through E-auction. A live E- auction was conducted on 22.9.2010 in which the petitioner came out as the highest bidder, offering a price of Rs.33,50,00,001/-. They have participated in the auction after making deposit of a pre- bid EMD of Rs.50 lakhs. On knocking the bid in favour of the petitioner, MSTC had issued Ext.P2 letter intimating that the bid has been provisionally accepted, subject to approval by the seller. The petitioner was requested to make deposit of an amount of Rs.3.35 lakhs (10 %) by way of Demand Draft in favour of the respondent, within 7 days. Accordingly the petitioner paid the 10% amount, less the pre bid EMD already remitted. The respondent issued Ext.P3 letter confirming the sale, through which a list of the items sold were furnished and the petitioner was requested to deposit the WP(C).5541/11-P 3 balance amount by way of Demand Draft by 8.2.2011. As per terms and conditions of the sale, the petitioner has to submit a Performance Bond/Bank Guarantee for Rs.170 lakhs, within 15 days from the date of acceptance of the sale. Through Ext.P4 a format of the Performance Guarantee was forwarded to the petitioner along with an expression of regret for the delay caused in furnishing such format. Through the said letter dated 25.1.2011 the petitioner was requested to submit the 'Performance Bank Guarantee' and to make payment of the balance at the earliest, so as to enable the respondent to issue the delivery order. It is evident from Ext.P7 that the petitioner had furnished Bank Guarantee as requested, which is seen executed on 27.1.2011. But to the surprise of the petitioner, the respondent issued Ext.P8 letter on 28.1.2011 stating that, “further proceedings on this sale order are stayed until further advice”. Petitioner immediately responded through Ext.P9 letter stating that the Performance Guarantee as required had already been furnished and that they have obtained the statutory factory licence for dismantling the plants. It is further stated that the WP(C).5541/11-P 4 petitioner had also arranged a 'letter of credit' for effecting balance payment and that they have made all arrangements to dismantle the plants by expending huge cost. But the petitioner was given a further reply through Ext.P10 that the further proceedings are put on hold and as such the respondent is not in a position to process the Bank Guarantee and to proceed with further. Explaining the plight of the petitioner, the petitioner again submitted Ext.P11 letter to the MSTC. But since there was no response, this writ petition is filed seeking to quash Exts.P8 and P10 and also seeking direction to the respondent to proceed with further steps for fulfillment of the sale. 3. During pendency of this writ petition another writ petition was filed by a person who has not participated in the E- auction, raising challenges against the tender proceedings. The said writ petition, WP(C).No.11151/11 was tagged on to this writ petition. When both the writ petitions came up for consideration before a learned judge of this court on 29.8.2011, it was pointed out that a meeting of the Board of Directors of the respondent company is scheduled on 12.9.2011 and that the Board will take WP(C).5541/11-P 5 a final decision in the matter. So the learned judge opined that the Board of Directors themselves have to take a decision in the first instance. Accordingly the Board of Directors of the respondent company was directed to take a final decision regarding sale of the plants in question pursuant to the auction already conducted, in its meeting scheduled on 12.9.2011, and to communicate the decision to the parties concerned. 4. In the meanwhile the petitioner in WP(C). No.11151/11 had filed an affidavit before this court stating that he is ready and willing to purchase the plants for Rs.45 Crores and is ready to deposit the sum of Rs.45 Crores within 60 days along with interest @ 10% p.a. till such deposit, in order to prove his bonafides. He also stated that offer made by him will not be altered for any reason whatsoever. On 26.9.2011 when the cases were taken up for further consideration, the respondent company had informed that the Board of Directors which met on 12.9.2011 had considered various aspects of the matter including the offer made by the petitioner in WP(C).11151/11 and decided in public interest that, in view of such an offer to move before WP(C).5541/11-P 6 this court for an order directing the petitioner to deposit Rs.45 Crores along with interest as offered. The Board has taken a further decision to permit the petitioner therein to inspect the plants in question. It was also decided to seek concurrence of this court to retain the amount of Rs.45 Crores, if so deposited, till the disposal of the plants through fresh tender to be floated, and if no bids are received with any sum exceeding Rs.45 Crores and to sell the plants to the petitioner therein for the said amount. 5. When the respondent company intimated about their decision as above, learned senior counsel, who was then appearing for the petitioner, submitted that atleast the petitioner in WP(C).No.11151/11 should be directed to deposit 10% of the amount of Rs.45 Crores offered, since the terms of the tender stipulates such deposit as a pre-condition. Counsel appearing for the respondent company also supported such contention. Thereupon the petitioner in WP(C).No.11151/11 made an offer to deposit 10% of the amount of Rs.45 Crores immediately and offered that the balance amount will be deposited on 25.10.2011. WP(C).5541/11-P 7 Considering such submissions made, the learned Judge directed the petitioner in WP(C).No.1151/11 to make deposit of a sum of Rs.4.5 Crores by way of Demand Draft/Bankers Cheque/Pay Order within 10 days from the date of the order (26.9.2011) and the respondent company was directed to keep deposit the said amount in a fixed deposit in any of the nationalised Banks for a period of 30 days. 6. But inspite of the above said order dated 26.9.2011, the petitioner in WP(C).No.11151/11 had failed to make deposit of the amount of Rs.4.5 Crores. Thereafter he had filed a petition seeking clarification of the order to the extent that, on making such remittance the sale should be confirmed in favour of him, for the sum of Rs.45 Crores. He also filed an application seeking extension of the time stipulated for payment. In the meanwhile considering the circumstances under which the order dt. 26.9.2011 was passed and also anticipating that there will be chance of a fresh floating of the tender, various parties have filed impleading applications both in this writ petition as well as in WP (C).No.11151/11. But, ultimately on 15.12.2011, WP(C). WP(C).5541/11-P 8 11151/11 was dismissed by this court observing that inspite of long lapse of time the petitioner therein had failed to comply with the conditions stipulated and also observing that there is absolutely no bonafides in the attempt of the petitioner, and further finding that he has no locus standi to challenge the proceedings of sale, confirmed in favour of the petitioner herein. 7. In the above back drop of the matter, an adjudication on merits of this case is necessary. In a statement filed on behalf of the respondent it is mentioned that, two E- auctions were conducted earlier and those were not successful. It is conceded that MSTC had issued intimation of confirmation to the petitioner and the respondent had issued the sale order, based on approval of the tender by the Board of Directors. It is further conceded that the petitioner was requested to remit balance 90% of the bid amount, with applicable tax and duties. However, it is stated that, while things being so a Fax Message was received from the office of the Chairman and Managing Director of the respondent company forwarding a representation received from one M/s Padma Cargo and Fertilizers, which bears WP(C).5541/11-P 9 an endorsement made by the Joint Secretary, Department of Fertilisers , Ministry of Fertilisers and Chemicals, Government of India, to look into the issue. Subsequently another Fax was received with a similar endorsement made by the Joint Secretary, directing to stay further proceedings on the sale and intimating that the issue will be discussed in the next Board meeting. According to the respondent, Exts.P8 and P10 letters were issued only on the basis of such messages received. It is contended that for attainment of the objectives of the respondent company they are having authority to enter into any agreement in a lawful manner. Therefore the Board of Directors is having power to look into the issue as to whether the contract entered is legal and valid. It is also stated that, subsequent to the Board decision, the Chairman and Managing Director of the respondent have received letters from 2 other parties stating that the petitioner, through some agents, have approached them and negotiated for sale of the plants in question for Rs.48 Crores. They have also mentioned that they are expecting to participate in the tender if floated again and to offer Rs.45 Crores, in which WP(C).5541/11-P 10 case the respondent company will be benefited with an additional sum of Rs.11.5 Crores. Therefore the Board of Directors in its 437th meeting held on 25.2.2007 has considered the matter and directed the company to review the matter and to obtain legal opinion. 8. It is pertinent to note that the respondent company has no case that there occurred any material illegality, impropriety or irregularity with respect to the E-auction conducted and with respect to the bid knocked in favour of the petitioner. There is also no dispute that the company had proceeded with confirmation of sale in favour of the petitioner. Even when the respondent pointed out that certain representations were received from other parties offering more amount, nothing is indicated to show that such parties have pointed out any material irregularity with respect to the process of sale, or that any of them have contended that the sale is in any manner vitiated. On the other hand the only allegation raised is that the petitioner had contacted one of them for sale of the plants in question for a higher value. WP(C).5541/11-P 11 9. In the statement of the respondent mention is made about the letter received from M/s. J3 Vision and Exports Pvt. Ltd. Cochin. But it was pertinent to note that W.P(C). No.11151/11 was filed only by the Managing Director of M/s. J3 Vision and Exports Pvt. Ltd. Cochin. Since the petitioner in W.P (C). No.11151/11 had failed to make deposit of the amount as directed in that case and since the said writ petition was already dismissed finding that the approach was made without any bonafides, such allegations deserve no merit. In this writ petition also the Managing Director of M/s.J3 Vision and Exports Pvt. Ltd. Cochin had filed an impleading application to get himself impleaded as an additional respondent. In the affidavit filed in support of the said application, I.A. 4609/11, various allegations of collusion between the petitioner and the respondent company as well as allegations regarding irregularity committed in the conduct of sale, are made. However, since the writ petition filed by the company, M/s. J3 Vision and Exports Pvt. Ltd. Cochin, had already been dismissed, the impleading application filed by the Managing Director of the said company cannot be entertained. WP(C).5541/11-P 12 10. It is also worth mentioning that one of the shareholders of the respondent company had filed yet another writ petition, W.P(C).22767/11 challenging the actions of the respondent for sale of the Ammonia and Urea plants, mainly contending that the decision taken by the respondent company for scrapping and selling of the plants in question, is unsustainable. According to him, the sale of the plants in question will result in huge loss to the respondent company and being a public sector undertaking it will result in huge loss to the public exchequer. It was contended that the plants in question can be revitalized with less expenditure than establishing new plants with new machineries. According to him, the plants can be revamped by utilising the Carbondioxide, which is plenty available in the Cochin Division of the respondent company as a bye- product in the process of manufactauring of other materials. The petitioner had also challenged the sale effected in favour of the petitioner herein and sought to cancel the same. While adjudicating the writ petition, this court found that there is no bonafides at all in the contentions raised by the petitioner since WP(C).5541/11-P 13 he had not challenged the action of the respondent in stopping production of the plants in question, as early as in the year 2003 and also the action of indefinitely keeping of the plants in an idle condition for more than 7 years. This court found that the petitioner who is a shareholder of the respondent company is a person interested in the matter and he cannot be heard to say that the scrapping and selling of the plants in question will cause loss to public revenue and that public interest is seriously affected. Being a shareholder he cannot step into the shoes of a public spirited person in the subject matter and hence his case cannot even be considered as a Public Interest Litigation. The petitioner in W.P(C). No.22767/11 had also filed impleading application in this writ petition as I.A.13626/11 raising almost identical contentions. But in view of dismissal of his writ petition, the impleading application cannot be allowed. 11. In the above narrated scenario, when claim of the petitioner is considered, it is evident that the petitioner is aggrieved only by the indefinite delay caused from the side of the respondent company in holding on the further steps pursuant to WP(C).5541/11-P 14 confirmation of the sale. But as conceded by the respondent company, the sale has not been cancelled nor the Board of Directors have taken any final decision. Even as observed in the interim order passed by this court on earlier occasion, at the first instance, a decision regarding further proceedings pursuant to confirmation of the sale, is a matter which need be taken by the respondent company itself. Contention of the petitioner is to the effect that merely keeping in abeyance further proceedings without assigning any valid reason is an action which can be termed as unreasonable and arbitrary and the same is resulting in huge loss to the petitioner. On the other hand, one of the contentions raised by the respondent company is that they are at liberty to cancel the sale in question even without assigning any specific reason, going by terms and conditions of the tender notification. The respondent specifically pointed out clause 11 of Ext.P1 in this regard. But on behalf of the petitioner it was contended that there is a concluded deal between the petitioner and the respondent and being a public sector undertaking unless there exists justifying grounds for cancellation of the sale, the WP(C).5541/11-P 15 action cannot be sustained. According to learned counsel appearing on behalf of the petitioner, even if it is assumed that such power for cancellation exists on the respondent, the respondent should not be permitted to do so without there being any reasonable cause. In other words, such power need be exercised only in a reasonable manner with an element of rationale, without any arbitrariness. However, as observed above, since the respondent has not taken any final decision in the matter, and since they have not raised any allegation of fraud, material irregularity or illegality in the conduct of the auction, it is for the respondent to take a final decision in the matter. It is only when the respondent company takes a decision against the interest of the petitioner, that they get a cause of action before this court to challenge such proceedings. 12. But in the case at hand, in view of the interim order passed by this court on earlier occasion, there were some incidental developments. On the basis of the common interim order passed by this court on 29.8.2011 and on 26.9.2011, an impression was created that there is a chance for floating a re- WP(C).5541/11-P 16 tender. Therefore various parties have filed impleading applications in this case as well as in W.P(C). 11151/11. It may be beneficial to have a brief mention about those impleading applications and the contentions of those parties before this court. 13. I.A.No.19277/11 is filed by M/s.Anappuram Steels (P) Ltd, a company claiming to be in the field of trading in steel and steel products. It is a company not participated in the E-auction conducted. According to them no enough publicity was there to invite the tender. It is stated that only on the basis of the interim order passed by this court indicating a chance of re- auction, they are making an offer for any amount higher than Rs.45 Crores. They also expressed willingness to make deposit or to furnish Bank Guarantee for 10% of the amount offered, i.e.: Rs.4.5 Crores. Sri.P.K.Suresh Kumar, learned counsel appearing for the petitioner in the application contended that there is no concluded contract in favour of the writ petitioner, because acceptance was only by MSTC with regard to the price offered. But it is noticed that Ext.P8 and P10 letters are issued by the WP(C).5541/11-P 17 respondent company itself confirming the auction. He also contended that the decision of the Board of Directors of the respondent company dt.12.9.2011 is indicative of the fact that the Board is tempted to cancel the sale in favour of the petitioner considering the public interest involved. Hence he contended that permission should be granted to the respondent company to float a re-auction with permission afforded to the applicant in the I.A. for participating. 14. I.A.No.19312/11 is filed by M/s. Minar Castings Pvt. Ltd., another company engaged in steel manufacturing. It is evident that the said company had also not participated in the E- auction conducted. But considering the developments pursuant to the interim order, it is stated that, they are prepared to make a bid for an amount higher than 45 Crores and is also ready to deposit Rs.4.5 Crores in favour of the respondent for participating in the re-auction. 15. I.A.No.18202/11 is filed by Mr.Arpit Prabhune as a representative of the authorised agent, Sri.Mukesh Gupta, who is the Director of M/s. Sapphire Steels Pvt. Ltd., a company WP(C).5541/11-P 18 engaged in the business of steel products. According to them, the sale conducted through E-auction is vitiated by fraud and material irregularity and had caused heavy loss to the respondent company. The applicant therein had offered a sum of Rs.52.11 Crores as price for the scrapped plants and he had produced copy of a cheque drawn in favour of the respondent company for the said amount, which is drawn at Axis Bank, Vidyanagar, Jaipur Branch. 16. I.A.No.18449/11 is an application filed by one Sri.Ashim Raizada, Manager (Operations) of M/s. Westend Promoters Pvt. Ltd. which is a company based at New Delhi. They have filed a subsequent affidavit in which an offer is made for Rs.54 Crores. It is stated that they are ready to furnish Bank Guarantee within 10 days for 10% of the amount offered. 17. I.A.No.17417/11 is an application for impleading filed by M/s. Liyashi Builders and Developers Pvt. Ltd. They raised an allegation that the writ petitioner had approached them for re- sale of the Ammonia and Urea plants and such re-sale was finalised for a sum of Rs.50 Crores and a token advance was WP(C).5541/11-P 19 received by a person named, Vijayakumar. It is further stated that subsequently the applicant came to notice that the writ petitioner had entered into another agreement for sale of the plants with another company for an amount of Rs.75 Crores and the agents of such company had visited the plants inside the premises of the respondent company and taken photographs. It is stated that the applicant company is ready to purchase the plant if given a chance for an amount of Rs.50 Crores and if re- tender is floated the company is ready to give Bank Guarantee for an amount of Rs.50 Crores. 18. Yet another impleading application is filed by M/s. Ashik Transport Container Company Pvt. Ltd. It is offered that, they are ready for purchasing the plants in question at Rs.51 Crores if re-auction is conducted and also that they are ready to offer 10% of the amount as Bank Guarantee provided they will be permitted to conduct inspection of the plants in question. 19. Learned counsel