C.W.P. No.19768 of 2003 -1- IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No.19768 of 2003 Date of Decision. 19.05.2010 Col. Pirthi Pal Singh Gill and others ........Petitioners Versus Municipal Corporation, Chandigarh through its Commissioner and others ....Respondents Present: Mr. M.L. Sarin, Senior Advocate with Mr. Nitin Sarin, Advocate for the petitioner. Mr. K.K. Gupta, Advocate for respondent Nos.1 to 3. 2. C.W.P. No.20022 of 2003 Amit Jain and others ........Petitioners Versus Municipal Corporation, Chandigarh through its Commissioner, Deluxe Building, Sector 17, Chandigarh ....Respondents Present: Mr. Ashok Aggarwal, Senior Advocate with Mr. Alok Jain, Advocate and Mr. Vikram Aggarwal, Advocate for the petitioners. Mr. K.K. Gupta, Advocate for respondent Nos.1 to 3. CORAM:HON'BLE MR. JUSTICE K. KANNAN 1. Whether Reporters of local papers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest? -.- C.W.P. No.19768 of 2003 -2- K. KANNAN J. I. The subject of challenge 1. The writ petitions challenge the decision of the Chandigarh Municipal Corporation to set aside the auction of Shop-cum-Office sites Nos.176-177 and 178-179 in Sector 9-C, Chandigarh that was held on 28.08.2002. The grounds of challenge to the decision essentially are that when admittedly there was no vitiating circumstance attendant on the public sale that was conducted after due publicity and in the manner provided by the rules, there was no scope for setting aside the sale and offering to pay back the amount paid by the successful bidders at the auction. To them the contract became complete when highest bids had been accepted on the spot and when the earnest money had been paid up by the petitioners. A concluded contract could not be rescinded unilaterally by the Chandigarh Administration. II. Circumstances leading to the impugned auction 2. The public auctions impugned now had been actually carried through for the second time and the result of the first auction literally carried a shadow on the second auction and spurred a rethink on the whole issue by the Chandigarh Municipal Corporation. The whole narration must therefore begin with what transpired in the first auction, the reasons for not going through it as proffered by the Corporation, whether at all there was such a first auction as denied by the petitioners and whether there was justification for setting aside the second auction although there was no fraud attendant at the auction for the only reason that the second auction C.W.P. No.19768 of 2003 -3- fetched a price lesser than what was alleged to have been offered at the first auction. III. Background facts 3. The Municipal Corporation, Chandigarh had notified various properties for sale to be held on 23.01.2002 on free-hold basis, that included, inter alia, three numbers of 3-bay SCOs and five numbers of 2-bay SCOs in Sector 9-C. The auction was reported to have been held in the premises of the Municipal Corporation in Sector 17. Two SCOs No.172-173 and Nos.180-182 were sold for Rs.2.50 crores and 2.55 crores respectively against the reserve price of Rs.1.72 crores. They were placed before the General House for information on 28.01.2002. Properties which had not been sold along with some other properties were also put up for auction on a subsequent date on 04.06.2002. They included SCO Nos.176-177 and 178-179. It appears that there were no bidders for the auction proposed to be held on 04.06.2002 and therefore, they were again notified for auction to be held on 28.08.2002. This was done after a publication was effected on 18.08.2002 and 25.08.2002. The reserve prices that were notified were lesser than the price quoted at the previous auction, in view of the fact that there had been no bids at all for the auction in June, 2002. The decision for reduction of the reserve price had been placed before the Finance & Contract Committee (for brevity “F&CC). The agenda put before the meeting records the fact that among other shops, the SCO sites in 176-177 and 178-179 could not be auctioned despite prior notification on the various dates on 02.01.1998, 18.03.1998, 28.10.1998, 04.08.2000, 19.03.2001 , C.W.P. No.19768 of 2003 -4- 25.09.2001, 23.01.2002 and 04.06.2002. IV. The perceived reasons for poor response for the shops in dispute 4. Six SCOs that had not been disposed of which included the sites in disputes now in the two writ petitions were perceived as not properly located and they were, therefore, not attractive. The reserve price which had been mentioned against the properties did not attract the prospective buyers and therefore, the agenda read that the reserve price should be reduced suitably so that the dire necessity of funds that the Corporation was beset with, would be made good. A decision had been taken for disposal of the commercial sites for reducing the upset price by 20%. The details of the supplementary agenda and the resolution passed are reproduced as under:- “Suppl. Agenda Item No.7 Disposal of Commercial sites The additional Commissioner put up the agenda item. Thereafter, detailed discussion was held on the issue of fixing of reserve price of the sites to be sold through open auction on 28.08.02. The following decision was taken unanimously by the Finance & Contract Committee. Item No.1: There will be 20% reduction in the existing reserve price already fixed by the F&CC in respect of 6 nos. SCO sites bearing No.124-125-126, 129-130-131, 156- 157, 158-159, 176-177 and 178-179.” The proceedings of the F&CC were reported in the newspaper on 28.02.2002 and the Municipal Corporation had also issued a press C.W.P. No.19768 of 2003 -5- release regarding the reduction of reserve price by 20% in respect of SCOs in Sector 9-C and 5% in respect of SCOs in Manimajra which was published in the newspaper on 27.08.2002. V. Objection to the highest bids from two quarters 5. The auction was held on 28.08.2002 and SCO Nos.176-177 received the highest bid of Rs.1.35 crores and SCO Nos.178-179 received the highest bid of Rs.1.35 crores against the respective reserve price of Rs.1.29 and 1.33 crores. In the normal course of events, the highest prices which were above the reserve price ought to have been accepted and proceedings culminated in completion of sale deeds in the names of the highest bidders. However, the problem arose when the Municipal Councillor, who was reportedly present at the time of auction took objections to concluding sales for a price allegedly lesser than what had been offered 7 months earlier for Rs.1.85 crores to shop no 178-179. Coming in tandem with the complaint was yet another communication from Sh. Mangat Ram Verma claiming to be Managing Director of M/s Phulkari Estates (P) Limited to the Commissioner on 09.09.2002 reporting that they were the highest bidders for the SCO site No.178-179 and the details of the complaint as have been by the Municipal Councillor were replicated. Sh. Mangat Ram claimed that he was a NRI and left India after auction on 23.01.2002 and coming to know from his Company Director in India that the property was ultimately sold for a lesser price, he had wanted the Commissioner to look into the matter. 6. The F&CC decided to call the complainants or their authorized representatives to ascertain whether the complainant C.W.P. No.19768 of 2003 -6- was a genuine person and whether they had solid proof of the truth of the allegations made in the respective complaints, the minutes of F&CC meeting held on 18.09.2002 recorded as follows:- “Thereafter, the Finance & Contract Committee unanimously decided to adjourn the meeting to 20.09.2002 at 11.00 AM to take decision on the abovesaid two issues, for which no written notice will be issued. The Committee further decided that in the meantime, undertaking in writing may be obtained from the complainant for offering a premium of Rs.1.40 crore for SCO site No.178-179, Sector 9-C, Chandigarh and to deposit a sum of Rs.14 lacs towards 10% of the said amount as security and further that he will be bound to purchase the said site at the said amount in case bid goes down. The Committee also decided that in the meantime, legal opinion from the Law Officer may be obtained in writing and placed before its next meeting to be held on 20.09.2002." VI. The report of the Enquiry officer and his suggestions for re-auction 7. By a subsequent meeting held on 20.09.2002, it appears that the matter was referred to the Administrator, U.T., Chandigarh for getting the matter enquired by him. The Administrator had ordered the enquiry for sale of SCO sites No.176-177 and 178-179 in Sector 9-C, Chandigarh. The matter was placed before the Chairman of the Chandigarh Housing Board to enquire into the details of the auction and how the property had been sold for a lesser price at a subsequent auction as regards one of the shops from what was allegedly offered at an auction held seven months earlier. The Officer appointed by the Administrator, Sh.G.C.Marwah, who incidentally was the Chairman of the Housing Board, to enquire into the details of the auction had examined several persons who claimed themselves to be present at the auction and a report had been C.W.P. No.19768 of 2003 -7- submitted by him on 17.12.2002. In that report the Enquiry Officer suggested to the Municipal Corporation to reject the bids in respect of the sites No.176-177 and 178-179 and refund the amounts which they had deposited along with interest @10% per annum from the date of deposit to till the date of payment. It was also suggested that the two SCO sites should be re-auctioned. He had also suggested that when a fresh auction schedule was notified, all the complainants, in particular, M/s Phulkari Estate Private Limited would be informed separately the date of auction and suggested that an amount of Rs.1.50 crores should be kept as a minimum amount from where the bid would start. VII. Contentions on behalf of the petitioners 8. Sh. M.L. Sarin, Senior Advocate appearing in C.W.P. No.14798 of 2003 would contend that there had been no complaints at any point of time for the sale of the property bearing No.176-177 and for complaint against SCO No.178-179, the auction of the property in which he was the successful bidder could not have been recalled. It was also his contention that while the auctions held on the same day elsewhere at Manimajra were not set aside, the Municipal Corporation had selectively picked on only the properties in SCO sites No.176-177 and 178-179 and therefore, they were arbitrary and discriminatory in character. To him, the mere fall in price of the property from the alleged previous bids ought not to have been the basis for setting aside the sales through the auction. If at all, the reduction in the reserve prices had been made after sufficient deliberation and even the properties at Manimajra had C.W.P. No.19768 of 2003 -8- also been sold by lowering the up-set price and the auctions held in that place had not been recalled. Referring to the report of the Chairman of the Chandigarh Housing Board, the learned Senior Counsel would contend that even in the report, it was specifically elicited that there was no fraud at the auction or vitiating circumstances. Even the decision not to accept the highest bid of Rs.1.85 crores had not been a mala fide decision but it was on a perception that the property would have fetched a price more than Rs.2 crores. In the meanwhile, there was a change in Punjab East Urban Regulation Act as applicable to Chandigarh exempting non- residential sites fetching rent of more than Rs.1500/- from the applicability of statutory protection afforded under the Act. There was consequently a sudden down fall in the rentals by the dampening effect in the market relating to prices of non-residential buildings. Matters looked up differently only after the Hon'ble Supreme Court held the change in law brought the notification of the Administrator to be bad through its decision in Vasu Dev Singh and others Vs. Union of India and others Vol.CLXIV (2006-3) PLR 802. The notification had been issued on 17.11.2002. The date is significant, for, according to the learned counsel for the petitioner the public got the wind of what was coming in future that led to the dampening of the market prices. The price that the property was sold at the time was best price that was possible and on their own showing, the auctions had been held several times but the property had no takers and even the suggestion that there was a bid for Rs.1.85 crores were not borne through any records. The report itself C.W.P. No.19768 of 2003 -9- noticed the fact that there were no bid lists for the alleged auction said to have been held on 28.01.2002 and there was no proof that M/s Phulkari Estate Private Limited had offered to purchase for Rs.1.85 crores. The learned Senior Counsel argued that a mere self- deprecatory observation that the officers who had conducted the auction were lax in not retaining the auction bids held on 23.01.2002 to make possible documentary proof available for the actual bids on that day would not be sufficient to annul the auction sales. The decision was made only on some oral evidence of persons that there had been a highest offer of Rs.1.85 crores and that could not have been accepted as true, especially when the transactions relating to public authorities could not have been done otherwise than through records. That the market was reigning low was an admitted fact even by the so-called offer of M/s Phulkari Estate Private Limited, who were not prepared to pay even the price which they had alleged to have offered earlier, but they were only prepared to only pay Rs.1.40 crores on that day. The decision to cancel the auction sale had been taken without notice to the petitioners and hence the whole enquiry was against the principles of natural justice. 9. Sh. Ashok Aggarwal, Senior Advocate arguing for the petitioner in C.W.P. No.20022 of 2003 pointed out that the power to cancel the auction sale itself did not reside with the Municipal Corporation and it was only with the Deputy Commissioner. Referring to Rule 6 of Chandigarh Sale of Sites and Building Rules of 1960, the argument was that what was necessary to conclude the contract for the offer made through public auction is the payment of C.W.P. No.19768 of 2003 -10- 25% of the bid and the power of cancellation was limited under the said Rule only to a failure of the purchaser to pay the balance of amount within the stipulated period. Rule 10 provided for payment of the balance of 75% amount in three equated installments with interest @6% and even the procedure in case of default of such payment of installments, was to call upon the person to pay the amount within a month together with penalty and if only the amount was still not paid, the liability would be only for recovery of the balance as arrears of land revenue or an action under Section 8A of the Capital of Punjab Development Regulation Act for cancellation of the auction. The cancellation, which had been made by the Municipal Corporation was, therefore, not justified at all and was illegal. He also argued on the defects in the report of the Chairman of the Chandigarh Housing Board by pointing out to the fact that Sh. Gupta, Municipal Councillor was himself not a bidder and he had no right to treat himself as an aggrieved person to make a complaint. In the absence of the bid list for the auction alleged to have been held on 28.01.2002, Sh. Marwah ought not to have accepted the oral evidence to conclude that there had been a highest offer for Rs.1.85 crores on an earlier date. VIII. The justification for setting aside the sales 10. The controversy that may have to be resolved in these two writ petitions is whether the alleged inadequacy of price is itself a ground for setting aside the sale when there is no proof of fraud or vitiating circumstance attendant on the auction. Since the rights of parties are regulated through the Capital of Punjab (Development C.W.P. No.19768 of 2003 -11- and Regulation Act) and the rules relating to Chandigarh (Sale of Sites and Buildings) Rules, 1960, could the Administration decide to act without reference to the Rules or cancel the auction on grounds which are not specified under the Rules? It has to be noticed that the terms and conditions of the auction themselves did not provide for rejection of a highest bidder without assigning any reasons by the authority, who conducts the acution. Learned counsel appearing for the respondents would submit that the actions of authorities have to conform wholly to the Rules, for every sale of the property is purported to be done with the sanction of the Central Government and the Central Government acts through the Administrator. The form of deed of conveyance prescribed in Form B read with Rule 8 itself suggests that without such sanction by the Administrator, a sale cannot be complete and it was necessarily to be understood as a specific stipulation under the terms and conditions of offer for sale. The relevant portion of Form B is reproduced here: "XXX XXX XXX And whereas the Central Government has sanctioned the sale of the site ot the transferee in consideration of the sum of RS......... (Rupees .................) for the purpose of building ................ (state here house, shop, factory, temple, sarai, school etc. as the case may be) and using the same exclusively for ............. (state here residence, trade, industry, workshop institution etc. as the case may be); XXX XXX XXX According to him, the overall control of all auctions obtained through the relevant statutory provisions and the rules and they shall be read as forming a part of the terms and conditions. C.W.P. No.19768 of 2003 -12- IX. Consideration of legal precedents cited by counsel (a) Decision to cancel without show cause notice is bad 11. Learned Senior Counsel, Sh. M.L. Sarin refers to a Full Bench decision in State of Haryana and others Vs. Vinod Kumar and others 1986 PLJ 161 that held that an action by an Administrative Authority without affording an opportunity of being heard before rendering a transaction as void or voidable is bad in law. This submission is in the context of the decision taken by the Municipal Corporation in setting aside the sales without affording an opportunity to the petitioners for which the said decision was taken. The decision of the Full Bench was rendered under the Punjab Security of Land Tenures Act and the relevant rules and the issue was with reference to the Collector's decision of declaring a particular land as surplus. Such decision without an opportunity of being heard is very different from a situation where a bidder at the auction knows that the sale could be done only in the manner contemplated by the Rules and if the Rules require a sanction for the sale before a sale deed is executed by the Administrator, the decision of the Administrator itself could not be subjected to any principles of hearing before such decision. The decision in Chet Singh Vs. State of Punjab and others 1977 PLJ 228 was cited to bring home the same point of a decision made without a show cause notice was non est and it should be ignored at any stage. The decision was rendered in the context of the East Punjab Holdings (Consolidation and Prevention of Fragmentation) Act with particular reference to Section 42, which contemplated notice to interested C.W.P. No.19768 of 2003 -13- parties and an opportunity of being heard and if such an order was passed without going through the statutory mandate, it was non est. The court further held that the fact that the petition had been dismissed for default was irrelevant to consider the merits of the case when the previous order passed under Section 42 itself had not complied with the statutory mandate. In Babu Singh Bains and others Vs. Union of India and others (1996) 6 SCC 565, the Hon'ble Supreme Court decided on the validity of order of resumption issued under Capital of Punjab (Development and Regulation) Act, 1952 when a challenge was made to the said decision. The Hon'ble Supreme Court upheld the validity of the Section only by making reference to a pre-decisional opportunity to show cause and to adduce evidence for passing a reasoned order and a provision that provided for an appeal as providing sufficient protection for a person not to be deprived of the property. This decision was cited by the learned counsel to urge that a decision to set aside or cancel the sale could not have been taken without putting the parties on notice of the proposal to set aside the auction. (b) A transaction involving allotment of public property cannot be cancelled only because there is a controversy; need for a holistic approach 12. Onkar Lal Bajaj and others Vs. Union of India and another (2003) 2 SCC 673 spells out the manner of exercise of a discretionary power vested in an Administrative Authority and the scope of judicial review for a decision, which is alleged to be arbitrary. The decision was in the context of distribution of State largesse for allotment of retail outlets, dealership/distributorships of C.W.P. No.19768 of 2003 -14- petroleum products and the Court held that allotments made due to alleged political patronage for some of the allotments ought not to have been a ground for setting aside of the allotments wholesale. The learned Senior Counsel refers to paragraph 26 relating to cancellation of an agreement and the extent of power with the Authority and the scope of judicial review in such like matters:- ".. It is evident from the facts that the cancellation of the agreements is not for violation of any term thereof. The cancellation is on account of a policy decision taken by the Government as noticed hereinbefore. The cancellation is not on account of any uniform reason applicable to all the selectees or whose who have been issued LOIs-holders or any discrepancy hving been found in what was required to be fulfilled by them. We are not concerned with any such individual case. Therefore, the cases of LOI-holders are no different in comparison to those cases where agreements have been entered into. Similar is the position of those who are on published merit panels and were awaiting issue of LOIs by the oil companies when the impugned decision was taken. For the present controversy, they are all in the same position except those who may come in the category of alleged tainted class, which aspect we would deal with later." Referring to the cardinal principles of governance, the Hon'ble Supreme Court held that:- "The role model for governance and decision taken thereof should manifest equity, fair play and justice. The cardinal principle of governance in a civilized society based on rule of law not only has to base on transparency but must create an impression that the decision-making was motivated on the consideration of probity. The Government has to rise above the nexus of vested interests and nepotism and eschew window-dressing. The act of governance has to withstand the test of judiciousness and impartiality and avoid arbitrary or capricious actions. Therefore, the principle of governance has to be tested on the touchstone of justice, equity and fair play and has taken into consideration other matters, though on the face of it, the decision may look legitimate but as a matter of fact, the reasons are not based on values but to achieve popular accolade, that decision cannot be allowed to operate." C.W.P. No.19768 of 2003 -15- The power to effect en masse cancellation could be legally permissible but how the power should be exercised was again set through the judgment in