D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 1/20 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR J U D G M E N T M/s Ridhi Sidhi Associates vs. State of Raj. & Ors. D.B.CIVIL SPECIAL APPEAL NO.389/2009 M/s Ridhi Sidhi Associates vs. State of Raj. & Ors. D.B.CIVIL SPECIAL APPEAL NO.390/2009 DATE OF JUDGMENT : 19th August, 2009 P R E S E N T HON'BLE MR.JUSTICE PRAKASH TATIA HON'BLE DR.JUSTICE VINEET KOTHARI REPORTABLE Mr.N.M.Lodha, for the appellant. Mr.Vijay Bishnoi, ] Mr.Sandeep Pathak, ] for the respondents. Mr.V.K.Mathur, ] BY THE COURT : (PER HON'BLE DR.VINEET KOTHARI, J.) 1. These two appeals arise out of the judgment and order of D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 2/20 learned Single Judge dated 2/4/2009 disposing of the two writ petitions with the direction to the petitioners to appear before the Secretary, Mines and Geology Department, Govt. of Rajasthan, Jaipur on 13/4/2009 and on that date the Secretary, Mines Department, after providing opportunity of hearing to the petitioners, was directed to take final decision and decide the grievance of the petitioners about the contract in question. 2. The facts leading to filing of the two writ petitions by the unsuccessful bidders in the contractual process, which was initiated by the Mining Department of Govt. of Rajasthan for awarding contract of collection of excess royalty, are in the following manner. 3. On 12/1/2009 the notice inviting tenders was issued by the Director, Mines for collection of excess royalty for the period 1.4.2009 to 31.3.2011. The tenders were to be submitted by 3 pm on 4.2.2009 and the tenders were to be opened on the same date at 4 pm. The present appellant M/s Ridhi Sidhi Associates gave the highest bid at Rs.81.77 crores against the reserve price of Rs.73.68 crores and a D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 3/20 provisional acceptance was issued in favour of the present appellant and as per the terms of the NIT the present appellant also furnished the security deposit in the form of FDR of Rs.10.22 crores. The said provisional approval was conveyed by the Director of Mines and Geology for approval to the State Government on 16/2/2009 and according to the present appellant on 14/3/2009 the first monthly installment towards said contract of Rs.6,81,48,150/- was also deposited by him. The said grant of contract in favour of the present appellant was sought to be challenged by the respondent-petitioners by way of two writ petitions before the learned Single Judge, one by M/s Parth Network (P) Ltd., Udaipur and another by one Ramswaroop Chhotiya. According to these writ petitioners, while the said Ramswaroop Chhotiya participated in the said tender process and his bid was lesser than the present appellant, the other writ petitioner M/s Parth Network (P) Ltd. contended before the Court that it was prevented by sufficient cause from participating in the tender process on account of resistance of certain persons and the Director, Mines was informed by telegram on 4.2.2009 that it was prepared to give highest bid of Rs.84 crores than the present appellant for the same D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 4/20 contract. The said writ petitioner also contended before the learned Single Judge that it had kept ready the demand drafts for security deposit and, therefore, the award of contract in favour of present appellant deserves to be set aside. 4. After hearing both the sides, the learned Single Judge disposed of the writ petitions in the light of judgment of another learned Single Judge of this Court in H.U.Construction Company & ors vs. State of Rajastahn - 1993 (1) WLC 280 and while holding that this Court is not inclined to interfere under Article 226 or 227 of the Constitution of India, but at the same time held that since the writ petitioner has sent the aforesaid telegram and also notice for demand of justice and such communications were received by the department, therefore, it is for the Government to decide whether any genuine offer was made by the tenderer, the present appellant or not and it is for the Government to take a decision in public interest and, for the same, before final approval, since matter was agitated by the petitioner firm, though its tender was not before it at the time of considering all the tenders on 4/2/2009, learned Single Judge directed the Secretary (Mines) to D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 5/20 decide the matter afresh after hearing the petitioner firm on 13/4/2009. 6. Being aggrieved by the said order of learned Single Judge, the successful bidder M/s Riddhi Siddhi Associate approached this Court by way of present appeals, which were admitted on 15/4/2009 and operation of the impugned judgment and order dated 2/4/2009 was stayed by this Court. 7. However, in the meanwhile, on 13/4/2009 as directed by learned Single Judge, the Secretary (Mines), Govt. of Rajasthan appears to have heard the petitioners and though while holding that offer of present appellant M/s Riddhi Siddhi Associate was a genuine offer and the offer of writ petitioner M/s Parth Network (P) Ltd. cannot be considered to have been made on prescribed date 4/2/2009 and his allegation about restraining him from participation in the bid process also appears to be without basis and other petitioner Shri Ramswaroop Chhotiya participated in the bidding process but his offer was less than that of highest bidder, present appellant, the said D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 6/20 Secretary (Mines) ordered for fresh negotiations between these parties to be held on 21/4/2009 for raising their bids. 8. Mr.N.M.Lodha, learned counsel appearing for the present appellant vehemently submitted that it is well settled that court's interference under Article 226 of the Constitution in contractual matters has to be very limited and relying upon the various judgments of Apex Court, he submitted that once the contractual process in favour of present appellant was concluded on 4/2/2009 while finding his bid of Rs.81.77 crores to be the highest and the present appellant having complied with the conditions of NIT by depositing earnest money, security deposit and further monthly installment within prescribed time and and the work has actually commenced by him under the said contract on 1.4.2009 itself, there was no justification for the learned Single Judge to direct the Principal Secretary of Department of Mines, Govt. of Rajasthan to rehear the petitioner in this matter, who has ended up by directing fresh negotiations between the parties on 13/4/2009 even without hearing the present appellant. He vehemently submitted that writ D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 7/20 petitioners have not approached this Court with clean hands and their effort is to scuttle the contract awarded in favour of the present appellant and by making a make believe offer of Rs.84 crores as against the offer of present appellant of Rs.81.77 crores, the writ petitioner has sought to undo the entire bidding process undertaken by the State Government in the present matter. He urged that there was no restriction or hindrance in the way of writ petitioner M/s Parth Network (P)Ltd. to have submitted his tender before the cut off date and participated in the bidding process on 4/2/2009 and the State Government itself in its reply filed before the learned Single Judge has stated that there was no such hindrance or restriction any body's way to participate in the said bidding process on 4/2/2009. He submitted that making of a marginally higher offer is clearly an after thought on the part of the writ petitioner and contract awarded in favour of the present appellant cannot be cancelled at the instance of such writ petitioner and, therefore, the judgment of learned Single Judge deserves to be set aside. 9. On the contrary, Mr. Vijay Bishnoi, Mr.Sandeep Pathak and D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 8/20 Mr.V.K.Mathur appearing for the respondents in the present appeal reiterated the their submissions made before the learned Single Judge and submitted that since the writ petitioner M/s Parth Network (P) Ltd. had made a higher offer and the same was also genuine, therefore, interference made by learned Single Judge in the said bidding process and directing the Principal Secretary of Mines of State of Rajasthan to reconsider the matter after hearing the writ petitioner was not wrong. They also relied upon the judgment of another learned Single Judge of this Court in the case of H.U.Construction Company's case (supra) and also certain other judgments in support of their contentions and prayed for dismissal of present appeals. 10. We have heard learned counsels at length and perused the record and have given our thoughtful consideration to the rival submissions made at the bar. 11. The legal position about interference by the Court under Article 226 of the Constitution of India in such contractual matters was once D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 9/20 again reiterated by the Apex Court discussing the various precedents in the case of Air India Ltd. vs. Cochin International Airport Ltd. & Ors. - 2000 (2) SCC 617. The relevant extract from para no. 7 of the said judgment is reproduced as under: “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 of 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 D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 10/20 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. 12. In a recent judgment, the Apex court in the case of Valji Khimji and company vs. Official Liquidator of Hindustan Nitro Products (Gujarat) Limited and others – (2008) 9 SCC 299 refused to interfere in a similar situation as is obtaining in the present case where the highest bid of the appellant at Rs.3.51 crores was accepted and sale was confirmed and for the offers by the parties who did not participate in the auction to buy assets for Rs.3.75 crores and Rs. 5 D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 11/20 crores respectively, the Court did not find any justification for setting aside such confirmed sale as no fraud was pointed out or established by such parties. The Apex court also observed that things would have been different if the auction sale was confirmed say for Rs.1 crore and subsequently somebody turns up offering Rs.10 crores and in that situation it is possible to infer in such cases that there was some fraud and an attempt has been made to acquire the assets at a grossly inadequate price, but the Court did not interfere on the basis of facts obtaining as aforesaid. It would be relevant to reproduce para no.26 to 31 from the said judgment, which are as under:- “26. On the other hand, learned counsel for the respondents relied upon a decision of this Court in Divya Manufacturing Company (P) Ltd. etc.vs. Union Bank of India & Ors. Etc. (2000) 6 SCC 69. We have carefully perused the above decision and we find that it is clearly distinguishable. The facts of the case were that at the initial stage the appellant offered 37 lakhs for purchasing the property in question. At the intervention of the court the price was raised to 1.3 crores, and ultimately it was found that the property could be sold for Rs.2 crores. It was on these facts that D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 12/20 this Court held that even after confirmation of the sale the same could be set aside. Thus, the ratio in Divya Manufacturing Company (P) Ltd. (supra) was that if there is fraud then even after the confirmation the sale can be set aside because it is well-settled that fraud vitiates everything. On the facts of that case, the Court was of the view that that confirmed sale deserved to be set aside. 27. In our opinion the decision of this Court in Divya Manufacturing Company (P) Ltd. (supra) cannot be treated as laying down any absolute rule that a confirmed sale can be set aside in all circumstances. As observed by one of us (Hon. Katju, J.) in his judgment in Civil Appeal No. 4908/2008 (Dr. Rajbir Singh Dalal vs. Chaudhary Devi Lal University, Sirsa & Anr pronounced on 6.8.2008), a decision of a Court cannot be treated as Euclid's formula and read and understood mechanically. A decision must be considered on the facts of that particular case. 28. If it is held that every confirmed sale can be set aside the result would be that no auction sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount. It D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 13/20 could have been a different matter if the auction had been held without adequate publicity in well-known newspapers having wide circulation, but where the auction sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction sale is advertised in well- known newspapers having wide circulation, all eligible persons can come and bid for the same, and they will be themselves be to blame if they do not come forward to bid at the time of the auction. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price. Of course, the situation may be different if an auction sale is finalized say for Rs.1 crore, and subsequently somebody turns up offering Rs. 10 crores. In this situation it is possible to infer that there was some fraud because if somebody subsequently offers 10 crores, then an inference can be drawn that an attempt had been made to acquire that property/asset at a grossly inadequate price. This situation itself may indicate fraud or some collusion. However, if the price offered after the auction is over which is only a little over the auction price, that cannot by itself suggest that any fraud has been done. 29. In the present case we are satisfied that there is D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 14/20 no fraud in the auction sale. It may be mentioned that auctions are of two types - (1)where the auction is not subject to subsequent confirmation and (2)where the auction is subject to subsequent confirmation by some authority after the auction is held. 30. In the first case mentioned above, i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of the auction) the auction is not complete and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud. 31. In the present case, the auction having been confirmed on 30.7.2003 by the Court it cannot be set aside unless some fraud or collusion has been proved. We are satisfied that no fraud or collusion has been established by any one in this case.” D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 15/20 13. The judgment of Learned Single of this court in H.U.Construction company and others vs. The State of Rajasthan & ors. - 1993 (1) W.L.C.(Raj.) 280, which was relied upon by the writ petitioners and also learned Single Judge in the present case is also distinguishable in the facts of the present case. In the said case, the court interfered before confirmation of sale because the price offered by the subsequent tenderer was more than 25% more than the successful bidder and since in the case of contract for royalty collection the auction was knocked down at Rs.2.56 crores and subsequent writ petitioners offered to take same contract for Rs.4 crores, the learned Single Judge directed the respondent State to negotiate again for higher bid. 14. In the present case, we find that the writ petitioner M/s Parth Network (P) Ltd. who did not participate in the bidding process, according to him being prevented by some other persons, the particulars of which or any action taken by him for the same is conspicuous by its absence, has offered to take the said contract at D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 16/20 Rs.84 crores and the contract was finalized in favour of present appellant at Rs. 81.77 crores and the difference is less than 5%. The State has categorically stated in its reply that the petitioner did not participate in the said bidding process and there was no hindrance or obstruction in his way to participate in the same and the respondent State had taken all measures to maintain law and order situation at the spot in the present case on 4/2/2009 when the tenders were opened and the highest bid of present appellant was found. 15. A perusal of letter dated 19/1/2009 written by Mining Engineer, Udaipur to the Superintendent of Police Udaipur for making available the police aid on the said date and which was so made available also shows prima facie that there was no occasion for the writ petitioner to have been prevented as alleged by him in the writ petition. If what petitioner seeks in the writ petition was to be allowed, it would be very easy to set at naught any contractual process or even concluded contract merely at the instance of any unsuccessful person, who comes to the Court with bald and vague allegation like in the present case that he was prevented by sufficient D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 17/20 cause and now he offers higher bid knowing fully well what was the highest bid and, therefore, contract awarded in favour of somebody should be cancelled. This obviously, cannot be permitted in law. 16. Lack of bonafides on the part of writ petitioners also appear from the fact that in the alleged deposit of demand draft of Rs.1.02 crores, the details of such bank draft have been given in the writ petition also; the demand draft of Rs.2 lacs was prepared at Jaipur on 4/2/2009 from Malviya Urban Cooperative Bank Limited and there is no branch of the said bank at Udaipur. Possibly the demand draft prepared at Jaipur on 4/2/2009 itself, the date of opening of the tender, could not have reached Udaipur before 3.00 pm on 4/2/2009. Further details, which the appellant has revealed in the memo of appeal are that other demand drafts for a sum of Rs.38 lacs were got prepared from Oriental Bank of Commerce, Udaipur but the said amount was debited in the account of person concerned at 2.45 pm on 4/2/2009 and, therefore, no such demand drafts could have been prepared and could have been said to be submitted before 3.00 pm, the prescribed time of submitting the tender as it was not practicable D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 18/20 to prepare so many demand drafts of said sum and submit the tender at 3.00 pm because branch of Oriental Bank of Commerce is at a distance of 4 kms from the concerned office of Mining Engineer. Besides these facts, despite specific query from the counsel for the respondents to the writ petitioners, they could not point out any action taken by the writ petitioners against the persons who prevented him in submitting the said tender within time. On the said date, no FIR was lodged by him nor any such complaint was made by him to the police or competent court. Thus, there is no evidence to support the allegations of the petitioner of the contemporary period and time. We are, therefore, no inclined to accept such bald and vague averments at their face value. 17. Therefore, we are satisfied that neither the petitioner was prevented by any sufficient cause as alleged by him in submitting the tender on the prescribed date & time nor the contract finalized and concluded in favour of the present appellant can be set aside at the instance of writ petitioners as neither any such fraud has been alleged, much less established, nor the price offered by him is so substantially D.B.CIVIL SPL.APPEAL NO.389/09- Ridhi Sidhi Associates vs. State D.B.CIVIL SPL.APPEAL NO.390/09-Ridhi Sidhi Associates vs. State Judgment dt:19/8/09 19/20 higher than the price at which the State Government has concluded the contract in favour of present appellants. It would be very easy to make such marginally higher offer for any body, once the tenders of other persons are opened and their bids are known to one and all. Therefore, unless the subsequent offer would have been substantially higher and such subsequent offer was genuine, there was no reason for the Court to interfere with the contractual process under Article 226 of the Constitution of India. Sanctity of process of granting contract specially by Government or public bodies has to be maintained and the very faith in such process shall be shaken if they were to be lightly interfered with or set at naught at the instance of such frivolous and frolic writ petitioners. We are, therefore, unable to agree with the learned Single Judge and great respects, there was no occasion for directing the Principal Secretary of Mines of State