IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No. 607 of 2010. Date of Decision : June 14, 2010 Universal Estate and another Petitioners Versus H.P. Housing and Urban Development Authority Respondent Coram: The Hon’ble Mr. Justice Deepak Gupta, Judge The Hon’ble Mr. Justice Sanjay Karol, Judge. Whether approved for reporting?1 Yes. For the petitioners : Mr. J. S. Bhogal, Senior Advocate with Mr. Bimal Gupta and Mr. Tarunjit Singh, Advocates, for the petitioners. For the respondent : Mr. Neel Kamal Sood, Advocate, for the respondent. Justice Deepak Gupta, J. (Oral) By means of this writ petition the petitioner has prayed for the grant of following amongst other reliefs:- “(i) That the impugned order dated nil, Annexure P-8 passed by CEO cum Secretary of respondent may kindly be held wrong, illegal, arbitrary and may kindly be set aside. The respondent may kindly be directed to issue letter of allotment in favour of the petitioner No. 1 and to fulfill all other formalities Whether reports of Local Papers may be allowed to see the judgment? Yes. 2 regarding allotment of plot in question i.e. 9947 square meter in Section-2, Parwanoo.” 2. Briefly stated the facts of the case are that respondent- HIMUDA invited sealed bids for lease of its various properties including the disputed property measuring 9947 square meters which is a commercial site in Sector-II, Parwanoo. Bids were also invited vide the same notice for lease of another commercial site in Sector-I, Parwanoo measuring 475.40 square meters. The reserve price fixed in the initial notice was Rs. 9000/- per square meter but later the same was reduced to Rs. 6000/- per square meter. In respect of the site in question any participant was required to deposit a sum of Rs. 60 lacs to be eligible to submit his bid. It is not disputed that the petitioner did deposit this amount. Petitioner was the highest bidder which fact is also not disputed. As per the terms and conditions of the notice the presiding officer permitted the petitioner to deposit an amount of 10% of the total bid amount instead of 25% and also adjusted bid money of Rs. 60 lacs. Therefore, the petitioner deposited another sum of Rs. 8,50,000/- on 8.2.2010 when the bids were opened. Thus he deposed a sum of Rs. 68,50,000/- in all. 3. It appears that some news item appeared in a local newspaper that property of the respondent/Authority had been sold for peanuts. Thereafter the Addl. Chief Secretary (Housing) to the 3 Government of Himachal Pradesh sent a confidential memo to the CEO-cum-Secretary (HIMUDA) which reads as follows:- “It has been brought to my notice that the bids were invited for the sale of two commercial plots in Sector-1 and 2, Parwanoo of 475 sq. mtr. and 10,000 sq. mtrs respectively. The bids received were widely varying. In the case of the smaller plot it is understood that the rate offered is Rs. 25,000 per sq. mtr whereas in the case of the larger plot it is Rs. 6,500 sq mtr. In view of the widely varying rates the bids may not be accepted till further orders. The following issues may kindly be clarified: In what circumstances were sealed bids invited when normally one would expect an open auction process to be resorted to in order to maximize return. Given the value of the land what steps were taken to ensure wide dissemination of the sale in Parwanoo, Himachal Pradesh and outside the State. What was the basis for the fixing of the reserve price and on what basis was it revised downwards. A full report addressing the above queries and indicating the level and nature of the participation in the bidding process may kindly be submitted within a week.” 4. In response to this memo reply of the HIMUDA was as follows:- QUESTION ANSWER 1. In what circumstances were sealed bids invited when one would expect an open auction process to be resorted to in order to maximize return? In this regard it is submitted that there are only 2 (two) commercial sites available at Parwanoo. Since, through the process of open auction there is every likelihood pooling of rates being given by the bidder as such sealed bids were invited. Earlier erstwhile Housing Board (Now HIMUDA) allotted Industrial Plots in Industrial Area at Bhatoli-Kalan (Baddi) through sealed bids. In addition, sealed bids were also invited for School sites at Sanjauli (Shimla), Sector-5, BCS, Shimla, Rohroo, Dhaundi (Mandi), Bajaura & Devta Ground (Kullu), 4 Daruhi (Hamirpur), Lohna (Palampur), Baddi, Education Hub at Kalujhanda (Baddi), Basal (Solan) and Cafeteria at Shimla etc. 2. Given the value of the land what steps were taken to ensure wide dissemination of the sale in Parwanoo, Himachal Pradesh and outside the State? Sealed bids were invited by publishing the advertisement notice in the leading newspapers viz. Times of India (English Newspaper) and Jansatta (Daily Hindi News Paper) through the office of Director, Information and Public Relations Deptt., Shimla. 3. What was the basis for the fixing of reserve price and on what basis was it revised downwards? Since there is recession in the market and location of plot is away from National Highway and in industrial area as such reserve price was reduced from Rs. 9,000/- per Sqm. to Rs. 6,000/- per Sqm. as per rate for industrial plots. 5. Though such a reply was sent to the Addl. Chief Secretary (Housing) on 17.2.2010 and the respondent justified its action before the Addl. Chief Secretary. On 19.2.2010 there was a sudden change of heart and the Chief Executive Officer made a noting on the file that keeping in view the vast difference in the rates quoted for the two plots the bid made by the petitioner be rejected. This action of the respondent is under challenge before us. 6. We may first deal with the primarily objection raised by the respondent that the matter should be referred to arbitration. Arbitration clause 33 relied upon by the respondent reads as follows:- “33. If any dispute arises between the Authority and the lessee in connection with exercise of the power and discharge of function by the Authority and decision of the CEO-cum-Secretary, on such disputes shall be final.” 5 7. At this stage there is serious doubt whether the bidder can be considered as lessee or not but assuming that this arbitration clause is applicable then also the prayer made by the respondent has to be rejected. 8. Section 8 of the Arbitration and Conciliation Act, 1996 reads as follows:- “8. Power to refer parties to arbitration where there is an arbitration agreement. – (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.” 9. A bare perusal of the aforesaid provision shows that an essential prerequisite for referring the dispute for arbitration is that the application under Section 8 should be filed before first statement on the substance of the dispute has been filed. In the present case no separate application has been filed and only preliminary objection has been taken in the written statement. For this reason alone this prayer has to be rejected. 6 10. We now come to the main issue viz. whether the respondent/authority had the right to reject the bid once bid money had been accepted by the designated officer. Clauses 10 and 11 of the terms and conditions of the notice read as under:- “10. The successful bidder shall have to pay 25% of the amount of bid on the spot at the fall of hammer in cash or by means of demand draft drawn in favour of the Estate manager, HP Housing and Urban Development Authority on any scheduled bank at Shimla. Payment by cheques shall not be accepted. However, the Presiding Officer as a special case may allow the successful bidder to deposit not less than 10% of the bid on the condition that the difference between the amount deposited and 25% of the bid shall be deposited in the same manner within 30 days from the issue of allotment letter. The remaining 75% premium is to be paid in accordance with the condition No. 11 (eleven) below. 11. The lease shall be deemed to have taken effect from the date of bid acceptance and from this date the interest @ 12% shall be charged on the 75% balance of the premium. The balance 75% premium can be paid in lump sum with-in 30 days from the date of acceptance of bid without interest or with 12% per annum interest in three annual instalments, first instalment being payable within one year from the date of the allotment along with lease rent. It will be the responsibility of the lessees to pay annual instalment without waiting for any notice and the Authority will not be under any obligation to issue any demand notice.” 11. Clause (10) postulates that the successful bidder has to deposit 25% on the spot at the fall of the hammer. The Presiding 7 Officer has been given the right to permit the successful bidder to deposit an amount not less then 10% of the bid on the condition that the balance amount alongwith the entire remaining amount to make good the amount of 25% is deposited within 30 days. It is not disputed before us that the authorized officer in this case permitted the petitioner to deposit 10% of the total amount after adjusting the amount of Rs. 60 lacs deposited bid money. The petitioner was permitted to deposit another sum of Rs. 8,50,000/- which admittedly it deposited when the sale bids were opened. The opening line of Clause (11) makes it clear that the lease shall be deemed to have taken effect from the date of acceptance of bid and empowers the respondent to charge interest on the balance amount @ 12% per annum. Therefore, as soon as the 10% amount approved by the Presiding Officer was deposited bid of the petitioner stood accepted. 12. True it is that the invitation inviting bids contained a clause where the CEO-cum-Secretary, HIMUDA had a right to reject any or all of the bids without assigning reasons. However, this right can be exercised before the bidder is allowed to deposit 25% or 10% of the bid money. Once this amount is accepted from the bidder this CEO- cum-Secretary has no further right to reject the bid. No other clause has been brought to our notice which gives the right to the respondent/authority to reject the bid for no fault of the bidder after deposit of 25% or 10% of the bid money as the case may be. 13. We lastly deal with the contention raised on behalf of the respondent that the bid was rejected because of public outcry that 8 property of the Board had been sold at a very low rate and that for the other plot measuring 475 sq. mts. the offer was Rs. 25,299/- per sq. mtr. whereas for the plot in question bid money is Rs. 6,551/- per sq. mtr. and therefore it is about 70% less than the other bid. Petitioner in his petition has specifically stated that the plots are not situated next to each other and according to the petitioner the commercial site in Sector-I is in the heart of Parwanoo town whereas the second plot of 9000 sq. mts. is in the industrial area which is at a distance of one kilometer from the center of the town. There is no specific reply to this averment by the respondent. 14. As pointed out above the respondent/authority in its reply to the Addl. Chief Secretary itself had stated that the location of the plot in question is far away from the National Highway and industrial area. Given the very large difference in size of the plots and the difference in the location of the plots there could be difference in their prices also. It was for the respondent to have placed before us clear cut material to show that the plot in question had been auctioned at a rate which is much below the market rate. In case respondent had placed such material on record and touched our judicial conscience we may not have exercised our writ jurisdiction in favour of the petitioner, but in spite of having time to file reply other than making a bare assertion in the reply that there is vast difference the respondent has not cared to place on record any material to show what is the market value of the plot. Therefore, 9 action of the respondent is totally illegal and unjustified. We therefore allow the writ petition and set aside Annexure P-8. 15. Mr. Neel Kamal Sood, learned counsel for the respondent contended that the amount deposited by the petitioner has been refunded to him. Mr. J. S. Bhogal, learned Senior Counsel for the petitioner submits that no doubt the draft has been received but the same has not been encashed by the petitioner since he had filed the writ petition. Petitioner is directed to return the draft to the respondent within one week from today and make good the difference to make up 25% bid money within 15 days from today. In case petitioner fails to deposit the balance amount to make up 25% it shall be presumed that he is not interested in the plot. The balance amount should be paid as per the terms and conditions contained in the bid documents. 16. Record which is produced by Mr. Neel Kamal Sood, learned Counsel has been returned. 17. The writ petition is disposed of in the aforesaid terms. No order as to costs. (Justice Deepak Gupta), Judge. (Justice Sanjay Karol), Judge. June 14, 2010 (PK)