Case: Haji T.M. Hassan Rawther Vs. Kerala Financial Corporation

A tea estate of 100 acres with some buildings, machinery and equipments was given as security to the Kerala Financial Corporation ("The Corporation") against the loan taken by the appellant. A part of the loan remained outstanding and the appellant could not clear it. The Corporation thereupon filed O.A. No. 8/6 4 before the District Court of Kottayam for recovery of the arrears and obtained decree for an amount of Rs.1, 20, 000. In execution of the decree, the said tea estate was brought for sale by court auction. On November 5, 1969, the auction sale was held. There was no bidder. So the Corporation itself had to purchase the property for about Rs.1, 65, 000. There was long standing dispute between the workmen of the estate and the previous management relating to payment of their wages . The Corporation therefore could not take possession of the estate. An extent of 85 acres out of 100 acres of the estate was in possession of the workmen as per settlement arrived at between the Labour Commissioner and the District Collector. The workmen used to collect the income therefrom towards their wages. This arrangement continued for about thirteen years. On January 7, 1982, the Corporation got possession of the entire estate. The Corporation wanted to recover its amount. It was not interested in the property. It therefore, invited tenders for the sale of the estate. On March 19, 1982, a tender notification was published in dailies like Malayala Manorama, Mathrubhoomi and Deepika newspapers. In response to the notification, the daughter-in-law of the appellant was the only tenderer. She offered Rs.5, 10, 505. The Corporation accepted the tender. It was subsequently found that the daughter-in-law was no better than the appellant. She also could not pay any amount.On January 18, 1983, the Corporation again invited tenders for the sale of the property. The notification was published in the said newspapers as it was done earlier. This time, the Corporation received these tenders: (i) T.M. Hassan Rawther (Appellant before us) for Rs. six lakhs; (ii) P.M. Jacob for Rs.4, 15, 550 and (iii) K.K. Mathew for Rs.2, 07, 451. Since the appellant submitted the highest offer, the Corporation naturally had to accept it. On March 2, 1983, the acceptance was communicated to the appellant. He must have thanked his stars for getting back his family property which was so dear to him or which was according to him so valuable. But there was no such anxiety shown. He did not pay anything except the earnest money of Rs.40,Corporation, however, extended the time for payment again and again. The Corporation also gave him installments for payment of the balance price. All the efforts of the Corporation failed to induce theCorporation wanted to get back its money. It was not interested in retaining the property. So it negotiated with P.M. Jacob who had submitted his tender alongwith the appellant in response to the notification dated January 18, 1983. He had then offered Rs.4, 16, 550. His tender was the next best. After negotiation, he enhanced the offer to Rs. four and a half lakhs. The Corporation accepted it and decided to sell the property to P.M. Jacob. The property however, was sold to M/s. Gumraj Plantations at the request of P.M. Jacob. M/s. Gumraj Plantations is a partnership firm in which P.M. Jacob is one of theappellant who could not purchase the said property by any means filed suit O.S. No. 2 29/84 before the Munsif Court Thidupuzha to restrain the Corporation from selling the property. He could not get relief in the suit since by then the sale deed was executed in favour of M/s. Gumraj Plantations. Subsequently, he moved the High Court of Kerala complaining that the Corporation while selling the property for Rs. four and a half lakhs to M/s. Gumraj Plantations, had deviated from the normal practice of inviting tenders from the public. He contended that the Corporation being a public authority was bound to act reasonably and fairly and it ought not to have arbitrarily selected the purchaser. The High Court found no substance in those submissions. The High Courtsubmission made by the petitioners counsel is that the decision to sell the property by private negotiations is arbitrary and is therefore liable to be interfered with by this court. This is clearly a case where in execution proceedings the decree holder has purchased the property and thereafter the property was sold in public auction to the petitioner, who purchased it for Rs. six lakhs but failed to pay the sale amount in spite of the fact that this court and afterwards the corporation had shown great indulgence towards the petitioner. This is not at all a fit case for interference under Art. 226 of theaggrieved by the judgment of the High Court, the appellant has preferred the present appeal.

Court's reasoning:
The public property owned by the State or by any instrumentality of the State should be generally sold by public auction or by inviting tenders. This Court has been insisting upon that rule, not only to get the highest price for the property but also to ensure fairness in the activities of the State and public authorities . They should undoubtedly act fairly. Their actions should be legitimate. Their dealings should be above board. Their transactions should be without aversion or affection. Nothing should be suggestive of discrimination. Nothing should be done by them which gives an impression of bias, favouritism or nepotism. Ordinarily these factors would be absent if the matter is brought to public auction or sale by tenders. That is why the Court repeatedly stated and reiterated that the State owned properties are required to be disposed of publicly. But that is not the only rule. As O.Chinnappa Reddy, J. Observed "that though that is the ordinary rule, it is not an invariable rule." There may be situations necessitating departure from the rule, but then such instances must be justified by compulsions and not by compromise. It must be justified by compelling reasons and not by just convenience.What is the position in the present case. Here is a case where the Corporation invited tenders for the sale of the property under notification dated January 18, 1983. The appellant submitted the highest tender in response to the said notification. He was given all concessions for payment of the tender amount. But he did not. He negotiated with the Managing Director of the Corporation for facilities for payment by installments. That was also granted to him. There again he failed. If the appellant could not act according to his tender, we fail to see why the property should not be offered to the person who was next in order. The Corporation, in our opinion, did not do anything unfair with P.M.Jacob. The Corporation got the tender amount raised from Rs.4, 16, 550 to Rs.4, 50, 000. It shows the fairness with which the Corpo ration dealt with thea consideration of all the facts and circumstances of the case, we are satisfied that the action of the Corporation in offering the property to P.M.Jacob and selling the same at his request to M/s. Gumraj Plantations was perfectly justified and cannot be found fault with