Case: Haryana Urban Dev. Authority  Vs. Orchid Infrastructure Developers P.Ltd

The plaintiff Bhudeep Builders and Exporters Pvt. Ltd. were later renamed as M/s. Orchid Infrastructure Developers P. Ltd. The plaintiff-respondent filed a suit for declaration with consequential relief as against the appellants with regard to rejection of bid relating to the commercial tower situated in Sector 29, Urban Estate, Gurgaon, in area admeasuring 9.527 acres. The bid submitted by the plaintiff was the highest of Rs.11,17,50,000/-. The reserve price was Rs.106.65 crores. The main terms and conditions of the auction were as under :(i) 10% of the bid amount to be tendered on the spot at fall of hammer(ii) 15% of the bid money to be deposited within 30 days from the date of issuance of allotment letter(iii) 75% of the amount to be paid within 60 days from issuance of allotment letter as one time interest free payment or with interest in the manner prescribed(iv) The Presiding Officer (Administrative Officer) reserved the right to withdraw any property from the auction or reject any bid without assigning any reason3. It is further averred in the plaint that the auction held on 24.5.2004 was presided over by the Administrator, Haryana Urban Development Authority (for short HUDA). Reserve price had been approved by Chief Administrator, HUDA. Though the reserved price for the other sites were approved by the Administrator. In the plaint it was further averred that 27 persons deposited the security amount of Rs.50 lakhs for bidding and various bidders actively participated in the bids. Ultimately the bid of the plaintiff amounting to Rs.111.75 crores being highest was accepted. Petitioner deposited 10% amount by various drafts on the fall of hammer. Formal letter of allotment was not issued inspite of efforts made by the plaintiff. Officials of HUDA were dragging their feet over the issue without any rhyme or reasonPlaintiff ultimately received memo dated 24.9.2004 purporting to refund 10% amount Rs.11,17,50,000 deposited by the plaintiff at the time of auction held on 24.5.2004 on the ground that the bid had not been accepted4. Plaintiff questioned the rejection of the bid on the ground of its being illegal, unlawful, mala fide, arbitrary, discriminatory and violative of principles of natural justice. The bid for the commercial tower was adequate and above the reserved price. The plaintiff relied upon Regulation 6 regarding issuance of allotment letter by Chief Administrator. The rejection of the bid is without any rhyme or reason. The order is non-speaking. There was no material available with the defendant to conclude that auction of property in question was made at a lower rate or that the same would fetch a higher price in the event of re-auction. The Chief Administrator alone was competent to decide about the bid and no delegation of power to Administrator has been shown to the plaintiff. Mere baseless apprehension harboured by the defendant that the auction could fetch a higher rate, could not be said to be in public interest. If such action is permitted, auction process shall be a never ending exercise. The plaintiff valued the suit for declaration and consequential relief of mandatory injunction at Rs.400 and paid the court fee of Rs.55. Plaintiff has prayed for a declaration that memo dated 24.9.2004 rejecting the bid of the plaintiff to be void ab initio, non est and illegal, and that plaintiff is successful bidder of commercial tower measuring 9.527 acres situated in Sector 29, Urban Estate, Gurgaon. Plaintiff further prayed for mandatory injunction directing the defendants to issue formal letter of allotment pertaining to the suit property in favour of the plaintiff and to complete requisite formalities of allotment including delivery of possession and sanction of site plan. Plaintiff further prayed for an injunction restraining defendants from re-auctioning the suit property and from creating any third party interest of any nature in respect of the suit property5. The defendant HUDA in its written statement raised preliminary objection that the civil court has no jurisdiction to entertain the present suit in view of section 15(2) of Haryana Urban Development Authority Act, 1977 (hereinafter referred to as the Act). It was also submitted that the suit was not maintainable in the present form, that the plaintiff has no cause of action to file the suit and has not come to court with clean hands, suit is liable to be rejected under Order 7 Rule 11 of the C.P.C., plaintiff is liable to pay ad valorem court fee on the sale consideration of Rs.111.75 crores of the commercial site in question, the suit is barred under section 41(h) of the Specific Relief Act. The plaintiff has not availed the remedy of arbitration as per the rules, regulations and bye-laws of HUDA. There is no concluded contract between the parties. Plaintiff has accepted the terms and conditions of the auction in which it was mentioned that the competent authority is entitled to accept or reject the bid without assigning any reason. The auction was presided over by the Administrator, HUDA. After auction in question was held complaints were received regarding intimidation and threatening of bidders. The bid was not accepted for the reason that the price of urban estates at other places like Faridabad, Panipat, Panchkula etc. for similar kind of property was higher. The bid in question was not acceptable as per prevalent market price of the similar property in Gurgaon. The Presiding Officer i.e. Administrator is fully competent to refuse or accept the bid. Competent authority after going through the individual reports/comments/opinion of the members of the Auction Committee comprising of Estate Officer, HUDA, Gurgaon, Senior Accounts Officer, District Town Planner and District Revenue Officer (representative of the Deputy Commissioner, Gurgaon) as members under the Chairmanship of Administrator, HUDA. Administrator thoroughly examined the observations and recommendations of the members of the Auction Committee regarding not to accept the bid prices of big commercial sites since these prices being apparently on the lower side which was also examined by the Government at the Headquarters level. The records of the entire auction proceedings including opinion of the Estate Officer, Gurgaon, other members of the Auction Committee, Deputy Commissioner and also after studying the reserve price and auction price trends, a decision was taken by the competent authority not to accept the bid prices vide their written report. It was further contended by HUDA that Administrator is the competent authority. Power to accept bid has been delegated to him by the competent authority6. In view of the written statement the plaintiff filed a rejoinder. It was denied that the civil court has no jurisdiction and bid price was not inadequate. It also denied the delegation of power to Administrator, HUDA, Gurgaon7. The trial court – Civil Judge, Junior Division, Gurgaon decreed the suit vide judgment and decree dated 14.10.2010. Three witnesses were examined by the plaintiff and on behalf of defendant HUDA. Shri P.K.Ramanand, Assistant was examined. The trial court held that Administrator, HUDA was not competent to reject the bid of the plaintiff. As per Regulation 6 of Haryana Urban Development (Disposal of Land and Buildings) Regulations, 1978 (hereinafter referred to as the Regulations of 1978), the authority to accept or reject a bid was vested with Chief Administrator, HUDA and delegation of power to Chief Administrator can only be made by the State Government vide notification as per section 51(4) of the Act. No notification has been placed on record to prove that the power of Chief Administrator has been delegated to Administrator, HUDA. The report on the basis of which bid had been rejected was not placed on record. The trial court held that the plaintiff is entitled to mandatory injunction for issuance of formal letter of acceptance of bid. The trial court further held that the suit is maintainable. The payment of court fee by the plaintiff was adequate as the suit was not for specific performance of contract. The trial court further directed the defendants to issue formal letter of allotment on completion of requisite formalities within two months8. On first appeal being preferred in the court of District Judge, Gurgaon the same was allowed vide judgment and decree dated 29.11.2010. The suit was dismissed by the first appellate court. The first appellate court has opined that the power of Chief Administrator has been delegated to Administrator, HUDA. As is apparent from the letter written by Chief Administrator to the Administrator. No legal and vested right accrued in favour of the plaintiff by submission of the highest bid and 10% of the amount on fall of hammer. Bid has not been finally accepted. The plaintiff ought to have paid ad-valorem court fee. The first appellate court also observed that no responsible officer of HUDA has entered the witness box and only a junior ranking Assistant has been examined who was not present when the auction was held. He was posted at Gurgaon on 2.10.2008. The first appellate court has observed as under :However, the defendants have not produced any document whatsoever to prove the above averment and nor has any responsible officer, including defendants No.2 and 3, cared to step in the witness box to substantiate the above referred plea and instead only one witness, and that too an Assistant named P.K. Ramanan from the office of HUDA, Gurgaon who is a junior ranking official was examined as DW1 who was admittedly not even present at the time of the impugned auction because he has admitted during his cross-examination that he came to be posted at Gurgaon only w.e.f. 8.8.2008. Non-appearance of any responsible official of HUDA thus indicates some sort of unholy news between certain quarters for which reason a copy of this Judgment is ordered to be forwarded to the Chief Secretary to the Government of Haryana for getting conducted an enquiry as to why such course of conduct was adopted despite huge stakes running into several crores. Was it intended to benefit the plaintiff by default. The Chief Secretary to Government of Haryana be requested to acknowledge receipt of the copy of the judgment9. On the second appeal being preferred on 2.1.2011 in the High Court as against the judgment and decree, the same has been allowed on 17.1.2011 within 15 days of it being filed. The High Court has restored the judgment and decree of the trial court on the ground that there is no delegation of power to the Administrator. The rejection by the Administrator was inconsequential and was not a valid decision in the absence of irregularity in auction the bid ought to have been accepted by the Chief Administrator, HUDA and letter conveying acceptance ought to have been issued in favour of the plaintiff. In view of Regulation 6(2) the Chief Administrator was competent authority to take a final decision on the bid. No notification has been issued by the State Government under section 51(4) of the Act. The suit has been held to be maintainable. It has been rightly valued and adequate court fee has been paid10. The judgment and decree of High Court has been questioned by filing the appeal in this Court. An application has also been filed on behalf of the appellant to take additional documents on record. HUDA for the first time has filed notification dated 13.9.1989 issued by it under section 51 of the Act, delegating the functions in favour of various officers indicating that the power has been delegated to the Administrator to accept the auction bids for commercial/residential/industrial sites. Apart from that, a judgment of Division Bench of the High Court of Punjab & Haryana in CWP No.12753/2010 – Jitender Singh v. Haryana Urban Development Authority has been placed on record in which the impugned decision of the High Court in the present appeal has been held to be not laying down a good law and has been overruled.

Court's reasoning:
13. Firstly, we examine the question whether there being no concluded contract in the absence of acceptance of bid and issuance of allotment letter, the suit could be said to be maintainable for the declaratory relief and mandatory injunction sought by the plaintiff. The plaintiff has prayed for a declaration that rejection of the bid was illegal. Merely by that, plaintiff could not have become entitled for consequential mandatory injunction for issuance of formal letter of allotment. Court while exercising judicial review could not have accepted the bid. The bid had never been accepted by concerned authorities. It was not a case of cancellation of bid after being accepted. Thus even assuming as per plaintiffs case that the Administrator was not equipped with the power and the Chief Administrator had the power to accept or refuse the bid, there had been no decision by the Chief Administrator. Thus, merely by declaration that rejection of the bid by the Administrator was illegal, the plaintiff could not have become entitled to consequential relief of issuance of allotment letter. Thus the suit, in the form it was filed, was not maintainable for relief sought in view of the fact that there was no concluded contract in the absence of allotment letter being issued to the plaintiff, which was a sine qua non for filing the civil suit14. It is a settled law that the highest bidder has no vested right to have the auction concluded in his favour. The Government or its authority could validly retain power to accept or reject the highest bid in the interest of public revenue. We are of the considered opinion that there was no right acquired and no vested right accrued in favour of the plaintiff merely because his bid amount was highest and had deposited 10% of the bid amount. As per Regulation 6(2) of the Regulations of 1978, allotment letter has to be issued on acceptance of the bid by the Chief Administrator and within 30 days thereof, the successful bidder has to deposit another 15% of the bid amount. In the instant case allotment letter has never been issued to the petitioner as per Regulation 6(2) in view of non-acceptance of the bid18. It is apparent that there had been delegation of power by HUDA to the Administrator with respect to the power to accept the auction bids for commercial/residential/industrial sites provided the highest bid is more than the reserve price and minimum of three bids have been received. The Administrator has also the power if the site is not sold in 3 attempts, to revise the price downwards up to a maximum of 10% of the reserve price. Thus plaintiff has not come to the court with clean hands and has suppressed for the reasons best known to it, the aforesaid order of HUDA by which delegation of power has been made.20. Admittedly, the Presiding Officer was the Administrator, HUDA. Thus, as per the terms of the auction also, the Administrator was having the power to accept or reject the bid. That the bid was more than the reserve price and there were more than 3 bidders, is not disputed. Thus, in our opinion, the Administrator had the power to reject the bid as per the delegation made to him on 13.9.198921. The learned counsel representing the plaintiff-respondent vehemently contended that there was no delegation of power under section 51(4) and it was the State Government only who could have delegated the power of the Chief Administrator as found by the High Court. As delegation had been made by HUDA under section 51(1) of the Act of 1977, it was incumbent upon the plaintiff to question it and assail the same. However, the plaintiff had feigned ignorance as to delegation on its part which does not inspire confidence as the line of arguments advanced on its behalf that no delegation was there under section 51(4) was clearly grounded upon the fact that the delegation made under section 51(1) was in fact to the knowledge of the plaintiff that is why the aforesaid argument had been advanced and unfortunately learned counsel for HUDA also conceded that there was no delegation of power made by the State Government under section 51(4). This was done by overlooking the delegation dated 13.9.1989, the factum whereof has not been controverted by the learned counsel appearing on behalf of the respondent in any manner whatsoever. In the absence of having questioned delegation made by HUDA under section 51(1) of the Act, plaintiff could not have succeeded in the suit22. The plaintiff has not questioned the delegation of power before the courts below in any manner whatsoever. We decline to examine the submission raised by learned counsel for the plaintiff in this Court that there is no delegation of power under section 51(4) and the power of the Chief Administrator could have been delegated only by the State Government not by HUDA under section 51(1) as per its order dated 13.9.1989. In the absence of challenge to legality of delegation order dated 13.9.1989, and the plaintiff being guilty of suppressio veri, it is not entitled to urge the aforesaid submission so as to invalidate the statutory delegation of power made by HUDA under section 51(1)23. In view of the aforesaid fact-situation, it is apparent that the Administrator had the power to reject a bid, not only being the Presiding Officer as per terms and condition N0.4 of auction but otherwise also he had the power, as discussed above. Thus, the decision of the High Court in setting aside the auction on the aforesaid ground cannot be said to be legally sustainable26. In our opinion when it is apparent from the communication that the reports were considered and what was contained in the report was very much pleaded in the written statement, mere non-production of report was not of any significance in the instant case. We are satisfied that the rejection of the bid by the Administrator was absolutely proper and justified and was beyond the pale of judicial scrutiny. The Administrator had the right to reject the bids and he had rejected it on sufficient ground, duly considering the materials on record as is apparent from the communication dated 21.9.2004. In the interest of the public, revenue of the State and in the interest of HUDA the huge property was saved from being plundered33. We are constrained to observe in the instant case that with respect to reserve price also, there was a hitch to fix and approve it right from the word go. It was a case of auction of big commercial tower having a huge area of 9.527 acres. Only the reserve price of the same was forwarded for fixation to the Chief Administrator, whereas the reserve prices of other properties were fixed by the Administrator. When the bids were received, the Administrator considering the huge stakes involved, forwarded the matter to the Chief Administrator. However, the Chief Administrator washed off his hands and did not decide it and sent the matter back to the Administrator, clearly indicating that the Administrator was delegated with the power to decide the bids. Thus, under compelling circumstances and duly considering the reports, the Administrator had taken the decision to reject the bids not only of the plaintiff but also six others. For the first time in the history of State of Haryana, such big properties were put to hammer on the prices indicated. The hitch in fixing the reserve price also indicates that the reserve price was not determined in a fair manner in the instant case. Not only the plaintiff but HUDA also did not place the delegation of power on record of the courts below. None of the officials of HUDA had been examined. Only an Assistant – a junior ranking person had been examined who was not posted there when the auction was held and came only in 2008. As the property was a commercial tower in Sector 29, Gurgaon, with huge commercial complex, the first appellate court was right in dismissing the suit34. Plaintiff came to the court for mandatory injunction, for issuance of allotment letter without payment of court fee also. It was incumbent upon the plaintiff to pay the ad valorem court fee as prevailing and the valuation of the suit should not have been less than the bid amount of Rs.111.75 crores, as rightly held by the first appellate court. The plaintiff is directed to pay the ad valorem court fee not only before the trial court but also before the High Court. Plaintiff is directed to deposit the court fee within two months from today, as payable