M/s. Rudra B2B Synergies (P) Ltd, Hyderabad Vs The Government of Andhra Pradesh and four others

@JUDGMENTTAG-ORDER

Vilas V. Afzulpurkar

1. This writ petition relates to public auction of leasehold rights relating to quarry lease of sand in Damuluru village, Ibrahimpatnam Mandal, Krishna District.

2. Under notification of respondent dated 16.07.2011 sealed tenders/public auction for grant of quarry lease was invited wherein the minimum bid amount was fixed at Rs. 50 lakhs. 05.08.2011 was the date fixed for opening tendeRs. It is alleged that about 10 persons/firms including the petitioner participated and the fifth respondent conducted open auctions where petitioner emerged as highest bidder with a bid amount of Rs. 1.09 crores and declared as such, requiring him to deposit 25% of the bid amount together with income tax thereon within two days. Petitioner deposited the said amounts and thereafter, the file was circulated for confirmation of auction as required under Rule 9-H (1) of the Andhra Pradesh Minor Mineral (Concession) Rules, 1966 (for short ''the Rules''). Petitioner, however, is aggrieved by the impugned proceedings of the District Collector/Confirming authority dated 16.09.2011 wherein the petitioner was informed that as per the Government Memo. No. 11367/SPIU&SAND/A1/2011-4 dated 05.09.2011, the Government decided to cancel the auctions held on 05.08.2011 and 06.08.2011 relating to sand auction conducted to the reaches of Gani-Atkuru, Damuluru, Madduru and Valluripalem in the ''interest of Government revenue'' and decided to go for fresh auctions. Based on the said decision, the Collector issued the impugned proceedings dated 16.09.2011, referred to above, declining to confirm the bid of the petitioner with regard to Damuluru reach and the amounts paid by the petitioner were ordered for refund.

3. The said impugned proceedings dated 16.09.2011 is questioned by the petitioner, inter alia, on the ground that the impugned proceedings are issued without proper application of mind and without recording requisite reasons for cancellation of auctions.

4. Mr. D.V. Seetharama Murthy, learned senior counsel, for the petitioner has contended that all earlier auctions of the said reach did not fetch the amount over Rs. 70 lakhs at any time and as such, the petitioner''s bid of Rs. 1.09 crores was clearly in the ''interest of revenue'' and the cancellation of the said auction under the impugned proceedings is wholly illogical. He also supports the contention by relying upon the fact that the upset price of only Rs. 50 lakhs was fixed, which clearly shows that the estimation of the Government revenue from the said auction was only in the range of upset price and when the petitioner has offered highest bid of more than double the upset price, there is no reason for the respondents to cancel the said auction on the ground of ''interest of revenue''. He submits that the said phrase ''interest of revenue'' used in the impugned proceedings is absolutely vague and unsupported by any material. He also relies upon the averments in the counter affidavit that in the earlier auction conducted for the same reach on 14.06.2011 though the highest bid received was Rs. 11,99,99,999/-, the said highest bidder did not turn up even to pay the 1/4th of the knocked down amount within the stipulated time and even the second and third highest successful bidders were reluctant to take the leasehold rights.

5. Learned senior counsel would, therefore, submit that the bid of the petitioner viz. Rs. 1.09 crores and that of the second (Rs. 1.06 crores) and third (Rs. 1.05 crores) highest bidders cannot be said to be against ''interest of revenue'' and as such, the requirement under Rule 9-F(4) of the Rules is not complied with as there are virtually no reasons recorded by the Government/Competent authority for cancelling the auction conducted. Learned senior counsel also objects to the averment in the counter affidavit of the Assistant Director Mines and Geology in para 18 wherein the impugned auction is justified, as if bidders have colluded together to deprive the Government of the revenue. Learned senior counsel submits that no such ground was mentioned either in the Government memo or in the impugned proceedings and in view of the ratio of the decision of the Supreme Court in Mohinder Singh Gill and Another Vs. The Chief Election Commissioner, New Delhi and Others, the said contention in the counter is required to be ignored and even otherwise, no collusion can be inferred in view of three bidders giving their bids more than double the upset price. Learned senior counsel also submits that the estimated quantity of sand available is taken into consideration by the respondents when they fixed the upset price and as such, the unrealistic figures under previous auction are relied upon by the respondents to cancel the auction.

6. Learned Government Pleader supported the impugned proceedings by pointing out that though in the auction on 14.06.2011 the highest bid quoted was Rs. 11,99,99,999/-, the present highest bid of the petitioner in the auction dated 05.08.2011 is only Rs. 1,09,00,000/-, which is not even 10% of the earlier bid, which clearly supports the decision of the respondents that in the ''interest of revenue'' fresh auction is required to be conducted by cancelling the present auction. He also submits that, admittedly, the auction requires confirmation by the competent authority under Rule 9-F(4) of the Rules and in the present case, the power exercised by the Government is referable to Rule 9-K(1) of the Rules. He submits that under the Government Memo dated 05.09.2011, the auctions of four reaches was cancelled and decision to conduct fresh auction was taken whereas this writ petition is filed by the highest bidder only of one of the reaches i.e. Damuluru and admittedly, his bid being subject to confirmation, no rights accrue to the petitioner merely because his bid was highest. It is contended that the respondents have right to safeguard the generation of revenue to the State and in their discretion; the Government was of the view that even higher revenue can be excepted if fresh auction is conducted. The impugned decision, therefore, cannot be invalidated as contended by the petitioner.

7. The admitted facts show that the petitioner''s highest bid of Rs. 1.09 crores is required to be confirmed by the competent authority under Rule 9-F(4), which provides as follows:

The right of quarrying shall be strictly subject to the confirmation or otherwise by the competent authority who has the right to refuse to confirm the right of quarrying sand with the reasons recorded therein.

8. It is also relevant to notice Rule 9-K(1), as under, which provides the power of the Government to cancel the auction as well as confirmation orders.

The Government shall have the power to cancel the auction conducted and confirmation orders issued thereon by the competent authority duly recording its reasons thereof.

The petitioner''s bid, therefore, is admittedly subject to confirmation by the competent authority and if the competent authority for any reason does not confirm the bid, no rights flow to the highest bidder. The sand auctions in the State are thus regulated by the Rules aforesaid, which provide for the manner in which the auction is to be conducted and the manner in which it will be confirmed by the competent authority subject to overriding power of the Government to cancel auction as well as confirmation under Rule 9-K(1) of the Rules, referred to above. The impugned proceedings refers to memo of the Government dated 05.09.2011, referred to above, and as directed by this Court, the learned Government Pleader, has produced the memo, which states as follows:

The attention of the District Collector/Joint Collector and the Chairman, District Level Sand Committee, Krishna District is invited to the references cited. In the circumstances explained in the references 1st and 3rd cited and keeping in view the Government interest more particularly from the revenue point of view the Government felt it necessary that it would be desirable to go for the auctions afresh in respect of (4) reaches i.e. Gani-Atkuru, Damuluru, Madduru and Valluripalem sand reaches in Krishna district duly cancelling the previous auctions held on 5-8-2011 and 6-8-20911 in respect of the above said reaches.

The Collector, Krishna District and the Joint Collector and the Chairman, District Level Sand Committee, Krishna District are requested to take immediate necessary action accordingly and report compliance.

9. Learned Government Pleader has also produced the record. The Government noticed huge gap in the bid amount under the auction in question as well as the previous auction. The record shows that the Government has examined the matter by taking into consideration the comparative statements and observations of the District Collector and a final decision was taken to conduct fresh auction immediately. The impugned decision of the Government in deciding not to confirm the present auction and go for fresh auctions is, therefore, passed on subjective satisfaction of the Government to avoid revenue loss to the State. The said decision and discretion of the Government cannot be substituted by this Court under Article 226 of the Constitution of India and the Government cannot be compelled to confirm the present auction in favour of the petitioner notwithstanding the satisfaction of the Government that the highest bid received is not in conformity with the actual and higher revenue yield to the Government.

10. Purely from the point of view of legal right also it is evident that any highest bidder at an auction, whose bid is knocked down, cannot claim a right to obtain the lease unless his bid is confirmed by the competent authority. The highest bid of the petitioner at best gives an inchoate right to the petitioner, which would get fructified into a legal right only upon its confirmation by a competent authority. The purport of Rule 9 F(4) of the Rules, extracted above, clearly shows that the petitioner cannot enforce an inchoate right, at this stage, unless it fructifies into a legal right.

11. Even from common law point of view also a tender being an invitation to offer, the petitioner''s highest bid is only an offer and unless it is confirmed, the said offer cannot get converted into a contract u/s 7 of the Indian Contract Act. The invocation of jurisdiction of this Court under Article 226 of the Constitution of India by the petitioner is, therefore, only permissible within a narrow compass to examine as to whether the decision of competent authority or for that matter the Government, either under Rule 9-F(4) or Rule 9-K(1), as the case may be, is unsupported by reasons. A look at the impugned proceedings as well as the memo based on which it is issued categorically mentioned that the said decision of the Government emanates from ''Government interest and more, particularly from the revenue point of view''. It cannot, therefore, be said that the auction of the Government is open for interference under Article 226 of the Constitution of India.

12. So far as the other contention of the learned senior counsel based upon upset price of Rs. 50 lakhs is concerned, it would be useful to notice the decision of the Supreme Court in Anil Kumar Srivastava Vs. State of U.P. and Another, wherein the Supreme Court examined the concepts of ''valuation'' and ''upset/reserve price'' in the following passages:

11. Before coming to the above challenge, we would like to examine the concepts of ''valuation'' and ''upset/reserve price''. In the case of McManus v. Fortescue & another reported in [1907 II K.B. 1] it has been held by Court of Appeal that in a sale by auction, subject to reserve, every offer/bid and its acceptance is conditional. That the public is informed by the fact, that the sale is subject to a reserve, that the auctioneer has agreed to sell for the amount which the bidder is prepared to give only in case that amount is equal to or higher than the reserve. That the reserve puts a limit on the authority of the auctioneer. He cannot accept a price below the upset/reserve price. That he could refuse the bid which is below the upset price.

13. Valuation is a question of fact. This Court is reluctant to interfere where valuation is based on relevant material. [See: Duncans Industries Ltd. Vs. State of U.P. and Others, The difference between valuation and upset price has been explained in the case of B. Susila & another v. Saraswathi Ammal & others reported in [ AIR 1970 Mad 357 ] in which it has been held that fixation of an upset price may be an indication of the probable price which the land may fetch from the point of view of intending biddeRs. However, notwithstanding the fixation of upset price and notwithstanding the fact that a bidder has offered an amount higher than the reserve/upset price, the sale is still open to challenge on the ground that the property has not fetched the proper price and that the sale be set aside. That the fixation of the reserve price does not affect the rights of the parties. Similarly, in the case A.U. Natarajan and Another Vs. Indian Bank, ] it has been held that the expressions "value of a property" and "upset price" are not synonymous but have different meanings. That the term "upset price" means lowest selling price or reserve price. That unfortunately in many cases the word "value" has been used with reference to upset price. That the sale has to commence at the higher price and in the absence of bidders, the price will have to be progressively brought down till it reaches the upset price. That the upset price is fixed to facilitate the conduct of the sale. That fixation of upset price does not preclude the claimant from adducing proof that the land is sold for a low price.

13. Thus, the criteria of applying the upset price to assess the possible revenue generation to the State is demonstrably incorrect as not only the petitioner but the second and third highest bidders also quoted bids in the range of more than double the upset price and the bidders, being businessmen, were fully conscious of the generation of revenue from the reach and did not venture to view bids closer to the upset price alone. The said factor coupled with the bids received by the Government about two months prior to the present auction clearly indicates that expectation of Government for higher revenues from the reach in question is justifiable. Interference with the said decision even otherwise, therefore, is impermissible.

The writ petition is liable to be dismissed and is accordingly dismissed. There shall be no order as to costs.