ZILA PARISHAD, MUZAFFARNAGAR v. UDAI VEER SINGH — 1988 DIGILAW 1130 (ALL)

RAVI S. DHAVAN, J. ( 1 ) PUBLIC auction is the issue in the present appeal. The duration of the contract as a consequence of the auction is one year i. e. April 1, 1988 to March 31, 1989. The subject-matter of the auction is the right to ferry or load or unload animals at the cattle fair for a monetary consideration. The auction was conducted by a corporate body the Zila Parishad, district Muzaffarnagar, constituted under the Uttar Pradesh Zila Parishad and Kshetra Samiti Adhiniyam, 1959. The auction was closed upon the highest bid having. been received. The Zila Parishad attempted to auction the subject-matter of the auction to yet another candidate outside the auction, subsequently. This led to the person who had offered the highest bid upon which auction was closed to seek in injunction to protect the right to carry on his trade by the trial Court. The Zila Parishad chose to file tie present first appeal from order questioning its own auction. The consideration whether injunction has been granted appropriately or inappropriately will inevitably affect the first appeal from order and the suit itself in which the injunction has been sought. The nature of the rights and obligations of the parties are in reference to the current financial year. Thus, this Court heard the matter to decide the appeal itself instead of the question of an interim order. ( 2 ) NOW the facts : A cattle fair is held at Banat district Muzaffarnagar. The fair is known as Pashu Panth Banat. It is held every Thursday of the week within the limits of the Zila Parishad, Muzaffarnagar. There is a flourishing trade at the cattle fair and the cattle sold and purchased is visited with a fee to be paid to the Zila Parishad for loading and unloading animals at the cattle fair. The right to collect fee is given to the highest bidder at a public auction held by the Zila Parishad, Muzaffarnagar. For the period of April 1, 1988 to March 31, 1989 the Zila Parishad, Muzaffarnagar announced by advertisement in the newspapers a public auction scheduled for March 17, 1988 to confer the right to collect a fee for loading and unloading animals at the cattle fair to the highest bidder. The advertisement in the newspapers is Annexure-11-D to the affidavit supporting the stay application referred to hereinafter as the affidavit. The advertisement in the newspapers is Annexure-11-D to the affidavit supporting the stay application referred to hereinafter as the affidavit. This advertisement carrying an invitation to make a bid also set conditions should the invitation be acted upon by prospective bidders. The first condition was that bidding would be permitted only if a sum of Rs. 50,000/- has been deposited with the Zila Parishad. The second condition laid down was that the highest bidder would have to deposit Rs. 2,00,000/- or 25% of the bid whichever is the highest immediately after the auction. The third condition was that should the second condition not be complied with then the security of Rs. 50,000/- would be forfeited and the next highest bid can be acted upon. The last condition was that the balance amount of the bid is to be deposited within three days of its acceptance. The auction as scheduled was carried out. The highest bid was of the plaintiff-respondent Udai Vir Singh at Rs. 4,75,000/-, implying that the auction closed at this highest bid. It may be mentioned here that it is a matter of record that the bid in the previous year in reference to the same cattle fair was Rs. 4,31,000/ -. The bid at the auction for the period 1988 to 1989 thus exceeded by Rs. 44,000/ -. ( 3 ) BEFORE the Court examines other matters the mechanics of the auction thus far for the plaintiff-respondent were : (a) Prior to making a bid he deposited Rs. 50,000/- with the Zila Parishad, (b) upon his highest bid closing the auction, he was required to deposit a sum of Rs. 2,00,000/- after the auction i. e. on March 17, 1988. This is evidenced by a receipt of the same day bearing No. 65/03363 for Rs. 2,00,000/ -. The balance amount of Rs. 2,75,000/- was deposited at the District Co-operative Bank, Muzaffarnagar main branch on March 23, 1988 on the indent of the Zila Parishad. The plaintiff-respondent had parted with the entire money in pursuance of which the auction of his highest bid had been closed. ( 4 ) NOW something strange happened at the office of the Zila Parishad. Somebody had second thoughts on the auction. After the entire money, deposited by the plaintiff-respondent in three steps was in the account of the Zilla Parishad there was an attempt to dislodge the auction. ( 4 ) NOW something strange happened at the office of the Zila Parishad. Somebody had second thoughts on the auction. After the entire money, deposited by the plaintiff-respondent in three steps was in the account of the Zilla Parishad there was an attempt to dislodge the auction. It may not be forgotten that the plaintiff-respondent had deposited the money in the following manner: Rs. 50,000/- for merely as a passport to be eligible to participate in the auction; Rs. 2,00,000/- after his highest bid had been accepted and was required to make the deposit the same day and Rs. 2,75,000/- on March 23, 1988 was the final or the balance amount which was due in pursuance of the bid accepted at the auction. The plaintiff-respondent had rivals in business. These are matters of record as in reference to the same cattle fair and the previous auction, respondent Udai Vir Singh before this Court in the present Appeal, was a defendant in the original suit No. 520 of 1987 before the Civil Judge, Muzaffarnagar. The suit was filed for injunction restraining respondent Udai Vir Singh from carrying on the business of collecting fee for loading and unloading cattle at the same cattle fair. The attempt to unsettle the finality of the auction was not without reason. Some of the intermeddlers were those who had initiated the original suit No. 520 of 1987. This business rivalry is not a matter to be probed but on record. There was in interest to unsettle the auction and an official of the Zila Parishad only needed an excuse to do so with a rival offering more after the auction was closed. An attempt, then, was made by the Zila Parishad to back out of the auction which had closed on March 17, 1988. ( 5 ) IN reference to the subject-matter of the same auction, another advertisement was inserted in the local newspapers on March 25, 1988 announcing that an auction to sell the rights of collecting fee for loading and unloading animals at the cattle fair is scheduled for March 29, 1988. The terms and conditions were exactly the same as were advertised for the auction held on March 17, 1988. The terms and conditions were exactly the same as were advertised for the auction held on March 17, 1988. This was sufficient cause for the respondent Udai Vir Singh to file the original suit No. 217 of 1988 : Udai Vir Singh v. Zila Parishad and another and at present pending before the 6th Additional District Judge, Muzaffarnagar. Upon an injunction sought Udai Vir Singh the highest bidder of the auction held on March 17, 1988 received an order restraining the Zila Parishad from unsettling his rights in pursuance of the auction already held in his favour. ( 6 ) THE Zila Parishad which has been unsuccessful in dislodging the injunction before the Court below, in appeal before the High Court contends that the auction held on March 17, 1988 is null and void and conferred no rights on the respondent Udai Vir Singh and that it must be permitted to confer rights under another auction to yet another suit or who may surpass the amount settled with Udai Vir Singh. This matter now engages the attention of this Court as it affects the credibility of a public auction conducted by a local and statutory body. The issues centre on what is the scope of a public auction, more so when substantially conducted by a semi public organisation and regard being had to the facts and circumstances that the auction was closed upon the highest bid, a bid higher than last year and no irregularity has been pointed in the conduct of the auction and all conditions have been met. ( 7 ) ON one aspect there is no dispute that so far as the auction of 1988 was concerned it was conducted regularly, there is no irregularity having been pointed out by any party of the manner in which it was conducted nor is there any assertion on record that the amount received in auction was inadequate compared to the auction of the previous year. The other aspect which has to be examined is what has occasioned the change. ( 8 ) THESE circumstances cannot be better found than in the notings made on the official files of the Zila Parishad. The notings begin with the date of the auction on March 17, 1988. The other aspect which has to be examined is what has occasioned the change. ( 8 ) THESE circumstances cannot be better found than in the notings made on the official files of the Zila Parishad. The notings begin with the date of the auction on March 17, 1988. It records that the pursuance of the advertisement made in four newspapers i. e. Dainik Dehat, Muzaffarnagar, Dainik Sada Shai, Muzaffarnagar, Hamara Yug, Meerut and Paschimi Jyoti, Muzaffarnagar, the auction was carried out as scheduled at 11 Oclock. One fact on record is that as a prelude to the auction, persons bidding had to deposit a sum of Rs. 50,000/-as security. Respondent Udai Vir Singh was one such person. The notings record that the auction closed with Udai Vir Singh offering the highest bid of Rs. 4,75,000/- and on the date of auction he was made to deposit in accordance with the conditions already set a sum of Rs. 2,00,000/ -. The left hand margin of the notings record that Rs. 2,00,000/- was deposited and recorded against receipt No. 65/03363. The note also records that for the previous year 1987-88 the subject-matter of the same auction fetched Rs. 4,31,000/- and that the present auction has fetched Rs. 44,000/- more. The note seeks appropriate orders from the AMDA/ MA/administrator (Atrikt Mukhya Adhikari/mukhya Adhikari/administrator ). For six days there was silence on the official files and on the sixth day an official one Nutan Sharma, Atrikt Mukhya Adhikari was recommending that an offerof Rs. 6,00,000/has been received from one Shiv Transport and Company and reauction may be considered. The offer was received by this official it is claimed on March 13, 1988, in any case, after the auction on March 17, 1988 which closed on the highest bid of Rs. 4,75,000/ -. ( 9 ) WITH these notings recommending a possible reauction the Mukhya Adhikari/a. D. M. of the Zila Parishad on the next date i. e. March 23, 1988 gave no decision but definitely had reservations on the second thoughts, the Atrikt Mukhya Adhikari had had to disturb the auction of March 17, 1988. The noting of the Mukhya Adhikari/a. D. M. of March 23, 1988 in effect reads : (translation from Hindi ). The note has been put up belatedly when the auction was on March 17. In future, bear this in mind and put up such notes forthwith. The noting of the Mukhya Adhikari/a. D. M. of March 23, 1988 in effect reads : (translation from Hindi ). The note has been put up belatedly when the auction was on March 17. In future, bear this in mind and put up such notes forthwith. " ( 10 ) IN 24 hours the District Magistrate endorsed the note of the Atrikt Mukhya Adhikari; on 24 March 1988. Thereafter the Mukhya Adhikari/a. D. M. made a noting for the Atrikt Mukhya Adhikari/kar Adhikari that an auction be announced for March 29, 1989 at 10. 30 a. m. at the Collectorate. The advertisement for publication be sent to four newspapers on that date. The note further records that the District Magistrate has expressed displeasure in putting up a suggestion of reauction belatedly. There is a postscript to the note by the Atrikt Mukhya Adhikari that Rs. 2,00,000/- in deposit be returned to the person who had deposited the amount. One aspect is clear from the record. On 24 March 1988 the Mukhya Adhikari was taking two decisions; (a) a reauction on 29 March by publication in newspapers and (b) a direction to refund and return the Rs. 2,00,000/- which the highest bidder was required to deposit. But, the highest bidder had not been intimated that his bid was hence not being acted upon. The cause was a secret unilateral offer, after the auction. The highest bidder was entitled to an opportunity of being apprised of circumstances why the auction of 17 March 1988 may be recalled. This opportunity was to be afforded before recalling the result of the 17 March 1988. The decision to recall the result of this auction was taken on 24 March 1988. The highest bidder had been told of this by the letter of 25 March, 1988, Annexure- 12 to the affidavit. The opportunity before taking this decision was never given to the highest bidder of the 17 March auction. These are matters of record. ( 11 ) THE above are the notings as presented by the Zila Parishad of the mechanics to dislodge the auction of March 17, 1988. This Court has to see whether the auction of March 17, 1988 ought to be dislodged as a matter of propriety or can it be permitted to be dislodged in equity or does the law permit it to be dislodged. This Court has to see whether the auction of March 17, 1988 ought to be dislodged as a matter of propriety or can it be permitted to be dislodged in equity or does the law permit it to be dislodged. The nature of the contract, thus arising out of this Auction needs to be examined, in the perspective of equity, law and public policy. ( 12 ) THE concept of an auction must be clearly understood, before examining the issues in the present appeal. ( 13 ) AN auction is a sale by a public competition to the highest bidder. Auction sales are of two kinds, with reservation and without reservation. The auction sale is with reservation when the upset price is fixed below which the auctioneer refused to sell. It is not necessary that this particular phraseology be used, it would be enough indication that the seller makes it plain and reserves the right. An auction is without reservation when the goods are sold to the highest bidder, whether the sum paid is equivalent to real value or not. ( 14 ) THE concept of an auction in general terms is contained in S. 64 of the Indian Sale of Goods Act, 1930. ( 15 ) THE reference to auction sale is made in Chapter VII under the head Miscellaneous in the aforesaid Act. S. 64 reads : -"64. ( 14 ) THE concept of an auction in general terms is contained in S. 64 of the Indian Sale of Goods Act, 1930. ( 15 ) THE reference to auction sale is made in Chapter VII under the head Miscellaneous in the aforesaid Act. S. 64 reads : -"64. In the case of a sale by auction - (1) Where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale ; (2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid ; (3) a right to bid may be reserved expressly by or on behalf of the seller and, where such right is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the auction; (4) where the sale, is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer; (5) the sale may be notified to be subject to a reserved of upset price ; (6) if the seller makes use of pretended bidding to raise the price, the sale is voidable be at the option of the buyer. " ( 16 ) THE principle of sale by auction is that the announcement about the auction is a mere information to offer, the actual bids made are all offers, each higher bid superseding the previous bid, and that when the hammer falls on the last bid there is an acceptance and the contract becomes complete. ( 17 ) PARTIES have stated at the Bar that the auction is not regulated or guided in the modality of it by any bye-laws of the Zila Parishad and the advertisement issued announcing the auction is the only guideline. Nothing. has been produced before this Court more than what is on record. ( 17 ) PARTIES have stated at the Bar that the auction is not regulated or guided in the modality of it by any bye-laws of the Zila Parishad and the advertisement issued announcing the auction is the only guideline. Nothing. has been produced before this Court more than what is on record. ( 18 ) THE concept of an auction as, is referred to in the Indian Sale of Goods Act, 1930, ought not to be ignored. It is, at last a guiding factor on the principles of an auction. That, the auction is by a public or statutory body is another aspect. ( 19 ) HAS the contract been spelled out from the facts as are on record between Zilla Parishad and the respondent Udai Vir Singh? The Zila Parishad after having finalised the auction upon the highest bid says that it has not indicated its acceptance of the final bid. The respondent Udai Vir Singh contends that he does not have to wait for the acceptance to be received as the acceptance is implied under the terms of the auction. The schedule of which was advertised in pursuance of which the auction was held on 17. 3. 1. 988. ( 20 ) THE mere exercise of participating in the public auction conducted by the Zila Parishad envelopes any bidder with heavy financial obligations. The first step is access to participate in the auction, the price of this is a deposit of Rs. 50,000/- as security. The next is the day of auction. In the event of the highest bid closing the auction the Zila Parishad expects the highest bidder to act on his offer with the part performance of the contract by depositing adequate consideration arising out of the contract. The consideration would not be less than 25% of the highest bid or rupees two lakhs whichever is higher. The third condition is the deposit of the rest of the money within three days of the acceptance of the highest bid. Much debate has taken place on the expression acceptance. The bid was accepted, the respondent Udai Vir Singh says when the auction closed and his bid was the highest. This is the knock out price as is generally known under the law. Much debate has taken place on the expression acceptance. The bid was accepted, the respondent Udai Vir Singh says when the auction closed and his bid was the highest. This is the knock out price as is generally known under the law. The Zila Parishad contends that the acceptance is yet to be indicated to the highest bidder after the District Magistrate or the Administrator approves of it. ( 21 ) UNDER the terms as announced in the public notice upon which issues have been raised by the Zila Parishad to scuttle its own I auction, what is to be interpreted is the stage after the deposit of Rs. two lakhs. The stipulations in the conditions are clear that the balance money would be deposited within three days of the acceptance of the highest bid. The sentence in the notice reads shesh Dhanrashi Ko Syvikrit ke Teen Din Ke Andar Jama Karna Hogi. The word syvikritclarifies the act of acceptance. The acceptance on its own has no relevance, but inevitably implies the acceptance of a highest bid. This is better explained by the expression shesh Dhanrashi. This means that the balance amount after rupees two lakhs has been deposited is to be paid within three days of acceptance of the highest bid. This has nothing to do with the rest of the contention that the highest bid would be left to the hope of acceptance of the District Magistrate and/or Administrator, implying thereby approval. ( 22 ) IN matter relating to contracts the expression reasonable time has been referred to both in the Sale of Goods Act-1930 and the Contract Act-1872. The Sale of Goods Act makes a reference to this expression in S. 63, which reads as under: -"63. Reasonable time a question of fact Where in this Act any reference is made to a reasonable time, the question what is reasonable time is a question of fact". A reference to the same expression can be found in S. 46 of the Contract Act-1872. This section reads as under time for performance of promise where no application is to be made and no time is specified. %46. where by the contract, a promisor is to perform his promise without application by the promises and on time for performance is specified, the engagement must be performed within a reasonable time. This section reads as under time for performance of promise where no application is to be made and no time is specified. %46. where by the contract, a promisor is to perform his promise without application by the promises and on time for performance is specified, the engagement must be performed within a reasonable time. Explanation - The question "what it a reasonable time" is, in each particular case, a question of fact" thus, reasonable time is an aspect which must engage the attention of the court in discerning from the facts and circumstances of a particular case in reference to time when a contract is complete. While it may be unreasonable to delay the finalisation of a contract and whether the delay has been inordinate or not is a question of fact. When contracts are meant to be finalised with a sense of urgency then not to do so is also unreasonable and this is also a question of fact. In the facts and circumstances of the present case the reasonable time within which the approval or disapproval of the Mukhya Adhikari and/or the District Magistrate was to be obtained was the period when the highest bid had closed the auction and the outer limit by which the highest bidder was called upon to perform his obligation to show his intention to act on his highest bid by depositing 25% or rupees two lacs whichever is higher. It was entirely up to the Zila Parishad either to indicate the highest bidder that the time to deposit rupees two lacs was being extended as the matter of the highest bid was engaging the approval or disapproval of the named authorities. In such a situation the highest bidder would not have tied up his capital, which was otherwise a substantial amount. ( 23 ) THE highest bidder took the challenge and accepted his obligation to perform the contract. ( 24 ) UNLESS anything to the contrary could be shown and it is not that the auction did not close with the highest bid at Rs. 4,75,000/ -. Let the conditions of the auction be tested if the highest bidder were to resile. The retraction of the bid indicates the penalty of forfeiture of Rs. 50,000/ -. ( 24 ) UNLESS anything to the contrary could be shown and it is not that the auction did not close with the highest bid at Rs. 4,75,000/ -. Let the conditions of the auction be tested if the highest bidder were to resile. The retraction of the bid indicates the penalty of forfeiture of Rs. 50,000/ -. The generality of a was contained in S. 64 of the Sale of Goods Act mentions that the sale is complete when the auctioneer announces its completion by the fall of the hammer and until such announcement is made any bidder may retract his bid. If before the fall of the hammer any bidder retracts his bid the security amount may not be forfeited. If after the fall of the hammer the highest bidder recalls his bid the Security may be liable to be forfeited. An indication that the auction is closed at the highest bid signifis an intention to finalise the contract on the last bid. In the facts and circumstances of the present case the intention to finalise the contract was taken to the second stage by requiring the highest bidder to make a deposit of rupees two lacs after the auction had closed on his bid. A justification to the effect that the auction is dependent upon the hope that the District Magistrate and/or the Administrator would grant approval cannot be seen in isolation too. Under the generality of law, after the deposit of rupees two lacs, not to finalise the contract must be for a valid reason. ( 25 ) THE right to bid may be reserved expressly by the seller (in the present case Zila Parishad) add the bid may be dependent upon such reservation. One such reservation may be that the contract would be notified subject to a reservation of upset price. But, such was not the reservation in the present case. Any other reservation, then, must be expressed within a reasonable time. This is in reference to reservation not to finalise the contract which the Zila Parishad intended to give, to the highest bidder of Rs. 4,75,000/ -. If there was any reservation which the District Magistrate or the Administrator had to exercise it should have been expressed prior to the respondent, Udai Veer Singh, was made to deposit rupees two lacs. This had not been done. 4,75,000/ -. If there was any reservation which the District Magistrate or the Administrator had to exercise it should have been expressed prior to the respondent, Udai Veer Singh, was made to deposit rupees two lacs. This had not been done. If the argument is that the highest bid is subject to the approval of the District Magistrate and/or the Administrator, but without any stipulation to time then it is an unreasonable contention. The conditions of the auction do not spell out the time within which the approval is to be granted. ( 26 ) THE time for performance of the contract, and it cannot be denied that it is a contract within the meaning of Contract Act- 1872. Thus, while having reservation on the highest bid may be an express condition left to the discretion of the District Magistrate and/or the Administrator, in the fact and circumstance of the present case, this Court feels that this reservation must be exercised before the highest bidder is called upon to deposit 25% or rupees two lacs or in the alternative the highest bidder ought to have been clearly indicated that notwithstanding that his bid was the highest, the amount of rupees two lacs will be received after the authorities, aforesaid, have granted their approval on the highest bid. ( 27 ) IN either of the two eventualities, should the highest bid not meet the approval of two authorities, aforesaid, the highest bidder would have been saved the sufferance of depositing rupees two lacs and simultaneously would have received the refund of his security. It is for this reason that the notings on the file itself record a remark by the Additional District Magistrate/mukhya Adhikari to the effect that any reservation on the auction which was held on 17. 3. 1988 should have been put by a Atrikta Adhikari not belatedly but forthwith. The file should have been closed on this note. ( 28 ) TO contend, as the Zila Parishad does so, that the balance amount of Rs. 2. 75 Lakhs was deposited with the Zila Parishad Bank in mysterious circumstance is to cast aspersion on its own officers and servants. This amount was meant to be deposited within three days of the highest bid which closes the auction on the fall of the hammer. The time was running against the highest bidder to deposit the balance amount. 2. 75 Lakhs was deposited with the Zila Parishad Bank in mysterious circumstance is to cast aspersion on its own officers and servants. This amount was meant to be deposited within three days of the highest bid which closes the auction on the fall of the hammer. The time was running against the highest bidder to deposit the balance amount. At no stage within a reasonable time had the highest bidder been indicated that his bid does not meet with the approval of the authorities by which the right to bid had been reserved on an express condition. The express condition being, the approval of the authorities. The Zila Parishad connot ask the highest bidder to take steps in aid for completing the contract and simultaneously without rejecting the bid take the stance that it will hold another auction. ( 29 ) THE nothings record that on 18. 3. 1988 someone who had not made the highest bid at the auction was tempting the Zila Parishad to offer six lacs rupees. The notings bear out that although the Zila Parishad and the person Who was claiming to offer rupees six lacs, was totally conscious of the fact that an auction had taken place the previous day. If this was so then why was the highest bidder made to fork-out Rs. 2. 5 lacs at the end of the day when the auction closed on his highest bid. ( 30 ) THE notings of the Zila Parishad record that the bid of the highest bidder exceeds the amount received the previous year by. Rs. 44,000/ -. The only occasion for upsetting the auction of 17-3-1988 was not that it was irregularly conducted or that the amount received was less than what was received the previous year or the highest bidder has not complied with any of the conditions. A rival syndicate was meddling with the affairs of the Zila Parishad to unsettle a regularly conducted auction. ( 31 ) THERE is another important aspect which the Court cannot help, but notice. The Zila Parishad was arranging to resile from the auction of 17-3-1988. Let the arrival of stranger after the auction be examined. The respondent Udai Veer Singh deposited the entire amount upon which the hammer closed the auction, implying that the finality was on the highest bid at Rs. 4. 75 lacs. The amount lies with the Zila Parishad. The Zila Parishad was arranging to resile from the auction of 17-3-1988. Let the arrival of stranger after the auction be examined. The respondent Udai Veer Singh deposited the entire amount upon which the hammer closed the auction, implying that the finality was on the highest bid at Rs. 4. 75 lacs. The amount lies with the Zila Parishad. It was deposited. as a pattern set in the conditions. The meddler offered and expressed that he would deposit six lacs, but he neither did so nor the Zila Parishad required him to do so. Clearly, the person who had offered six lacs or sought to offer an amount more after the auction was playing a game without investing a single paisa in it. He had not even deposited Rs. 50,000/-which the highest bidder had done so, before participating in the auction. ( 32 ) FIRST, the Rs. 50,000/- as a pass to enter the arena of this public auction. Then, by demand of the Zila Parishad to deposit Rs. 2,00,000/- after the auction, it was not deposited unsolicited. Then came the deposits of Rs. 2,75,000/- with the Zila Parishads bankers on the challan of the Parishad. What did this meddler deposit despite the tall claim that he is prepared to do so in cash?whereas the plaintiff-respondents monies continue to be utilised by the Zila Parishad as available capital, those who are attempting to unsettle a settled, auction are playing game without parting with a paisa. The equity is with the plaintiff-respondent. He made a successful bid according to rules. The game over the bidding match has closed. ( 33 ) THE intention of the parties to a contract is to be ascertained from the facts of each case. Of the performance of contracts, the Contract Act, under S. 37, refers to contracts which must be performed. In reference to an auction about which no irregularity or illegality is pointed out by either party, the intention is to finalise the contract. In reference to commercial transactions the Supreme Court in a recent case observed : "the presumption is that legal obligations are intended. The onus is on the parties asserting the absence of legal obligations and the test is not subjective to the parties, but is an objective one", (1988) 3 SCC 562 , Commr. of Wealth Tax v. Abdul Hussain Mulla Muhammad Ali. The onus is on the parties asserting the absence of legal obligations and the test is not subjective to the parties, but is an objective one", (1988) 3 SCC 562 , Commr. of Wealth Tax v. Abdul Hussain Mulla Muhammad Ali. ( 34 ) IN an auction by a public body cancelling the result of auction when the highest bidder has been made to act upon his obligations is unfair and illegal. More so, when a unilateral order was secretly made after the close of a public auction. Prior to an attempt to cancel the result of the auction held on 17 March, 1988, the plaintiff respondent, the highest bidder, was entitled to an opportunity to explain why his highest bid was not being acted upon. And this should have been done immediately. Cancellation of the auction held on 17 March, 1988 and announcing another on 29 March, 1988, and on a secret offer of another who had not participated in the earlier auction was an arbitrary act. In this regard certain j observations of the Supreme Court, in AIR 1985 SC 1147 ,ram and Shyam Co. v. State of Haryana, a matter relating to a public auction made by the State is of significance : -"12. . . . . . . . . . . . . . . At one stage, it was observed that the Government is not free like an ordinary, individual, in selecting recipient for its largesse and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion. The law is now well-settled that the Government need not deal with anyone, but if it does so, it must do so fairly and without discretion and without unfair procedure. Let it be made distinctly clear that respondent No. 4 was not selected for any-special purpose of to satisfy any Directive Principles of State Policy. He surreptitiously ingratiated himself by a back-door entry giving a minor raise in the bid and in the process usurped the most undeserved benefit which was exposed to the hilt in the Court. Only a blind can refuse to perceive it". "13. . . . . . . . . . . . . . . . . . . . . . . . . . . . "14. Only a blind can refuse to perceive it". "13. . . . . . . . . . . . . . . . . . . . . . . . . . . . "14. What happened in this case must open the eyes both of the Government as well as the people at large. How an uncontrolled, exercise of executive power to deal with socialist property in which entire communitys interest was sacrificed so as to cause huge loss to the public exchequer would have gone unnoticed but for the vigilance of the appellant who no doubt is not altruistic in its approach but its business interest goaded it to expose the unsavoury deal. Conceding that on weighty and valid considerations, the highest bid can be rejected by the State, one such which can be foreseen is that the highest bid does not represent the adequate market price on the concession, yet before giving up the auction process and accepting a private bid secretly offered, the authority must be satisfied that such an offer if given in open would not be outmatched by the highest bidder. In the absence of such satisfaction, acceptance of an offer secretly made and sought to be substantiated on the allegations without the verification of their truth, which was not undertaken, would certainly amount to arbitrary action in the matter of distribution of State largesse which by the decisions of this Court is impermissible. . . . . . . . . . . . . . . . . . . . . . . . . . . ""18. . . . . . . . . . . . . . . . . . . . . AND at any rate disposal of the State property in public interest must be by such method as would grant an opportunity to the public at large to in it, the State reserving to itself it of as best subserve the public deal. Viewed from this angle the disposal of the contract pursuant to the letter by the fourth respondent to the Chief Minister is objectionable for more than one reason. The writer has indulged into allegations, the truth of which was not verified or asserted. Viewed from this angle the disposal of the contract pursuant to the letter by the fourth respondent to the Chief Minister is objectionable for more than one reason. The writer has indulged into allegations, the truth of which was not verified or asserted. The highest bidder whose bid was rejected on the ground that the bid did not represent the market price, was not given an opportunity to rise his own bid when an higher offer was received. If the allegations made, in the letter influenced the decision of the Chief Minister, fair play in action demands that the appellant have been given an opportunity to counter and correct the same. Application of the minimum principles of natural justice in such a situation must be read in the statute and held to be obligatory. When it is said that even in administrative action, the Authority must act fairly, it ordinarily means in accordance with the principles of natural justice variously described as fair play in action. That having not been done, the grant in favour of the fourth respondent must be quashed. " ( 35 ) IN the case before us certain aspect in favour of the plaintiff respondent are relevant. The highest bid substantially exceeded the contract price of the previous year; thus it was not a case of loss. No irregularity was pointed out in the auction. The highest bidder was made to deposit substantial moneys in keeping with the pattern and modality of the auction. Within a reasonable time his highest bid was not rejected, and has not been rejected. Another auction was announced but the highest bidder was not given an opportunity to have his say before such an announcement this virtually amounted to rejecting the highest bid without indicating it to the bidder and in the absence of an opportunity to him. The attempt to reauction was surreptitious and entertained unilaterally and secretly and as an after thought. Prior to that the intention of the Zila Parishad, compatible with the conditions set by it was to complete the contract. Giving an objective test to the facts and circumstances of the auction which closed on 17 March, 1988 and the obligation which the highest bidder had performed and was made to perform, the contract was complete. Prior to that the intention of the Zila Parishad, compatible with the conditions set by it was to complete the contract. Giving an objective test to the facts and circumstances of the auction which closed on 17 March, 1988 and the obligation which the highest bidder had performed and was made to perform, the contract was complete. ( 36 ) PUBLIC bodies conducting public auctions will lose their credibility and the conduct of public auction might lead to endless litigations when they will be upset without cause though held profitably, regularly arid without defect. An auction which has been regularly conducted strictly as desired by a public body or government with no illegality having been pointed out and is at a monetary advantage over the previous year, must be finalised. This Court cannot permit an auction in which no illegality has been pointed out to be abandoned merely because officials do not act when they should have acted, or chose to act when it was too late to act. ( 37 ) THIS appeal by the Zila Parishad, Muzaffarnagar, having second thoughts on the auction conducted by it on 17 March, 1980 is inappropriate and misconceived. The order of the VIII Additional District Judge, Muzaffarnagar dated 21 April, 1988, on the application and affidavit of the plaintiff-respondent, 5 Ga and 6 Ga granted an injuniction is upheld. The plaintiff-respondent, Udai Vir Singh is entitled to carry out the contract under the auction for the period April, 1988 to 31 March 1989. ( 38 ) THE appeal of the Zila Parishad and another is dismissed with costs. Appeal dismissed. .