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2001 DIGILAW 545 (KAR)

KUSHAL GUTTEDAR v. STATE OF KARNATAKA

2001-07-16

M.P.CHINNAPPA

body2001
M. P. CHINNAPPA, J. ( 1 ) THE petitioner who is a registered excise contractor has questioned the auction held on 13-6-2001 and acceptance of the bid of the respondent 5 to vend liquor in Bangalore urban district on the ground that the excise rules have been vitiated. ( 2 ) THE brief facts of the case are that the petitioner is an excise contractor and he participated in the auction held on 31-5-2001 and deposited a sum of Rs. 4,84,50,600/- as required under Rule 13 of the rules and made his offer. As his bid was not accepted and the authorities postponed the said auction, it was subsequently re-auctioned on 13-6-2001. However, the petitioner did not participate in the re-auction. On that particular day only two bidders competed and the 5th respondent was ultimately declared as the highest bidder to offer a sum of Rs. 6,50,00,050/- which was provisionally accepted. It is the case of the petitioner that the 5th respondent had to deposit the said sum on the very same day as provided under Rule 13 of the karnataka excise (lease of the right of retail vend of liquors) rules, 1969, but he has not deposited the full amount. On the other hand, the petitioner submits that a demand draft for Rs. One crore and odd was stolen and that the demand draft along with the other amount was given to the respondent as emd. The 5th respondent is not eligible to participate at all. Accepting the offer made by the 5th respondent who is not financially sound and his business turnover is not over Rs. 2,00,000/- accepting the bid of over 2 crore rupees is against the interest of the state exchequer; he is not reliable and dependable contractor. Therefore, his representation to reject his bid also was not heeded to. The police complaint was lodged against the theft of the demand draft and the investigation is in progress and it was disclosed that the 5th respondent has given the demand draft and the bank refused to honour the same. Therefore, his representation to reject his bid also was not heeded to. The police complaint was lodged against the theft of the demand draft and the investigation is in progress and it was disclosed that the 5th respondent has given the demand draft and the bank refused to honour the same. Therefore, he filed this writ petition for the following reliefs:"wherefore, it is humbly prayed that this Hon'ble court be pleased to call for the records of the auction proceedings of 13th June, 2001, conducted by respondents 1 to 4 respecting grant of lease for the Bangalore urban district, and (a) issue writ of mandamus or such other writ, directing the respondents 1 to 4 not to grant the lease for the Bangalore urban district to the 5th respondent herein by virtue of auction proceedings dated 13-6-2001 and declare it as having been vitiated; and (b) issue a writ of mandamus or such other writ directing the respondents to investigate and hold an enquiry into obtaining of demand drafts belonging to others for the purpose of deposit as emd; and (c) restrain the respondents 1 to 4 from issuing any lease to the 5th respondent as he is disqualified being a defaulter, by issuance of an appropriate writ; and (d) issue writ of mandamus or such other writ, directing the respondents 1 to 4 to reauction the rights of retail vend of liquors for the Bangalore urban district permitting only genuine and eligible contractors for participation; and (e) issue such other writ, order or direction as deemed fit in the circumstances of the case, in the interest of justice". the respondents 1 to 4 filed their objections. ( 3 ) HEARD Sri madhusudan r. Naik, the learned counsel for the petitioner; Sri a. n. jayaram, Advocate general with Sri n. k. ramesh, additional government Advocate for respondents 1 to 4. ( 4 ) THE learned Advocate general raised an objection to the effect that the petitioner not being one of the bidders has no locus standi to question this auction held on 13-6-2001. It is not in dispute that as admitted by the petitioner, he is a registered excise contractor and he had participated in the auction held on 31-5-2001 and as the bid was not accepted by the respondents 1 to 4, the same was held on 13-6-2001. It is not in dispute that as admitted by the petitioner, he is a registered excise contractor and he had participated in the auction held on 31-5-2001 and as the bid was not accepted by the respondents 1 to 4, the same was held on 13-6-2001. On that day, as the petitioner though claiming himself to be resourceful to undertake contract of such magnitude of the bids offered for Bangalore urban district was unable to participate on 13-6-2001 in the auction held as he could not arrange for the said emd deposit of Rs. 4,84,50,600/ -. So from this it is abundantly clear that he had not participated in the auction held. Notwithstanding this fact, the learned counsel for the petitioner submitted that the petitioner has locus standi in view of the fact that he is one of the registered excise contractors and this petition is filed to save the state exchequer by bringing to the notice of the court the malpractice played by the authorities and also the violation of the excise rules. Therefore, he submitted that he has locus standi to file this petition. ( 5 ) IN support of this argument, he has placed reliance on a decision rendered by the Supreme Court wherein their lordships in k. n. guruswamy v state of Mysore and others, have held:"that the sale of these licences forms such a lucrative source of revenue that state legislatures have deemed it wise not to leave the matter to unfettered executive discretion; accordingly legislation has been enacted in most parts of India to regulate and control the licensing of these trades; acts are passed and elaborate rules are drawn up under them. It is evident that there is a policy and a purpose behind it all and it is equally evident that the fetters imposed by legislation cannot be brushed aside at the pleasure of either government or its officers. The rules bind the state and subject alike". it is further held:"the next question is whether the appellant can complain of this by way of a writ. In our opinion, he could have done so in an ordinary case. The appellant is interested in these contracts and has a right under the laws of the state to receive the same treatment and be given the same chance as anybody else. In our opinion, he could have done so in an ordinary case. The appellant is interested in these contracts and has a right under the laws of the state to receive the same treatment and be given the same chance as anybody else. Here we have thimmappa who was present at the auction and who did not bid - not that it would make any difference if he had, for the fact remains that he made no attempt to outbid the appellant. If he had done so it is evident that the appellant would have raised his own bid". so it can be held that the petitioner being a citizen of the country and also being an excise contractor who also desired to participate in the bid but could not do so because of paucity of funds, on that day has locus standi to question the auction held on that particular day. This is further substantiated if a reference is made to a decision rendered by the Supreme Court in shivajirao nilangekar patil v Dr. Mahesh madhav gosavi and others, wherein it is held that if a lamentable state of affairs is brought to the notice of the court, it is the duty of the court to the public that the truth and the validity of the allegations made be inquired into. ( 6 ) IN t. Prakash v state of karnataka, it is held that Rule prescribes that a chronic defaulter who has no intention of honouring his obligation under the act should not be permitted to participate and if such person is allowed to participate, he is likely to raise the bid with impunity and outbid genuine bidders. A kind of 'gresham's law' would then operate : the bad bidder would drive out the good and public as well as private interests would suffer. ( 7 ) THE question that arises for consideration is as to whether any of the rules have been violated in conducting the auction or accepting the highest bid offered by the 5th respondent. ( 8 ) THE learned counsel for the petitioner has drawn my attention to Rule 3 which deals with decision by the government of manner of disposal which admittedly has been satisfied. It is also not in dispute that Rule 4 deals with notification by excise commissioner consequent on order under Rule 3 by the government. ( 8 ) THE learned counsel for the petitioner has drawn my attention to Rule 3 which deals with decision by the government of manner of disposal which admittedly has been satisfied. It is also not in dispute that Rule 4 deals with notification by excise commissioner consequent on order under Rule 3 by the government. Similarly, Rule 4-a deals with registration of excise contractors which also is satisfied. Rule 5 deals with the manner of submission of tender and the procedure-required to be followed in cases of auction. Rule 5 (6) provides that every tender shall be accompanied by an emd of an amount equal to one month's rent of each shop or group of shops as in the previous excise year. Such deposit shall be made in the form of a dd on a schedule bank in favour of the deputy commissioner or the divisional commissioner as the case may be or the excise commissioner. Tenders not accompanied by such deposit shall be rejected. ( 9 ) IN the case on hand there is no dispute that the 5th respondent has tendered dds as required under sub-rule (6) of Rule 5. The complaint of the petitioner is that one of the dds tendered by him for a total consideration ] of Rs. One crore was stolen and that the dd was subsequently not honoured by the bank as a complaint was lodged by the person who had obtained the dd. This fact has been admitted by the respondents in their written objections at paras 2 and 3. ( 10 ) HOWEVER, the fact remains that the 5th respondent deposited emd as per the terms by producing the demand drafts for a total consideration of Rs. 6,50,00,050/- out of which a dd for Rs. 1 crore was said to have been stolen. Notwithstanding this fact, the amount payable under the dd was subsequently deposited by the 5th respondent and the government accepted the said amount. Even if there were minor lapses in depositing the amount, it is clear that the government has a discretion to condone those lapses. 1 crore was said to have been stolen. Notwithstanding this fact, the amount payable under the dd was subsequently deposited by the 5th respondent and the government accepted the said amount. Even if there were minor lapses in depositing the amount, it is clear that the government has a discretion to condone those lapses. To substantiate that, the learned Advocate general submitted that the Rule 18 has been amended by substituting the word 'may' in place of the word 'shall' and therefore, a discretionary power is given to the state and in support of this argument he placed reliance on a judgement of this court in ms. Sowcar t. Thimmappa and sons and others v state of Karnataka and others. In this case, the court has considered the judgment of the Supreme Court in k. n. guruswamy's case, supra, and also state of Assam and another v keshab prasad singh and another, and held thus:"the enunciation of the principle of law by the Supreme Court in the above decision does not speak of any conferment of right on the licensee nor any right of the licensee to demand the continuance of his previous licence, if any default is cemmitted by the highest bidder by failure to comply with the Provisions of rules 16 and 17. The Supreme Court has laid down that the liquor licensing in the state can only be done in certain specified ways and such discretion as is left to the authorities is strictly ' controlled by the statute and rule. As already pointed out, the discretion is conferred on the deputy commissioner, whether or not to continue the previous licensee in the event of default committed by the highest bidder. . . . . . . . . . . The amended Rule 18, deleted the words "shall be cancelled by the state government" and the words "may be cancelled by the government at its discretion" were substituted. Further, "if it is so cancelled, the deposit made by such a person shall be and shall be deemed to have been substituted with effect from 1st January, 1977". . . . The amended Rule 18, deleted the words "shall be cancelled by the state government" and the words "may be cancelled by the government at its discretion" were substituted. Further, "if it is so cancelled, the deposit made by such a person shall be and shall be deemed to have been substituted with effect from 1st January, 1977". the plain meaning of amended Rule 18 is that the government has now been conferred with the discretion either to cancel licences of retail liquor vendors for non-compliance of rules 16 and 17 or confirm in its discretion licences of the retail vend of liquors in spite of belated compliance of rules 16 and 17. Thus amended Rule 18 validates the belated deposit and the bank guarantee furnished by the 6th and the 4th respondents respectively in these writ petitions. Therefore, in view of this judgment it is clear that even if there is any lacuna in the case of the 5th respondent not depositing the entire amount on the particular day, a discretion is given to the government to validate the auction. ( 11 ) AS stated above, this admitted fact would show that the 5th respondent actually deposited the entire amount in the eye of law and satisfied the requirement. As rightly pointed out by the learned Advocate general the dd is a document which will have to be honoured by the bank and the government has accepted the dd without knowing as to whether it was stolen or presented as a genuine document. The payment of the dd cannot be stopped by the bank as it was in the name of the respondents. However, the bank had reported the matter as detailed in para 3 of the objections because there was some complaint lodged by the person who had obtained the dd. Immediately, the government has taken steps and on 24-6-2001 the 5th respondent deposited the entire amount. There is not even an iota of material to show that the 5th respondent has defaulted at any point of time; nor that he was only an ordinary contractor as alleged by the petitioner; nor that the interest of the state exchequer was not protected. It is too early for any action to be taken against the 5th respondent by the government. It is too early for any action to be taken against the 5th respondent by the government. There is a delay of a few days in depositing the amount covered under the dd and obviously it appears to be due to some confusion and in view of the discretion given to the government, it has exercised that discretion as it felt that the complication in respect of one dd was a bona fide one. Therefore, this court cannot at this stage say that he is not a bona fide contractor. The petitioner ought to have produced some material to show that he is an ordinary contractor or that he was not capable of completing the contract as per the licence issued by the government. No mala fide can be attributed just because the bid amount was increased by two crores compared to the previous year. If the amount is increased, it should be taken in the best interest of the state exchequer. Under the circumstances, the argument of the learned counsel for the petitioner that normally only 10% of the previous year's amount would be increased in the succeeding year and this bid is a farce has to be rejected. ( 12 ) THEIR lordships of the Supreme Court in Raunaq International Limited v. I. V. R. Construction Limited and others, held that in a challenge by an unsuccessful tenderer, the court not to interfere unless substantial public interest was involved or grant is mala fide. The court must satisfy itself about the bona fide of the petitioner and must also carefully weigh conflicting public interests before interfering and passing interim orders. It is held that the award of tender cannot be stayed at the instance of a party who does not fulfill the requisite criteria itself. ( 13 ) IN the case on hand also, from the overall view of the contract, the 5th respondent has offered highest bid i. e. , Rs. 2 crores, even much more than 10% which is increased in the normal course every year. On the other hand, the only apprehension of the petitioner is that the 5th respondent being not a big contractor would deceive the government by not paying the premium amount regularly and that there are political influences which prompted him to bid the highest amount with a view to avoid payment to the government etc. On the other hand, the only apprehension of the petitioner is that the 5th respondent being not a big contractor would deceive the government by not paying the premium amount regularly and that there are political influences which prompted him to bid the highest amount with a view to avoid payment to the government etc. It is too early for this court to comprehend that the allegations made by the petitioner would be true. There is no material to show that the 5th respondent had indulged in such activities previously. It is no doubt true that certain paper publication was produced by the petitioner wherein the leader of the opposition has made a statement that some ministers also actively participated in the auction, etc. Except bald allegations, there is no material to hold that some malpractice is being played in these transactions. Further, the persons who are alleged to be involved in this contract are not made parties, whereby the court could draw an inference and pass any order against them. ( 14 ) THE learned counsel for the petitioner further vehemently argued that if such a malpractice could be allowed, the petitioner also would have raised the bid amount still further and the petitioner was not aware of these facts and therefore, he could not participate in this bid. It is not open to the petitioner to raise the contention that he would have increased the bid and even now he is ready to pay higher amount, if he is also permitted to deposit the emd as was done by the 5th respondent. I am of the firm view that the petitioner is estopped from raising the plea as he did not participate in the auction. He himself has admitted that because of some commitments, he could not participate in the bid held on 13-6-2001 though he had participated in the earlier auction sale. Under the circumstances, though the argument of the learned counsel for the petitioner appears to be palatable, I am not inclined to accept the same as the apprehension of the petitioner is too far fetched and imaginary to the effect that the 5th respondent would not comply with the contract and he would not pay the premium. It is too early to blacklist this respondent. If he commits any default, the respondent is at liberty to cancel the contract and take appropriate action. It is too early to blacklist this respondent. If he commits any default, the respondent is at liberty to cancel the contract and take appropriate action. For the foregoing reasons, the petition is liable to be dismissed. Accordingly, the petition is dismissed. However, it is open to the government to take effective steps in the event any default is committed by the 5th respondent in honouring the contract. --- *** --- .