Lavanya Enterprises, West Godavari District Durgamalleswara v. Swamyvaarla Devasthanam
2012-03-15
NOOTY RAMAMOHANA RAO
body2012
DigiLaw.ai
Judgment : 1. This writ petition challenges the validity of the method adopted by Sri Durga Malleswaraswamy Vari Devasthanam, the first respondent herein, by floating e-procurement, sealed tenders and public auction notice on 01.03.2012 as contrary to Rule 3 of the Andhra Pradesh Charitable Hindu and Religious Endowments Immovable Properties and Other Rights (Other than Agricultural Lands) Leases and Licenses Rules, 2003 (henceforth referred as 'Rules'), and consequently to set-aside the same. 2. The first respondent/Devasthanam has floated on 01.03.2012 e-procurement, sealed tenders and public auction notification proposing approximately eight different licenses to be conferred upon the highest bidders. One of them is the right to collect 'human hair'. By floating this complex tendering process, the first respondent/Devasthanam has adopted e-procurement method through e-tendering process and also invited sealed tenders to be filed latest by 16.03.2012 up to 2.00 P.M. Again the public auctions were slated to be conducted at 3.00 P.M onwards on 16.03.2012. However, it has been made clear that, after conducting the public auction only the sealed tenders as well as e-tenders would be opened. Validity of this notification is under attack in this writ petition. 3. Sri Guru Gopal, learned counsel for the writ petitioner has rested his contentions on essentially two grounds. One, Rule 3 mandatorily requires a lease and license to be granted by way of public auction only whereas, the impugned notification makes a departure there from and by not confirming the highest bid secured at the public auction, the first respondent/Devasthanam is resorting to opening tenders and e-tenders thereafter, and if in that process any bid is received which is higher than the highest bid received at the public auction, the same is likely to be accepted and finalized. Thus, a lease or a license is likely to be conferred upon a bidder whose tender or e-bid may have been the highest offer. This, according to the learned counsel, amounts to granting leases or licenses in a manner other than the one contemplated by the rules. The second contention urged by the learned counsel is that, by opening the sealed tenders and e-tenders after the public auction is over, the first respondent is risking and jeopardizing the prospect of securing a competitively higher price.
The second contention urged by the learned counsel is that, by opening the sealed tenders and e-tenders after the public auction is over, the first respondent is risking and jeopardizing the prospect of securing a competitively higher price. It is very likely that the person who has filed his tender or e-tender would turn up for participating at the public auctions and so long as the tender or e-tender is not opened, excepting the bidder, the others may not have the knowledge of the bid offered by him. If such a person were to participate in the public auction, he may purposefully not bid for anything higher than what he has already quoted in his bid document or e-bid. On the other hand, if the public auctions are conducted after opening of the tenders and e-tenders, bids of all the competitors will become known and the highest bid so secured can be made the upset price at the open auction. Thus, at the open auction, the competitive edge amongst the rival bidders can be retained and the best offer that comes for consideration at that public auction can be accepted. 4. Per contra, Sri V.T.M. Prasad, learned counsel who has taken notice on behalf of the first respondent would submit that, by opening the tenders and e-tenders subsequent to the public auction, the bidders at the public auction would not be knowing about the offers of the other competitors made in their tender forms and consequently the public auctions will retain the edge of competitiveness amongst the bidders. If the tenders and e-tenders were to be opened before conducting the public auction, the bidders would be reluctant to increase their offers at the public auction appreciably. 5. The rules have been framed in exercise of the power available to the Governor under Section 153 read with Section 82 of the Endowments Act and hence, they have enforceability. Rule 3(1) undoubtedly declares that, all leases or licenses shall be made by way of public auction. Rules have not defined the expression "Public Auction". But however, the expression 'public auction' is understood in common and commercial parlance as the one where all those persons who are interested in securing a right or a privilege for themselves can compete with one other and secure it for the best offer/price 6.
Rules have not defined the expression "Public Auction". But however, the expression 'public auction' is understood in common and commercial parlance as the one where all those persons who are interested in securing a right or a privilege for themselves can compete with one other and secure it for the best offer/price 6. Learned counsel for the writ petitioner has also drawn my attention to Rule 4 for contrasting purposes. Rule 4(1) made it clear that, in case of immovable properties such as buildings and sites to be given or used for residential purposes only, leases shall be granted and while dealing with other types of immovable properties such as shops, buildings, sites, etcetera, to be used for purposes of running business, and such other rights of usufruct, fishery, collection of coconut pieces, human hair, etcetera, licenses shall be granted. 7. When we look at the notification issued on 01.03.2012, it becomes eminently clear that, three different modes are adopted. One is e-tendering process. This process has been resorted to in view of the undesirable practice of the prospective tenderers forming into a group or a cartel and thus ensure that the tendering process is regulated to suit their interests and convenience. By the e-tendering process, the other competitors may not be knowing as to who are all the persons who are likely to participate in response to the notice inviting e-tenders. The secrecy is maintained. This would help to retain the genuine competitive edge amongst various competitors. Their identity will not be known to others till such time their bids are opened up. Similarly, the ordinary tendering process also will offer the edge of competitiveness among various bidders. The respective offers made by them will be known only after the tenders are opened but not until then. Now the question is, whether the sealed tenders received and the e-tendering process which is also simultaneously invited, should they be opened first or should be opened later on after conducting the public auction?. 8. In my opinion, once public auctions are slated to be conducted, there is a fair compliance with the requirements of Rule 3(1). But, however, Sri Guru Gopal, would contend that, in public auctions, the highest bidder may not have matched with the highest bid received in the tender or e-tendering process.
8. In my opinion, once public auctions are slated to be conducted, there is a fair compliance with the requirements of Rule 3(1). But, however, Sri Guru Gopal, would contend that, in public auctions, the highest bidder may not have matched with the highest bid received in the tender or e-tendering process. Illustratively put, if, at the public auctions, the highest bid received, let us say, for the collection on human hair, stands at Rs.5 crores and when the bids are opened and the highest bid received could be Rs.5.5 crores, and subsequently, when the e-tenders are opened, the highest bid may be for Rs.6 crores. If the first respondent/Devasthanam were to confirm the highest bid received through e-tendering at Rs.6 crores, then, according to the learned counsel for the petitioner, it would amount to departing from Rule 3(1) by granting the lease or license, otherwise than by public auction. 9. There is also another dimension projected by Sri Guru Gopal. A tenderer or e-tenderer may participate at the public auctions and may well stop at a below par offer than what he has offered either in the sealed tendering process or e-tender. Since, bidding process is open and transparent in the case of public auctions, a particular bidder with a desire to subvert the course, may have deliberately stopped at 4.5 crores, notwithstanding the fact that, he himself has tendered for Rs.5.5 crores and offered an e-tender for Rs.6 crores as well. By stopping his bid at Rs.4.5 crores at the public auction, he would be sending a wrong message to the rest of the bidders, purposefully to mislead them, who may offer something little more than 4.5 crores and stop there at. In the process, he can manipulate the system to his advantage by ensuring that the bidding at public auction will not go beyond Rs.6 crores. Therefore, learned counsel would urge that, the method adopted by the first respondent/Devasthanam in opening the tenders and e-tenders subsequent to conducting the public auctions is likely to result in a compromise of the interests of the Devasthanam rather than seeking to preserve the integrity of the auction process. 10. In my opinion, much can be said on both ways in a matter of this nature.
10. In my opinion, much can be said on both ways in a matter of this nature. If the tenders and e-tenders were opened first, all the bidders will be in the know of the highest bid or tender received well before hand. Consequently, they may not actively participate in the open auctions and may well regulate it in such a manner that after an initial and artificial bidding undertaken hectically, as part of a make believe exercise, stop it at a convenient point and may not allow it to be pushed up. For instance, when tenders or e-tenders are open, if it emerges that, an offer of a sum of Rs.6 crores has been received, at the subsequent public auctions, the bidding may not go beyond few lakhs of rupees after Rs.6 crores which is made the upset price. For all external appearances, it may look to be a realistic and proper result of fair bidding, but in truth, it is a designed exercise to secure maximum advantage to themselves than to the institution. 11. As was already noticed supra, there is an element of speculation involved in both types of cases. If the tenders and e-tenders are not opened before the public auctions, the bidders at the public auction will not be knowing as to the highest bid received earlier. When the element of speculation is present in both kind of situations as to which one would be far more suitable and proper method for granting leases or licenses should at best be left to the grantor. So long as fair, reasonable and transparent methods and procedures are adopted for granting the licenses or leasehold rights in favour of the highest bidders, one can only expect that a realistically true bidding or offering can be procured. The fact as to which method could have fetched a better result than the other is difficult to be predicted. This is where the discretion to adopt the fair procedure should be left to the grantor. So long as the procedure adopted is not arbitrary or totally unjust, and it is based upon sound principles of exercise of discretion, the Courts should not seek to substitute their discretion to that of the administrator. What is best is not always discernible, the wisdom of any choice may be disputed or condemned. But that by itself does not provide scope for judicial review. 12.
What is best is not always discernible, the wisdom of any choice may be disputed or condemned. But that by itself does not provide scope for judicial review. 12. It is true that, if the requirement of law is to adopt or follow a particular procedure, the same method or procedure should be followed or adopted and no other method should either be adopted or followed, as contended by Sri Guru Gopal. In fact, Sri Guru Gopal has also drawn my attention to the Judgment rendered by the Supreme Court in Gujarat Electricity Board Vs. Girdharlal Motilal (1969-AIR(SC)-0-267), in support of his contention. 13. I am aware that, right from Taylor Vs. Taylor (1875 (1) Ch D 426) and Nazir Ahmad Vs. Emperor (AIR 1936 PC 253), Shiv Bahadur Singh Vs. State of Vindhya Pradesh ( AIR 1954 SC 322 ), and Ramachandra Keshav Adke (Dead) by LRs Vs. Govind Joti Chavare and others ( AIR 1975 SC 915 ), the principle has been crystallized that, if a statute has prescribed, to achieve a particular objective in a particular manner, the same should be done in that particular manner, but not by any different method. In fact, the same principle has been reiterated by the Supreme Court in Gujarat Electricity Board Vs. Girdharlal Motilal relied upon by the learned counsel for the petitioner. The whole question is, whether Rule 3(1) of the Rules can be construed as prohibiting the other methods also to be adopted or followed along with public auctions. The answer to this question lies in understanding or giving full meaning to the expression "public auction". As was noticed supra, public auction is a method where at, all people who have a stake or who are interested in securing a right or a privilege are entitled to participate at bidding with each other and bid to their hearts content. Whoever comes up with the best offer, will be entitled to secure the right or privilege which is put to offer. Therefore, transparency, fairness of procedure and an equal opportunity for all interested to participate are some of the salient features that are associated with the exercise of public auction. So long as these features are retained, any other method can also answer the description of the expression "public auction". Now, for instance, let us test the sealed tendering process.
Therefore, transparency, fairness of procedure and an equal opportunity for all interested to participate are some of the salient features that are associated with the exercise of public auction. So long as these features are retained, any other method can also answer the description of the expression "public auction". Now, for instance, let us test the sealed tendering process. Whosoever secures the tender form by paying up the necessary fee prescribed there for, and satisfying the eligibility criteria, can fill it up and offer it. Perhaps any number of tenders can be offered by a single individual or entity but the requirement is, there can only be one price that can be offered per tender. In other words, the best price offered by the tenderer will be basis for consideration. Same is the case with e-tender system. Any number of bids proposed can be lodged but, each bid will contain one single quotation of a price or offer. Consequently, the sealed tendering process or e-tendering process also retain the same features of transparency and the competitive edge and a fair and equal opportunity to everyone as in the case of public auctions. Only feature that will be missing in such cases is, after knowing each other's price or offer, there will not be a further opportunity to bid for the bidders to match the offers of others. 14. In a public auction, this element is what makes it a distinctive feature. When bidding starts at a public auction platform, all those who remain present would instantaneously come to know the offer made by one or the other of the bidders. At that stage, if one is truly interested, he can come up with a better or matching offer. If a better or a matching offer comes forth, against the original bidder or even a third party will get a turn to give further improved offer. Therefore, in case of public auctions, the bidders will be knowing as to who is offering and as to how much one is offering. There will be a competitive edge that would be retained amongst these bidders all through. This is the only element that would be found missing in the case of e-tendering which is not the same as e-auction platform and also in the case of sealed tenders.
There will be a competitive edge that would be retained amongst these bidders all through. This is the only element that would be found missing in the case of e-tendering which is not the same as e-auction platform and also in the case of sealed tenders. But, nonetheless, inviting tenders or e-tenders, in stark contrast to limited tendering system or calling for quotations from a limited sources, in my opinion, answers the description of "public auction" only. The fact that, there can be a further bidding process available even after knowing the offers made by the competitors makes open auctions stand out from that of tendering or e-tendering process. That can be achieved, by requiring the tenders to come up with better offers, as well. In the instant case, the first respondent/Devasthanam has not completely done away with or dispensed with the public auction mode and method as prescribed in the rules. Therefore, the impugned auction notice in inviting bids in three different forms or the prospects of accepting bids received on the e-tendering platform or in the sealed tender form does not amount to violating the mandate contained in Rule 3. 15. Consequently, I am not able to accede to the contentions canvassed by the petitioner and accordingly the writ petition stands dismissed at the admission stage. No costs.