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M/S Rajshila v. State Of U.P And Others
Case Summary
Factual and Procedural Background
On 21 September 1990 the Public Works Department, Uttar Pradesh, issued a notice inviting tenders for the exclusive right to collect toll on the Ganga bridge at Jajmau, Kanpur. The auction was first fixed for 30 October 1990, postponed to 8 November 1990 and finally held on 14 November 1990.
Of seven entities that purchased tender forms, only two filed them in time. Ultimately only one bidder—M/s Munendra Nath Upadhyay & Company (respondent 4)—participated, offering Rs 75 lakhs per year. After a protest by Roshan Lal & Company that the postponement lacked publicity, respondent 4 raised its offer to Rs 80.21 lakhs, which the authorities accepted.
The appellant, M/s Rajshila, did not participate, claiming it was prevented by an ongoing strike in government offices from depositing the requisite Rs 7 lakhs security. On the auction date it tendered the sum and expressed willingness to bid Rs 86 lakhs per year, but was refused entry. The appellant’s writ petition challenging the award was dismissed by the Allahabad High Court on 31 January 1991, leading to the present appeal. The Supreme Court granted special leave and heard the matter on merits.
Legal Issues Presented
- Whether the award of the toll-collection contract to respondent 4, amid allegations of inadequate publicity and lack of competition, was valid.
- Whether the appellant, asserting it was obstructed from bidding, is entitled to a fresh opportunity through re-auction.
Arguments of the Parties
Appellant’s Arguments
- Successive postponements were inadequately publicised, suppressing genuine competition.
- A government-office strike made compliance with the security-deposit procedure impossible in time.
- The appellant offered Rs 86 lakhs per year and tendered the cash security on the auction date but was wrongfully denied participation.
Respondents’ Position
- The State and respondent 4 relied on the accepted bid of Rs 80.21 lakhs and the contract already in force from 9 February 1991.
- No procedural infirmity warranting interference was admitted.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court sought to balance fairness to bidders with continuity of revenue to the State. It noted:
- The appellant demonstrated readiness to pay significantly more (Rs 86 lakhs) than the accepted bid.
- The claim of administrative impediments to participation was not implausible.
- An equitable solution could safeguard public revenue while giving all eligible bidders a fair chance.
Accordingly, the Court fashioned a conditional order:
- The appellant must deposit Rs 25 lakhs by 10 January 1992 to show bona fides; on deposit, the existing contract stands set aside.
- Respondent 4 may continue toll collection only until 31 March 1992 at Rs 80.21 lakhs per annum.
- If the appellant fails to deposit, respondent 4 retains the contract for the full term but at Rs 86 lakhs per annum, calculated from 9 February 1991.
- A fresh auction, with the appellant’s opening bid recorded at Rs 86 lakhs, must be completed by 20 March 1992 for a three-year period commencing 1 April 1992.
- The appellant must satisfy all standard eligibility conditions but is exempt from paying the Rs 7 lakhs cash security at the re-auction.
Holding and Implications
The High Court’s order is set aside and the appeal is allowed subject to the Supreme Court’s conditional directions for re-auction.
Immediate Effect: Compliance with the deposit schedule will determine whether respondent 4’s contract is curtailed and a re-auction held, or continues at the higher consideration of Rs 86 lakhs per year.
Broader Implications: The ruling emphasises transparency and revenue maximisation in public auctions but is confined to the specific facts; it does not establish a new legal precedent.
Order
1. The appellant, M/s Rajshila, a firm of partners, seeks special leave to appeal to this Court from the order dated January 31, 1991 of the Division Bench of High Court of Allahabad made in Civil Miscellaneous Writ Petition No. 2250 of 1991. Appellant challenged the award of the exclusive right to collect toll on the bridge across Ganga at Jajmau, Kanpur Division in favour of M/s Munendra Nath Upadhyay & Company, respondent 4 herein, at the auction held in that behalf on November 14, 1990. The High Court dismissed the writ petition.
2. We have heard Sri Harish Salve, learned counsel for the appellant, Sri R.B Mishra for the State of Uttar Pradesh; and Sri R.N Narsimhamoorthy learned senior counsel for respondent 4. Special leave is granted and the appeal taken up for final hearing, heard and disposed of by this judgment,
3. On September 21, 1990, a public notice was caused to be issued by the authorities concerned inviting tenders from intending bidders for the award of the right to collect toll on the said bridge. The auction was originally fixed to be held on October 30, 1990. Seven persons obtained tender papers but only two, respondent 4 and another by the name Roshan Lal & Company, filed their tender papers in time. The auction which was scheduled to be held on October 30, 1990 was postponed to November 8, 1990 and thereafter to November 14, 1990. At the auction held on November 14, 1990, however, only respondent 4 participated and offered a bid of Rs 75 lakhs per year. Thereafter Roshan Lal & Company aired a grievance that the postponement of the auction from November 8 to November 14, 1990 was done without due publicity; that it had been denied competitive participation and that it would offer a higher bid of Rs 80 lakhs per year. In the light of this development, the authorities appeared to have communicated to respondent 4 that its bid of Rs 75 lakhs per year was inadequate and could not be accepted whereupon respondent 4 communicated its willingness to offer Rs 80.21 lakhs which was found acceptable and was accepted. The said Roshan Lal & Company did not bestir itself to agitate the matter any further.
4. But the present appellant which did not participate in the auction came up before the High Court with the grievance that it was virtually prevented from participation at the auction. It was alleged that owing to a strike in government offices during the period it had had to run from pillar to post to fulfil the precondition of a security deposit which, in view of the involved procedure, was rendered impossible to be fulfilled and that appellant tendered the cash security of Rs 7 lakhs on the date of the auction and sought permission to participate. Upon this request being turned down appellant is said to have given an application on the same date signifying its willingness to offer Rs 86 lakhs per year.
5. After hearing learned counsel for the parties we are persuaded to the view that ends of justice would be met by a conditional order, directing a re-auction subject to the following conditions:
(a) That appellant shall, with a view to establishing its readiness and willingness to stand by the offer of Rs 86 lakhs per year, deposit a sum of Rs 25 lakhs by a crossed demand draft drawn on any nationalised bank in favour of the “Executive Engineer, National Highways Construction Division (Bridge), Public Works Department, 12/476, Makrawat Ganj, Kanpur”. The draft shall be delivered to the said Executive Engineer on or before January 10, 1992.
(b) If the said sum of Rs 25 lakhs is so deposited the present contract in favour of respondent 4 shall stand set aside.
However, with a view to maintaining the continuity of the collection of the toll till the procedural formalities of re-auction are complied with, respondent 4 shall be permitted to continue to operate the contract till March 31, 1992. Its rights and obligations arising out of the earlier contract shall be limited to the period from February 9, 1991 when the operation of the contract is stated to have commenced till March 31, 1992. For this period, respondent 4 shall be liable to pay at the rate of Rs 80.21 lakhs per year and proportionate part thereof for the year, months and days actually covered.
(c) If the appellant fails to deposit the sum of Rs 25 lakhs as aforesaid then the contract in favour of respondent 4 shall run for the whole period of three years from February 9, 1991 but at Rs 86 lakhs per year. The sum of Rs 86 lakhs shall be calculated from the inception, namely, February 9, 1991.
(d) If the appellant makes deposit of Rs 25 lakhs on or before January 10, 1992, the authorities concerned shall take immediate and prompt steps for the conduct of a fresh auction by notifying the calendar of events. The proceedings for the conduct of the re-auction shall be concluded by March 20, 1992 as the outermost date. It is desirable that the proceedings be finalised much earlier. The period of the contract shall be three years to commence from April 1, 1992.
(e) That at the re-auction, appellant shall satisfy all other requirements of eligibility for participation such as necessary and requisite Solvency Certificate, Income Tax Claim Certificate, Character Certificate etc., as required by the rules and as applicable to all other bidders.
However, in view of the fact that appellant has been asked to make an earnest deposit of Rs 25 lakhs, it shall not be necessary for the appellant to furnish the cash security of Rs 7 lakhs or such other sum as may be prescribed as such cash security in relation to the re-auction.
(f) At the re-auction the first bid shall be recorded against the appellant at Rs 86 lakhs per year. If appellant, for whatever reasons, does not, or is found ineligible to, participate in the re-auction and if the bids secured thereat fall short of Rs 86 lakhs per year, the difference calculated for the period of three years shall be deducted out of the sum of Rs 25 lakhs deposited by the appellant and the balance alone shall become refundable to the appellant.
6. The order of the High Court under appeal is set aside and the appellant's writ petition in the High Court disposed of on the aforesaid terms. Appeal disposed of accordingly. No costs.
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