LexHAJI T.M. HASSAN RAWTHER versus KERALA FINANCIAL CORPORATION
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HAJI T.M. HASSAN RAWTHER A v. KERALA FINANCIAL CORPORATION. NOVEMBER 17, -1987 [B.C. RAY AND K. JAGANNATHA SHETTY, JJ.] B Indian Contract Act, 1872: Auction-Disposal of property by State or instrumentality of the State-Resort to private negotiation instead of public auction justified in compulsive situations. Constitution of India, Article 14: Property owned by State or instmmentality of State-sale of-Through public auction or by inviting C tenders-Action to be fair and above board-Nothing to be done to give impression of bias, favouritism or nepotism. The respondent, a State Government Corporation obtained decree for certain amount against the appellant and in execution pro- D ceedings a tea estate was brought for sale by court auction in 1969, but in the absence of a bidder the respondent itself bad to purchase it at a higher price, The respondent, however, could take possession of the estate only in 1982. It then invited tenders for the sale of the estate. The ·-.J_ appellant offered Rs.6,110,000. The next best offer was for Rs.4,15,550 and the third for Rs.2,07 ,451. The highest offer was accepted, but the E appellant could not pay the amount except the earnest money, even after repeated extension of time and offer to receive the balance in instalments. The respondent then negotiated with the next highest bid- der, who enhanced the offer to Rs.4,50,000 which was accepted by the respondent. The property, however, was sold to a partnership firm in ~ which the said bidder was a partner. The appellant thereupon moved the High Court complaining that F the respondent in selling the property to t.he firm had deviated from the normal practice of inviting the tenders from the public and that the Corporation being a public authority was bound to act reasonably and fairly and it ought not be have arbitrarily selected the purchaser. The G High Court declined to interfere. Dismissing the appeal, HELD: The action of the respondent in offering the property to the person next in order by private negotiations and selling the same at H 1079 1080 SUPREME COURT REPORTS [1988) 1 S.C.R. A his request to the partnership firm was perfectly justified. [I087G] i"' B c D E F G The public property owned by the State or by any instrumentality of the State should be generally sold by public auction or by inviting tenders, not only to get the highest price for the property but also to ensure fairness in the activities of the State and public authorities. They should act fairly. Their actions should be legitimate. Their dealings should be above board, Their transactions should be without aversion 't .~ or affection and should not be suggestive of discrimination, bias, favouritism or nepotism. Ordinarily these facts would be absent if the • matter is brought to public auction or sale by tenders. Though that is the ordinary rule, it is not an invariable rule. There may be situations J necessitating departure from the rule, but then such instances must be "'. justified by compelling reasons and not by just convenience. [ 10868; 1087 A -Cl In the instant case, the respondent dealt with the property in all fairness. It invited tenders for the sale of the property under the notifi- cation. The appellant submitted the highest tender in response to the said notification. He was granted all concessions and facilities for pay- ment by instalments but he failed. If the appellant could not act accord- ing to his tender, there was no reason why the property should not be offered to the person who was next in order. The respondent, therefore, did not do anything unfair with the second bidder after it had got the tender amount raised substantially. [1087D-F) K.N. Guruswamy v. The State of Mysore & Ors., [1955] 1 SCR 305 at 312; Mohinder Singh Gill & Anr. v. The Chief Election Commis- sioner, New Delhi & Ors., [1978] 2 SCR 272; R.D. Shetty v. The International Airport Authority of India & Ors., [1979) 3 SCR 1014; Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir & Anr., -- [ 1980] 3 SCR 1338; Fertilizer Corporation Kamagar Union v. Union of~ India, AIR 1981 SC 344; Ram and Sh yam Company v. State of Haryana \ & Ors., [1985] Suppl. SCR 541 and Shri Sachidanand Pandey v. State of W.B. AIR 1987 SC 1109, applied. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 914 of 1987. From the Judgment and Order dated 22.8.1984 of the Kerala High Court in O.P. No. 6806 of 1984. H Abdul K
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