http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 11

PETITIONER:

STATE OF PUNJAB

Vs.

RESPONDENT:

M/S. YOGINDER SHARMA ONKARRAI & CO. AND ORS.

DATE OF JUDGMENT: 17/09/1996

BENCH:

FAIZAN UDDIN (J)

BENCH:

FAIZAN UDDIN (J)

KULDIP SINGH (J)

ACT:

HEADNOTE:

JUDGMENT:

WITH

(CIVIL APPEAL NO. 7993/96. 7994/96)

J U D G M E N T

BHARUCHA, J.

These are appeals against the judgment and order dated

8th may, 1996, of a Division Bench of the High Court of

Punjab & Haryana, Passed upon a writ petition filed bu the

first respondent, M/S. Yoginder sharma Onkar Rai & Co. The

subject matter of the writ petition was the auction of

liquor vends of Group nos. 108 to 111 in Khanna Circle,

district Ludhiana, State of Punjab for the year 1996-97. The

first appeal is by the State of Punjab. The other appeals

are by the successful bidders.

The auction took place on 11th march, 1996. On 18th

March, 1996, the first respondent filed an earlier writ

petition (Writ petition no. 4047/1996) before the High court

challenging the auction. Thereon the Division Beach ordered

:

"After hearing the learned counsel

for the parties and perusing the

record we are of the opinion that

the points raised by the

petitioners do require a

consideration by the competent

authority authorized a reject the

higher bid offered and the auction

held. The disputed questions of

facts raised in this litigation can

also better be appreciated by such

authority.

In view of the facts and

circumstances of the case, this

petition is disposed of with the

following directions :

(i) That Shri Y.S. Ratra Financial

Commissioner, Taxation shall treat

this writ petition as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 11

representation/revision in terms of

Rule 36 (18) of the rules filed

before him to determine the

legality of the bids in auction

held in favour of the private

respondents.

(ii) The parties shall be given an

opportunity of being heard before

passing the appropriate orders."

Consequential directions were also given.

The Financial commissioner heard the parties as

directed by the High Court and rejected the

representation/revision filed by the first respondent. He

noted various circumstances on the basis of which he came to

the conclusion that the first respondent had not given a bid

of Rs. 4.21 crores for Group no. 108 or a bid of Rs.3.50

crores for Group no. 111. The Financial commissioner found

that the possession of a receipt for entry into the auction

pandal did not mean that the first respondent had made a bid

unless it was shown from the bid sheet that its name was

recorded thereon. Being a sitting licensee for the last 4 or

5 years did not give the licensee any right to get the vend

again unless he bid for it in open auction. Not much

reliance could be placed on newspaper reports, as the

Supreme Court had held that newspaper reports had no

evidentiary value but were only hearsay evidence. That a

bank counter had been opened in the pandal did not bar the

successful bidders from depositing the requisite amount of

15% of the bid money in the government Treasury at Khanna in

the state time. In the pandal there were 1200-1300 persons.

They were not all bidders. Being the first auction of liquor

vends in the state for the given year, licensees from other

districts had come to see the trends and make a market

survey. That only 2 or 3 bidders had given bids for a

particular vend was, therefore, not noteworthy. Though the

partners of S.P. Kalia and Co. and Puneet kalia and Co. Were

relations there was no reason why they should not bid

against each other. It was next to impossible that 34 drafts

could have been prepared on the day of the auction in banks

at Khanna and Mandi Gobind Garh which would reach the pandal

by 11 a.m. considering the fast that the banks opened at 10

a.m. at Khanna and mandi Gobind Garh, which was

approximately 40-50 kms. from the site of the auction at

Ludhiana. It was more likely that all this would take 2

hours. This indicated that the first respondent did not have

adequate funds to deposit 15% of the bid money at the fall

of the hammer and, therefore, did not bid at all. Note was

taken of the pattern of bidding. for Group no. 108 the

initial bid was for Rs.3.55 crores, the next was Rs.3.65

crores, then 3.68 crores, than Rs.3.70 and the successful

bid was of Rs.3.71 crores. Thus the trend of the rise was

Rs.10 lacs in the first instance, then Rs.3 lacs, then Rs.2

lacs and, lastly, Rs.1 lac. The case of the first respondent

was that it bid Rs.4.21 crores, that is to say, there was a

rise of Rs.50 lacs over the last bid. Substantially similar

was the position in regard to Group No. 111 where there was

allegedly a rise of Rs.45 lacs. It was hard to believe that

the Collector, Who was present at the auction, would not

have intervened in these circumstances. No evidence was

forthcoming that anything spectacular had happened in the

pandal. The first respondent had not approached any of the

senior officers who were in the city in connection with the

auction. The mere mention during the argument that it had

approached the Excise and Taxation Commissioner and told him

its case and that be said he would look into the matter was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 11

an after-thought. If the difference between the successful

bids and the allegedly higher bids was really of Rs.50 lacs

and Rs.45 lacs respectively, the first respondent should

have put it in writing and the Excise and Taxation

Commissioner would have taken cognizance. The telegram sent

by the first respondent was 4 days after the auction. There

were telegrams under different names but they were all

similarly worded and no mention was made therein of the

amounts of the allegedly higher bids, but merely that a

lower bid had been accepted despite a higher bid. Due

credence had to be given to the reports of the two

independent observers nominated by the Excise and Taxation

Commissioner and the Deputy Commissioner of the District who

were present at the pandal. No mention had been made of the

alleged higher bids in the observers' reports, which stated

that the auctions were fair and there was no favoritism. The

decision of the State Government not to allow S.K. Ralhan,

Deputy Excise and Taxation Commissioner, Patiala Division,

to conduct auction in other districts of Patiala Division

was based on administrative grounds and the matter was under

consideration. There was no evidence that the auction had

been stage-managed. The claim of the first had been stage-

managed. The claim of the first respondent was, therefore,

without any basis, an after-thought and not based on any

concrete evidence.

The order of the Financial Commissioner was passed

consequent upon three writ petitions. The petitioner in one

of three writ petitions did no carry the matter to the High

Court. The writ petitioner in another writ petition filed a

second writ petition challenging the order; it came up

before another Division Bench which, on 9th April, 1996,

passed the following order :

"We find no infirmity in the

detailed order, Annexure P-9,

passed by the financial

commissioner, (Taxation), Punjab.

All the points raised before us

have been dealt with in detail by

the financial commissioner and we

concur with the findings recorded

by him.

Dismissed."

The writ petitioner in the third writ petition was the

first respondent and it filed the present writ petition

(No.5007/96) impugning the Financial commissioner's order

6th April, 1996. this writ petition was disposed of by the

judgment and order under appeal.

The Division Bench noted therein the case of the first

respondent that it had offered Rs.4.21 crores for group no

108 as against the successful bid of Rs.3.71 crores which

had been wrongly accepted, thereby putting the public

exchequer to a loss of Rs.50 lacs. Similarly, for Group no.

111, the first respondent had offered Rs.3.5 crores but the

bid of Rs.3.05 crores was accepted, thus putting the

exchequer to a loss of Rs.45 lacs. Though the

representatives of the first respondent were present at the

time of the auction, their presence and the bids offered by

them were not recorded. It was the said S.k Ralhan who had

not accepted the higher bids offered by the first respondent

without any basis or assigning any valid reason. The first

respondent had raised a hue and cry, through its partner,

Yoginder Sharma, had approached the Excise and Taxation

commissioner and brought to his notice the arbitrary,

capricious, illegal and unconstitutional action on the part

of the said S.K. Ralhan, but no action was taken. The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 11

denials of the respondents before the High Court were noted

including those of the said S.K. Ralhan. The order on the

earlier writ petition (No. 4872/96) was set out in extenso.

The division Bench then enumerated the circumstances which

had led the Financial commissioner to reject the

representation or revision of the first respondent (as set

out above). The validity of the auction was challenged by

the first respondent on three grounds. the first and second

grounds related to the provisions of the Punjab Excise Act

and the Punjab Liquor Licence Rules and the terms and

conditions of the auction notice. (There grounds were

rejected and need not detain us.) the third ground, which

was accepted, was set out thus :

"iii) The petitioner, despite being

the highest bidder, was wrongly

shown to have not participated in

the bid. The learned counsel had

referred to various circumstances,

which, according to him, show the

bonafides of the petitioner in

bidding in the auction and having

been present on the spot."

The Division bench stated that, in support of his

submission that the first respondent had offered a higher

bid, its counsel had referred to various circumstances and

submitted that the cumulative effect there of proved the

presence and participation of the first respondent in the

auction, which had not been taken note of . The

circumstances enumerated by the first respondent and

"probabilised to have been proved" were set out by the

Division bench. The first circumstance was the receipt for

entry into the auction pandal; this, according to the

Division Bench, established that the first respondent had

decided to participate in the auction. the second

circumstance was that the representatives of the first

respondent were in possession of bank drafts worth Rs.1.90

crores besides cash in the sum of Rs.10 lacs on the date of

the auction "for the purpose of bidding in the auction". The

factum of bank drafts was not disputed. The Financial

Commissioner's observations in regard to the bank drafts

were then set out and the Division Bench observed :

"The conclusion arrived at by the

Financial Commissioner, Taxation,

are based upon conjecturers and

apparently observed with pale eyes.

It is not improbable to obtain 34

drafts prepared from a bank at

Khanna and mandi Gobindgarh on the

same day and before the time of

auction. It is not uncommon that

the banks have been providing

special services to their customers

particularly having huge monetary

Taxation, has not referred to any

special knowledge of banking system

and had arrived at the aforesaid

conclusion without ascertaining the

true position from the concerned

bank."

According to the Division Bench, if drafts for such a

huge amount had been issued, the same demonstrated the bona

fide intention of the first respondent to participate in the

auction. Again, it was "fully established" that the first

respondents' representatives were in possession of the bank

drafts on the relevant date, which showed their intention to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 11

participate in the auction. The provisions of Rule 36 (17).

Though they could not be made the basis for quashing the

auction proceedings, were relevant to show the biased

treatment given to the first respondent. Whether the first

respondent had raised the plea or not, it was for the

authorities to explain the omission in not mentioning the

pre-determined license fee, which might have become the

basis for accepting or rejecting the bid offered by a

particular bidder. It was intriguing and not explained as to

why such an omission was allowed in the case of Group Nos.

108 and 11 only and not in the case of any other group

auctioned on the same day or thereafter. The first

respondent had taken steps for participation in the auction

by obtaining an entry slip and by procuring bank drafts,

which led to the irresistible conclusion that it was not

only a spectator. The affidavits of the partners of the

first respondent showed that they were present at the time

of the auction and had participated in it, but their

presence was not taken note of. Press reports also suggested

that the auction was not free from suspicion. Some extracts

of these press reports were set out. It was then said by the

Division Bench that it was true that press reports could not

be made the basis for holding the auction illegal or

contrary to the law; however, "in drawing inferences, the

circumstances of the press reports cannot be completely

ignored,..........". The telegrams aforementioned also could

not be completely ignored. The mere omission of details

therein could not be made the basis for rejecting them. It

was not a coincidence that immediately after the auction was

concluded on 11th March, 1996, the said S.K. Ralhan had been

transferred. His transfer suggested, prima facie, the

satisfaction of the authorities that he had not been fair in

holding the auction. It was worth mentioning that the

successful bidders had not denied the allegations made

against them and it was, therefore, proved that the persons

and it was, therefore, proved that the persons participating

in the auction were hand in glove with each other with the

object of putting the State exchequer to loss. "The

cumulative effect". The High Court held, "of the aforesaid

discussion clearly and unequivocally leads to the conclusion

that the auction with respect to groups No. 108 and 11 held

on 11th march , 1996, was neither fair, nor proper. The

petitioners were wrongly deprived of their right of

participation in the bid and the State exchequer was

subjected to huge loss, which in no case in lesser than

Rs.95 lacs."

As far as the Financial Commissioner was concerned, the

High Court said :

"Least we say out Shri Ratra,

better it would be. we were

interested in the job of

adjudication of the rival claims of

the parties, presuming him to be an

independent and impartial person,

keeping in view the status of the

post he is holding. During

arguments, a reference had been

made to Annexure PS2, a press

report dated 12th March, 1996,

which shows that Shri Ratra had

gone to the press with the claim

that outcome of the auction had

allegedly been better than the

expected rise of 12 to 13 per cent.

At that time, it was not brought to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 11

our notice that Shri Ratra had

already taken a stand with respect

to the matter in dispute and,

presumably, could not have given

any other finding than the one,

which is incorporated in Annexure P

66. Omission on the part of the

parties to bring to our notice the

commitments made by Shri Ratra has

resulted in the reference being

made to him."

Ultimately, in the High Court's

view, the substance of the

circumstances in the context of the

allegations made, clearly suggested

that the auction was not fairly and

properly held, with the result that

the State exchequer had been

subjected to a huge loss. The High

Court thereupon passed the

following order, which must be

quoted in extenso :

"Under the circumstances, the writ

petition is allowed and the auction

held on March 11, 1996, with

respect to group Nos. 108 and 111

vide annexures P 44 and P 47 is

quashed. Consequently, the auction

of group Nos. 109, 110 and

protection vend of Kotla Azner

(Fatehgarh Sahib) in favour of the

successful bidders of group Nos.

108 and 111 shall also stand

quashed. This judgment would become

effective from May 16, and the

private respondents are allowed to

continue their business until the

mid-night of May 15, 1996.

In view of the detailed discussion

made above, the order of the

Financial Commissioner, Taxation,

Punjab (Annexure P 66) is quashed

for the remaining period of 10 and

a half months commencing with

effect from 16.5.1996 to 31.3.1997.

All the four groups, i.e., Nos. 108

to 111 and protection vend of Kotla

Azner (Fatehgarh Sahib), are

directed to be re-auctioned

positively before May 15, 1996, at

the cost of the petitioners, after

due publicity and advertisement.

The petitioners, private

respondents and all others shall be

permitted to participate in the

bid, which shall be strictly held

in accordance with the provisions

of Rule 36 of the Punjab Liquor

Licence Rules. All such persons,

who enter the venue for the purpose

of bid, shall, recording their

attendance and the bid shall be

supervised by an officer, not below

the rank of Financial Commissioner.

After pre-determining the licence-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 11

fee, first bid for group No. 108

shall be deemed to be Rs.4.21

crores offered by the petitioners

and for group No. 111, the first

bid shall be deemed to be of

Rs.3.50 crores, offered by the

petitioners.

After deducting the proportionate

fee for the period commencing from

1.4.1996 to 15.5.1996, the balance

amount of fee, if deposited by the

respondent/successful bidders,

shall be refunded to them after May

15, 1996.

The petitioners shall deposit a sum

of Rs. one lac within two days, out

of which the expenditure for re-

holding of the auction shall be

adjusted and the balance amount

paid back to them after completion

of the process of auction.

In the new auction, Shri S.K.

Ralhan Deputy Excise and Taxation

Commissioner and Shri Y.S. Ratra,

Financial Commissioner, Taxation

shall not be associate in any

manner.

In case, the petitioners opt not to

participate in the new auction bid

and no other bidder offers the bid

of the amount already offered by

the private respondents-successful

bidders, this petition shall be

deemed to have been dismissed with

costs of rupees one lac to be paid

to the private respondents.

However, on the completion of the

fresh process of auction, the

private respondents shall be liable

to pay a sum of Rs.10,000/- as

costs which shall be deposited in

the State Treasury."

Learned counsel for the appellants submitted that

questions of fact were involved. At the hearing of the

earlier writ petition this had been recognised by the

Division Bench and the first respondent had been referred to

the Financial Commissioner treating the writ petition as a

representation or revision under the statutory provision.

The order of the Financial Commissioner was reasonable in

its appreciation of the facts. The Division Bench had not

found it to be perverse. The Division Bench, therefore, was

not entitled to reverse it. In any event, the judgment of

the Division Bench was based upon conjectures and the order

that was passed by it was erroneous and unworkable.

Learned counsel for the first respondents drew our

attention to its case that in the auction pandal itself its

partners had met the Excise and Taxation Commissioner and

told him their grievance and the Excise and Taxation

Commissioner had assured them that the matter would be

looked in to. Learned counsel referred to the press reports

which stated that the Excise and Taxation Minister of Punjab

had said that while there was no report with the state

Government on the alleged irregularities during the auction

of liquor vends, it had come to the notice of the State

Government that the auction of some liquor vends in Ludhiana

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 11

were conducted in a manner contrary to the interests of the

revenue and that, on the basis of a representation, the

state Government had relieved the Deputy Excise and Taxation

Commissioner in charge of the Patiala Division of the

responsibility of conducting auctions for the remaining

districts of the Division. A copy of the order relieving

the said S.K Ralhan was pointed out. Learned counsel

submitted that even so, the Financial Commissioner in his

report had stated that the decision of the state Government

not to allow the said S.K. Ralhan to conduct auctions in the

remaining districts of Patiala Division was based on

administrative grounds. Learned counsel submitted that

there was , thus, evidence to show that the auction had not

been conducted fairly and in the prescribed manner. The

Financial Commissioner in his report had stated that it was

hard to believe that the Collector would not have intervened

when bids of Rs.50 and 45 lacs respectively over the next

highest bids had been made. Learned counsel submitted that

the Financial Commissioner himself should have accepted the

higher bids of the first respondent. The first respondent

was even now prepared to deposit 15/ of the required deposit

for the remaining half of the term and secure the balance.

learned counsel relied upon the judgment of this Court in

M/s. Rajshila vs. state of U.P. and ors. 1993 supp. (1)

S.C.C. 477. This was a case where The appellant could not

participate in the auction of the exclusive right to collect

tolls on a bridge owing to a strike in Government offices.

The appellant 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 of fulfillment.

The appellant had tendered cash security of Rs.7 lacs on the

date of the auction and sought permission to particular, but

the request had been turned down. Upon this, the appellant

had given Rs.86 lakhs per year as against the accepted bid

of Rs.75 lacs per year. After hearing counsel, this Court

was persuaded to take the view that the ends of justice

would be met by an order directing a re-auction subject to

certain conditions, the first being that the appellant

should, with a view to establishment its readiness and

willingness to stand by the offer of Rs. 86 lacs per year,

deposit a sum of Rs. 25 lacs on or before the stated date.

If the sum of Rs.25 lacs was deposited, the contract in

favour of the successful bidder would stand set aside.

Learned counsel submitted that the present was a case where

the ends of justice required that the judgment and order

under appeal be maintained subject to such conditions as

this Court might deem fit to impose.

The question that goes to the root of these appeals is

: did the first respondent make bids at the auction of Rs.50

and Rs.45 lacs respectively over the successful bids for

Group nos. 108 and 111?

This is a question of fact. It was rightly referred to

the Financial Commissioner under the statutory provision by

the Division Bench in its order on the earlier writ

petition. On the order passed by the Financial

Commissioner the High Court could interfere in a writ

position under Article 226 only if it found it to be

perverse, that is to say if it found its conclusions such as

could not reasonable have been arrived at upon the record.

The division Bench in the order under appeal had not so

held, specifically or impliedly.

The order of the Financial Commissioner is not perverse

or unreasonable. He was right in concluding that the fact

that the first respondent had entered a bid. His views

about the drafts procured by the first respondent from the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 11

banks at Khanna and Mandi Gobindgarh are not unreasonable,

for , ordinarily, prospective bidder would not cut it so

fine. He would ordinarily obtain the required bank drafts

before the auction date and not wait to do so with only an

hour or so to spare. No extraordinary circumstances have

been adverted to by the first respondent which required it

to be obtain the drafts only on the morning of the auction

from banks which were a sizeable distances form its site.

The pattern of bidding referred to by the Financial

Commissioner is very telling. It is unlikely that when the

bid is rising by Rs.10 lacs, Rs.3 lacs, Rs.2 lacs and Rs.1

lacs it should suddenly rise by Rs.50 lacs and Rs. 45 lacs

respectively. The Financial Commissioner was justified in

rejecting the case of the first respondent that ut had

approached the Excise and Taxation Commissioner and spoken

to his about what had happened for this was mentioned only

in the course of the argument before him. It also germane

for the Financial Commissioner to observe that no higher

revenue officials had been approached by the first

respondents, as also to point out that the observers'

reports did not speak of any irregularity. They would

certainly have done so had a bid which was Rs.50 lacs more

than the successful bid been ignored; there would have been

a commotion in the auction pandal and this would have been

mentioned in the reports. The Financial Commissioner

pointed out, and rightly, that the telegram sent by the

first respondent was four days after the auction. There

were other telegrams, similarly worded but under different

names. In all the telegrams no mention had been made of the

quantum of the higher bid but merely that a lower bid had

been accepted against a higher bid. The Financial

Commissioner noted that two partnerships had bid against

each other but commented, with some justification, that the

mere fact that their partners were relations did not make

for a rigged auction.

The Division Bench castigated the Financial

Commissioner for his report and stated that his conclusions

were "based upon conjectures and apparently observed with

pale eyes". It said that "it is not improbable" to obtain

34 drafts prepared from a bank at Khanna and Mandi

Gobindgarh on the same day and before the time of auction.

It is "not uncomman : that banks provide special services to

their customers particularly if they have huge monetary

dealings. The Financial Commissioner had not referred to

any special knowledge of the banking system and had arrived

at his conclusions without ascertaining the true position

from the concerned bank. The Division Bench did not state

its authority for its statements about banking practices.

The Division Bench found that "it was fully

established" that the first respondent's representatives

were in possession of the bank drafts," which showed

petitioner's intention of participation in the auction".

The Division Bench took the view that the revenue

authorities were obliged to explain why the pre-determined

license fee had not been mentioned and that it was

intriguing "why such an omission was allowed in case of

Groups no. 108 and 111 only and not with respect to any

other group auction on the same day or thereafter". In

fact, it appears that this omission took place not only with

regard to Group nos. 108 and 111 but with regard to all

auctions in Ludhiana-I. The fact that the first respondent

had taken steps for participation in the auction by

obtaining an entry slip and by procuring bank drafts led the

Division Bench "to the irresistible conclusion that they

were not only spectators". The affidavits of the partners

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 11

of the first respondent also showed that they were present

at the time or the auction and had participated in it but

their presence had not been taken note of. Extracts of press

report were set out in the judgment and the Division Bench

noted that while hey could bot be made a basis for holding

an auction illegal or contrary to the law," in drawing

inferences "the press reports could not be ignore. The mere

omission of giving details in the telegrams was not a reason

to reject them. It was not a coincidence that the said S.K.

Ralhan had been transferred after the auction on 11th March

,1996, was concluded and it suggested, prima facie, that

the authorities had been satisfied that he had not been fair

in holding the auction. The Division Bench found that the

successful bidders had not specifically denied the

allegations of relationship between their partners and their

inter-action in the auction; it was, therefore, proved that

they "were hands in glove with each other with the object of

putting the State exchequer to loss". As a matter of fact,

the allegations are denied by the successful bidders in

their affidavits. The cumulative effect clearly and

unequivocally led the Division Bench to the conclusion that

the auction with respect to Group nos. 108 and 111 was

neither fair nor proper. the first respondent had been

wrongly deprived of its right of participation therein and

the state exchequer had been subjected to a loss of not less

than RS. 95 lacs.

We are constrained to observe that the judgement of the

Division Bench is based upon conjectures and inferences more

tenuous than those it found the Financial Commissioner

guilty of. Such conjectures and inferences are

impermissible in a judgment upon a writ petition under

Article 226 where the fact-finding authority had arrived at

a conclusion which is not perverse or so unreasonable that,

upon the record, it could not have been reached.

The basic question which cannot be lost sight of is :

did the first respondent make bids at the auction of Rs.50

and Rs.45 lacs respectively over the successful bids for

Group nos. 108 and 111? Securing Group nos. 108 and 111 was

so important for the first respondent, it would have us

believe that it raised the bids by the staggering sums of

Rs.50 and Rs.45 lakhs respectively. If it did, the previous

rises having been of the order of Rs.10 lacs, Rs. 3 lacs,

Rs.2 lacs and Rs.1 lacs, it would have attracted the

attention of some, if not most, of the twelve to thirteen

hundred persons in the auction pandal. It would be a brave

auctioneer indeed who would, in the circumstances, ignore

such bids. The partners of the first respondent would not

in the ordinary course of human conduct have let it pass

without stout, long and loud protests. They would had

attracted notice, and support. But according to the oral

submissions of the first respondent's counsel before the

Financial Commissioner, the first respondent's partners were

satisfied with an oral complaint to the Excise and Taxation

Commissioner and his assurance that he would look in to the

matter. In the ordinary course of events, one would have

expected a bidder making such large bids which are ignored

to shoot off notices in all directions. All we have are

telegrams sent four days after the auction which do not

mention the enormous difference between the bids. Of the

twelve to thirteen hundred persons present in the pandal,

not one independent observer had stated on affidavit that

the first respondent had m far larger than the successful

bids but they had been ignored. To our ears the first

respondent's story does not ring true.

As we have already held the Financial Commissioner's

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11

conclusion in his report were reasonable. The remarks made

by the Division Bench about him were not justified. As

Financial Commissioner, he spoke to the press about the

outcome of the auctions generally. This was in the

performance of his duties. In any event, we do not see in

his order anything that indicates that he was in any way

biased.

The Division Bench was, in the circumstances, in error

in reaching the conclusion that the auction was not fairly

and properly held with the result that the State exchequer

had ben subjected to a huge loss. In any event, loss to the

exchequer is a factor which may be taken in to account in

genuine cases, as it was in the case of M/s. Rajshila cited

by learned counsel for the first respondent. At the same

time, the finality of auctions must also be recognised to be

in the interests of the exchequer. If auctions are set

aside and re-auctions ordered in less than satisfactory

material, the loss of the exchequer would be far greater.

This brings us to the form of the order that the

Division Bench passed. We have quoted it above in extenso.

It quashes the auction. It directs re-auction for the

balance of the term. It directs that for Group no. 108 the

first bid "shall be deemed to be Rs.4.21 crores" as offered

by the first respondent, and for Group no. 111 the first bid

"shall be deemed to be Rs.3.50 crores" as offered by it. The

order then directs that in case the first respondent opts

not to participate in the fresh auction and no other bidder

offers a bid of the amount equivalent to the earlier

successful bid, "this petition shall be to have been

dismissed".

It is a very difficult order to appreciate. If at the

fresh auction the first respondent does not bid and no other

bidder offers a bid equivalent to the earlier successful bid

and the writ petition is to stand dismissed, what is the

State Government's authority for holding the fresh auction?

Whether or not the first respondent bids or somebody else

bids an amount equivalent to the earlier successful bid can

be known only after the fresh auction is held. If at that

stage the petition is to stand dismissed, there is no

authority for holding the fresh auction. Secondly, if at

the fresh auction the first respondent does not bid and no

other bidder offers a bid equivalent to the earlier

successful bid, it must mean that the earlier successful

bidder is no longer interested; but, by reason of the

dismissal of the writ petition, he remains bound by his

earlier bid. This not a workable or well thought out order.

In cases where there is real need to set aside an

auction, he who challenges it mist be required to prove his

bona fides before the auction is set aside by depositing a

substantial portion of what he says he will bid. It is only

if the deposit is made that the auction should be set aside

and a re-auction ordered.

The Division Bench would have done well to follow the

order (quoted above) already passed by another Division

Bench upon a writ petition impugning the same order of the

Financial Commissioner.

The appeals are allowed. judgment and order under a is

set aside. The writ petition filed by the first respondent

is dismissed. The first respondent shall pay to the

appellant in each of the three appeals the costs of the

appeal, quantified in the sum of R.25,000/-.