Karthik Service Station Reptd. by Sri Ambi Sambaraju S/O Yellaiah, Indian Oil Dealer Vs. the Official Liquidator, A.P.S.S. Industrial Development Corporation Ltd. and ors. - Court Judgment

Excerpt:
- all india services act, 1951.sections 8 & 11 & a.p. buildings (lease, rent and eviction) control rules, 1961, rule 5: [v.v.s. rao, g. yethirajulu & g. bhavani prasad, jj] refusal by landlord to receive rent - deposit of rent in court - held, a tenant has the option to take recourse to section 8 in case of refusal or evasion by landlord to receive rent and if landlord were to not name a bank or refuse even the money order of rent, the tenant can deposit the rent in accordance with sub-rules (1) to (3) of rule 5. the notice to person entitled to rent and proper maintenance of accounts of such deposits under sub-rules (4) and (5) of rule 5 are solely dependent on compliance with sub-rule (3) by the tenant. the payment or deposit of rent under section 11 read with sub-rule (6) of rule 5 arises only in respect of a tenant who did not take recourse to section 8 or section 9 before an application for eviction has been made against him in respect of any rent in arrears by date of that application, whereas in respect of rent that becomes subsequently due since date of application for eviction, the tenant is bound to pay or deposit regularly until termination of proceedings in order to enable him to contest the application. any violation of section 11(1) to (3) and sub-rule (6) of rule 5 makes the tenant liable for the adverse consequences under sub-section (4) of section 11. thus, the provisions of section 11 and sub-rule (6) of rule 5 are intended only to ensure the payment and deposit of rent including arrears during pendency and till termination of proceedings for eviction. the forfeiture of right of tenant to contest in case of default is to protect the rights and interests of landlord pending such an application for eviction, but not to confer any right on tenant to plead that all defaults committed by him prior to application for eviction can never be considered wilful, if he were to deposit all arrears of rent due within fifteen days under rule 5(6) read with sub-section (1) of section 11. the object and effect of section 11 and sub-rules (1) to (5) to rule 5, the former being for protection of landlord during pendency of eviction proceedings and the later being for protection of tenant to avoid any liability for eviction on ground of wilful default. consequently, while taking recourse to section 8 by tenant is optional, once that option is exercised, compliance with sub-rules (1) to (5) of rule 5 becomes mandatory in the sense that any non-compliance with prescribed procedure will positively indicate the wilful nature of default committed in paying or tendering rent as prescribed. while deposit of rent in terms of provisions of act and the rules amounts to valid tender of rent to landlord, the failure to comply with rule 5 (3) requiring delivery of a copy of the challan for deposit of rent in office of controller or appellate authority, as the case may be, so as to enable controller or appellate authority to cause maintenance of proper accounts under sub-rule (5) and give notice of deposit to person amounts to wilful default in making valid payment or lawful tender of the rent by the tenant to the landlord. thus, where a tenant obtains an order to deposit rent, same shall be deposited at least by the last day of the month following that for which rent is payable and rent challan shall be delivered in the office of controller within a reasonable time so that rent controller can take necessary action for service of notice of deposit under sub-rule (4) of rule 5 of the rules within seven days of such delivery. in the absence of compliance in so depositing rent and delivering challan in the office of controller, tenant shall be deemed to have committed wilful default. - 4. through letter dated 2-5-2003 the senior transaction and financial adviser of implementation secretariat, public enterprises department, hyderabad, informed the appellant that though the official liquidator invited proposal for purchase of the land through advertisement dated 21-1-2003, fixing 13-2-2003 as the date of opening of tenders and conducting auction, the appellant failed to participate in the tender-cum-auction process and that consequently the only one valid bid received from respondent no. 4 was found to be the highest and better than the unsolicited bid of the appellant; , that the appellant has withdrawn its offer in the event of calling for open tender and that it failed to make a counter offer by filing the tender in response to tender-cum-auction notice, and that the appellant is guilty of suppression of its letter dated 5-11-2002, wherein it has withdrawn its offer in the event of issuance of auction-cum-tender notice by respondent no. so ioc has recommended my name because i am dealer of ioc to purchase the balance land. 1 had supplied undated tender form to the appellant and received the duly filled tender from it even before the tender notification was published and had subsequently ignored the said tender, without any explanation, clearly suggests that respondent no. 1 failed to maintain absolute transparency in conducting sale of a public property and he failed to ensure that the decision making process was fair and proper. 1 failed to conduct the bid. on this premise, he has failed to hold open auction. this fact clearly demonstrates that both the appellant and respondent no. 1 was expected to be more diligent in ensuring that the property fetches the best price in the market. the learned single judge also failed to consider the crucial omission by respondent no. 1 failed to conform to the fair, proper and transparent procedure in conducting sale of the public property. association of management studies (2009) 6 scc 171 wherein the supreme court reiterated the well settled doctrine of trust by observing that disposal of the public property by the state or its instrumentalities partakes the character of a 'trust' and the methods to be adopted for disposal of public property must be fair and transparent providing an opportunity to all the interested persons to participate in the process. 1 failed to follow this firmly established principle of law and allowed the property to be sold for a thoroughly inadequate price.c.v. nagarjuna reddy, j.1. this appeal under clause 15 of the letters patent arises out of order, dated 10-7-2009, in writ petition no. 12588 of 2003, whereby the learned single judge dismissed the writ petition filed by the appellant.2. the facts, which are necessary for disposal of this writ appeal, are summarized hereunder:the andhra pradesh small scale industrial development corporation limited (for short 'the apssidc') owned about 5071 square meters of land in warangal, which is presently a municipal corporation. as some portions of the said land were in occupation of the encroachers, the apssidc offered to sell a part of the said land. the indian oil corporation (for short 'the ioc') purchased the land at the rate of rs. 3,230/- per square meter. the appellant established a retail outlet on the said land purchased by the ioc. the remaining land of 3,742 square meters was still available with the apssidc. the apssidc went into liquidation and respondent no. 1, the official liquidator, is in control of the properties. as the unsold land was situated contiguous to the land purchased by the ioc, whereon the appellant is running the retail outlet under license, it approached the official liquidator, through letter dated 3-10-2002 with a request to sell the remaining land to it at the price of rs. 3,230/- per square meter at which the extent of 1036.64 square meters was sold to ioc. in reply to the said letter, the official liquidator sent letter dated 31-10-2002, wherein he, inter alia, stated that the government examined the appellant's proposal and stipulated certain conditions for considering the appellant's offer, which are reproduced herein below:1. your offer should be subject to the outcome of counter offers. 2. you should agree to keep the validity of the offer till the counter offers are decided. 3. you can participate in the counter offer proposed to be invited on tender-cum-auction basis. 4. you should remit the emd of rs. 1 lakh in support of your present offer.3. the official liquidator in the said letter stated that after obtaining clearance from the appellant on the above mentioned conditions, the apssidc should invite counter proposals on tender-cum-auction basis keeping the appellant's offer as 'base price offer' and subject to the condition that the counter proposals over and above the said offer should only be accepted; and that if no improved offers are received over and above the base price offer, the apssidc should be willing to accept the price quoted by the appellant. in reply to the said letter, the appellant informed the official liquidator that it is agreeable for purchasing the land at the price offered by it earlier and that it is not interested in counter offers. the appellant further stated that if open tenders were called, its offer of rs. 3,230/- per square meter 'is automatically cancelled' and it can also participate in open tender and offer its rate based on the circumstances.4. it is the plea of the appellant that its proprietor personally approached the official liquidator on 22-12-2002 and expressed his willingness to purchase the land and that on 28-12-2002 the official liquidator supplied a copy of tender schedule, which did not contain any schedule for receiving and opening of the tenders. it is the further plea of the appellant that on 15-1-2003 it has submitted its tender along with an amount of rs. 1,00,000/- towards emd with an offer of rs. 3,230/- per square meter. on 18-1-2003 the official liquidator issued tender-cum-auction notice for sale of the land by fixing rs. 3,230/- as the base price, describing the same as unsolicited bid. respondent no. 4 submitted its tender for 3,742 square meters by offering the price of rs. 1,21,00,000/- which works out to rs. 3,233-56 ps., per square meter. subsequently, correspondence ensued between the appellant and the official liquidator. in letters dated 21-4-2003 and 1-5-2003 the appellant expressed its willingness to purchase the property. in the latter letter it requested to sell the land to it at rs. 3,233-56 ps., per square meter as offered by respondent no. 4. through letter dated 2-5-2003 the senior transaction and financial adviser of implementation secretariat, public enterprises department, hyderabad, informed the appellant that though the official liquidator invited proposal for purchase of the land through advertisement dated 21-1-2003, fixing 13-2-2003 as the date of opening of tenders and conducting auction, the appellant failed to participate in the tender-cum-auction process and that consequently the only one valid bid received from respondent no. 4 was found to be the highest and better than the unsolicited bid of the appellant; and that as the tenders have since been finalized and approved by the cabinet sub-committee, it was not feasible to consider the appellant's request. through the official liquidator's letter dated 6-6-2003, respondent no. 4 was informed that its offer was accepted for sale of 3,442 square meters for rs. 1,11,29,931/- though the latter's offer was for purchase of 3,742 square meters for rs. 1,21,00,000/-, because the extent of 300 square meters of land was the subject matter of writ petition no. 1893 of 2003 in this court. feeling aggrieved by the acceptance of respondent no. 4's offer, the appellant filed writ petition no. 12588 of 2003.5. by order dated 30-6-2003 this court granted interim stay of all further proceedings in pursuance of acceptance of the offer of respondent no. 4.6. in the writ petition, separate counter-affidavits were filed on behalf of respondents 1 and 4.7. in the counter-affidavit filed by the official liquidator-respondent no. 1, most of the facts referred to above were mentioned. significantly, he admitted that the appellant filed its tender form along with emd of rs. 1,00,000/-. while he is conspicuously silent on the date on which the appellant filed its tender form, in the affidavit filed in support of the writ petition, the appellant specifically pleaded that it submitted its tender along with emd of rs. 1,00,000/- on 15-1-2003. in support of the said plea, the appellant filed a photostat copy of tender, which contains its offer of rs. 3,230/- per square meter and also details of demand draft/bankers cheque bearing no. 689368 dated 15-1-2003 for rs. 1,00,000/- towards emd. thus, it is an undisputed fact that while tender-cum-auction notice dated 18-1-2003 was published in the news papers on 21-1-2003, respondent no. 1 supplied a copy of the tender to the appellant and received the duly filled tender from him on 15-1-2003 itself along with emd of rs. 1,00,000/- submitted through dd/bankers cheque. but, curiously, respondent no. 1 maintained in his counter-affidavit that only one tender, which was filed by respondent no. 4, was received by him. however, respondent no. 1 averred that in response to his letter dated 31-10-2002, the appellant conveyed that it was not interested in counter offer and that the offer of rs. 3,230/- per square meter made by it would be automatically cancelled if the apssidc calls for open tenders. respondent no. 1, thus, justified his action in accepting the tender of respondent no. 4 on two grounds, viz., that the appellant has withdrawn its offer in the event of calling for open tender and that it failed to make a counter offer by filing the tender in response to tender-cum-auction notice, and that the appellant is guilty of suppression of its letter dated 5-11-2002, wherein it has withdrawn its offer in the event of issuance of auction-cum-tender notice by respondent no. 1.8. the contents of the counter-affidavit of respondent no. 4 need not be specifically referred to herein except to the extent of the plea that it has deposited a sum of rs. 27,98,500/- towards 25% sale value after adjusting the emd on 23-6-2003.9. in his order the learned single judge accepted the plea of respondents 1 and 4 that in view of letter dated 5-11-2002 addressed by the appellant, no further opportunity need be given to it. the learned judge also held that the appellant suppressed the material fact pertaining to its addressing letter dated 5-11-2002 to respondent no. 1. the learned judge rejected the contention of the appellant that the approval of the competent authority was not obtained as envisaged in section 512 of the companies act, 1956 (for short 'the act') by holding that in the meeting of the creditors held on 10-12-2001 and 10-3-2003 resolutions were passed for sale of the assets and that since it was a case of voluntary winding up, the official liquidator is empowered to exercise the powers conferred on him under section 457(a) to (d) of the act with the approval of the company court or the committee of inspection or, if there is no such committee, of the creditors in their meeting. the writ petition was accordingly dismissed by holding that acceptance of the offer of respondent no. 4 did not suffer from any illegality.10. we have heard sri c.v. mohan reddy, learned senior counsel for the appellant; sri d.prakash reddy, learned senior counsel for respondent no. 4, and sri n.v. jagannath, learned counsel for the official liquidator-respondent no. 1. we have also carefully perused the record.11. at the outset, we may deal with the aspect relating to non-compliance of the provision of 512 of the act. though, initially, this objection was raised, at the hearing of the writ appeal, sri c.v. mohan reddy, learned senior counsel, did not press for the same in view of the provisions of section 457 of the act and realizing the fact that since this is a case of voluntary winding up, the permission of the company court is not mandatory.12. there remains the question whether respondent no. 1 has acted in a fair and transparent manner in disposing of the property held by a state undertaking. the chronology of events discussed above suggests that the appellant being ioc dealer carrying on its retail outlet on the land situated adjacent to the property in dispute appeared to be interested in buying the said property. it has approached respondent no. 1 on its own with an offer of rs. 3,230/- per square meter. respondent no. 1 evidently consulted the government and stipulated certain conditions to consider the appellant's offer, vide his letter dated 31-10-2002. the said conditions include that the appellant should deposit the emd of rs. 1,00,000/-; its offer should be treated as base price, the appellant also can participate in the tender-cum-auction, and if no improved offers are received over and above the base price offer, the apssidc should be willing to accept the price quoted by the appellant. the immediate response of the appellant to the said letter is reflected in its letter dated 5-11-2002. since the controversy mainly centers around this letter, it would be useful to reproduce the same herein below:05.11.2002tothe liquidator,apssidc ltd.,hyderabad.sir, sub: purchase of rmsc land - reg. ref: lr. no. sidc sale of properties dt. 31.10.2002. with reference to the lr., cited it is to informed that i am prepared to take entire land which is available without any litigation, provided the land is made available at a rate of rs. 3,230/- per sq. mtr, as the rate at which ioc purchased front portion of the land. my petrol bunk is situated in this rmsc land purchased by ioc. ioc land has locational advantage of two sides main road i.e., hanumakonda - warangal 100 ft wide road and 100 ft wide road to mulugu. the balance land is rear portion of ioc land. ioc has no budgetary allocation for purchase of the balance land. so ioc has recommended my name because i am dealer of ioc to purchase the balance land. basing on ioc authorization, i have offered my rate of rs. 3,230/- (the rate sold to ioc land) to purchase this balance land even though this land has no front entrance. the main entrance was blocked by ioc land. if the corporation allot the balance land at the rate of rs. 3,230/- per sq. mtr, i am agreeable to purchase this land. otherwise, i am not interested in counter offers. my rate i.e., rs. 3,230/- per sq. mtr., is more advantages to the corporation when compared to the offers already received in earlier tenders. if you call for open tenders my rate of rs. 3,230/- per sq. mtr., is automatically cancelled. i can also participate in open tender and offer my rate only at the time of tender opening basing on the circumstances. (emphasis added). thanking you,yours faithfully,sd/-(a. sambaraj) 13. though in the letter extracted above the appellant has indicated that it is not interested in counter offers, in the last para while stating that if respondent no. 1 calls for open tenders, its offer of rs. 3,230/- per square meter is automatically cancelled, it has unequivocally reserved its right to participate in open tender and offer its rate. as stated by the appellant, it had in fact made a fresh offer by filing its tender on 15-1-2003 by enclosing a dd/bankers cheque for rs. 1,00,000/- towards emd. it is, therefore, clear that the appellant has not gone out of the race following its letter dated 5-11-2002. far from that, it has kept its offer alive by filing its tender and submitting the emd. it is not the case of respondent no. 1 that either he has not supplied the tender, which was subsequently published in the newspapers, to the appellant or that he has not received the tender form duly filled in by the appellant along with the dd/bankers cheque for rs. 1,00,000/- towards emd. it is also not the case of respondent no. 1 that since the appellant has submitted its tender even prior to publication of the tender notice, the said tender was treated as an invalid one. as observed herein above, respondent no. 1 maintained a stoic silence on how he treated the appellant's tender, which was received by him even before the tender notification was published. the fact that respondent no. 1 had supplied undated tender form to the appellant and received the duly filled tender from it even before the tender notification was published and had subsequently ignored the said tender, without any explanation, clearly suggests that respondent no. 1 failed to maintain absolute transparency in conducting sale of a public property and he failed to ensure that the decision making process was fair and proper. the very fact that respondent no. 1 decided to follow the procedure of tender-cum-bid process shows that the prices offered through the sealed tenders alone are not intended to be considered and if there were to be more than one offer, open auction by way of bids will be held. this method was intended to make sure that the public property is sold for the highest possible price. what perplexes us is that having received the tender of the appellant, albeit, before the tender notification was published, and, significantly, after the appellant's letter dated 5-11-2002 respondent no. 1 failed to conduct the bid. instead, respondent no. 1 ignored the appellant's tender and treated the tender of respondent no. 4 as the only tender received. on this premise, he has failed to hold open auction. when respondent no. 1 has supplied the tender form to the appellant and received the same without any demur, he ought to have considered the offer made by the appellant and conducted the auction between the appellant and respondent no. 4.14. while respondent no. 1 was under no obligation to supply tender form to the appellant even before the tender notification was published, having supplied the tender form and received the same along with the emd, we see no justification in respondent no. 1 to ignore the tender filed by the appellant. such an action not only constitutes arbitrariness but also reveals absolute lack of transparency.15. to our mind though the appellant's conduct in approaching respondent no. 1, obtaining an undated tender and filing the same even before a formal tender notification was issued, showed its undue anxiety to steal a march over others in buying the property, obviously at a less or throw away price; by ignoring the appellant's offer and treating the tender of respondent no. 4 as the only responsive tender, respondent no. 1 has caused enormous loss to public exchequer and damage to public interest. this view of ours' is further fortified by the fact that at the hearing the appellant expressed its willingness to buy the property at rs. 7,500/- per square meter in addition to compensating respondent no. 4 with reasonable interest for the deposit he has made to recompense for the loss that he would have sustained for holding up of his amount since the year 2003. we have no doubt in our mind that had respondent no. 1 held an auction between the appellant and respondent no. 4 on the basis of the tenders filed by them, the property would have fetched far higher price than at which the offer of respondent no. 4 was accepted. it requires to be noted that in the tender notification issued by respondent no. 1 'unsolicited offer' of the appellant was mentioned. interestingly, respondent no. 4 offered the sum of rs. 1,21,00,000/-, which worked out to rs. 3.56 ps., per square meter more than the offer made by the appellant. this fact clearly demonstrates that both the appellant and respondent no. 4 are very guarded in making their offers and respondent no. 1 fell prey to the commercial ingenuity displayed by both these parties. as a trustee of the public property, respondent no. 1 was expected to be more diligent in ensuring that the property fetches the best price in the market. the only way by which he should have done this was to have held auction between the appellant and respondent no. 4 by treating rs. 3,230/- per square meter offered by the appellant as the base price.16. in our view, the learned single judge committed an error in not properly construing the contents of letter dated 5-11-2002 submitted by the appellant. the learned single judge also failed to consider the crucial omission by respondent no. 1 to consider the tender filed by the appellant, particularly, in the absence of any plea forthcoming from respondent no. 1 that the tender filed by the appellant was not a valid tender in the eye of law.17. the scope of judicial review under article 226 of the constitution of india in the matter of award of contracts or sale of public property through tenders is limited to examining the decision making process as held by the supreme court in a catena of judgments. see: tata cellular v. union of india (1994) 6 scc 651 and air india limited v. cochin international airport ltd. : (2000) 2 scc 617 having undertaken the limited judicial review on the decision making process and for the reasons referred to above, we are of the firm view that respondent no. 1 failed to conform to the fair, proper and transparent procedure in conducting sale of the public property.18. in the present context, it would be apposite to refer to a recent judgment of the apex court in meerut development authority v. association of management studies : (2009) 6 scc 171 wherein the supreme court reiterated the well settled doctrine of trust by observing that disposal of the public property by the state or its instrumentalities partakes the character of a 'trust' and the methods to be adopted for disposal of public property must be fair and transparent providing an opportunity to all the interested persons to participate in the process. in this case, respondent no. 1 failed to follow this firmly established principle of law and allowed the property to be sold for a thoroughly inadequate price. therefore, such an action is liable to be invalidated in public interest.19. for the reasons above-mentioned, we set aside the order of the learned single judge, allow the writ petition and quash the proceedings impugned in the writ petition. writ appeal is accordingly allowed.20. before parting with this case, it is relevant to note that during the hearing the learned senior counsel for the appellant offered rs. 7,500/- per square meter and also expressed his client's willingness to participate in the further bid. the learned senior counsel for respondent no. 4, after getting instructions from his client, submitted that his client is not interested to buy the property at the price offered by the appellant. having regard to these facts, we direct that respondent no. 1 shall issue a fresh tender notification by giving wide publicity in the newspapers, fixing rs. 7,500/- as the base price and finalize the offers received by him. respondent no. 4 shall be free to participate in the auction. respondent no. 1 shall forthwith return to respondent no. 4 the amount received from it; and also to the appellant the sum of rs. 1,00,000/- received from it towards the emd.