Calcutta High Court
Swastika Enterprises And Anr. vs The Board Of Trustees For The Port Of ... on 13 November, 1987
Equivalent citations: AIR1988CAL204, AIR 1988 CALCUTTA 204
JUDGMENT Dipak Kumar Sen, Acting C.J. 1. The material facts and proceedings leading up to this appeal are, inter alia, that the authorities constituting the Calcutta Port Trust in exercise of their powers under Section 64 of the Major Port Trust Act, 1963 proceeded to distrain and sell a sea going vessel named "M.V. VAL1PERO" belonging to the respondent No. 4 herein to recover rates and charges claimed to he due to the Calcutta Port on account the said vessel- No rules have been framed laying down the procedure of sales as are effected under Section 64 of the said Act of 1963. 2. On the 19th Feb. 1987, advertisements were published in the name of the Chairman, Board of Trustees for the Port of Calcutta, the respondent No. 2 herein inviting tenders from prospective purchasers. It was stated that the tenderers would have to deposit a sum of Rs. 2 lakhs with the Treasurer in cash or bank draft by way of earnest, that the tenders would be received by the Director, Marine Department, Calcutta Port Trust, respondent No. 3herein up to the 18th March 1987 and that the tenders would be opened at 2.30 p.m. on the 18th March 1987 in presence of the tenderers or their authorised representatives who would be entitled to be present. It was further stated that the Calcutta Port Trust reserved the right to reject any tender or tenders without assigning any reason. 3. Pursuant to the said advertisements, tenders were submitted by seven parties including M/s. Swastika Enterprises, the appellant No. 1 and M/s. Amar Streel Industries, the respondent No. 5 herein. 4. At that stage the respondent No. 4, the owner of the said vessel moved this Court by an application under Article 226 of the Constitution seeking to impugn the sale of the said vessel by the Calcutta Port Trust Authorities where an interim order was passed giving liberty to the Calcutta Port authorities to proceed with the tenders but not to finalise the same or to hand over the vessel to the successful bidder. The said writ petition was ultimately dismissed and the order of dismissal was affirmed in appeal by a Division Bench of this Court on the 18th May 1987. 5. The said vessel had been valued by Messrs. Norman Stewarts & Co., Surveyors appointed by the Calcutta Port Trust. The seven tenders which had been submitted pursuant to the said advertisement were opened by the Tender Committee of the Calcutta Port Trust consisting to the Deputy Chairman, Calcutta Port Trust, Harbour Master, Calcutta Port Trust and the Deputy Senior Accounts Officer of the Calcutta Port Trust. It was found that all the tenders fell short of the valuation made by the Surveyor which had been decided to be the reserve price. The tender of the appellant No. 1 was found to be the highest. 6. After the final disposal of the proceedings initiated by the owners of the said vessel by the Division Bench as aforesaid, the Director of Marine Department, Calcutta Port Trust, the respondent No. 3 herein invited in writing the seven tenderers to a meeting of the Tender Committee to be held at 3 p.m. on the 27th May 1987 for negotiations. 7. On the 27th May 1987 the said seven tenderers including the appellant No. 1 and the respondent No. 5 attended the meeting of the Tender Committee and were informed that their offers all fell below the reserve price. They were asked whether they were willing to revise their offers. Six out of the seven tenderers submitted their revised offers in writing in sealed envelopes to the Tender Committee. All the six revised tenders were opened and it was found that the revised offer of the appellant No. 1 was the highest and the revised offer of the respondent No. 5 was the next highest. 8. The appellant No. 1 and the respondent No. 5 were thereafter called upon and submitted further revised offers in sealed envelopes. It was found that the further revised offer of the respondent No. 5 was the highest and the offer of the appellant No. 1 was the next highest. 9. On the 28th May 1987 the appellant No. 1 and Sanjiv Kumar Jain, the appellant No. 2 a partner of the appellant No. 1 moved this Court under Article 226 of the Constitution, inter alia, for appropriate writs restraining the Port authorities from taking any further steps for sale of the said vessel and conducting the proposed sale in any manner except by public auction. A Rule nisi was issued and an interim order was passed restraining the respondents Nos. 1, 2 and 3 here in, the Calcutta Port Trust and the authorities thereunder from taking any steps for the sale of the said vessel. 10. It was, alleged in the petition, inter alia, that the Calcutta Port authorities had acted arbitrarily and in violation of Article 14 of the Constitution in conducting the sale of the said vessel in the manner as it was done, It was alleged further that at the third stage when the final bids were received from the appellant No. 1 and the respondent No. 5, the .appellant No. 1 was called to submit its final revised offer first and thereafter the respondent No. 5 was given the opportunity to submit its final revised offer. It was alleged that the appellants were apprehensive that the respondent No. 5 had been informed of the final offer of the appellant No. 1 submitted earlier and thereby obtained an unfair advantage which enabled the respondent No. 5 to give a higher offer. The appellant No. 1 was prepared to increase his offer even further. It was alleged that the acts and conduct of the Port authorities were wrongful and illegal. 11. The said application was opposed by the Calcutta Port authorities as also the respondent No. 5. 12. Affidavits were filed in opposition to the writ petition on behalf of the respondents Nos. 1, 2 and 3, the Calcutta Port authorities as also the respondent No. 5. 13. The case of the Calcutta Port authorities in their pleading was, inter alia, that on the 27th May, 1987 when all the tenders were rejected on the grbund that the same were below the reserve price, it was agreed amongst the tenderers that they would submit revised written offers in sealed envelopes out of which only the two highest offerers would be given another chance to submit their further offers if they so desired. The Tender Committee accepted the proposal and revised offers were received from the six tenderers at the second stage and two further offers were received from the appellant and the respondent No. 5 at the third stage. 14. It was alleged that at the third stage the respondent No. 5 was called first and made its further revised offer. Subsequently the appellant No. 1 was called on to submits its revised offer. 15. It was alleged that all the tenderers present including the appellant No. 1 and the respondent No. 5 agreed to the above procedure and no objection or protest was raised at any stage. It was alleged further that both the final offers of the appellant No. 1 and the respondent No. 5 were read out in their presence and the appellant No. 1 thereafter did not make any higher offer as agreed. It was denied that the final offer of the appellant No. 1 was disclosed to the respondent No. 5 or that any unfair advantage was given to the respondent No. 5. It was admitted that no sale had been completed. 16. At the hearing of the writ petition some of the other unsuccessful tenderers intervened and supported the appellants. Offers, higher than the final revised offer of the respondent No. 5, were made in Court. 17. The said writ petition was disposed of by the first Court by a judgment and order dated the 27th July 1987. It has been held by the first Court that though the procedure adopted by the Calcutta Port authorities was somewhat peculiar and arbitrary but the same did not cause any prejudice to the appellants. The learned Judge held that the appellants were called last to submit their final revised offer and that it was not established nor could it be inferred that the Tender Committee had disclosed the offer of the appellant No. 1 to the respondent No. 5. The learned Judge held further that no case of mala fides had been made out against the members of the Tender Committee nor was it established that the power under Section 64 of the Major Port Trust Act, 1963 had been exercised by the Calcutta Port Authorities dishonestly or in bad faith or contrary to public interest. The learned Judge noted that the appellant No. 1 was all along the highest bidder except at the last stage when the respondent No. 5 became the highest bidder but the same could not warrant interference with the decision of the Tender Committee by the court. The writ petition was dismissed. 18. The present appeal is from the said judgment and order dated the 27th July 1987. At the instance of the parties the appeal was treated in the day's list and was heard along with the application. The appearing respondents Nos. 1, 2 and 3 and 5 waived service of the notice of appeal. The respondent No, 4 did not participate in the proceedings either before the first court or before us. Service of notice of appeal on the respondent No. 4 was directed to be dispensed with. It was recorded that the appearing respondents did not admit the allegations in the petition filed in the appeal as no affidavit was filed in opposition thereto. The appeal and the application were heard together. By consent filing of paper book was dispensed with and the undertaking given in that behalf was directed to stand discharged. 19. At the hearing, some of the unsuccessful tenderers intervened to support the appellants. 20. Learned Advocates for the appellants and some of the intervenes submitted that the Calcutta Port authorities had proceeded wrongfully and illegally in conducting the sale of the said vessel in the manner as it was done. It had been decided by the Calcutta Port authorities to sell the said vessel to the highest tenderer. The appellant No. 1 was the highest tenderer initially and even at the second stage. The Calcutta Port authorities were not entitled to ignore and brush aside the earlier tenders and call upon only the appellant No. 1 and the respondent No. 5 to make further revised offers. At the third stage the other unsuccessful tenderers should also have been given the opportunity to make further revised offers. In any event, the appellant No. 1 should have been given a further opportunity to match final revised offer of the respondent No. 5. 21. It was submitted that the said vessel could have been sold at a much higher price as was evident from the offers made in court by the parties and the interveners the highest of which was over Rs. 1 crore. The final offer of the respondent No. 5 was only Rs. 92,50,000/-. It would be in public interest that the said vessel should be sold at the best possible price as apart from the Calcutta Port authorities other persons had right, title and interest in the balance sale proceeds which would be left after meeting the dues and charges of the Calcutta Port authorities and the said persons would be seriously prejudiced if the said vessel was sold to the respondent No. 5. at its final revised offer. 22. In support of the above contentions, learned Advocate for one of the inlerveners who supported the appellant, cited Shri Harminder Singh Arora v. Union of India . In this case tenders were invited on behalf of a Military firm for supply of fresh buffallo and cow milk. Under the terms of the tender notice the contract was to be awarded to the lowest bidder. The tender of the appellant before the Supreme Court was the lowest and he was otherwise eligible to be awarded the contract as he was in the list of the contractors. Another tender submitted by a Government Milk Scheme for pasteurised milk and not fresh milk at a higher rate was accepted by the Officer-in-charge of the Military farm. On these facts it was held by the Supreme Court that the acceptance of the tender of the Government Milk Scheme was illegal and had to be quashed. In entering into a contract the Government authority could not act arbitrarily and the tenders were required to be considered and adjudged on their own intrinsic merits in accordance with the terms and conditions of the tenders. 23. Learned Advocate for the Calcutta Port authorities submitted at the hearing that the Calcutta Port authorities were not interested in one way or the other as to the price which the vessel might fetch as long as the Port charges and dues could be met out of the sale proceeds. He submitted that the Tender Committee had been constituted with senior officers and frivolous allegations of mala fide had been made against them which were not warranted in the facts. He submitted further that in the instant case the Tender Committee proceeded bona fide and with the object of securing the best possible price. Equal opportunity was given to all the tenderers to make their offers. It was not established that the appellant No. 1 was called upon to submit his final revised offer before the respondent No. 5 or that the final revised offer of the appellant No. I had been disclosed to the respondent No. 5 to enable the latter to make a higher bid and secure the contract. 24. He submitted further that all the propective tenderers who appeared before the tender committee on the 27th May 1987 agreed to accept the procedure to be followed and there was no contemporaneous objection or protest from any of the' tenderers. He submitted that in the facts this Court was not called upon to interfere with the proceedings for sale of the said'vessel. 25. Learned Advocate for the respondent No. 5 submitted that in the instant case the Calcutta Port authorities had proceeded to sell the said vessel with the limited object of realising the outstanding dues and charges of the Port. This was not a case where Government property was being sold and the principles which have been laid down by Courts to be followed where the Government was proceeding to deal with its own property were not strictly applicable to the facts. 26. Learned Advocate submitted further that in the instant case the Tender Committee had proceeded bona fide and opportunity had been given to all the tenderers to submit their bids. It was not a fact that the respondent No. 5 was intimated of the final revised offer of the appellant No. 1 or that the appellant No. 1 had submitted his final revised offer before the respondent No. 5. The appellant No. 1 had the last opportunity to submit its final revised tender and at this stage the appellant No. 1 failed to out bid the respondent No. 5. The steps taken by the Tender Committee could not be held to be arbitrary. He submitted further that law stood settled that when tenders were invited it was implied that there would be negotiations on the basis of the offers made through tender. It was not a public auction where the highest public bid should be accepted. In the instant case instead of open negotiations successive offers had been invited from the tenderers and, ultimately, the respondent No. 5 emerged as the highest bidder. He submitted that the -application was not maintainable. In support of his contentions Learned Advocate for the respondent No. 5 relied on and cited the following decisions : -- (a) Purxotoma Ramanata Quenim v. Mohanlal Cauji . In this case the concerned authority for the Union Territories of Goa, Daman and Diu invited tenders on behalf of the President of India for a lease, on the basis that the highest tender shall finally be accepted but the Government reserved the right to select any tender or reject any tender without assigning any reason. Three tenders were submitted pursuant to the said invitation. The respondent No. 1 before the Supreme Court was the highest tenderer and the appellant was the next highest. The authorities rejected the tender of the respondent No. 1 and negotiated with the appellant who raised his offer over that of the respondent No. 1. The revised offer of the appellant was accepted. On these facts it was held by the Supreme Court that the Government was not bound to accept the highest tender and that the Government did not act arbitrarily in negotiating subsequently with the next highest tenderer and accepting the higher offer. The conduct of the Government was held not to be arbitrary. The Supreme Court noted that there was a difference between an auction and an invitation to tender and approved the law laid down in Halsbury's Laws of England, third edition, Vol. 11, page 69 that an invitation to tender was a mere attempt to ascertain whether a suitable offer can be obtained and the same was an offer to negotiate. (b) M/s. Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir, . This decision was cited for the following observations : -- "It is now well settled as a result of the decision of this Court in Ramana D. Shetty V. Internationa] Airport Authority of India, (supra) that the Government is not free, like an ordinary individual, in selecting the recipients for its largesse and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion. The law is now well established that the Government need not deal with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure. Where the Government in dealing with the public, whether by way of giving jobs or entering into contracts or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with some standard or norm which is not arbitrary, irrational or irrelevant. The Government action must not be arbitrary or capricious, but must be based on some principle which meets the test of reason and relevance." (c) Life Insurance Corporation of India v. Escorts Ltd., . This decision of the Supreme Court was cited for the following propositions laid down. 'The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the share of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reason when it seeks to change the management, by a resolution of the Company, like any other shareholder." 27. Learned Advocate for the respondent No. 5 also cited Geep Industrial Syndicate Ltd. v. Central Government, and Chaitanya Kumar v. State of Karnataka, . The facts involved and the principles laid down in the said decisions are not strictly relevant to the points in controversy, in the instant case and the said decisions need not be considered further. 28. On 'consideration of the tacts and circumstances of the instant case and the principles of law laid down in the decisions noted hereinabove it appears -to us that the actions of the Tender Committee of the Calcutta Port authorities in the instant case uptil now do not call for interference. We are unable to accept the case of the appellants that the final revised offer of the appellant No. 1 was disclosed to the respondent No. 5 before the latter made his final revised offer. This case is not borne out by the records of the Calcutta Port produced before us. We also note that at the second stage all tenderers were given the opportunity to make their respective revised bids and six out of seven tenderers availed of the opportunity. At the third stage only the two highest tenderers were given a further opportunity to bid. The other tenderers, it appears, did not raise any protest against their elimination at the second stage. There is no contemporaneous correspondence from the other tenderers' recording their objections to the procedure followed. We also note that none of the other tenderers apart from the appellant No. 1 came to court but only after proceedings were initiated by the appellant No. 1 they sought to intervene. 29. So far as the appellant No. 1 is concerned in our view he was given equal opportunity with respondent No. 5 to make his offers up to the final stage where he lost. 30. We note that the Calcutta Port Authorities have not framed any rules as to how sales under Section 64 of the Major Port Trust Act, 1963 should be conducted. Therefore, it cannot be said that any rule has been violated by the Tender Committee in conducting the impugned sale. We are only concerned with the question whether the steps taken were unreasonable, unfair or arbitrary. We hold that the steps taken by the Tender Committee in conducting the sale were not unfair as opportunity was given to all the Tenderers up to to second stage. 31. It is next to be considered whether the procedure followed in conducting the sale of the said vessel was unreasonable or arbitrary. In the absence of any Rules that Port authorities were of necessity required tor lay down some procedure. The procedure which was followed may be stated to be ad hoc or improvised but the same cannot be said to be tainted with that degree of arbitrariness or unreasonableness which calls for interference by the court. The procedure laid down gave a fair opportunity to all the tenderers and also ensured that a reasonably high price would be secured for the said vessel. The procedure satisfies both the tests and we are not inclined to interfere with the same. 32. We are unable to accept the contention of the respondent no. 5 that in holding a sale under Section 64 of the Major Port Trust Act, 1963 the Port authorities were not acting as a Government instrumentality. The powers under which the sale was sought to be effected were statutory powers and the Calcutta Port Authority, which is indisputably a Government authority, was exercising statutory powers. Therefore, the principles laid down by the Supreme Court in the case of International Airport Authority and the other decisions noted hereinabove. must be said to be applicable. 33. We also note that before the first Court and also before us substantial higher offers have been made in Court. We note (hat uptil now the Calcutta Port Authorities have not accepted the offer of the respondent No. 5. It will be open now to the Calcutta Port Authorities to proceed with and conclude the said sale by accepting the offer of the respondent No. 5. It is also open to the Calcutta Port Authorities not to accept any of the offers made uptil now and invite further offers in view of the higher bids which have been made in fourt We also note that the sale of the said vessel requies sanation of the Central Government. We do met intend to dictate to the Calcutta Port authorities as to what they should do. It has been submitted on behalf of the respondent no. 5 that if the Calcutta Porl authorities accept the offer of the respondent No 5 in spite of subsequent higher offers, the Calcutta Port authorities may render themselves liable to the other persons who are also interested in the sale proceeds for loss and damages for having sold the said vessel at a lower price when a hight price had been offered. The higher offers made in Court do not appear to be frivolous inasmuch as to show bona fides at least one of the intervenors had deposited a substantial earnest. However, we leave the matter to be dealt with by the Calcutta Port authorities in the manner as they choose or as they may be advised. 34. For the reasons as above, this appeal cannot succeed. The same is dismissed. 35. There will be no order as to costs. 36. Parties other than the respondent No. 5 who have deposited any amount by way of earnest in terms of an earlier order of this Court will be at liberty to apply for refund of the same. 37. All parties to act on a signed copy of the minutes of the operative part of this judgment. Shyamal Kumar Sen, J.
38. I agree.