Andhra HC (Pre-Telangana)
P.Srinivasa Rao, Achampet Village And ... vs The Executive Engineer, P.R.I. ... on 17 December, 2012
Author: Nooty Ramamohana Rao
Bench: Nooty Ramamohana Rao
THE HON'BLE SRI JUSTICE NOOTY RAMAMOHANA RAO WRIT PETITION NO.37789 OF 2012 17-12-2012 P.Srinivasa Rao, Achampet Village and Mandal, Guntur District and one another The Executive Engineer, P.R.I. Division, Vijayawada, Krishna District and one another Counsel for the petitioner: M/s. P.Prabhakara Rao Counsel for the respondents: GP for Panchayat Raj <Gist: >Head Note: ?Citations: ORDER:
This writ petition is instituted by two petitioners, essentially challenging the validity of the action of the respondents in not returning the earnest money deposit paid by them at the time of participating at the public auctions for grant of license to operate the ferry across Krishna River for a period of one year during 2012-13.
The case of the petitioners is that the first respondent Executive Engineer floated a tender notice inviting bids for grant of a license for operating a ferry across River Krishna between Ramanapeta village situate at Chandarlapadu Mandal of Krishna district to Putlagudem on the other side of the banks of river Krishna, lying in Guntur District, for a period of one year namely 2012-2013. The open auctions were conducted on 07.06.2012 at 12.00 noon. It is one of the essential conditions for participation at this public auctions that each offerer/bidder must deposit a sum of Rs.1,93,400/- by way of a demand draft drawn in favour of Chief Executive Officer, Zilla Parishad Krishna district at Machilipatnam. Accordingly, both the petitioners have paid the earnest money deposit of Rs.1,93,400/- respectively. When the bids were opened, it is realized that Sri A. Katamraju who quoted Rs.30,06,000/- emerged as the highest bidder followed by N. Vigneswara Rao, who quoted Rs.30,05,000/-. The petitioners herein quoted Rs.30.00 lakhs and Rs.28,55,000/- respectively. Thus, they have emerged as the best third and fourth offerers.
As is expected, the highest offerer committed a default in complying with the rest of the conditions pursuant to emerging as the highest bidder. Since he has committed a default and has not taken the ferry rights, the Executive Engineer has declined to refund the Earnest Money Deposit amount deposited by the second, third and fourth highest bidders. In those set of circumstances, the second highest bidder namely Sri N. Vigneshwara Rao, approached this Court and filed W.P.No.23025 of 2012. That writ petition came to be decided by this Court by its judgment dated 29.10.2012 holding that, not refunding the Earnest Money Deposit paid by the second highest bidder as improper and consequently directed the Earnest Money Deposit by the second highest bidder to be refunded to the petitioner in that case immediately. Hence the present petitioners have also come up with a similar prayer in this writ petition.
I have perused the terms and conditions of the tenders which have been placed at page No.16 of the paper book. As per condition No.8 of the auction notification, the best offer fetched beyond the upset amount, would be accepted and the other bidders would be refunded their Earnest Money Deposit. In case the highest bidder committed any default, the Earnest Money Deposit made by that bidder would be confiscated to the State fund. Condition No.8 also reserved the right for canceling the auctions afresh or for conducting the auctions without assigning any reasons. Therefore, it emerges that, whenever the auctions are conducted, but could not be finalized, the respondents have the right only to forfeit and confiscate the Earnest Money Deposit deposited by the highest bidder. The Earnest Money Deposit made by the other bidders is not liable to be confiscated or forfeited. Hence this writ petition is allowed directing the respondents to immediately refund the Earnest Money Deposit made by both the petitioners respectively for participating at the public auction for grant of license for operating the ferry, pursuant to the auction notice dated 31.05.2012. Let these amounts be refunded before 15.01.2013.
Before I part with this case, it is appropriate to notice that the absence of a condition reserving the right in the hands of the respondents for accepting the second highest bid or the third highest bid or the fourth highest bid, whenever the respective highest bidder commits default is causing enormous administrative and other operational difficulties in finalizing public auctions. The recent experiences reveal that, purposefully some miscreants take part in public auctions and make fanciful and unrealistic offers knowing full well that thereby they are only creating an artificial ring about the entire auction process which is far from realistic. The offereror is not willing to live upto his commitment as the resultant loss for him is either too insignificant or less stringent. For, the default to live up to the rest of the conditions by the highest bidder can at best result in forfeiture of the Earnest Money Deposit amount only. But however, the vested interest in committing the default is to ensure that the licenses/rights are not immediately granted at such public auctions. In a given case, the defaulter would be deriving some consequential benefits for the failure to finalize the public auctions, either directly or indirectly. Thus, the advantage which the defaulters gain from the delay and consumption of precious time required for finalizing the next round of public auctions would be far outweighing the small disadvantage of allowing the Earnest Money Deposit amount to be forfeited. To remedy this kind of a malady, the State would do well to ensure that the following specific conditions are incorporated in auctions/tender schedules: 1) The highest bidder and the other bidders in the descending order, whoever has not come forward to accept the license or the right, put to public auction, is/are liable to be treated as a defaulter/defaulters and consequently, the Earnest Money Deposit amount made by all such bidders is liable to be forfeited to the State. 2) Further, the standard, cost and risk clause, independent of forfeiture of Earnest Money Deposit is also liable to be incorporated, making each of the defaulting bidders in the descending order, as liable to make good the differential amount between his bid amount and the next highest bid amount to the State. In that process, all the bidders become equally liable and responsible for allowing the bidding process to be completed and accomplished in time. The failure by any one or all of them would expose them not only to the cost and risk clause liability to make good the differential amount to the State, but would result in forfeiture/confiscation of the Earnest Money Deposit amount deposited by them. For easy grasp, let us say, at a public auction four offers are received and they are for Rs.6,00,000/-, Rs.4,50,000/-, Rs.3,25,000/- and Rs.2,25,000/-. If for any reason, the first offeror backs out, he can be promptly declared as a defaulter and the second offeror be called upon to perform his part of the obligations by depositing Rs.4,50,000/-. If he fails to honour his commitment, then the 3rd offeror be called upon to perform his obligations and if he also fails to live upto his promise, the 4th offeror be called upon by accepting his bid. Let us assume that he accepts and performs his part by depositing Rs.2,25,000/-. The State, can recover, using the risk and cost clause, a sum of Rs.1,50,000/- from the first offeror and Rs.1,25,000/- from the second offeror and a sum of Rs.1,00,000/- from the 3rd offeror, respectively, apart from forfeiting the Earnest Money Deposit amount of all three of them. In case, the 4th offeror also backs out the loss for him would be the maximum i.e. Rs.2,25,000 + Earnest Money Deposit. This would possibly deter the speculative and non-serious bidders committing the preconceived defaults.
(3) A further clause that they shall be debarred, either individually or in association with others, from participating at any such public auctions for a continuous period of two years thereafter, would also produce the desired result of finalizing the rights and licenses quickly and in time, thus saving the most precious time, attention and energy of the State and its machinery.
I therefore, direct the Collector and District Magistrate, Krishna at Machilipatnam to forthwith take up this issue with the Chief Secretary to the Government of Andhra Pradesh, so that, a s a policy such conditions would be made part of every tendering process undertaken by the State in all it's Departments or it's instrumentalities.
Writ petition is allowed. No costs.
________________________________ NOOTY RAMAMOHANA RAO, J 17th December, 2012