Gujarat High Court
Punambhai Madhabhai Parmar And Anr. vs Bhupat Devsinhbhai Barot And Ors. on 14 October, 1993
Equivalent citations: (1994)1GLR746
JUDGMENT R.K. Abichandani, J.
1. The petitioners who are elected members of the Respondent No. 4-Tarapur Nagar Panchayat, have filed this petition challenging the Resolution No. 365 passed by the respondent No. 4-Panchayat on 25th June, 1993 for giving contract for collection of octroi, to the respondent No. 3.
2. It appears that a previous contract for collection of octroi which was given by the Panchayat under Section 180 of the Gujarat Panchayats Act, 1961 (hereinafter referred to as 'the Act'), had expired ,on 26th October, 1992, but it came to be extended by two months with the permission of the District Development Officer. It appears that there was correspondence between the Panchayat and the District Development Officer in connection with the fixing of upset price for the octroi contract to be given for the ensuing period. By letter dated 10th October, 1992 the respondent No. 1 wrote to the District Development Officer seeking permission for the Nagar Panchayat to give private contract for collection of octroi for a period of 2 years and to fix the upset price for the purpose. The upset price was to be fixed keeping in view the revised rates of octroi and in light of the Government circular dated 27th September, 1990. Again on 20th November, 1992 the District Development Officer was moved to fix the upset price on the basis of the revised rates. The District Development Officer fixed the upset price at Rs. 20,00,000 by his letter dated 9th December, 1990 addressed to the Panchayat and directed that further proceedings may be undertaken on the terms indicated in the order for giving the private contract by public auction for the period from 27th December, 1992 upto 26th December, 1993. It was specified that the deposit was to be taken as per the Rules. It was also specified that after the tenders were opened, there could be negotiations with the tenderers to get the highest amount. Pursuant to the order of the District Development Officer, the Panchayat issued public advertisements in two Newspapers having wide circulation. These notices were published on 13th December, 1992. It was specified in these notices that a tender deposit of Rs. 2,25,000/ - was to be made by the tenderer and if such amount was not deposited, the offer would not be accepted. It appears that the Talati-cum-Mantri of the respondent-Panchayat wrote letters dated 16th December, 1992 to the Taluka Development Officer and the District Development Officer requesting them to remain present in the office of the Panchayat on 21st December, 1992 in connection with the opening of the tenders. It appears that by letter dated 21st December, 1992, these Officers were informed by the Pinhead that not a single tender was received pursuant to the advertisement until 21-12-1992 being the last date for receiving the tenders, as indicated in the advertisement. Thereafter, a letter dated 22-12-1992 was written by the Panchayat to the District Development Officer, stating that the upset price of Rs. 20,00,000/-which was fixed by him, was unrealistic and it should be reduced. It was indicated that it was difficult for the Panchayat to undertake the collection of octroi since it was not having adequate staff. The District Development Officer was requested to fix the upset price around Rupees 8 to 9 lacs. It appears that immediately thereafter, by letter dated 24th December, 1992, which was brought to light by the respondent No. 2, District Development Officer that he had informed the Panchayat that there was no reasonable ground for changing the upset price and since the extended period of the contract was to expire on 26m December, 1992, the Panchayat should take over the work of collection of octroi from the previous contractor. The District Development Officer thereafter, again wrote letter dated 29di December, 1992 to the Panchayat, enquiring as to whether the directions issued under his letter dated 24di December, 1992 were carried out. It appears that the Panchayat had taken over the work of collection of octroi from the contractor as directed by the District Development Officer from the date when the extended period of contract had expired. The Panchayat thereafter, wrote letter dated 23rd March, 1993 to the Deputy District Development Officer, stating that having regard to the recovery in the previous two months, it appeared that the amount of octroi that may be collected by the Panchayat would not exceed Rs. 14,00,000/- in the year. It was indicated that some contractors had expressed their readiness to get the contract. The Panchayat, therefore, requested the District Development Officer to give his permission for readvertising the matter with a view to invite the contractors. On receipt of such permission the Panchayat was to issue a fresh advertisement. The District Development Officer thereupon enquired from the Panchayat by letter dated 12th May, 1993 as to the particulars of the contractors who had shown readiness to take the contract and the amount offered by them. Thereafter, on 27-5-1993 the Panchayat again wrote a letter to the District Development Officer showing anxiety that there was no sufficient recovery of octroi and requesting the District Development Officer to fix the upset price again and permit the Panchayat to give the contract for collection of octroi. It appears that by letter dated 22-6-1993 the Panchayat gave particulars of five persons who were prepared to accept the contract for the amounts mentioned against their names. It appears that barely 3 days after its letter dated 22-6-1993 giving details of these parsons to the District Development Officer, the Panchayat passed the impugned resolution on 25-6-1993 in which elaborately recording its decision for giving the contract for collection of octroi, it resolved to give the contract to V.K. Desai - the respondent No. 3 herein for a sum of Rs. 15,85,333.33 paise. The respondent No. 3 was handed over the contract from the mid-night of 26th May, 1993.
3. It has been contended on behalf of the petitioners that the respondent-Panchayat could not have so suddenly and without inviting any offers, handed over the contract for collection of octroi to the respondent No. 3. It was submitted that the Panchayat ought to have invited tenders or held public auction and could not have doled out a contract for less than the upset price which was fixed by the District Development Officer. It was contended that by the manner in which the contract was given to the respondent No. 3 by ignoring some persons who were desirous of having the contract and by excluding other who would have responded if tender were invited, the Panchayat has acted arbitrarily and in violation of the provisions of Article 14 of the Constitution and other statutory provisions as per which it could not go beyond the mandate of its superior authority.
4. The learned Counsel appearing for the respondent on the other hand contended that it was the function of the Panchayat to collect octroi either by itself or by giving a private contract for collection of octroi under the provision of Section 180 of the Act. Therefore, all that the Panchayat did by making the resolution was to exercise its powers under Section 180 of the Act. The District Development Officer had fixed an unrealistic upset price and was not responding to the request of the Panchayat to fix it afresh and, therefore, the Panchayat was left with no option but to grab at the highest amount that was offered by the respondent No. 3. Even if the Panchayat has, in the above process, not adhered to the procedural rules, its action cannot be termed as mala fide. It was contended that the Panchayat had acted in the best interest of the Panchayat in acting swiftly rather than waiting further for the green signal from the District Development Officer. It was also contended that the Panchayat could not have afforded the continuance of daily wagers which it had employed for collection of octroi and if these persons were allowed to work, they would have claimed service rights against the Panchayat on completion of certain number of days of service in a year.
5. Undisputedly, the Panchayat had moved the District Development Officer for fixing the upset price, which came to be fixed at Rs. 20,00,000 by the District Development Officer, who directed on 9th December, 1992 that the Panchayat may proceed to give the private contract for collection of octroi by public auction on the conditions mentioned in that order. It was stipulated that deposit will be taken as per the Rules and the contract was to be given not straight away to the person offering the highest amount, but after making them bid inter se, so as to secure the highest amount by negotiations. The order which was issued by the District Development Officer on 9th December, 1992 was not challenged by the Panchayat before any higher forum. When the Panchayat failed to secure any tender pursuant to the advertisement published in two Newspapers, it made request to the District Development Officer for revising the upset price to Rs. 8 to 9 lacs. The District Development Officer, however, by his communication dated 24-12-1992 rejected that request informing the Panchayat that there was no valid ground for revising the upset price of Rs. 20,00,000/- which was fixed by him. He directed the Panchayat to take over the collection of the octroi from the contractor whose extended term was to expire on 26th December, 1992. When the Panchayat again wrote to him on 23rd March, 1993 and 27th May, 1993 for fixing the upset price and permitting the Panchayat to issue public advertisement again, the course which the Panchayat intended to adopt was obvious. In the earlier communication dated 26th December, 1992, the Panchayat has suggested revised upset price of Rs. 8 to 9 lacs. However, in its communication dated 23rd March, 1993 the Panchayat suggested a revised upset price of Rs. 14,00,000/-. The Panchayat had indicated that there were people who were desirous of keeping the contract. It is in the context of above statements made by the Panchayat in its communication dated 23rd March, 1993 that the District Development Officer by his letter dated 12th May, 1993 sought for information within 2 days of persons who were inclinded to take the contract, with the amounts that they offered. This letter dated 12th May, 1993 cannot be read as a permission to the Panchayat to accept the contract of any of the persons who had expressed a desire, as was sought to be contended by the learned Counsel for the respondents. Even after this letter dated 12th May, 1993 the Panchayat wrote to the District Development Officer on 27th May, 1993 to fix the revised upset price and to permit them to collect the octroi by giving a private contract while pointing out the difficulties that the Panchayat was undergoing in the process of collection of octroi by itself. The District Development Officer obviously had called for the information of persons who according to the Panchayat were desirous of taking the contract, so that he could consider the matter in the context of the request of the Panchayat to fix the upset price again. It would appear that in March, 1993 the Panchayat never contemplated handing over the contract without getting upset price refixed and without issuing an advertisement inviting tenders. This is clearly borne out from the communication addressed by the Panchayat on 23rd March, 1993 to the District Development Officer. The Panchayat again reminded him to permit it to adopt the said course and to fix revised upset price, by its letter dated 27th May, 1993. The action of the Panchayat in suddenly handing over the contract to the respondent No. 3 has to be viewed in this background.
6. From the material on record referred to by both the sides, it appears that the Panchayat received certain communications from individual contractors much after the last date for submitting tenders was over. On 6-2-1993 one Arvindbhai Bhagubhai & Co. seems to have written to the respondent No. 1 (Annexure 10) that they had come to know that the Panchayat intended to enter into a private contract for collection of octroi and that this company was interested in such contract and therefore, they may be called for negotiations. On 20th February, 1993, one Chandrakant B. Shah also sent a letter (Annexure 11) to the respondent No. 1 showing readiness that he was prepared to take the contract for Rs. 20,21,000/-. He wrote that if a fresh public advertisement was issued for giving the contract by public auction, he would participate as a person interested and would be ready even to offer a higher amount. A copy of this letter was endorsed to the District Development Officer. On 17th March, 1993 one Dilipbhai also wrote to the respondent No. 1 that he is interested in taking the contract and he may be called for negotiations. Thereafter, on 11-5-1993 Maganbhai Bharwad wrote to respondent No. 1 that as and when the octroi contract may be advertised, he was interested in participating at the public auction. It appears that thereafter, respondent No. 1 wrote letters dated 27th May, 1993 to Chandrakant B. Shah calling upon him to pay the deposit of Rs. 2,25,000/- in connection with his offer for accepting the contract. It was indicated to him that if he did not pay the deposit within 3 days by a demand draft in favour of the Panchayat or in cash, it would be taken as if he has no interest in the contract. Similarly, letters were written by the respondent No. 1 to Arvindbhai Bhagubhai & Co., Dilipbhai L. and Maganbhai Bharwad on 5-6-1993 (Annexures 18 collectively), in which these persons were requested to deposit a sum of Rs. 2,25,000/- as was referred to in the public advertisement issued on 13-2-1992. It appears that thereafter, Chandrakant B. Shah by his communication dated 11th June, 1993 informed that he was not interested in the contract at the price which was mentioned by him. Then it appears that one Vinodkumar Gohil who was under the impression that the Panchayat had called for offers on 7-6-1993 quoted a sum of Rs. 15,55,555.55 for the contract as stated in his letter dated 11-6-1993 (Annexure 20) addressed to the respondent No. 1 and he sent a cheque for Rs, 2,25,000/- by way of deposit and also a receipt showing payment of Rs. 5,000/-. A similar offer was sent by Kanabhai Gohil to respondent No. 1 (Annexure 21), who also sent a cheque for the tender deposit amount of Rs. 2,25,000/- on 11-6-1993. Again on 11-6-1993 one Meladi Octroi Company also wrote to the respondent No. 1 (Annexure 22) that they had deposited a sum of Rs. 2,25,000/- with the Panchayat and that their offer for the contract was at Rs. 15,55,555.60. On 14-6-1993 Dilipbhai L. gave an offer of Rs. 15,60,000/- for the contract (Annexure 23). Thereafter, on 15-6-1993 the respondent No. 3 wrote a letter (Annexure 24) to respondent No. 1 in which it was stated that he had not filled in tender form in response to the public advertisement which was earlier given because the upset price fixed was high. It was also stated that as per his information no tender was received by the Panchayat pursuant to that advertisement and the Panchayat was itself collecting the octroi. It was stated that if Panchayat intended to give a private contract for collection of octroi, his final offer was Rs. 15,85,333.33 and that by way of a token amount, he had deposited Rs. 10,000/- on 15-6-1993 with the Panchayat. It was stated that if his offer was accepted, he undertakes to pay the tender deposit of Rs. 2,25,000/-. There was no satisfactory explanation forthcoming on behalf of the respondent when it was pointed out to them that the respondent No. 3 had not complied with the condition of depositing a sum of Rs. 2,25,000/- which was required to be deposited by those who were interested in the contract as is evident from the communications addressed by the respondent No. 1 to some parties requiring such payment to be made. It would not be open for a Public Body to adopt different yardsticks for different parties while inviting offers by requiring some to pay the tender deposit and others to compete without payment of such deposits. On an indication that a deposit is required to be paid for considering the offer, many parties who would otherwise be interested but are not able to raise the deposit amount immediately, would be deterred from making their offers. The respondent No. 1 in his communications dated 5th June, 1993 addressed on behalf of the Panchayat had clearly mentioned the requirement of payment of tender deposit of Rs. 2,25,000/- with reference to the public advertisement dated 13-12-1992 with a view to emphasise that it was a condition precedent for acceptance of an offer. It is, therefore, strange that the Panchayat has entertained the offer of the respondent No. 3 which on the face of it was not accompanying by any tender deposit. Mere assurance by the respondent No. 3 that he would, if given the contract, pay the tender deposit, was not enough. The Panchayat has, therefore, in considering the offer of the respondent No. 3 and giving him contract without his having paid the deposit, acted arbitrarily by according such special treatment to the respondent No. 3. Furthermore, it is not as if the person who offered the highest amount was to be straight away given the contract. The offers were required to be opened and there were to be negotiations between the parties and bids amongst the offerers, so that the Panchayat may fetch the higher amount for the contract. Such a course was reflected in the conditions which were imposed by the District Development Officer for giving the contract. The Panchayat without waiting for the clearance from the District Development Officer sought for it as late as on 23rd March, 1993, suddenly changed its course by refixing the upset price while passing the resolution giving the contract. The Panchayat refixed the upset price at Rs. 13,44,000/- at the stage of giving the contract under the impugned resolution. Arvindbhai & Co. and Maganbhai Bharwad who had evinced interest in the contract were asked by the respondent No. 1 by his communication dated 5th June, 1993 to deposit Rs. 2,25,000/-. Their names do not seem to have been considered by the Panchayat while taking the final decision since they did not comply with the requirement of making the deposit of Rs. 2,25,000/-. The respondent No. 3 had also not deposited that amount, yet he was bestowed the favour by the Panchayat.
7. The contention canvassed on behalf of the respondents that the Panchayat could itself have fixed the upset price and given a private contract to a person who has offered the highest amount, cannot be accepted. The Panchayat while discharging its functions under Section 180 of the Act, is required to act in furtherance of the purposes of the Act and in public interest. The fact that the Panchayat can lawfully lease by public auction or private contract the collection of octroi cannot be so construed as to give arbitrary powers to the Panchayat to give a private contract in a private manner. The Panchayat could not have exercised its powers arbitrarily in a manner that would exclude eligible persons from competing. The power conferred upon the Panchayat has to be exercised reasonably and in the best interest of the Panchayat, so as to secure the highest amount while entering into a private contract for collection of octroi. The power of the Nagar Panchayat exercisable under Section 180 of the Act is subject to the authority of the District Panchayat as laid down in Section 8 of the Act. As provided in Sub-section (3) of Section 8 the Nagar Panchayat shall be subordinate to the District Panchayat. Sub-section (4) of Section 8 lays down that subject to the control of the State Government and the competent authority, the Nagar Panchayat shall exercise such powers, perform such functions and duties and shall have such responsibilities and authority as are provided by or under this Act or any other law for the time being in force. Thus, the respondent No. 4 Panchayat could not have arrogated to itself the function of revising the upset price of Rs. 20,00,000/- which was fixed by the District Development Officer, being a superior authority empowered to exercise control over the Nagar Panchayat. The Panchayat also could not have ignored the direction regarding bringing about inter se competition among the offers after opening their offers, so as to secure the highest amount while giving contract under Section 180 of the Act. The Government had issued circular dated 27th September, 1990 showing how the upset price was to be fixed before giving the contract by auction. Clause 4 of that circular in terms lays down that the upset price that may be fixed by the Nagar Panchayat should be got approved by the District Development Officer and only after his prior approval the process of giving the contract should be undertaken by the Panchayat. Thus, even if the Panchayat was empowered under the said circular, itself to work out the upset price, it was incumbent upon it to get the prior sanction from the District Development Officer for such purposes. When the Panchayat was required to give the contract by public auction in view of the directions of the District Development Officer who had fixed the upset price for the purpose and had refused to revise it in absence of any valid ground, it was not open to the Panchayat to flout the directions of the District Development Officer as also of the Government contained in the circular and to adopt a course by which eligible persons were excluded from the arena of contest. It may also be noted that the respondent No. 2 in his affidavit, pointed out that one Ramesh & Co. had deposited Rs. 2,25,000/-with the respondent No. 1 on 14-6-1993, but he was not considered by the respondent while awarding the contract. There was no valid reason shown for not considering the offer of this Company. It has been stated on behalf of the respondent No. 2-District Development Officer that the Panchayat did not furnish the requisite information though asked to do so earlier, and on 22-6-1993 it sent information and passed the impugned resolution on 25-6-1993 without leaving any time for the District Development Officer to consider that information. It is also stated in the affidavit-in-reply that though some contractors had requested that they should be allowed to remain present when the decision is taken, so that they may compete, the Panchayat had ignored such request. It is also pointed out that there was revision of the octroi rates and higher upset pries fixed for Various Nagar Panchayats which was almost double than the previous year. This is borne out from paragraph 11 of the affidavit-in-reply (Annexure 'F'). It is also stated that the District Development Officer would have taken action under Section 294 of the Act for suspending the resolution and the order in that regard was ready, but it was not issued on the Panchayat since this petition was pending. Under Section 294(4) of the Act, the District Development Officer was empowered to suspend the execution of the resolution passed by the Taluka Panchayat, if in his opinion it is unlawful. The Panchayat by flouting the directions given by the District Development Officer and making the impugned order, has acted unlawfully. It has also acted arbitrarily by giving contract to the respondant No. 3 in a private manner without giving an opportunity to other eligible persons for competing in the bid and without trying to secure the highest amount possible by making the contestants bid amongst themselves, which would have been in the best interest of the Panchayat. Many persons who were desirous to get the contract were under the impression that there would be a public advertisement or they would be called at the time when the question is to be considered as noted above. Under the above circumstances, the impugned resolution passed by respondent No. 4 cannot be upheld.
8. Reliance was sought to be placed on behalf of the respondents on the decision of this Court rendered on 26-3-1992 in Special Civil Application No. 2019 of 1992 by M. B. Shah, J. particularly on the following observations:
Further under Section 180(1) of the Gujarat Panchayats Act, the Panchayat is entitled to grant Ijara for collection of octroi even by private contract. Therefore, it is not illegal nor it can be held that the Panchayat should grant Ijara for collection of octroi only by public auction, it depends upon the facts and circumstances of each case. The exercise of power under Section 180 of the Gujarat Panchayats Act to grant Ijara for collection of octroi by private contract, if justified by circumstances and reasonable decision by the General Body of the Nagar Panchayat by passing resolution with absolute majority, cannot be said to be arbitrary, illegal of mala fide which calls for interference by this Court under Article 226 of the Constitution.
9. These observations clearly disclose that the exercise of power by the Panchayat under Section 180 should be justified by circumstances and a reasonable decision should be there by the General Body of the Panchayat as an answer to the allegation of arbitrariness. In the instant case, as noted above, the action of the Panchayat was not at all justified and it was grossly unreasonable. Furthermore, it will be noticed that in the matter in which above observations were made, the District Development Officer had fixed the upset price of Rs. 14 lacs and the contract was given at Rs. 15 lacs and, therefore, there was no question of the Panchayat violating the direction of the District Development Officer in that case. The said decision, therefore, cannot assist the respondent.
10. Reliance was also sought to be placed on the decision of the Supreme Court in Sterling Computers v. M.N. Publications reported in 1993 (2) GLH 314, more particularly on the observations that in some special circumstances, a discretion has to be conceded to the authorities who have to enter into contract by giving them liberty to assess overall situation for the purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the Courts, such decisions are upheld on the principle that the Courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of "play in the joints" to the executive.
It will be noticed that in paragraph 26 of the judgment the Supreme Court observed that the executive does not have an absolute discretion, and that certain precepts and principles have to be followed, the public interest being the paramount consideration. It has also been pointed out that for securing the public interest one of the methods recognised is to invite tenders affording opportunity to submit offers for consideration in-an objective manner. It is only where there were special facts and circumstances and compelling reasons that the departure of this rule can be made. The decision should be free from bias, discrimination and under the exigencies of the situation just and proper.
11. In the instant case, as noted above the decision taken by the Panchayat cannot be justified on any ground. There were no compelling circumstances or reasons or any special facts and circumstances in favour of the Panchayat to take a different course flouting the orders of the superior authorities by handing over the contract in a private manner to the respondent No. 3. Since the decision taken by the Panchayat is not free from discrimination or bias and cannot be justified on the exigencies of the situation, the decision of the Supreme Court in the aforesaid case, cannot assist the respondent. As held by the Supreme Court in Sterling Computers (supra), it cannot be urged that this Court has left the option of the authorities concerned whether to invite tenders or not according to their own discretion and to award contracts ignoring the procedures which are basic in nature, taking into account factors which are not only irrelevant but detrimental to the public interest.
12. The public authorities are essentially different from private persons. The public authorities must be guided by relevant considerations and not by irrelevant ones. If such decision is influenced by extraneous considerations which it ought not to have taken into account, the ultimate decision is bound to be vitiated, even if it is established that such decision had been taken without bias. Thus, the decision of the Supreme Court in the case of Sterling Computers (supra) far from supporting the impugned action of the respondent-Panchayat, points to the contrary.
13. Under the above circumstances, the impugned Resolution No. 365 dated 5-6-1993 by which contract was awarded to the respondent No. 3 for collection of octroi is held to be illegal, arbitrary and violative of Article 14 of the Constitution of India and is hereby set aside. At this stage, learned Counsel for the respondent-Panchayat submits that the contract may be allowed to be continued for some period, so that the Panchayat can follow the procedure which may be required to be followed under the law in the light of this decision. The respondent No. 3 admittedly has continued to collect the octroi under the interim orders of this Court granted at the time of admission, initially till 30th September, 1993 and thereafter, continued until further orders. With a view to enable the Panchayat to take appropriate decision as regards the exercise of its powers under Section 180 of the Act in accordance with law and in light of the observations made in this judgment, purely by way of ad-hoc arrangement, it is directed that respondent No. 3 may continue to collect the octroi on the terms of the contract till 15-11-1993 or until the Panchayat takes suitable action either for commencing the collection of octroi by itself or giving a private contract as envisaged by Section 180 of the Act whichever is earlier. Rule is made absolute accordingly with no order as to costs.