Kerala High Court
The Fertilisers And Chemicals ... vs Annam Steels Pvt. Ltd on 14 May, 2013
Author: K. M. Joseph
Bench: K.M.Joseph, A.Hariprasad
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE K.M.JOSEPH
&
THE HONOURABLE MR. JUSTICE A.HARIPRASAD
MONDAY, THE 20TH DAYOF JANUARY 2014/30TH POUSHA, 1935
WA.No. 942 of 2013 ()
------------------------------
AGAINST THE JUDGMENT IN WP(C).NO.9049/2012 DATED 14-05-2013.
.....
APPELLANT/1ST RESPONDENT:
----------------------------------------------
THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED,
COCHIN DIVISION, AMBALAMEDU, KOCHI -682 303.
BY ADVS.SRI.A.K.JAYASANKAR NAMBIAR,
SRI.M.GOPIKRISHNAN NAMBIAR,
SRI.P.GOPINATH MENON,
SRI.P.BENNY THOMAS,
SRI.K.JOHN MATHAI.
RESPONDENTS/PETITIONER/ADDL. SECOND RESPONDENT:
---------------------------------------------------------------------------------------
1. ANNAM STEELS PVT. LTD.,
NO.3/3- 2ND LANE, T.H. ROAD,
WASHERMENPET, CHENNAI- 600 021.
2. M/S. SAPPHIRE TECH PVT. LTD.,
A-31, AMANISHAH ROAD, SASTHRI NAGAR,
JAIPUR- 302 016, REPRESENTED BY ITS
DIRECTOR ALOK PRABHUNE,
OMKAR SHREE APARTMENTS,
SASTHRI NAGAR, JAIPUR- 302 016, RAJASTAN.
R1 BY SRI.A.MARIARPUTHAM, SENIOR ADVOCATE.
ADVS. SRI.TITUS MANI,
SRI.R.N.AMARNATH,
SRI.BINNY THOMAS.
R2 BY ADV. SRI.SUNIL V.MOHAMMED.
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 26/11/2013
ALONG WITH W.A. NO.1268 OF 2013 AND W.A. NO.1291 OF 2013,
THE COURT ON 20/01/2014 DELIVERED THE FOLLOWING:
rs.
K. M. JOSEPH & A. HARIPRASAD, ,JJ.
======================
W. A. Nos. 942, 1268 & 1291 of 2013
======================
Dated this the 20th day of January 2014
JUDGMENT
K. M. JOSEPH, J.
'E-auction' for sale of scrapped ammonia/urea plants of the appellant company (hereinafter referred as 'FACT') at Cochin Division was conducted by M/s. MSTC. Production has been stopped in the year 2003. First respondent (petitioner in W.P.(C) No.9049/2012) was the highest bidder in the auction. It offered Rs.33,50,00,001/-. By Ext.P6 letter it was asked to deposit 10% of the bid amount, less the EMD, which was complied with. On 10/1/2011 M/s.MSTC issued Ext.P7 confirming the sale and asked the first respondent to deposit the balance by way of Demand Draft. As per the condition of the sale, the first respondent has to furnish a performance bond/bank guarantee for Rs.170 lakhs within 15 days of acceptance of the sale. Bank guarantee was furnished and executed on 27/1/2011. FACT however, by Ext.P8 dated 28/1/2011 intimated the first respondent that further proceedings in the sale order were stayed until further advice. W.A.Nos.942/2013 & others 2 The first respondent approached this Court by filing W.P.(C) No.5541/2011 challenging Exts.P8 and P10. Ext.P10 was the letter issued by FACT stating that further proceedings were put on hold and as such the bank guarantee for performance bond has not been processed further. By Ext.P1 judgment this Court disposed of W.P.(C) No.5541/2011. Paragraph 27 of the said judgment reads as follows:-
"27. Hence, the writ petition is disposed of directing the respondent company to take a final decision on the question of proceeding with further steps pursuant to the tender confirmed in favour of the petitioner, through decision of its Board of Directors or through decision of any other competent authority. Needless to say that if the respondent proposes to cancel the bid finalised in favour of the petitioner, they shall be afforded with an opportunity of personal hearing and a reasoned order is to be issued in that regard. It is left open to those petitioners in various impleading applications filed before this court, other than the petitioners in WP(C).No.11151/2011 and 22767/2011 to submit representations before the respondent making their offers. The question to be decided by the respondent is mainly on the issue as to whether there exist any valid reasons for cancellation of the bid which is confirmed in favour of the petitioner, which is to be decided on the basis of facts and circumstances prevailing and on the basis of observations contained herein above, taking note of all contentions raised by the petitioner. I am of the view that any delay caused in this regard will cause prejudice and loss to the petitioner as well as to the respondent company. Therefore it is necessary to have a final decision taken on the matter at the earliest possible.W.A.Nos.942/2013 & others 3
Considering status of the proceedings now pending and also considering other exigencies, I direct the respondent to take a final decision as directed above, within 10 days from the date of receipt of a copy of this judgment."
2. Pursuant to Ext.P1 judgment, Ext.P2 was issued by FACT wherein it is stated as follows:-
"This has reference to the above. The company had intimated you vide e-mail dated 28.01.2011 that further proceedings on this sale order are stayed until further advice. It was further informed to you vide e-mail dated 31.01.2011 that Bank Guarantee for Performance Bond has not been processed further.
While the matter of stay on sale order was under
the consideration by the company, you approached the Hon'ble High Court of Kerala vide Writ Petition No.WP(C) No.5541/2011 praying for a 'writ of certiorari' and 'writ of mandamus' against the company which has ultimately been disposed off vide judgment dated 23rd December 2011 directing the company to take a final decision on the matter.
As directed by the Hon'ble High Court, you were given an opportunity to appear before the Board to explain the position. Accordingly, your company representative Mr. Vijayakumar appeared before the Board on 9.03.2012 at 4 PM at Conference Hall, Department of Fertilizers, New Delhi and clarified W.A.Nos.942/2013 & others 4 the issue from your side.
Before taking the final decision as directed by the Hon'ble High Court of Kerala, the following issues, among others, were considered by the company:
1. The representation made by your company during the personal appearance;
2. Reliability of the valuation reports guiding the company for disposal of the Ammonia-Urea Plants;
3. The sale of another Urea plant by another public sector company at a substantially higher price;
4. The offers made by other applicants; and,
5. Public interest.
The value of the old Ammonia-Urea plant of FACT Cochin Division as assessed by Projects and Development India Ltd., FEDO and Engineers India Ltd. vary significantly. Hence the valuation does not give a true picture on the value of the scrapped plant. The Urea plants of Neyveli Lignite Corporation having one half of the capacity of FACT Plant, fetched Rs.132 Crores. The parties who filed the impleading petitions before the Hon'ble High Court of Kerala in their representation submitted to FACT, have offered higher amount. FACT is not in a position to accept any offer from any party without following transparent procedures. There is a need to protect the overall public interest and the interest of FACT, being a Government Company W.A.Nos.942/2013 & others 5 and the company is committed to avoid any chances of loss of public money.
Under the above circumstances, the company has decided to cancel the bid finalized in your favour. You are, therefore, informed that the bid finalized in your favour, which was kept on stay, has been cancelled. Amount paid by hour company shall be refunded back immediately."
3. The first respondent filed a petition before the appellant to review the decision, which was rejected by the appellant through Ext.P4. The present writ petition is filed challenging Ext.P2 and P4. As far as W.A.No.1291/2013, which arises from the judgment in W.P.(C) No.14873/2012, is concerned, the writ petition was filed by the second respondent in W.A.No.942/2013 who had not participated in the auction. They had sought to be impleaded in the earlier writ petition (W.P.(C) No.5541/2011) making an offer of Rs.52.11 crores. W.A. No.1268/13 is filed by them against the judgment in W.P (C).9049/12.
4. The learned Single Judge disposed of the aforesaid writ petitions by a common judgment, The operative portion reads as follows:-
"39. In the result W.P.(C) No. 9049/12 is W.A.Nos.942/2013 & others 6 allowed. Exts.P2 and P4 in the said writ petition are hereby quashed. The 1st respondent company is directed to proceed with further steps on the basis of sale confirmed through Ext.P7 and on the basis of the Bank Guarantee already furnished by the petitioner, on the petitioner remitting the balance bid amount within a period of six weeks from today.
On such payment being effected delivery order as contemplated in Ext.P5 shall be issued to the petitioner at the earliest, at any rate within two weeks of the date of such remittance. It is made clear that both parties will be bound by all the terms and conditions contained in Ext.P5 with respect to completion of the proceedings, dismantling of the plants and transportation of the scrap etc.
40. In view of the decision taken in W.P.(C) No.9049/2012 as above, W.P.(C) No.14873/2012 is hereby dismissed."
5. We heard Shri A. K. Jayasankar, learned senior counsel and Shri P. Gopinath Menon, learned counsel for FACT Shri A. Mariarputham, learned senior counsel for the first respondent and Shri Sunil V. Mohammed, learned counsel for the appellant in W.A.No.1268/2013 and W.A. No.1291/2013.
6. Learned senior counsel for FACT in W.A.No.942/2013 would submit that the learned Single Judge has clearly erred in W.A.Nos.942/2013 & others 7 granting the relief by directing the appellant company to act on the basis of Ext.P7 sale confirmation. He would submit that the appellant company has taken a bona fide decision in the commercial realm guided by relevant facts. He would point out that the learned Single Judge has erred in finding that there is passing of property in the goods to the writ petitioner merely on the basis of issuance of the sale letter. He would also point out that having regard to the provisions in the contract between the FACT and bidders, as contained in the tender document, by issuance of sale confirmation letter property could not have passed. He would, in fact, submit that the learned Single Judge has erred in proceeding on the basis that it is a case of mere sale of goods and deciding the matter by referring to the Sale of Goods Act. He would contend that what is contemplated is removal of the scrap from the premises and it is not a mere sale of goods. According to him, a perusal of the condition in Ext.P5 would show that if there is a delivery order issued, it could not be said that there is a transfer of property in the goods. It is without noticing various relevant conditions and only on the basis of reference to the Sale of Goods Act that the learned Single Judge arrived at an erroneous conclusion that W.A.Nos.942/2013 & others 8 there is a concluded contract of sale/transfer of property. It is on the said mistaken impression that the learned Single Judge, thereafter, finds that the decision of the FACT is arbitrary. The learned counsel submits that this is a case where there was a complaint. The committee took a bona fide decision that the sale bid need not be accepted and it is to be cancelled, which is within the powers of the company.
7. Learned senior counsel for the FACT would submit that the learned Single Judge erred in proceeding as if the case is one to be considered only with reference to the Sale of Goods Act 1930. It is submitted that even if it is a case covered by Section 64 of the Sale of Goods Act, the question as to whether the property in the goods would pass, has to be decided further with reference to the terms of the contract. In this connection, he would refer to the terms of the contract as found in Ext.P5- special terms and conditions for auction. He would submit that under clause (5) no doubt there is a sale confirmation (Ext.P7) issued in favour of the writ petitioner. According to him, with that alone the property in the goods is not transferred. This is in view of clauses 6,7 and 11 in particular. Under clause (6) the period of contract is shown as W.A.Nos.942/2013 & others 9 up to the validity of the Delivery Order/Release Order issued by the auctioneers/appellant. Clause (7) provides for the payment terms. It inter alia provides that on receiving the EMD (10% of the value), sale letter is to be issued. The balance payment of 90% with taxes/duties on confirmation of the acceptance of the lot is to be made within 30 days of the issue of sale order/acceptance letter. There is provision for credit facility. Further under clause (7) it is also mentioned that in addition to the aforesaid, the successful bidder is to submit Performance Bond within 15 days of the date of the sale order. Clause 7 (f) provides that on compliance with the aforesaid conditions, delivery order will be issued. Clause 11 is relevant and crucial. We extract the same below:
"11.) THE FERTILISERS AND CHEMICALS TRVANCORE LIMITED/MSTC reserves the right to accept/reject and cancel any bid, amend the quantity under any lot or withdraw any lot at any stage under this e-auction sale after acceptance of bid/issue of Sale Order/deposit of full value by the buyer, without assigning any reason thereof and the value of such material if paid for, shall be refundable FACT/MSTC shall not be responsible for any damages/loss whatsoever to purchasers/Bidders/Buyer on account of such withdrawal, at any stage from the auction sale."
8. We would refer to clause (13) and the same is W.A.Nos.942/2013 & others 10 extracted below:
"13) The goods after confirmation of sale left at FACT will remain at the sole risk and responsibility of the purchaser/bidder/buyer MSTC/FACT will not undertake any liability whatsoever for the safe custody, protection or preservation after the sale has been confirmed. Delivery of the lots as put up for sale, are subject to change by nature's wear and tear No complaint will be entertained regarding quality or incorrect description for the materials sold once the bid is accepted."
9. With reference to clause (11), the contention is that it contemplates the right to accept/reject and cancel any bid after the acceptance of the bid/issue of sale Order/deposit of full value by the buyer. Still further at any rate he would submit that the FACT has a right to amend the quantity under any lot or withdraw any lot at any stage after the acceptance of bid/issue of sale order and even the deposit of full value by the buyer. No reason need be assigned in regard thereto. He would complain that the learned Single Judge has not at all adverted to the effect of clause (11) in particular. In short, his contention is that this is a case where the property in goods has not passed to the 1st respondent. After the issuance of the sale letter, though in this case EMD of 10% was given and even if the first respondent was ready to pay the balance W.A.Nos.942/2013 & others 11 amount, in fact it was not paid. What is more under clause (11) in view of the right reserved to FACT to cancel the bid and at any rate to amend the quantity or to withdraw any lot even after sale letter being issued/full payment clearly, the property in the goods must be treated as remaining with FACT. The property in the goods would pass only on issuance of the delivery order because after the issuance of the delivery order, power may not be available to cancel/reject a bid, amend or withdraw any lot. Fundamental error is committed by the learned Single Judge , it is pointed out, in ignoring the impact of clause (11).
10. The learned senior counsel for the first respondent, on the other hand, would submit that there is no merit in the appeal. The amount involved in the bid is for more than Rs.33 crores. He would point out that there are three valuation reports. M/s. Projects and Development (India) Ltd. arrived at the valuation of Rs.23.56 crores during November, 2009. M/s. FEDO, which was asked to review of the valuation made by the earlier valuer, conducted a detailed study and reported that the physical assets are having value of Rs.28.6927 crores. This valuation was done in August, 2010, before the 'e-auction' was W.A.Nos.942/2013 & others 12 conducted. After Ext.P1 judgment the FACT took a decision to have another valuation conducted by M/s. Engineers India Ltd. Report of M/s. Engineers India Ltd. made an estimation of the asset value as Rs.26.2212 crores. He would, therefore, point out that the price, which was offered by the first respondent as Rs.33,50,00,0001/-, is more than the highest valuation obtained under the three reports by Rs.5 crores. He would also submit that this is not a case that there is any justification for the appellant, which is an authority under Article 12 of the Constitution, to not proceed with the sale letter. He would also point out that, at any rate, having regard to Ext.P7, by which the offer was accepted and confirmed, the property in the goods passed to it. He further submit that however, clauses which are referred to by the appellant relate to the enforcement of the contractual obligation and will not detract from the property of the goods passing to the first respondent.
11. The contention of the 1st respondent is that upon the writ petitioner becoming the highest bidder and what is more bid being accepted and the sale letter being issued, EMD being paid, the writ petitioner being further ready to pay the balance amount and to comply with the conditions otherwise, W.A.Nos.942/2013 & others 13 the provisions in clause (11) cannot bear the interpretation sought to be placed on it by the appellant. He would contend that working of clause (7) relates to the enforcement of the contract which already stands concluded with the issuance of Ext.P7 sale letter. Clause (8) also relates to enforcement of the contract and cannot militate against the concluded sale. As far as clause (11) itself, it is case of the 1st respondent that clause (11) must be understood as falling in two parts, at any rate. In so far as it relates to 'accept/reject and cancel any bid' while it can be done without assigning any reason thereof though reason must exist, it cannot be done after the stage where the bid is accepted/sale order is issued/deposit of full value is made by the buyer. In other words, portion relating to the reservation of right to accept/reject, cancel any bid is not qualified by the words acceptance of bid/issue of sale order/deposit of full value by the buyer.
12. Shri Sunil V. Mohammed, learned counsel for the appellant in W.A.No.1291/2013 and W.A.No.1268/2013 also impugned the judgment and submit that his client had offered substantial sum. According to him, the contract should not be allowed to go through the respondent.
W.A.Nos.942/2013 & others 14
13. We must consider what was it that this court found in the earlier round of litigation culminating in Ext.P1 judgment. A number of persons intervened and offered higher price. While so, the learned Single Judge disposed of the Writ Petition finding intera alia as follows :
14. The sale in question has never been cancelled. The sale was put on hold based on some complaints. According to the appellant company the Board was to take a final decision. Nobody had challenged the sale by raising any allegation or fraud, collusion or any material illegality. The question to be decided was whether the bid knocked in favour of the writ petitioner and the confirmation granted to him needs to be cancelled, merely because subsequent offers for higher price has come up before the Court.
15. It is here that learned Single Judge took the view that it is for the appellant company to decide at the first instance considering the circumstances prevailing and also considering the legal principles. Learned Single Judge found that according to the counsel for the appellant company, they are not in a position to take any risk by affording a re-tender, especially in view of the fact that bid of the writ petitioner was W.A.Nos.942/2013 & others 15 for more than .33 crores and is in the third round of E- auction . It had furnished 10% deposit as well as Bank Guarantee/Performance Guarantee. It was noted that the stand of the company was that it was interested in getting more money. Considering overall situations, the learned single Judge took the view that it is for the respondent company to take final decision on the matter. In regard to the applicant who sought impleadment except writ petition Nos. 11151/2011 and 22767/11 the impleading petitions were not allowed, but they were given liberty to approach the company with their offers. The company was asked to take final decision on the question of proceeding with further steps pursuant to the tender confirmed in favour of the petitioner, through decision of its Board of Directors. It was further held if the respondent propose to cancel the bid finalised in favour of the writ petitioner, they should be given opportunity of personal hearing and a reasoned order is to be passed. It is inter alia directed to decide the question as to whether there exist any valid reasons for cancellation of the bid, which was confirmed in favour of the petitioner, taking note of all the facts and circumstance prevailing and on the observations contained in W.A.Nos.942/2013 & others 16 the judgment and taking note of all the contentions raised by the petitioner.
16. Ext.R1(f) purports to be the minutes of the 446th meeting of the Board. Ext.R1(f) reveals that the matter was discussed at some length and different opinions were expressed by the Directors . It reads as follows :
Extract from the Minutes of 446th meeting of the board held on 9.3.2012 446.03 Study on the valuation of the assets of Ammonia - Urea Plant at Cochin Division and 446.04 Sale/disposal of old Ammonia-
Urea Plant at Cochin Division The Board deliberated thread bare the entire issue relating to the sale/ disposal of old Ammonia-Urea plant at Cochin Division.
The Board once again persuade the judgment of the Hon'ble High Court of Kerala dated the 23rd day of December,2011.
The Board considered the representation received from various parties, who had filed impleading petitions before the Hon'ble High Court of Kerala, making their offers.
An opportunity was given to M/s Annam Steels (P) Ltd., Chennai for a personal hearing. Shri. C. Vijayakumar, Managing Director, M/s.
Annan Steels (P) Ltd., explained their views. Shri. Vijayakumar stated that M/s.J3 Vision W.A.Nos.942/2013 & others 17 and Exports who had filed complaint against the tender proceedings is a bogus firm. He also told that others who are promising higher amounts are not regular buyers of scrap and they are only interested to get commission from him for ensuring trouble free sale. Shri. Vijayakumar informed that he is in the line of business of regular scrap/ship breaking and participated in various tenders. Shri. Vijayakumar requested to confirm the sale order in favour of them and expressed willingness to remit the balance amount. They have produced before the Board a Solvency certificate for Rs.200 crore and a letter of credit of Rs.30 crore issued by M/s.Tamilnadu Mercantile Bank Ltd.
The Board considered the study report on the valuation of the assets carried out by PDIL, FEDO and EIL.
The board noted the difference in the individual weights of Carbon Steel and stainless steel as asserted by PDIL, FEDO and EIL and variation in the value determined for electrical and instrumentation items. The Board observed that the huge difference in the value of structural steels, reformer tubes etc. as asserted by FEDO, PDIL and EIL is not properly addressed in the due diligence carried out by FACT.
It was also opined that since the market value of nickel is around Rs.1100 per Kg, the value of Rs.220 poer Kg as fixed in EIL report is not realistic.
It was also observed that the scrap rate has been discounted by 20%, 25% and 7% to 20% by PDIL, FEDO and EIL respectively for dismantling and other costs. The dismantling cost is based on quantity and not on the rate W.A.Nos.942/2013 & others 18 of the scrap, therefore dismantling cant be % age of the rate of scrap. This is also not realistic.
The Board observed that the due diligence report submitted to the Board failed to address the issue of difference in valuation of assets as determined by EIL, FEDO and PDIL and hence the report is unsatisfactory.
The Board noted that M/s. Neyveli Lignite Corporation Ltd.(NLC) fetched an amount of Rs.132 crore from the sale of a urea plant and the capacity of that plant was only one half of the capacity of FACT plant at Cochin Division. The Board noted that there was a complaint that NLC had imported certain goods under the concessional rate of custom duty for use in the revamping of the said Fertilizer plant and put up for sale. The matter became a matter of investigation by law enforcing agencies/Courts.
The Board expressed doubt about whether the issue relating to customs duty is properly addressed while taking a decision on the sale of scrapped plant of FACT CD.
The Board noted that as per the order of the Hon'ble High Court of Kerala, a decision on the sale/disposal of old Ammonia urea plant is to be taken on or before 11th March 2012, this date being Sunday, the next working day i.e., by 12.03.2012. The Hon'ble High Court of Kerala had directed the parties who had filed impleading petitions, to submit their representation before the Board of FACT and they have offered higher amount for the scrapped plant as compared to HI offer received against e-tender. Being a Public Sector company, FACT has to follow W.A.Nos.942/2013 & others 19 transparent procedures for sale/disposal of old plants and hence not in a position to accept any of the offers submitted by the impleading petitioners right now. Once a decision is taken for cancellation of the bid finalized in favour of M/s.Annam Steels Pvt.Ltd., Chennai, the only option available is to go for a re-tender.
The Board deliberated on the pros and cons of cancellation of the e tender finalized in favour of M/s.Annam, Steels (P) Ltd., Chennai including the possibility of obtaining a lesser amount on re-tender and possibility of litigation.
Shri P.Muthusamy, Director (Finance), said that the existing tender finalized in favour of M/s.Annam, Steels is the third tender floated through MSTC and the participation of the tender was through open bidding process only. The discovery of the actual realizable value would be effected only through tendering by way of market forces and expressed doubt about higher realization in the event of re- tendering.
Shri.P.K.Chandrasekharan, Director (Marketing) said that the only way to know the correct price would be through tendering process.
Shri V.K.Anil, Director (Technical) informed that there were certain additions to the Ammonia-Urea plant in around 2000 through import and the customs duty aspect thereof need to be examined.
Shri. Sham Lal Goyal, C&MD, informed that there is a likelihood of damages to be claimed by M/s.Annam Steels Pvt.Ltd. in the event of cancellation and M/s.Annam Steels has already given a letter informing FACT about their financial loss due to delay in processing the tender in their favour.
W.A.Nos.942/2013 & others 20 Dr.V.Rajagopalan, Director, informed that in a recent tender, for sale of scrapped reformer tubes of M/s.Rashtriya Chemicals and Fertilizers Ltd, RCF fetched a price of Rs.1.5 lakh per tube. As informed, FACT's scrapped plant is having 192 reformer tubes, and the value, therefore, would be higher than what has been indicated in the valuation report. Shri S.C.Gupta, Director, said that the reports of outside Consultants have to be internally discussed before their finalization and acceptance by the Company. He stated that instead of Board evaluating the value of the scrap on its own, it would be better that the instances and valuation of similar scrap items in case of RCF and NLC are also brought to the notice of EIL. EIL should suitably consider the same in their valuation and submit a revised report. CMD Shri Sham Lal Goyal also agreed with this view.
Given that a decision in the matter is required to be taken urgently in order to comply with the orders of the Hon'ble High Court, Dr.Rajagopalan was of the view that no useful purpose would be served at this stage by seeking clarifications from EIL/FEDO/PDIL. Significant differences amongst the three valuation reports and the recent sale of reformer tubes by RCF at a much higher price than what has been indicated in the three reports clearly point out to the conclusion that none of the three reports could be relied upon and fair value of the ammonia urea plant would be significantly higher. The NLC scrap sale clearly indicates that the ammonia urea plant has the potential to fetch a much higher price on re-tendering.
After deliberation, the Board considered the following:
W.A.Nos.942/2013 & others 21
1. The value of the old ammonia-urea plant of FACT Cochin Division as assessed by PDIL, FEDO and EIL vary significantly. Hence the valuation does not give a true picture on the value of the scrapped plant.
2. Considering value of the Reformer Tubes obtained by RCF recently, the valuation of plant as done by PDIL, FEDO and EIL amounts to significant undervaluation.
3. The urea plants of Neyveli Lignite Corporation having one half of the capacity of FACT plant, have fetched Rs.132 crore.
4. The parties who have filed the impleading petitions before the Hon'ble High Court of Kerala in their representation submitted to FACT, have offered higher amount. FACT is not in a position to accept any offer from any party without following transparent procedures.
5. The issue of customs duty on imported items used in the ammonia-urea plant is not thoroughly analysed.
Considering the above, the Board came to the conclusion that in order to protect the overall public interest and the interest of FACT and to avoid any chances of loss of public money, there is no other alternative than cancellation of the bid finalized in favour of M/s.Annam Steels (P) Ltd. The Board decided to cancel the tender finalized in favour of M/s.Annam Steels (P) Ltd. For the sale/disposal of old ammonia-urea plant of FACT Cochin Division and directed to float an open tender for sale/disposal of the scrapped plant after carrying out a proper due diligence exercise to arrive at fair value of the ammonia urea plant." W.A.Nos.942/2013 & others 22 It is apparently based on the same, Ext.P2 was issued.
17. Learned senior counsel for the appellant-FACT drew support from the following case law:
(1). In Michigan Rubber ( India) Ltd. v. State of Karnataka and Others (2012 (8) SCC 216), the Apex Court was dealing with the question as to whether state and their undertaking have discretion to set tender conditions and whether the court may interfere on the grounds that some other terms could have been fairer, wiser or more logical.
The court took the view that the Government and their undertakings must have a free hand in setting terms of the tender and only if they are arbitrary, discriminatory, mala fide or actuated by bias, the court would interfere.
(2). Tejas Constructions & Infrastructure (P) Ltd. (2012 (6) SCC 464). In this case the court was dealing with the case of challenge to the awarding of contract to the 2nd respondent in the writ petition on the ground that he had not complied with eligibility requirements in NIT. Paragraph 17 reads as follows;
"In Raunaq International Ltd. v. I.V.R. Construction Ltd. (1999) 1 SCC 492), this Court reiterated the principle governing the process of judicial review and held that the W.A.Nos.942/2013 & others 23 writ court would not be justified in interfering with commercial transaction in which the State is one of the parties to the same except where there is substantial public interest involved and in cases where the transaction is mala fide."
(3). Meerut Development Authority v. Assn. Of Management Studies (2009 6 SCC 171). This decision related to disposal of public property by an instrumentality of the State. In the said context, the Court inter alia held as follows;
" 26. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated it must be unconditional; must be in the proper form, the person by whom tender is made must be able to and willing to perform his obligations. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. However, a limited judicial review may be available in cases where it is established that the terms of the invitation to tender were so tailor-made to suit the convenience of any particular person with a view to eliminate all others from participating in the biding process.
27. The bidders participating in the tender process have no other right except the right to equality and fair treatment in the matter of evaluation of competitive bids offered by interested persons in response to notice inviting tenders in a transparent manner and free from hidden agenda. One cannot challenge the terms and conditions of the tender except on the above stated ground, the reason being the W.A.Nos.942/2013 & others 24 terms of the invitation to tender are in the realm of the contract. No bidder is entitled as a matter of right to insist the authority inviting tenders to enter into further negotiations unless the terms and conditions of notice so provided for such negotiations.
28. It is so well settled in law and needs no restatement at our hands that disposal of the public property by the State or its instrumentalities partakes the character of a trust. 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.
29. The Authority has the right not to accept the highest bid and even to prefer a tender other than the highest bidder, if there exist good and sufficient reason, such as, the highest bid not representing the market price but there cannot be any doubt that the Authority's action in accepting or refusing the bid must be free from arbitrarinesses or favouritism".
(4). Kisan Sahkari Chini Mills Ltd. Vardan Linkers (2008) 12 SCC 500) . There were six State controlled sugar mills in Uttaranchal State which produced molasses. Sale of molasses by them was controlled by the Molasses Sale Committee constituted by the State Government. On the basis of tender received the Committee permitted the respondent in the appeal to lift 85,000 quintals of molasses from the mills at a particular price. The Government received a report that the W.A.Nos.942/2013 & others 25 price was much higher. The Secretary, Cane Development and Sugar Industries stayed the order of the Committee. In the amended writ petition filed by the respondents, the High Court took the view that there was a concluded contract and that having regard to the doctrines of part-performance, legitimate expectation, estoppel and acquiescence, cancellation of the allotment letter was unsustainable. Probably this is a case which is closest to the facts of the instant case and in fact relied on by the learned Single Judge also. We may refer to paragraphs 23 and 24, which are quoted herein as follows:
"23. If the dispute was considered as purely one relating to existence of an agreement, that is, whether there was a concluded contract and whether the cancellation and consequential non- supply amounted to breach of such contract, the first respondent ought to have approached the civil court for damages. On the other hand, when a writ petition was filed in regard to the said contractual dispute, the issue was whether the Secretary (Sugar) had acted arbitrarily or unreasonably in staying the operation of the allotment letter dated 26/3/2004 or subsequently cancelling the allotment letter. In a civil suit, the emphasis is on the contractual right. In a writ petition, the focus shifts to the exercise of power by the authority, that is, whether the order of cancellation dated 24/4/2004 passed by the Secretary(Sugar), was arbitrary or unreasonable. The issue whether there was a concluded contract and breach thereof becomes secondary. In exercising writ jurisdiction, if the High Court found that the exercise of power in passing an order of cancellation was not arbitrary W.A.Nos.942/2013 & others 26 and unreasonable, it should normally desist from giving any finding on disputed or complicated questions of fact as to whether there was a contract, and relegate the petitioner to the remedy of a civil suit. Even in cases where the High Court finds that there is a valid contract, if the impugned administrative action by which the contract is cancelled, is not unreasonable or arbitrary, it should still refuse to interfere with the same, leaving the aggrieved party to work out his remedies in a civil court. In other words, when there is a contractual dispute with a public law element and a party choose the public law remedy by way of a writ petition instead of a private law remedy of a suit, he will not get a full-fledged adjudication of his contractual rights, but only a judicial review of the administrative action. The question whether there was a contract and whether there was a breach, may however be examined incidentally while considering the reasonableness of the administrative action. But where the question whether there was a contract is seriously disputed the High Court cannot assume that there was a valid contract and on that basis, examine the validity of the administrative action.
24. In this case, the question that arose for a consideration in the writ petition was whether the order dated 24/4/2004 passed by the Secretary (Sugar), cancelling the allotment letter dated 26/3/2004 was arbitrary and irrational or violative of any administrative law principles. The question whether there was a concluded contract or not, was only incidental to the question as to whether cancellation order dated 24/4/2004 by the Secretary (Sugar) was justified."
(5). Our attention was drawn by the learned counsel to the decision in Tata Cellular v. Union of India (1994 (6) SCC
651).
W.A.Nos.942/2013 & others 27
"70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.
74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself.
77. The duty of the court is to confine itself to the question of legality . Its concern should be ;
1. Whether a decision-making authority exceeded its powers ?
2. Committed an error of law,
3. committed a breach of rules of natural justice,
4. reached a decision which no reasonable tribunal would have reached or,
5. abused its powers.
Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly W.A.Nos.942/2013 & others 28 put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under :
(i). Illegality : This means the decision-
maker must understand correctly the law that regulates his decision-making power and must give effect to it.
(ii). Irrationally, namely Wednesbury unreasonableness.
(iii). Procedural impropriety.
The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact in R.v.
Secretary of State for the Home Department, ex Brind Lord Diplock ( 1991) 1 AC 694), Lord Diplock refers specifically to one development namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should "consider whether something has gone wrong of a nature and degree which requires its intervention".
81. Two other facets of irrationality may be mentioned.
(1). It is open to the court to review the decision- maker's evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision
-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way cannot be upheld. Thus, in Emma Hotels Ltd v. Secretary of State for Environment (1980) 41 P& CR 255) the Secretary of State referred to a number of factors which led him to the conclusion that a non-resident's bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he W.A.Nos.942/2013 & others 29 could not see on what basis the Secretary of State had reached his conclusion.
2).A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R.v.Barnet London Borough Council, ex. p.Johnson 35 (1989) 88 LGR 73) the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority's parks was struck down.
91. In Food Corpn. Of India v. Kamdhenu Cattle Feed Industries (1993) 1 SCC 71), it was observed thus:
"In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is "fairplay in action".
18. The learned counsel for the 1st respondent drew our attention to the following case law;
(1). The State of Bombay and Another v. F.N.Balsara (1951 SCR 682) . The Apex Court took the view that Article 19 (1)(f) of the Constitution was wide enough to include movable as well as immovable property. It is pertinent to note that Article 19(f) stands deleted. No doubt, ' property' would take in unless in the context it is having limited meaning movable W.A.Nos.942/2013 & others 30 property also.
(2). A.V.Thomas & Co. Ltd. v. Deputy Commissioner of Agricultural Income Tax(AIR 1963 SC 608) . The Apex Court while dealing with the case of sale of teas by auction took the view that the property in the goods passed when the contract was accepted on the fall of the hammer in Fort Cochin which fell at that time in the Madras State.
(3). Agricultural Market Committee v. Shalimar Chemical Works Ltd. (1997 (5) SCC 516) . The Apex Court took the view that when conditions for applicability of Section 20 of Sale of Goods Act was satisfied viz. that there is an unconditional contract and there are specific goods in a deliverable state, the Court has to see whether any different intention appeared in the contract as indicated in Section 19(3) of the Sale of Goods Act. Paragraphs 39 and 41 of the above decision reads as follows:
"39. Section 20, which contains the first rule for ascertaining the intention of the parties, provides that where there is an unconditional contract for the sale of "specific goods" in a "deliverable state", the property in the goods passes to the buyer when the contract is made. This indicates that as soon as a contract is made in respect of specific goods which are in a deliverable state, the title in the goods passes to the purchaser. The passing of the title is not W.A.Nos.942/2013 & others 31 dependent upon the payment of price or the time of delivery of the goods. If the time for payment of price or the time for delivery of goods, or both, is postponed, it would not affect the passing of the title in the goods so purchased. "
40. In order that Section 20 is attracted, two conditions have to be fulfilled: (i) the contract of sale is for specific goods which are in a deliverable state; and (ii) the contract is an unconditional contract. If these two conditions are satisfied, Section 20 becomes applicable immediately and it is at this stage that it has to be seen whether there is anything either in the terms of the contract or in the conduct of the parties or in the circumstances of the case which indicates a contrary intention. This exercise has to be done to give effect to the opening words, namely, "Unless a different intention appears" occurring in Section 19 (3) . In Hoe Kim Seing v. Maung Ba Chit it was held that intention of the parties was the decisive factor as to when the property in goods passes to the purchaser. If the contract is silent, intention has to be gathered from the conduct and circumstances of the case."
The court also took note that one of the terms of the contract between the parties is that the seller would not be liable for any future loss of goods and that the goods were being dispatched at the risk of the respondent.
(4). Dist Board, Hoshiarpur v. Hira Singh (AIR 1968 Punjab and Haryana 289). A Division Bench of the said Court held that physical delivery of goods is not essential and sale can be completed without affecting immediate delivery or even without immediate payment.
W.A.Nos.942/2013 & others 32
(5). Valji Khimji & Co. v. Official Liquidator of Hindustan Nitro Porduct (Gujarat) Ltd. (2008) 9 SCC 299). This is a case of an auction sale of company's assets to the highest bidder. The court referred to the decision in Kayjay Industries (P) Ltd. v. Asnew Drums (P) Ltd. (1974) 2 SCC 213) , wherein the court held that mere inadequacy of price cannot demolish every court sale. The court reasoned that if there is fraud, as fraud vitiates everything, it would be a different matter. It would also be a different matter if the auction was held without adequate publicity in the well known newspapers having wide circulation. It is further held that the situation may be different if an auction sale is finalised for Rs. 1 Crore and subsequently somebody turns up offering Rs. 10 Crores. The court held that in this situation it is possible to infer that there was some fraud. The court took the view that once the sale is confirmed by the authority in the case of auction, certain rights accrued in favour of the auction purchaser and these rights cannot be extinguished except in exceptional cases such as fraud. It is to be noticed that the case related to a court auction.
(6). The counsel also refers to the decision reported in Kumari Shrilekha Vidyarthi and others v. State of U.P. and W.A.Nos.942/2013 & others 33 others (1991) (1) SCC 212) . Paragraph 20 of the said decision reads as follows;
"20. Even apart from the premise that the 'office' or 'post' of DGCs has a public element which alone is sufficient to attract the power of judicial review for testing validity of the impugned circular on the anvil of Article 14, we are also clearly of the view that this power is available even without that element on the premise that after the initial appointment, the matter is purely contractual. Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the State can thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more ?. We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co- exist."
It is also relied on for the purpose of establishing that even when the State is under no obligation to furnish reasons there must be reasons.
19. The learned senior counsel for FACT would point W.A.Nos.942/2013 & others 34 out that the learned Single Judge ought to have found that in this case the appellant has seriously disputed the contract and therefore in terms of the judgment of the Apex Court the learned Single Judge ought not have assumed that there is a valid contract. On the other hand, the learned counsel for the writ petitioner would contend that there is no fraud committed in the matter of holding the auction. There are no irregularities attending the sale. He would point out that a mistake as to fact hardly suffices to vitiate a contract. He relied on Section 25 of the Contract Act to point out that mere inadequacy of consideration cannot vitiate the contract. The learned counsel would submit that there is an unconditional contract of sale of specific goods in a deliverable state and there is nothing which militates against the passing of title with the sale being confirmed. Vide Ext.P7, the property of the goods passed. FACT could not divest the writ petitioner of its title to the goods. The decision not to proceed with the sale was clearly illegal. The State could not proceed to re- auction the property of another in view of the fact that the title had passed to the writ petitioner. The State could not act in an arbitrary manner. He also drew support from clause (13) of W.A.Nos.942/2013 & others 35 Ext.P5 and contended that it clearly shows that the property had been passed by virtue of the confirmation of the sale as it is is stated therein that after confirmation of the sale, the goods left are at the risk of the buyer. Therefore, there cannot be any doubt that the property had passed to the successful bidder. He also would point out clause (46) of Ext.P5.
"46. Termination/Breach of contract:
In the event of bidder's failure to fulfill any of the contractual obligations including non-lifting the contracted materials under this agreement, MSTC/FACT's decision in regard to bidder's failure being final and binding on the bidder. MSTC/FACT shall have the full liberty to do any or all of the following:
Cancel the contract with immediate effect for the materials under the contract not taken delivery by the bidder as on that date, in which case the Performance Bank Guarantee will be invoked.
And/or Retain and/or adjust, recover from bidders any amount lying with MSTC/FACT to the bidder's credit either under this contract or any other which may at any time become payable/refundable to the bidder either under this contract or any other contract, the amount of losses or damages or claim that might be incurred by MSTC/FACT in selling the materials under contract not taken delivery by the bider at bidder's risk and costs. Even after such recovery/adjustment by MSTC/FACT from bidder any amount as mentioned above lying with W.A.Nos.942/2013 & others 36 MSTC/FACT if any further amount is still found payable/refundable by the bidder, the bidder shall pay the same to MSTC on demand without any objection or demur."
20. The learned senior counsel for the first respondent further submits that clause 46 was available only when there is a breach by the buyer and it enables cancellation of the contract among other remedies. The learned senior counsel for FACT would submit that he does not dispute that in view of the judgment of the Apex Court in ABL International Ltd. And Another v. Export Credit Guarantee Corporation of India Ltd. And Others (JT 2003 (10) SC 300), there is jurisdiction with writ court to decide the disputed question of facts. He also does not dispute that the Judgment of the Apex Court in ABL's case (supra) has been reiterated in Zonal Manager, Central Bank of India v. M/s. Devi Ispart Ltd. & Ors. (JT 2010 (8) SC
1). In paragraph 10 of the said decision, the Apex Court held as follows;
"10. It is clear from the above observation of this Court in the said case, though a writ was not issued on the facts of that case this Court has held that on a given set of facts if a State acts in any arbitrary manner even in a matter of contract, an aggrieved party can approach the court by way of writ under Article 226 of the Constitution and the court depending on facts of the said W.A.Nos.942/2013 & others 37 case is empowered to grant the relief. This Judgment in K.N.Guruswamy v. State of Mysore was followed subsequently by this Court in the case of D.F.O. v. Ram Sanehi Singh wherein this Court held:
"By that order he has deprived the respondent of a valuable right. We are unable to hold that merely because the source of the right which the respondent claims was initially in a contract, for obtaining relief against any arbitrary and unlawful action on the part of a public authority he must resort to a suit and not to a petition by way of a writ. In view of the judgment of this Court in K.N.Guruswamy case (supra) there can be no doubt that the petition was maintainable, even if the right to relief arose out of an alleged breach of contract, where the action challenged was of a public authority invested with statutory power. "
Findings.
21. In this case there was an auction under Ext.P5 terms and conditions. The 1st respondent apparently offered the highest price of about more than 33 Crores. Thus, the first respondent was the successful bidder. We notice that the position in respect of an auction sale has been considered by the Apex Court in the decision in Consolidated Coffee Ltd. And another v. Coffee Board, Bangalore (1980 (3) SCC 358). It is held that Section 64 (2) of the Sale of Goods Act does not deal with the question of passing of property at the auction and it only deals with the completion of the contract of sale. The W.A.Nos.942/2013 & others 38 question as to passing of title must be decided with reference to the provisions of the Sale of Goods Act and the intention of the parties as evident from the terms of the contract and also any other attendant circumstances.
22. Now, we must pass on to the question as to whether the FACT was justified in proceeding to cancel the bid. As already noted the parties were before this court earlier and it culminated in Ext.P1 Judgment. In Ext.P1 Judgment taking note of the various facts, the Court had directed the appellant to take a final decision in the matter as to whether there existed any valid reason for cancellation of the bid which was confirmed in favour of the 1st respondent taking note of the circumstances and observations therein. The learned Single Judge has found that the impugned decision cannot be sustained and set aside the same and direct the FACT to proceed further on the basis of the sale confirmation in favour of the 1st respondent. Let us examine the reasoning of the learned Single Judge. With regard to clause 11 of Ext.P5, it is found that even though it empowers the FACT to cancel without assigning any reason there must exist reasons. In this regard the learned Single Judge relied on the decision in Kumari W.A.Nos.942/2013 & others 39 Shrilekha Vidyarathi And others v. State of U.P. and others (1991 1 SCC 212). It is found that the appellant could not act arbitrarily and not enter into relationship with any person. The learned Single Judge proceeded to find that the observations in Ext.P2 and Ext.R1(f) to the effect that value assessed by the three agencies who were engaged by the FACT to value the materials in question varied significantly and that the valuation did not give a true picture was found to be unconvincing. It was found that observations were made without any genuineness considering the facts revealed from the valuation reports. In regard to the sale of similar plant of the Neyveli Lignite Corporation at Rs. 32 Crores which was matter referred for opinion of M/s FEDO, which had made the valuation, it had noted that the successful bidder put up a claim for Rs. 90 Crores with Neyveli Lignite Corporation stating that those plants are not a re-usable condition and can only be considered as scrap. The learned Single Judge refers to a news item which appeared in M/s. 'Hindustantimes- news'(website of Hindustan Times). It reveals that bidder had induced M/s. State Trading Corporation of India to make advance payment of Rs.149.79 Crores for purchase of the W.A.Nos.942/2013 & others 40 scrap plants on the basis of a report submitted by MMT after they won the e-auction and thereby caused immense loss and there is reference to the CBI enquiry. It is found that these aspects have not been considered in the impugned judgment. Reason stated for cancellation of the tender is that the parties impleaded before this Court in the earlier litigation have offered higher amounts. The learned Single Judge found that there is nothing indicated in the decision about the amount of such offers and about bona fides in making such offers. There is no indication that any of such parties had established any convincing reason for their non- participation in the e-auction conducted on three occasions. The learned Single Judge found that observations in Ext.R1 (f) is that, being a PSU the respondent company had to follow transparent procedure in the sale and hence it is not in a position to accept any such offers. But, at the same time it is found that receipt of such offers is also mentioned as one of the reasons for cancellation. In regard to the contentions of the FACT on the aspect of public interest and protection of public money, the learned Single Judge took note of the affidavit filed by the General Manager in the earlier litigation wherein it is inter alia stated that the Board of W.A.Nos.942/2013 & others 41 Directors had decided to seek early disposal of the cases on account of the fact that the company was loosing financially and it is a safety hazard to keep the scrapped plant any longer and further decided to pray for a final decision in the case of the 1st respondent if no other party is willing to deposit higher amount immediately. It is further stated that the tender proceedings could not be finalised due to the pendency of the writ petition. The delay in the sale proceedings is having serious financial implications and it is a safety hazard to keep the scrapped plant any longer. The learned Single Judge found that all other companies who intervened in the earlier writ petition had backed out from the scene, except the petitioner in W.P.(C) No. 14873/2012 and they have failed to make deposit of 50% as directed. The learned Single Judge found from the statement which are referred to, that it is clear that the FACT had not raised any objection against proceedings further on the basis of the confirmed sale. It is noted that the FACT had already incurred approximately Rs. 85 Lakhs for obtaining the valuation reports one after another and for which it incurred huge amount of Rs. 1.40 Crores for further re- auction. It is noted that the price offered is 5 Crores above the W.A.Nos.942/2013 & others 42 offer already confirmed. From Ext.R1(f) it is evident that the first respondent had produced Solvency Certificate for Rs.200 Crores and a 'Letter of Credit' for Rs.30 Crores from the Bank for payment of the balance. It is further noted that even though the Chairman and the Managing Director had expressed the view that there is likelihood of the 1st respondent claiming damages in the event of cancellation, there is no discussion or decision on that aspect. The learned Single Judge also referred to the fact that scrapped plants are having 192 Nos. of Reformer Tubes and that one of the members of the Board had pointed out that a recent sale of scrapped 'Reformer Tubes' of M/s Rashtriya Chemicals and Fertilisers Ltd. had fetched value of Rs. 1.5 Lakhs per Tube. Even calculated on that basis, the total value of the Tubes available will only be Rs. 288 Lakhs. It was found that the confirmed bid in this case is Rs. 500 Lakhs more. This aspect was also omitted to be considered. The Director (Finance) expressed doubt about the possibility of realising any higher amount on re-tender. The learned Single Judge found that the Board had not discussed such a contingency and not considered the heavy expenditure for getting further valuation and for conducting a further e-auction. W.A.Nos.942/2013 & others 43 The learned Single Judge further finds that it was on the basis of a Fax Message received from the Joint Secretary Department of Fertilizers that the bid was not finalised. The Fax Message was send on the basis of a complaint submitted by M/s.Padma Cargos and Fertilizers. The nature of the complaint was not revealed. There is silence about the further auction to prove the said complaint. The stand of the respondent in the earlier round of litigation that they do not want to lose a bidder who had offered such an amount was taken note of. It is found that the reasons now stated for a turn-around is not at all convincing. Learned Single Judge found that there is no justification for canceling the sale concluded if there is violation of Article 14 of the Constitution.
23. In ABL's case (cited supra) no doubt the Apex Court has held that merely because one of the authorities raises a dispute in regard to the facts, the writ petition need not always relegate the authority to a suit. It can resolve the disputed questions of fact. Further in ABL's case para 37, the court would further held as follows;
" 37. In our opinion, this limited ares of dispute can be settled by looking into the terms W.A.Nos.942/2013 & others 44 of the contract of insurance as well as the export contract, and the same does not require consideration of any oral evidence or any other documentary evidence other than what is already on record. The claim of the contesting parties will stand or fall on the terms of the contracts, interpretation of which, as stated above, does not require any external aid. "
24. In this case no oral evidence appears to be necessary. At the same time, we have also noted that in Kisan Sakhari Chini Mills Limited and others v. Vardan Linkers and others (2008) 12 SCC 500), the Apex Court in a later decision took the view that where the question whether there was a contract or not is seriously disputed, the court is not to assume that there was a valid contract and on that basis examine validity of administrative action. In this case what is essentially disputed is that there is no transfer of property in the case. The other facts are not in dispute.
25. In other words, the fact that the first respondent was the highest bidder and appellant issued Ext.P7 confirmation of sale in favour of the appellant is not in dispute. On the said admitted position, we have absolutely no difficulty in coming to the conclusion that there was a contract of sale which was concluded with the issuance of Ext.P7. As to whether the property passed in the case is a different matter altogether. W.A.Nos.942/2013 & others 45
26. To consider the question as to whether there is a concluded contract and whether title in the goods has passed in this context, it is necessary to consider the provisions of the Sale of Goods Act. Section 5 of the said Act speaks about the contract of sale, which reads as follows:
5. Contract of sales how made :(1).
A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed.
(2). Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties. "
Therefore, a contract of sale is made on the basis of an offer to buy or to sell goods for a price and the acceptance of such offer. It is now necessary to go back to Section 4 of the Act.
Section 4 of the Act reads as follows:
"4. Sale and agreement to sell: (1). A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.
(2). A contract of sale may be absolute or conditional.W.A.Nos.942/2013 & others 46
(3). Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
(4). An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. "
27. From a perusal of Sections (4) and (5), following consequences are inevitable. On the basis of an offer being accepted as contemplated in Section 5, there would be a contract of sale. The contract of sale is a contract whereby the seller either transfers or agrees to transfer the title in the goods to the buyer. Under the contract of sale, if the transfer of property is to take place in future or subject to certain conditions being fulfilled, it would be regarded an agreement to sell. On the other hand, if there is a transfer of property in the goods, it is a sale. Thus the words 'contract of sale' are capable of bearing the meaning a completed sale and also an agreement to sell. A contract of sale may be a mere agreement to sell on the basis that while there is an offer and acceptance and a contract has emerged it remains an executory contract and it has not blossomed into a sale where W.A.Nos.942/2013 & others 47 under the property in the goods has passed.
28. It is on this understanding of the Law, we must apply the law to the facts. In the facts of this case, we are of the view that when the writ petitioner had offered the highest amount under the auction and that offer was accepted and sale letter was issued confirming the sale in favour of the writ petitioner, there arose a contract of sale. But, that is not to say that immediately property in the goods has passed. In order to ascertain whether the property in the goods has passed, we must consider the effect of Section 19 of the Sale of Goods Act. It provides inter alia that where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. It further provides that the intention is to be gathered from the terms of the contract, the conduct of the parties and the circumstances of the case. Lastly it provides that the rules in Sections 20 to 24 are the rules for ascertaining the intention of the parties unless different intention appears. Section 20 being crucial, we extract the same as follows;
"20. Specific goods in a deliverable state:- Where there is a unconditional contract W.A.Nos.942/2013 & others 48 for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed."
29. We must further consider the question as to whether it could be said that there is a sale in view of Section 20 of the Sales of Goods Act. According to the learned senior counsel for the appellant, there is no unconditional contract having regard to the conditions, particularly clause 11 of Ext.P5. He would further contend that while the goods are specific they are not in a deliverable stage and only upon issuance of delivery order it would be in a deliverable stage. Of course, this is disputed by the learned Senior counsel for the first respondent. He would point out that contract has been made, at any rate, when Ext.P7 was issued the property in the goods have passed thereupon.
30. In this case we must notice that clause 11, at any rate, empowers the appellant to amend lot and to withdraw the lot even after the issuance of the sale confirmation and what is more even after the payment of the full price. This is a case where clause 11 is not challenged before us. This is a condition which the bidders have agreed to. This cannot be W.A.Nos.942/2013 & others 49 ignored. Our conclusion would be as follows in our jurisdiction under Article 226. When the contract itself is hedged within the condition that at any time the lot could be withdrawn it is our understanding under Article 226 that the contract is not an unconditional contract if we were to ask the question as to what would happen if the first respondent was to resell the goods on the basis that it has become the owner of the goods in view of the elements in Section 20 being present, could it stand in the way the appellant amending the lot or withdrawing of the lot? We would think that it may not possible to say so as the claim for absolute ownership of the goods is completely inconsistent with the right of the seller to abridge the quantity or to withdraw the lot itself. No doubt the learned counsel for the first respondent would have a case that in this case there is only one lot and there can be no withdrawal of that lot as what is contemplated is withdrawal of lot when there are more than one lots. Even assuming that said contention is correct nevertheless there is power to amend lot. Such power detracts from the contract becoming an unconditional contract. The power to amend the lot overhangs the transaction like a Damocles sword. It cannot be said W.A.Nos.942/2013 & others 50 that the buyer is the owner of certain quantity of goods. Such a certainty is imparted only with the issuance of the delivery order.
31. The offshoot of the above discussion in the facts of this case, we are of the view that while there is a contract of sale of goods, it amounts only to an agreement to sell with a power with the seller to amend the lot or to withdraw the lot. The above said power to withdraw the lot or to amend the lot is available till the issuance of the delivery order. Thus, while there is a contract of sale, it is not yet a sale. Question is as to whether the action of FACT is arbitrary. We would have to bear in mind several facts. This is a case where the parties were before this Court earlier. In the litigation culminating in Ext.P1 judgment several persons came forward offering higher prices. The learned Single Judge relegated them to the FACT. The FACT was directed to take final decision in the matter as to whether there exists any reason to cancel the bid or whether the bid should be proceeded with. The matter was placed in the meeting for the decision of the Directors of the FACT. Different opinions were expressed. There was a view that better offer may not received. There was aspect of W.A.Nos.942/2013 & others 51 certain persons who came forward offering higher amount. Apparently FACT took note of the higher price fetched in the sale of assets of Neyveli Lignite Corporation. It also considered the recent sale of 192 items Reformer Tubes by Rashtriya Chemicals and Fertilisers Ltd.- another public sector company. It felt that the disposal of the company's property must be done in a fair and transparent manner. In matters such as this overriding consideration which weighs with the writ court is public interest.
32. Sri. Mariarputham learned senior counsel would submit that there is overwhelming public interest when the court takes into consideration the facts and also principle of rule of law and the need to do things fairly as a constitutional guarantee. When the State acts in a unfair and arbitrary manner, it is breach of the rule of law. When the person is at the receiving end of arbitrary action. it has an adverse impact on public interest. We are not very much impressed by the said argument. When competing claims are private interest v. public interest, then in the case of disposal of public property the question would be whether the right of the person, who has earned the right to the public property in a public W.A.Nos.942/2013 & others 52 auction, is to be preferred over the right of the public in ensuring that valuable public assets were not disposed of except for a fair price and in a fair and transparent manner. In this case no doubt the writ petitioner's bid is 5 crores more than the highest valuation done in the studies conducted. It is also true that it is a third time that the tenders were called for. Whether this Court should, in judicial review, sit in judgment over the decision of a public unit which is of the view that it need not go further ahead on the basis of Ext.P7 confirmation in favour of the writ petitioner. It is true if such a decision is taken without any reasons to support it or mere ipsi dixit it would be arbitrary. In this case there are reasons. The learned Single Judge analysed the reasons and took the view that those reasons are not correct. Is such an exercise to be supported under judicial review principles? In our view in matters particularly to the disposal of valuable assets by the State when the State feels that it need not proceed further on the basis of the confirmation and it seeks to explore the possibility of getting higher price and when clause 11 permits FACT to withdraw the lot or or amend the lot, this court would be sitting in judgment over the decision taken in a commercial W.A.Nos.942/2013 & others 53 matter which may not be justified .
33. In this regard, we think it is relevant to refer to the following averments in the counter of the appellant as to what transpired both during the pendency of the earlier writ petition and after Ext.P1 judgment was pronounced. In the counter affidavit it is stated as follows:
"11. This Respondent submits that during the pendency of these proceedings, the following persons who had not participated in the e-auction held on 22- 9-2010, filed Interlocutory Applications before this Hon'ble Court offering substantially higher amounts than the amount of Rs.33.5 crores offered by the petitioner.
A) Smt. Jasmine Majeed, Managing Director, M/s.
Liyashi Builders and Developers Pvt. Ltd. who had not participated in the e-auction filed an application as IA No.17417/2011 for impleading herself as an additional party. In her affidavit before the Court, she stated that she is willing to purchase the plants for Rs.50 Crores excluding tax and if retender is floated her Company is ready to give Bank Guarantee for Rs.50 Crores. A true copy of the IA No.17417/2011 in W.P.(C) No.5541/2011 is produced herewith and marked as Ext.R1(d).
B) Sri Ashim Raizada (M/s. West End Promoters Pvt. Ltd., New Delhi) who had not participated in the e- auction filed an application as I.A.No.18449/2011 for impleading himself as an additional party. In his affidavit before this Hon'ble Court, he stated that he is willing to purchase the plants for an amount of 54 Crores. A true copy of the I.A. No.18449/2011 in WP (C) No.5541/2011 is produced herewith and marked as Ext.R1(e).
C) Sri P E Nissar, (Managing Director - M/s Ashik Transport Container Company, Kochi who had not W.A.Nos.942/2013 & others 54 participated in the e-auction filed an application for impleading himself as an additional party. He offered to purchase the plants for Rs.51 Crores and stated that he is ready to give 10% of the amount as Bank guarantee provided they would be permitted to conduct inspection of the plants.
D) Dr. A Mohammed Shafique (Director, M/s Minar Casting Pvt Ltd., Palghat) who had not participated in the e-auction also filed an application for impleading himself as an additional party as IA 19312/11. He stated that he is prepared to make a bid for an amount higher than Rs.45 Crores and is ready to deposit Rs.4.5 Crores in favour of FACT for participating in the re-auction.
E) Mr. Mohammed Shaffi (Managing Director, M/s.Anappuram Steels, Palghat) who had not participated in the e-auction also filed an application for impleadiing himself as an additional party. He offered an amount above Rs.45 Crores and expressed his willingness to deposit the same or to furnish Bank guarantee for 10% of the amount offered.
F) Mr. Mukesh Gupta (Director - M/s. Sapphire Steels Pvt. Ltd., Jaipur) who had not participated in the e- auction filed an application for impleading himself as an additional party. He offered Rs.52.11 Crores and produced a photocopy of a cheque drawn in favour of FACT for the said amount, drawn on Axis Bank, Jaipur Branch (Vidya Nagar) along with his application.
12. It is submitted that in addition to the above, 3 more persons had made representations to the Ministry with copy to Chairman and Managing Director of this Respondent expressing their willingness to participate in the tender, if re-tender is ordered. Since the company is losing financially and it is a safety hazard to keep the scrapped plant any longer, the Board of Directors in its meeting held on 9-11-2011 considered the status report regarding the sale of Ammonia and Urea plants and decided to file an application for early disposal of the case.
13. It is submitted that this Hon'ble Court considered W.A.Nos.942/2013 & others 55 W P No.11151 of 2011, W.P. No.22767 of 2011 and W.P No.5541 of 2011 together. After dismissing W.P. No.11151/2011 and 22767/2011, this Hon'ble Court disposed of W.P.No.5541 of 2011 by judgment dated 23-12-2011 directing this Respondent to take a final decision on the question of proceeding with further steps pursuant to the tender confirmed in favour of the Petitioner, through decisions of the Board of Directors or any other competent authority. The Court observed that if the Company proposes to cancel the bid finalized in favour of the Petitioner, they shall be afforded with an opportunity of personal hearing and a reasoned order is to be issued in that regard. Court directed the various impleading Petitioners other than the Petitioner in WP (C) No.11151/2011 (Jose Joseph Vakayil), and WP (C) No.22767/2011 (T K Ranjith) to submit representations before the Company making their offers. The Court observed that the question to be decided is mainly on the issue as to whether there exists any valid reasons for cancellation of the bid which is confirmed in favour of the Petitioner which is to be decided on the basis of facts and circumstances prevailing and on the basis of observations contained in the judgment taking note of all the contentions raised by the petitioner.
14. In compliance with the directions of this Hon'ble Court in W P No.5541/2011, the Board of Directors of the Company met on 5.1.12. As directed by this Hon'ble Court, as on 5-1-12, out of the 7 impleading Petitioners, 2 firms viz., M/s. Sapphire Steel Tech Pvt Ltd., Jaipur (In the I.A. filed before the court the name was Sapphire Steels pvt. Ltd.) and M/s. Liyashi Builders and Developers submitted their representations. One M/s. Mavin Impex Pvt. Ltd., who had neither participated in the e-auction nor filed any application before the Court, also filed a representation making an offer of Rs.52.05 Crores.xxxxxxxxxxxxxxxxxxxxx. This respondent further submits that after the decision taken by the Board of Directors on 5.1.2012, 3 more firms viz. M/s. Annapuram Steels Pvt. Ltd., M/s. Minar Castings W.A.Nos.942/2013 & others 56 and M/s. Westend Promoters submitted their representations making their offers. In the meeting of the Board of Directors held on 14/2/12, action taken report was placed. In the said meeting the Board considered the representations submitted by Annapuram Steels Pvt. Ltd., M/s. Minar Castings and M/s. Westend Promoters and directed to complete the due diligence at the earliest. "
34. It is true that there is no specific denial about the paper report and its contents in relation to Neyveli Lignite Corporation as such. No doubt, there is apparently some investigation going on. It is also true that apart from one of the persons who offered a higher price and who has also filed two appeals before us, others have not challenged the decision of the learned Single Judge (No doubt some have filed impleading petition). But, we must pose the question whether it is for the Court to decide in judicial review that the contract must be specifically enforced in Article 226 by the judgment which is impugned. That is precisely what the learned Single Judge has directed. We have already found that there is no sale of goods as such. There is only contract of sale which amounts to an agreement to sell. Once it is found that there is only an agreement to sell, and not a sale, then the finding of the learned Single Judge to the contrary cannot W.A.Nos.942/2013 & others 57 be sustained. As noted, the learned Single Judge has proceeded on the basis that a decision to cancel 'the sale' is without authority and is illegal. ( See para 38 of the judgment of the learned Single Judge). The learned Single Judge has purported to give reasons to say that the findings of the authority cannot be appreciated as acceptable or correct. It is in this regard, that we must remind ourselves the nature of the jurisdiction under Article 226. Even while the jurisdiction is very wide, it is hedged in with self imposed limitations. The limitations all flow from the quality of the judicial over sight, which, as already noted, is not appellate. This Court does not re-appreciate the facts. It does not sit in judgment over the correctness or the wisdom of the authority's decision particularly in the field of contractual matters.
35. It is true that in the earlier round of litigation culminating in Ext.P1 judgment the nuances of the various clauses were not considered in the manner in which it is sought to be projected before us. The resultant position is that the learned Single Judge in Ext.P1 proceeded to direct the appellant to consider and take a decision as to whether a bid was to be cancelled, taking note of the observations and the legal W.A.Nos.942/2013 & others 58 position as also the fact that there are other persons who were prepared to pay higher prices. We are faced with the rather anomalous position in that, we find, on our understanding of clause (11), that it is not open to cancel a bid which is accepted. The learned Single Judge considered the question as to whether the bid should be cancelled. On our understanding as such the bid, once it is accepted, could not be cancelled.
But, at the same time, we are not in agreement with the learned Single Judge when he says that there is a sale and we take the view that there is no sale. Of course, if there was a sale, it would have been a different matter altogether.
Therefore, we are left to finding that this is a case where though the bid of the first respondent was accepted with the issuance of Ext.P7 sale confirmation, there still was only a concluded contract of sale not amount to sale but remaining an agreement to sell. We can only take it that there is a refusal on the part of the appellant to honour its obligation under the contract of sale. Therefore, what the first respondent could seek then is the specific performance of the contract of sale which is an agreement to sell, therefore, an executory contract. In short, the substance of the matter is this W.A.Nos.942/2013 & others 59 amounts to a writ petition filed by the first respondent in essence asking the writ court to enforce an executory contract which is an agreement to sell. The question would whether in the facts and and circumstances of the case, we should hold that the refusal to honour the contractual obligations by the appellant should be interfered with by us. In our view this is a contract involving a sale of public property. It is true that the first respondent offered more than 33 Crores, which is more than 5 Crores above the highest valuation from among the three valuation reports. The appellant felt that it should proceed to re tender the matter. The learned Single Judge has proceeded to appreciate the matter on facts and come to the conclusion that the decision by the Board is not acceptable as the reasons are not correct. We have already set out in detail the reasoning of the learned Single Judge. In our view, it may not be appropriate for us to dub it as a decision which is liable to be quashed as perverse. We cannot hold it so arbitrary as to warrant our interference. We cannot loose sight of the principle which is far to well established to require reiteration that in respect of such contracts unless the public interest is overwhelming the court need not interfere. We are not dealing W.A.Nos.942/2013 & others 60 with the matter as Civil Court considering the prayer for specific performance as already noticed. We would only think that in exercise of writ jurisdiction, we should take a view based on well established principles under which we do not see any ground for overturning the decision taken by the appellant no doubt a public sector unit. We would think that in essence the learned Single Judge considered the matter on sitting in judgment on the issue as an appellate body. May be if we were exercising our authority as an appellate body we may have concurred with the learned Single Judge. But, that is not to say that our understanding of limits of our jurisdiction should be blurred. Considerations like expenditure incurred in this regard towards tender in our view was not for the learned Single Judge to consider. The attitude of other persons who evinced interest in getting at the property (may be they are not participated in the tender process as such), cannot be altogether excluded from consideration. While we are not for a moment suggesting that contracts validly entered can be unceremoniously and capriciously disregarded by the State, in a case where there are reasons given it may not be appropriate for the writ petition and we again emphasise the W.A.Nos.942/2013 & others 61 'writ court', to disregard or upset the said decisions sitting as an appellate body. In such circumstances, we are unable to agree with the learned Single Judge. We allow W.A. No. 942/2013, set aside the judgment of the learned Single Judge and dismiss W.P.(C) No. 9049/2012.
As far as W.A. No.1268/2013 and W.A. No. 1291/2013, are concerned, they have been filed by the same party. The appellant in W.A. No.1291/2013 has not made out a case for granting contract in their favour as such. No orders are required in W.A. No.1268/2013 in view of our judgment in W.A. No.942/2013. W.A. No.1268/2013 is closed. W.A. No. 1291/2013 is dismissed.
Sd/-
K. M. JOSEPH, JUDGE Sd/-
A. HARIPRASAD, JUDGE.
Dpk /true copy/ PS to Judge.