A quantity of 1,15,600 kgs of steel scrap from the construction site of the first respondent, which is the agency responsible for the construction of the new High Court building at Gomti Nagar, Lucknow, was advertised for sale through a public auction. In the first round on 13 June 2014, 10 bids were received. The highest bid was of a bidder by the name of Rohit Steel which had offered a rate of Rs.40 per kg. The bid was awarded to Rohit Steel which was required to deposit a sum of Rs.46.24 lacs. The successful bidder failed to deposit the amount by the extended date of 6 July 2014 following which the bid was cancelled and the earnest money of Rs.50,000/- was forfeited. The Purchase Committee of the first respondent resolved to make an offer to the second highest bidder at the same rate that was offered by the highest bidder and accordingly, a communication dated 7 July 2014 was addressed to the second highest bidder. Since the second highest bidder also did not accept the offer at the rate of Rs.40 per kg, the tender proceeding was cancelled.
A second auction notice was published in the newspapers on 25 July 2014 and bids were to be opened on 12 August 2014. No bid was received. Consequently, the tender proceeding was cancelled.
On 15 August 2014, a fresh auction notice was published for which tenders were to be opened on 22 August 2014. Bids were submitted by five firms, including the petitioner and the fifth respondent. The bids of two bidders, namely, the petitioner and the fifth respondent were found not to be eligible on the ground that they had not submitted copies of the TAN registration and the registration certificate of the service tax department. Three firms were found to be eligible of which the highest bid was of the fifth respondent, Akash Traders, in the amount of Rs.26.50 per kg. The bid submitted by the fifth respondent was accepted and the fifth respondent was directed to deposit an amount of Rs.30,63,400/-.
The petitioner has moved these proceedings to challenge the decision of the Purchase Committee to award the contract to the fifth respondent. When the petition came up initially before the Division Bench on 2 September 2014, a statement was made on behalf of the petitioner that though the petitioner had offered an amount of Rs.28.20 per kg, the contract of scrap has been awarded to the fifth respondent who had offered Rs.26.50 per kg and as of date, the petitioner was ready and willing to enhance the offer. The Division Bench having due regard to the rates quoted by the fifth respondent and as offered by the petitioner, suspended the auction proceedings till the next date of listing. A counter affidavit has been filed by the first respondent to which there was a rejoinder by the petitioner.
The principal ground on which the petition has been opposed is that the petitioner was not an eligible bidder. The terms and conditions governing the auction sale required eligible bidders to furnish, inter alia, copies of the TAN registration. Besides, it was stated that the bidder should be registered with the Commercial Tax Department. Admittedly, the petitioner did not possess a TAN registration and the service tax number which also was required to be furnished under the terms and conditions governing the auction sale. Moreover, it has been submitted on behalf of the first respondent that the petitioner did not enclose a copy of the Income Tax clearance of the previous three years which was also a requisite condition. The relevant conditions of the auction notice have been annexed at Annexure CA-1 of the counter affidavit, which reads as follows:-
"A. Should have registered in Commercial Tax Department.
B. Permanent Account Number - The Contractor should furnish copy of Permanent Account Number (PAN).
C. TIN - The Contractor should furnish copy of TIN.
D. TAN - The Contractor should furnish copy of TAN.
E. Service Tax Number - The Contractor should furnish copy of service Tax No. F. Income Tax clearance - Enclose copy of Income Tax clearance of the last three years."
On these facts of which there is no dispute, we do not find any merit in the grievance of the petitioner that the contract ought to have been awarded to the petitioner. The question of opening commercial bids arises as between bidders who are found to be eligible under the tender conditions. Once the petitioner did not fulfill the requirements of eligibility, there could be no legitimate grievance on the part of the petitioner of the contract not being awarded to it.
However, in our view, that, by itself, should not result in the dismissal of the petition simplicitor. Whether or not the petitioner would be ultimately entitled to the award of the contract is not the sole issue particularly in a matter, such as the present, where steel scrap is lying at the construction site of the High Court and which is under the custody and control of a Corporation owned and controlled by the State Government. The first respondent is entrusted by the State Government of the work of constructing the building of the High Court at Gomti Nagar, Lucknow. The first respondent cannot act as a private party or a private builder. It is an agency and/or the instrumentality of the State under Article 12 of the Constitution, which is amenable to the writ jurisdiction under Article 226. The decisions, which the first respondent takes, have to be guided by the norms of fairness and non-arbitrariness under Article 14 of the Constitution. It is necessary for the Court to particularly emphasize, in the strongest possible terms that the first respondent, while executing this public project of constructing a building for the High Court which is intended to sub-serve the wider interest of the litigating public, must be cognizant of the public duty which it is performing as an agency which is nominated by the State for carrying out the work of construction.
The amount involved in a particular auction process cannot be the touchstone. The norms which the first respondent follows must be transparent and must be above board. In the present case, we are not satisfied that the first respondent has acted in an entirely bona fide manner. The first respondent was in the process of selling steel scrap which, obviously, has a commercial value. The least that is to be accepted is that an agency, such as the first respondent which has experience in the area of civil construction, would have an objective assessment of the value which ought to be realized in the course of the sale process. When the first respondent is selling a commodity which has a commercial value, it is necessary for it to fix a reserve price before it proceeds to hold an auction. The failure to do so results in a situation which has emerged before the Court in the present case. In the first round of the auction which took place on 13 June 2014, the purchase was awarded to Rohit Steel which had quoted the highest rate of Rs.40 per kg. Rohit Steel, admittedly, did not have either a service tax registration or a TAN number, which is evident from the comparative chart annexed at Annexure CA-2 to the counter affidavit. How the first respondent could have awarded a contract to a contractor which did not admittedly fulfill the tender condition defies explanation. Yet on the same anvil, the petitioner had been informed that his bid which was eventually rejected in the third round of auction could not have been accepted because he did not fulfill the requirements which were waived in the first instance in the case of Rohit Steel.
In the course of the first auction, since the second highest bidder did not accept the rate which was quoted by the highest bidder, the auction was cancelled. In the second auction, no bidder emerged. Hence, a third auction was conducted on 22 August 2014. The rates which were quoted at the first auction and the rates which have emerged in the third auction would reveal a progressive reduction in the rates. The fifth respondent had quoted a rate of Rs.30 per kg in the first auction. The bid which has been awarded in the third auction to the fifth respondent is at the rate of Rs.26.50 per kg. Similarly, it appears that the petitioner had quoted the rate of 33.44 per kg, which has been scaled down to Rs. 28.20 per kg (plus tax) in the third auction. This scenario, to our mind, is indicative of the fact that the rival bidders have acted in their own private interest and the first respondent has merely accepted at the highest bid without having regard to whether the bid itself represents a reasonable offer for the sale of the steel scrap. It is necessary to emphasize that the first respondent or, for that matter, any public authority is not bound to accept the highest bid (when it involves the sale of a commodity) or the lowest bid (when it involves the purchase of a commodity). Ultimately, the authority has to be satisfied that the bid which has been quoted is reasonable. The reasonableness of an offer can be assessed objectively if the bid is evaluated with reference to a reserve price. No reserve price was fixed.
For these reasons, we have come to the conclusion that though the petitioner would not be entitled to any relief in these proceedings, nonetheless the process which has been followed by the first respondent is not fair and reasonable. The process does not fulfill the norms which are required to be followed by a public authority, which is amenable to its actions being scrutinized with reference to the provisions of Article 14 of the Constitution.
In this view of the matter, we are inclined to set aside the auction process, which we hereby do. We direct the first respondent to fix a reserve price and thereafter to re-advertise the scrap for the purposes of a fresh auction. We may also indicate that the petitioner has made certain allegations in the course of these proceedings against parties who are not impleaded. For the purposes of the present judgment and in the view which we have taken, it is not necessary for this Court to deal with those allegations.
In the circumstances, the petition is disposed of in the aforesaid terms. While doing so, however, we particularly emphasize the need for the first respondent to maintain norms of fairness and transparency in its dealings in the ensuing work which is being carried out for the purpose of the construction of the building of the High Court at Gomti Nagar, Lucknow.
A copy of this order shall be made available to the Chairperson of the first respondent, who shall personally ensure that all decisions which are taken by the first respondent in respect of the Gomti Nagar Project are strictly in accordance with the norms that will ensure a transparent and accountable completion of the public project.
The petition is, accordingly, disposed of. There shall be no order as to costs.
Order Date :- 10.10.2014 VMA (Dr. D.Y. Chandrachud, C.J.) (V.K. Shukla, J.)