Ankit Sharma vs State Of U.P. And 2 Others
2015 Latest Caselaw 5308 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Chief Justice's Court							     AFR
 

 
Case :- PUBLIC INTEREST LITIGATION (PIL) No. - 50508 of 2015
 

 
Petitioner :- Ankit Sharma
 
Respondent :- State Of U.P. And 2 Others
 
Counsel for Petitioner :- Ajay Kumar Sharma
 
Counsel for Respondent :- C.S.C.,Sanjay Kumar Pundir,V.K.Dixit
 

 
Hon'ble Dr. Dhananjaya Yeshwant Chandrachud,Chief Justice
 
Hon'ble Yashwant Varma,J.

(Per: Dr D Y Chandrachud, CJ)

These proceedings have been instituted in the public interest. The subject matter of the writ petition relates to the award of a contract by the Zila Panchayat of Saharanpur for the realization of a fee from vehicles carrying mines and minerals for the period between 1 April 2015 to 31 March 2018 in the total amount of Rs 6.40 crores. The principal basis on which the petition has been filed is that for the previous contractual period between 2012 to 2015, the total value at which an agreement was executed was Rs 17.10 crores. As a consequence of the bid which was accepted in the bidding process for the current cycle, the revenue stands to loose an amount of Rs 10.70 crores.

An affidavit was filed by the Tax Officer of the Zila Panchayat, Saharanpur on 8 September 2015 in response to the petition. The affidavit states that a public notice was issued in the newspapers on 20 January 2015 for an auction which was fixed for 7 February 2015. No bids were received and the auction was postponed. Thereafter, in pursuance of a notice dated 6 February 2015, an auction was to take place on 13 March 2015 but on that date, two firms participated in the auction where the highest bid was in the amount of Rs 6.21 crores. The bid was not sanctioned by the Chairperson on the ground that it was not found to be sufficient and hence a fresh auction notice was published in the daily newspapers on 14 March 2015 for an auction to be conducted on 20 March 2015. On 20 March 2015, the highest bid which was received was in the amount of Rs 6.21 crores which was again not sanctioned on the ground of insufficiency of the bid amount and a fresh auction notice was published on 21 March 201 for an auction on 26 March 2015. At the auction which was held on 26 March 201, the highest bid was of the third respondent, an entity by the name of Yamuna Enterprises for a value of Rs 6.40 crores.

On 26 March 2015, a communication was addressed by the Uppar Mukhya Adhikari, Zila Panchyat, Saharanpur to the Principal Secretary, Panchayat Raj. On 6 April 2015, the Uppar Mukhya Adhikari issued directions for the execution of an agreement with the third respondent.

On 20 June 2015, the then Commissioner of the Saharanpur Division addressed a communication to the Principal Secretary, Panchayat Raj. In his communication, the Commissioner adverted to the fact that on 26 March 2015, a proposal had been moved by the Uppar Mukhya Adhikari to the State Government for its approval. Subsequently, between 31 March 2015 until 2 April 2015, an amount of Rs 3,63,325/- had been realized towards revenue collection, after the term of the earlier contract had come to an end. Having regard to this revenue realization, the Commissioner opined that it was likely that the actual revenue collection would be in the vicinity of Rs 26.15 crores (as opposed to Rs.6.40 crores which was the highest bid of the third respondent). On this ground, an early decision of the State Government was solicited. The petition was instituted before this Court to challenge the decision of the Uppar Mukhya Adhikari of 6 April 2015 for the execution of a contract agreement with the third respondent.

On 16 September 2015, this Court adverted to the report submitted by the Commissioner, Saharanpur Division to the Principal Secretary, Panchayat Raj on 20 June 2015. The Court indicated that prima facie the manner in which the contract had been awarded by the Zila Panchayat raises serious questions in regarding to the protecttion of the public revenue and public interest. Hence, both the Principal Secretary, Panchayat Raj and Commissioner, Saharanpur Division were directed to scrutinize the matter and take a considered decision within a period of three weeks. This Court specifically directed that all aspects including the legality of the purported auction process shall be looked into by the aforesaid officials. The question as to whether a cartel has been formed and price rigging had taken place was also directed to be considered. Finally, the Court also clarified that pendency of these proceedings shall not be construed to be any restraint on the authorities taking such action as is necessary in accordance with law to protect the interest of the revenue.

A counter affidavit has been filed on 1 December 2015 by the Principal Secretary, Panchayat Raj. The counter affidavit relies upon a report submitted by the present Commissioner of Saharanpur Division to the Principal Secretary, Panchayat Raj. The report states that the contract had been advertised on four occasions and on the fourth occasion, the highest bid was in the amount of Rs 6.40 crores. It has been stated that on 26 March 2015, the Addl. Chief Officer addressed a communication to the Principal Secretary, Panchayat Raj upon which the State Government issued a direction to act in accordance with the prescribed procedure. The Chairperson of the Zila Panchayat on the basis of the application submitted by the third respondent on 2 April 2015 directed the execution of the agreement till 7 April 2015 "in the interest of the Panchayat". An agreement was executed on 6 April 2015. The Principal Secretary, Panchayat Raj states in his affidavit that the District Magistrate, Saharanpur has indicated that no complaint had been received either during or before the approval of the auction and the documents which have been made available in the auction file did not indicate that the bidders were acting in collusion with one another.

The petitioner has filed an affidavit in rejoinder on 9 December 2015. The affidavit in rejoinder inter alia adverts to the fact that Yamuna Enterprises, the third respondent in whose favour the contract has been awarded has been constituted as a partnership firm by a deed of partnership dated 9 February 2015 (a copy of which is annexed to the rejoinder affidavit). The parties to the deed of partnership are:

(i) Vijay Dhawan;

(ii) Bhanu Karanwal;

(iii) Deepak Chaudhary; and

(iv) Sanjay Chaudhary

This firm has been constituted amongst the partners of two firms, namely Swagat Enterprises and United Associates who were the main contenders for the award of the contract for the previous bidding cycle of 2012-15. Of the four partners of the third respondent, Bhanu Karanwal is stated to be the son of Sanjay Karanwal, a partner of Swagat Enterprises. Sanjay Chaudhary was a partner of United Associates.

Certain material facts have come on the record in regard to the award of the contract for the previous bidding cycle of 2012-15. Initially on 30 March 2012, a contract was awarded for the period between 1 April 2012 to 30 March 2015 in the amount of Rs 6.02 crores. The auction proceeding which was held on 30 March 2015 was challenged in a writ petition1 before this Court by United Associates. The writ petition was disposed of by a Division Bench of this Court consisting of Hon'ble Mr. Justice R K Agrawal (as his Lordship then was) and Hon'ble Mr. Justice Vinay Kumar Mathur. By the direction of this Court, the Commissioner, Saharanpur Division was directed to scrutinize the matter including certain videograph recordings which were pressed in aid of the submission that the petitioner who offered a bid of Rs 10 crores in the auction proceeding had not been permitted to submit a bid. Eventually, in pursuance of the directions of the Division Bench, a fresh auction took place at which the contract was awarded in the amount of Rs 17.10 crores in favour of Swagat Enterprises. United Associates had offered a bid in the amount of Rs.17,00,10,000/-.

The affidavit in rejoinder has indicated before the Court that the third respondent was constituted by a deed of partnership dated 9 February 201. The partners have been alleged to be drawn from the two firms of Swagat Enterprises and United Associates who had been involved in the bidding process in the previous bidding cycle for 2012-15 or are close relatives.

Apart from the aforesaid material which has been produced before the Court, the petitioner has also placed on the record a copy of the Vigilance report submitted by the Superintendent of Police in the Vigilance Department of the State Government on 4 October 2015. The Vigilance report indicates that the contract has been awarded by the Zila Panchayat, Saharanpur for the realization of fee from vehicles carrying minerals at a value which is Rs 11 crores lower than the value of the contract for the previous contractual period 2012-15. The report indicates that the term of the previous contract ended on 31 March 2015 whereas the new contract was awarded on 2 April 2015. During this period, arrangements were made for the recovery of the fee through the employees of the Zila Panchayat when an amount of Rs 3,63,325/- has been realized. The report indicates that though the fee is realized from 11 locations within the jurisdiction of the Zila Panchayat, arrangements were made during this period, due to a paucity of staff to realize the fee from a lesser number of spots. The report indicates that even on the basis of a realization of the fee from the specific locations for which arrangements could be made during the period after the end of the term of the previous agreement, the total contract value would be approximately Rs 26.15 crores. If proper arrangements were to be made for recovery of license fee at all locations, the contractual amount would be significantly higher. The report of the vigilance department has also cast serious aspersions upon the officials, both elected and otherwise, at the level of the Zila Panchayat as well as on the conduct of the Collector and District Magistrate. There are specific allegations in the report which has been submitted in regard to the acquisition of assets by the President of the Zila Panchayat, Uppar Mukhya Adhikari, District Collector and by other persons. For the purpose of these proceedings, we may indicate that we are not inclined to broaden the inquiry beyond the scope of the public interest litigation.

The material which has been placed on the record indicates the brazen manner in which the authorities of the Zila Panchayat have chosen to award a contract without protecting the public revenues. Worse still, the material which has come before the Court indicates that even after specific directions were issued by this Court for a proper inquiry, no serious effort has been made on the part of the State Government to inquire into the matter. As we have noted earlier, for the period 2012-15, which was the term of the earlier contract, the highest bid which was realized was in the amount of Rs.17.10 crores. Even on that occasion, the realization of this bid in the value of Rs.17.10 crores was preceded by litigation before this Court. As the order of the Division Bench of this Court dated 5 April 2012 indicates, the authorities had initially accepted a bid in the amount of Rs 6.02 crores. When a complaint was made before this Court that a person with a higher bid of Rs 10 crores had been prevented from participating in the auction, the Division Bench directed the Commissioner, Saharanpur Division to look into the matter. Thereafter, when a re-auction took place, the highest bid for which the contract was awarded was in the amount of Rs 17.10 crores. After the term of the contract ended, bids were notified on four occasions. The highest bid which emerged after the fourth round of bidding was in the amount of Rs 6.40 cores. The previous Commissioner of Saharanpur Division addressed a report to the Principal Secretary, Panchayat Raj on 20 June 2015 in which he cast serious doubts on the bidding process and adverted to the fact that if the realizations between 31 March 2015 to 2 April 2015 were to be utilized for indicating a reasonable bid value for the current term, the realizations on account of revenue would be in the vicinity of Rs.26.15 crores. It was in this background that the Principal Secretary, Panchayat Raj was directed to scrutinize the matter.

When the petition came up before this Court, by an interim order dated 16 September 2015, both the Principal Secretary, Panchayat Raj and the Commissioner, Saharanpur Division were directed to look into the matter particularly in the backdrop of the report which was submitted on 20 June 2015. We are constrained to observe that both the present Commissioner of Saharanpur Division as well as the Principal Secretary, Panchayat Raj have completely abdicated their duties and functions and have chosen to gloss over the brazen manner in which the concerns of the revenue are sought to be defeated. The material which has come before this Court indicates that the third respondent in whose favour the bid has been awarded was constituted into a partnership firm barely a month before the final bidding process took place on 26 March 2015. The firm which was constituted under a deed of partnership dated 9 February 2015 consists of persons who are closely related to the partners of United Associates and Swagat Enterprises who were the two main contenders in the previous bidding cycle which took place for the contract for 2012-15. In fact, United Associates was the petitioner which had moved the Court in the previous writ petition (Writ-C No. 16678 of 2012) which resulted in the order of the Division Bench dated 5 April 2012. The least that was expected of responsible officers of the State Government was a due and proper application of mind to these circumstances which have now been placed on the record. The State has been a silent spectator despite the report which has been submitted by the Superintendent of Police in the Vigilance Department at Lucknow on 4 October 2015 drawing attention to the serious violations which have taken place in the award of the contract. The Principal Secretary, Panchayat Raj has simply chosen to rely upon the report of the Commissioner, Saharanpur Division. The Commissioner, Saharanpur Division has simply chosen to rely upon the report of the Collector and District Magistrate, Saharanpur. The Court has only been informed that there was nothing on the documentary material or on the auction file to indicate that a cartel has been formed or that the bidding process has been rigged. The fact that the bids which have been realized on this auction resulted in a highest offer which is Rs 10.70 crores lower than the contract value of the previous period is a matter which ought to have warranted a serious scrutiny on the part of the State. The scrutiny which has been carried out, we observe with a sense of responsibility, does only lip service to the need to protect the legitimate concerns of the revenue. The entire bidding process is thus evidently in violation of the fundamental requirement of fairness and fair procedure under Article 14 of the Constitution. The mere fact that a contract has been advertised on a number of occasions is no guarantee that it realizes a genuine or legitimate bid. In the present case, there is sufficient material to indicate that the process has been completely derailed and that the highest bid of Rs 6.40 crores is not reflective of what the value of the contract should be. As we have noted earlier, the realizations which were made after the term of the earlier contract had ended only at a few locations by the regular staff had led both the erstwhile Commissioner of Saharanpur Division as well as the Superintendent of Police in the Vigilance Department to observe that the contract value should not be less than Rs 26.15 crores. These are aspects to which no judicial body can shut its eyes, even if the officials of the State who are entrusted with the duty of protecting the interest of the State and the revenue have chosen to do so. Hence, consistent with the norms which are enshrined in Article 14, it would be impossible to subscribe to the decision of the State Government in this matter.

During the course of the hearing yesterday, an apprehension was expressed by the learned counsel appearing on behalf of the Zila Panchayat that though the previous contract had been awarded for an amount of Rs 17.10 crores, the amount may not have been realized. In order to enable the learned counsel to make a factual statement before the Court, we had adjourned the proceedings to today. During the course of the hearing, this Court has been informed by counsel for the Zila Panchayat on instructions that the amount of Rs 17.10 crores which was the bid amount fixed under the earlier contract was in fact realized by the Zila Panchayat.

For these reasons, we allow the writ petition. The decision taken by the second respondent on 6 April 2015 to award the contract to the third respondent shall, accordingly, stand quashed and set aside. We direct that a fresh auction shall take place in accordance with law so that the contract is finalized by following all procedural norms consistent with Article 14 of the Constitution. In the meantime, we direct the Zila Panchayat, Saharanpur to make all appropriate interim arrangements to ensure the due collection of the fee in accordance with law until a fresh contract can be finalized.

A copy of this order shall be forwarded to the Chief Secretary of the State Government so that such steps as are necessary to protect the administrative interest of the State Government are taken for the future. The Chief Secretary, it is needless to clarify, shall take into account the conduct of all the public officials involved in the matter and determine what action is necessary, after due notice.

The learned senior counsel appearing on behalf of the third respondent has submitted before the Court that since the award of the contract in favour of the third respondent has been quashed, the third respondent may be permitted a refund of the amount which has been deposited including the security deposit after making due deductions, if any. We leave it open to the third respondent to move the Zila Panchayat for a necessary decision and consequential action.

The writ petition is, accordingly, disposed of. There shall be no order as to costs.

 
Order Date :- 10.12.2015
 
RK
 

 
		            (Yashwant Varma, J)     (Dr D Y Chandrachud, CJ)