Puran Singh vs Union Of India And Others
2021 Latest Caselaw 1327 j&K

      HIGH COURT OF JAMMU AND KASHMIR AND LADAKH
                       AT JAMMU
                                 Reserved on :  23.09.2021
                                 Pronounced on: 22.10.2021

                                                               OWP No. 303/2016


Puran Singh                                              .....Appellant/Petitioner(s)

                                  Through :- Mr. Ashok Sharma, Advocate

                            v/s

Union of India and others                                         .....Respondent(s)

                                  Through :- Mr. Vishal Sharma, ASGI


Coram:        HON'BLE MR. JUSTICE RAJNESH OSWAL, JUDGE

                                  JUDGMENT

1. The petitioner, pursuant to the auction notice bearing No.

Misc/GEN/1/Trees/DEO dated 01.05.2014 for 89 trees situated at 31

RR Military Station, Udhampur issued by the respondent No. 3,

participated in the auction and emerged as the highest bidder on

15.05.2014 for offering a price of Rs. 7,25,500/-. As per the

condition of the auction notice, besides depositing earnest money of

Rs. 25,000/-, the petitioner also deposited 25% of the highest bid

money immediately at the fall of hammer. The petitioner claims to

have waited for acceptance of his offer and it was only after 18

months, the respondents accepted the bid of the petitioner.

2. It is further stated by the petitioner that as the bid was accepted after

more than 18 months, so in the intervening period the price of wood

had come down about 50% of the total amount of the bid. The

petitioner claims that the market rate of the wood at the time of

auction was Rs. 750 per quintal i.e. in the month of May, 2014. The

petitioner has further stated that he continued to approach the

respondent No. 3 number of times and finally on 03.12.2015

requested the respondent No. 3 to pay back his 25% of the amount

already deposited by him on 15.05.2014 but the same was not paid

by respondent No. 3 deliberately and in turn re-auction notice was

issued on 18.02.2016 causing pecuniary loss to the petitioner.

Thereafter, the petitioner claims to have issued the legal notice dated

06.02.2016 to respondent No. 3 requesting him for refund of his

money but the respondent No. 3 forfeited 25% of the amount i.e. Rs.

1,81,375/- deposited by the petitioner at the time of bid vide notice

issued by the respondents on 29.01.2016.

3. The petitioner has challenged the forfeiture of the sum of Rs.

1,81,375/- on the ground that the respondent No. 3 intentionally and

willfully despite numerous requests of the petitioner did not grant

permission to the petitioner to remove the trees and further caused

delay of 18 months in communicating the approval of bid and it has

resulted in huge loss to the petitioner, as the price of the auctioned

wood was reduced to 50 % of the total market value as it existed at

the time of bid. It is further stated that the petitioner has been

condemned unheard and without affording opportunity of being

heard, the amount has been forfeited. The petitioner has prayed for

quashing of order of forfeiture of the amount of Rs. 1,81,375/- and

further prayed for issuance of appropriate directions to the

respondents to refund the above mentioned amount.

4. The petitioner has placed on record the copy of the auction notice

dated 01.05.2014, the receipt regarding the amount deposited by the

petitioner with the respondent as advance money, letter dated

03.12.2015 and legal notice dated 06.02.2016 and subsequent auction

notice dated 18.02.2016 issued by the Defence Estates Officer,

Udhampur Circle, respondent No. 3 herein. During the pendency of

the present writ petition, the petitioner has also placed on record the

receipt regarding the bid money deposited by the successful bidder

pursuant to re-auction conducted by the respondents and perusal of

the said receipt reveals that the tress have been auctioned for a sum

of Rs. 3,05,000/-.

5. Response stands filed by the respondents in which it is admitted that

the petitioner after emerging as successful bidder has deposited a

sum of Rs. 1,81, 375/-. It is further submitted by the respondents that

after the payment was received by the respondents, the case was

forwarded to respondent No. 2 for approval vide office letter dated

21.05.2014 (Annexure-II to the objections filed by the Respondents).

The Competent Authority raised certain observations vide letter

dated 23.06.2014 (annexure-III to the objections filed by the

Respondents) and the matter was again taken up with the Army

Authority vide letter dated 30.06.2014 for rectification of the

observations. It is further stated that it took some time to rectify the

observations as different agencies i.e. Sericulture Department, State

Government and local authorities were involved in the said process

and after rectification, the Competent Authority accorded the

approval for removal of trees vide order dated 23.10.2015

(Annexure-IV). After the approval, the petitioner was asked to

deposit the balance amount i.e. 75% of bid money and 10% security

deposit within seven days vide letter dated 06.11.2015 (Annexure-

V). Thereafter, the petitioner made a representation on 03.12.2015

that he was not interested in the contract as the rates of the wood had

come down and the decision to accept the bid after 18 months was

not justified. The said representation was sent to the Competent

Authority vide letter dated 08.12.2015 (Annexure-VII). However, the

Competent Authority directed to give final chance to the contractor

to deposit the balance amount and further it was mentioned in the

notice that if he failed to deposit the amount, the amount already

deposited by him shall be forfeited but the petitioner did not respond

to the said notice and thereafter fresh auction notice was issued and

the permission letter was given to new contractor, namely, Mulkh

Raj for removal of 89 trees. It is further stated by the respondents

that as per terms and conditions of the auction notice, in case of

failure to cut/ remove the trees within the stipulated time, the

contractor is liable for penalty at the discretion of the Defence

Estates Officer (DEO) and further DEO has reserved the right to

cancel the contract and forfeit the advance amount. It is further

mentioned in the auction notice that in case of breach of any term

and condition of the auction notice, the contractor shall be liable for

penalty including forfeiture of his security.

6. Mr. Ashok Sharma, learned counsel for the petitioner vehemently

submitted that the respondents consumed 18 months in approving the

bid of the petitioner and by that time, the rates of the wood had

substantially come down and the respondents have acted in a very

unfair and unreasonable manner.

7. Per contra, Mr. Vishal Sharma, learned ASGI, has vehemently

argued that the respondents were well within their right to either

approve or refuse the bid of the contractor and it was stipulated in the

auction notice that acceptance of the bid was to be made by the

Competent Authority. As the number of agencies were involved for

clearing the observations made by the Competent Authority so

Competent Authority took some time to grant the approval for the

bid.

8. Heard and perused the record.

9. As per the terms and conditions of the auction notice, the petitioner

was required to deposit 75% of the balance money plus 10% as

security money and TCS as applicable, on the acceptance of the bid

by the Competent Authority. The Competent Authority had reserved

the right to reject/accept any bid/highest bid without assigning any

reason thereof and decision of the Defence Estates Officer,

Udhampur Circle was held to be final. So the bid made by the

petitioner/contractor was required to be approved by the Competent

Authority. The bid admittedly was made on 15.05.2014 and as per

response filed by the respondents it was approved by the Competent

Authority on 23.10.2015 i.e. it took 17 months and 8 days for the

Competent Authority to grant the approval of the bid made by the

petitioner. It is evident from the terms and conditions of the auction

notice that no period has been stipulated in the auction notice for

approval of the bid by the Competent Authority. Even the perusal of

the letter dated 18.12.2015 (Annexure-V to the objections filed by

the respondents) addressed by the respondent No. 3 to respondent

No. 2 reveals that the respondent No. 2 has himself observed that no

time limit to accept the bid has been mentioned therein besides there

is no mechanism to deal with cases wherein inordinate delay has

occurred to communicate approval of the bid. So, there is admission

on the part of the respondents that there was inordinate delay in

communicating the approval of the bid. Now in such scenario when

the respondents have themselves admitted that there is no mechanism

to deal with the cases where there is inordinate delay in

communicating the approval of the bid, it is to be seen as to whether

the respondents have acted in a reasonable manner or not. It is apt to

take note of section 6 of the Jammu and Kashmir Contract Act, 1977

(1920 A. D.) which reads as under:

"6. Revocation how made.- A proposal is revoked-

(1) by the communication of notice of revocation by the proposer to the other party;

(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

(3) by the failure of the acceptor to fulfill a condition precedent to acceptance; or (4) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance."

10. A perusal of sub section 2 of section 6 of the Act reveals that a

proposal is revoked by the lapse of time prescribed in such proposal

for its acceptance and where no time is so prescribed, by the lapse of

a reasonable time, without communication of the acceptance

meaning thereby when the proposal is not accepted within the

reasonable time. In the instant case, this is an admitted fact that no

period was provided for acceptance of the bid by the Competent

Authority so it is required to be considered as to whether the offer

made by the petitioner stood revoked by the lapse of time as the

same was not accepted by the Competent Authority within the

reasonable time. The expression "reasonable time" may vary from

case to case. In certain circumstances even a delay of few days may

be fatal and in certain other circumstances, the delay of few months

may not be fatal.

11. The contention of the petitioner is that the respondents did not accept

the bid within the reasonable time and they took 17 months and 8

days during which the rates of the wood had substantially come

down and this contention of the petitioner is substantiated by the

amount of bid offered and accepted by the respondents in the re-

auction conducted on 06.03.2016 where 89 trees those were the

subject matter of the earlier auction notice, were re-auctioned for a

sum of Rs. 3,05,000/- so there is substantial difference of Rs.

4,20,500/-. The time consumed by the respondents for granting the

approval of the bid of the petitioner can by no means be termed as a

reasonable time for acceptance of the bid particularly when the

respondents have themselves admitted that there is no mechanism to

deal with the cases where inordinate delay has occasioned in

communicating the acceptance. The use of word "inordinate delay"

by the respondents themselves in the Annexure-V (supra) is self

explanatory that means usually or disproportionately large or

excessive. The respondents should have obtained the requisite

clearances for the purposes of cutting the trees in question before

putting the same for auction and the respondents cannot be permitted

to forfeit the amount solely on the ground that no time was

prescribed for acceptance of the bid by the Competent Authority. If

such contention of the respondents is accepted, then there cannot be

any time limit for acceptance of proposal and that shall be violative

of Contract Act (supra) The bid should have been accepted within a

reasonable time and if the respondents did not accept the same within

the reasonable time, then the offer stood revoked, notwithstanding its

acceptance beyond the reasonable time.

12. The State and its authorities/instrumentalities while dealing with its

citizens must act with fairness as well as in reasonable and

transparent manner. While the relationship between the parties after

the contract has come in to existence, is governed by the terms and

conditions of the contract and it does not matter if one of the

contracting party is State but at pre contract stage, the State and its

instrumentalities must act in a transparent, fair and reasonable

manner. Any action of the State which is not informed by fairness

and reason is constitutionally invalid on the touchstone of article 14

of the constitution of India.

13. In Shrilekha Vidyarthi (Kumari) v. State of U.P, reported in

(1991) 1 SCC 212, Apex Court has observed as under

"21. The Preamble of the Constitution of India resolves to secure to all its citizens Justice, social, economic and political; and Equality of status and opportunity. Every State action must be aimed at achieving this goal. Part IV of the Constitution contains

„Directives Principles of State Policy‟ which are fundamental in the governance of the country and are aimed at securing social and economic freedoms by appropriate State action which is complementary to individual fundamental rights guaranteed in Part III for protection against excesses of State action, to realise the vision in the Preamble. This being the philosophy of the Constitution, can it be said that it contemplates exclusion of Article 14 -- non-arbitrariness which is basic to rule of law -- from State actions in contractual field when all actions of the State are meant for public good and expected to be fair and just? We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. In our opinion, it would be alien to the constitutional scheme to accept the argument of exclusion of Article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals.

22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply

with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non-arbitrariness at the hands of the State in any of its actions.

24. The State cannot be attributed the split personality of Dr Jekyll and Mr Hyde in the contractual field so as to impress on it all the characteristics of the State at the threshold while making a contract requiring it to fulfil the obligation of Article 14 of the Constitution and thereafter permitting it to cast off its garb of State to adorn the new robe of a private body during the subsistence of the contract enabling it to act arbitrarily subject only to the contractual obligations and remedies flowing from it. It is really the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters. There is a basic difference between the acts of the State which must invariably be in pubic interest and those of a private individual, engaged in similar activities, being primarily for personal gain, which may or may not promote public interest. Viewed in this manner, in which we find no conceptual difficulty or anachronism, we find no reason why the requirement of Article 14 should not extend even in the sphere of contractual matters for regulating the conduct of the State activity.

14. In ABL International Ltd. v. Export Credit Guarantee Corpn. of

India Ltd., reported in (2004) 3 SCC 553, the Apex Court has held

as under:

"28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other

provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] .) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."

15. Thus in view of the inordinate delay in acceptance of offer and

communication thereof, this court is of the considered opinion that

the action of the respondents in forfeiting the amount paid by the

petitioner is unfair, unjust and arbitrary.

16. In view of what has been discussed above, the present petition is

allowed and the forfeiture of sum of Rs. 1,81,375/ by the respondents

is held to be bad in law and the respondents are directed to refund the

sum of Rs. 1,81,375/ along with interest @ 5% per annum from

01.02.2016 within a period of three months from today.

(RAJNESH OSWAL) JUDGE

JAMMU 22.10.2021 Rakesh Whether the order is speaking: Yes Whether the order reportable: Yes