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2014 (4) TMI 1211

Eligibility of auction - permissible for the Port Trust to terminate the tender - Held that:- As already pointed out that can hardly be a ground to test the validity of a decision in administrative law. For the sake of argument, even if you presume that there a concluded contract, mere termination thereof cannot be dubbed as arbitrary. A concluded contract if terminated in a bonafide manner, that may amount to breach of contract and certain consequences may follow thereupon under the law of contract. However, on the touch stone of parameters laid down in the administrative law to adjudge a decision as are arbitrary or not, when such a decision is found to be bonafide and not actuated with arbitrariness, such a contention in administrative law is not admissible namely how and why a concluded contract is terminated. We, therefore, reject this contention of the appellant. - Doctrine of promissory estoppel applicability - Held that:- If there is a supervening public equity, the Government would be allowed to change its stand and has the power to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such pe .....

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o Mukherjee, Divya Anand, Aniruddha P. Mayee and Nitin Lonkar, Advs. 1. Leave granted. 2. The factual matrix which needs to be taken note of, for the purpose of deciding the present appeal, unfolds as under:- Respondent No. 2 herein, viz., the Board of Trustees of Kandla Port Trust (hereinafter referred to as the 'Port Trust') has number of plots, in and around Kandla Port, which are of different sizes. The Port Trust took a decision, sometime in the year 2005, to allot these plots on leasehold basis for a period of 30 years for the purpose of enabling the allottees thereof to put up the construction of liquid storage tanks. For this purpose the Kandla Port Trust issued notice inviting tenders dated 12.3.2005. The annual rent in respect of these plots was fixed at a nominal rate of Re. 1/- per plot. However, the bidders were required to submit the price bid in the form of premium in respect of the concerned plots for which they intended to bid. The basic value of this premium was fixed at ₹ 612/- per sq. mtr. The bids were to accompany the earnest money deposit of ₹ 3 lakhs per plot. As per the prescribed procedure in such matters, the Port Trust held pre-bid me .....

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ted. This prolonged time lag resulted in taking decision by the Board of Trustees on 9.12.2010, in the form of Resolution No. 108, deciding to cancel the tender process started in the year 2005. This decision of the Port Trust was conveyed to the appellant vide letter dated 9.12.2010. Similar letters were written to other tenderers as well who were issued similar LOI's. 6. All these affected persons challenged the validity of Resolution No. 108 of the Port Trust by preferring Writ Petitions under Article 226 of the Constitution of India in the High Court of Gujarat. One such Writ Petition being Special Civil Application No. 286 of 2011 filed by M/s. Nikhil Adhesives Ltd. was dismissed by the High Court vide detailed reasoned judgment dated 4.2.2011. Another SCA NO. 1328 of 2011 filed by IMC Limited was also dismissed by detailed reasoned order on 7.2.2011. When the petition of the appellant herein i.e. SCA No. 1877 of 2011 came up before the same Bench of the High Court on 10.2.2011, following the decision in the said two Writ Petitions the Court dismissed the petition of the appellant as well with one paragraph order, which reads as follows:- Identical petitions for the same p .....

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re amounted to infraction of Article 14 of the Constitution. 11. The High Court negated all the aforesaid propositions. Answering the first argument, the High Court concluded that the LOI issued by the Port Trust was just an information that the addressee (the petitioner therein) had been declared highest bidder for the plot for which it had submitted its tender. This letter further informed that formal allotment letter shall be issued after the receipt of CRZ clearance in general by Port Trust for tank forms for handling all hazardous and non- hazardous and also informing that additional CRZ clearance if required for installation, safety, pollution control etc. had to be obtained by the said petitioner, from time to time at its cost. This letter also mentioned that payment will be made by the said petitioner after obtaining CRZ clearance for the individual premises allotted to it or within 3 months of issuance of allotment letter whichever was earlier. In the opinion of the High Court it did not result in any concluded contract. In the process, the High Court also noted that after the issuance of LOI on 12.1.2006 till the passing of Resolution No. 108 dated 22.11.2010, no effectiv .....

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e and before any formal letter of allotment is issued, the earlier tender process stood cancelled.. 12. In so far as argument based on Article 14 is concerned, the High Court found that the action on the part of the Port Trust was neither arbitrary nor malafide. Before taking the decision, the Board had sought the opinion of the Additional Solicitor General. Further, the Port Trust was within its right to take such a decision in the year 2010 keeping in mind the larger public interest. The court noted that the original tender premium in the year 2005 was fixed on ₹ 612/- per sq. mtr. whereas fresh tender premium, after the cancellation of the earlier tender process was fixed at ₹ 8358 per sq. mtrs. 13. In so far as argument of promissory estoppel is concerned the same was rejected on the ground that the LOI did not amount to any promise. Further, the petitioner had paid only ₹ 3 lakhs by way of earnest money as against the total premium amount which was 23.74 crores and was to be paid only after receipt of the said CRZ clearance, which amount was never paid. 14. The reading of the judgment in IMC Limited case would reveal that the Counsel for the petitioner in tha .....

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le discussing the same, we would take note of the arguments which were advanced by both the sides on these propositions. I WHETHER DECISION CONTAINED INRESOLUTION NO. 108 DATED 9.12.2010 ISARBITRARY AND MALAFIDE. 16. Few facts, leading to this impugned Resolution, which need to be recapitulated are the following:- Tenders for allotment of plots on leasehold basis were floated on 12.3.2005. After receiving bids and evaluating technical as well as price bids respectively, the Tender Committee had recommended the cases for allotment of plots. In so far as the appellant is concerned in respect of all the three plots bearing No. 14, 15 and 17, LOI was issued after the Board agreed to accept the recommendations of the Tender Committee in its meeting held on 8.12.2005. However, in the LOI it was made clear that formal letter of allotment will be issued after receiving the CRZ clearance in general and if any further CRZ clearance was required for installation, safety, pollution etc. the same was to be obtained by the appellant. The Port Trust applied to the Ministry of Environment, Government of India for such permission. However, for one reason or the other, this permission/ clearance was .....

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hether there was a concluded contract between the parties. This distinction is lucidly explained in Kisan Sehkari Chini Mills & Ors. v. Vardan Linkers & Ors.; (2008) 12 SCC 500. Keeping in mind this distinction between the two, we are not required to bring in the contractual elements of the case while dealing with the administrative law aspects. 18. 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 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. Whether this court should, in judicial review, sit in judgment over the decision of a public body which is of the view that it need not go further ahead with the tender process. 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 High Court analysed the reasons and has taken the view that those reasons are valid. In our view in matte .....

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he Authority's action in accepting or refusing the bid must be free from arbitrarinesses or favouritism. 20. Lucid enunciation on the scope of judicial review of administrative action, that too in tender matters can be found in Tata Cellular v. Union of India (1994 (6) SCC 651), where following discussion is worthy of extraction: 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 tneder 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 exer .....

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e 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 could not see on what basis the Secretary of State had reached his conclusion. ii) 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. 21. In Tejas Constructions and Infrastructure (P) Ltd. v. Municipal Council, Sendhwa & Anr.; 2012 (6) SCC 464, 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 of that case reads as follows: In Raunaq International Ltd. v. IV.R. Construction Ltd. (1999) 1 SCC 492, this Court reiterated the principle gover .....

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e 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 stying 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 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 arbi .....

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e. For this reason it was specifically mentioned in the LOI itself that the premium amounts were to be paid by the appellant only after the receipt of CRZ clearance in general and after issuance of allotment letter as well as individual CRZ clearance and on execution of these documents. Before these events could happen, the Port Trust decided to cancel the entire process. Thus, except making payment of ₹ 3 lakhs by way of earnest money the appellants did not incur any other expenses or suffered any liabilities or took any steps to implement the project of construction and maintenance of the tanks. The High Court has, therefore, rightly remarked that even if it is assumed that issuance of LOI tantamounted to a promise given by the Port Trust, the appellants did not alter its position to its prejudice pursuant thereto to such an extent which could inspire the court to take the decision that holding the promisor to its representation is necessary to do justice between the parties. 26. In MP Mathur & Ors. v. OIC & Ors.; 2006 (13) SCC 706 it is held that once the public interest is accepted as the superior equity which can override individual equity, the principle would be .....

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rom the five sugar mills at a price of ₹ 127 per quintal. Around that time, the State Government received several reports that the prevailing price of molasses was much higher. The Secretary, Cane Development and Sugar Industries (Secretary (Sugar)) therefore, stayed the operation of ACC's order. The respondent then approached the High Court by a writ petition seeking a direction for continuance of supply of the entire quantity of 85,000 quintals of molasses to it. By an interim order, the High Court directed the State Government to decide the respondent's claim after hearing the respondent. Pending such decision, the High Court permitted the respondent to lift up to 20,000 quintals of molasses. After hearing the respondent, the Secretary (Sugar) held that there was no valid contract for supply of molasses to the first respondent and that, therefore, the allotment letter issued by the ACC was without any authority. Consequently he cancelled the same. Aggrieved by the interim order of the High Court to supply 20,000 quintals of molasses to the respondent, the appellants approached the Supreme Court which in turn, set aside that interim order and permitted the responden .....

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have already held that the impugned decision of the Port Trust was not arbitrary, unreasonable or malafide and further that the doctrine of promissory estoppel has no application in the present fact situation. 31. In so far as the issue regarding concluded contract in the present case is concerned, this falls squarely in the realm of the contract law, without any hue or shade of any public law. In fact, that is not even pleaded or argued. At the same time, whether there was a concluded contract or not is seriously disputed by the respondents and, therefore, in the first instance it was not even necessary for the High Court to go into this issue and could have relegated the appellant to ordinary civil remedy. We are conscious of the position that merely because one of the authorities raises a dispute in regard to the facts, it may not be always necessary to relegate the parties to a suit. This was so stated in ABL International Ltd. & Anr. v. Export Credit Guarantee Corporation of India Ltd. & Ors.; JT 2013 (10) SC 300 in the following manner:- 37. In our opinion, this limited areas of dispute can be settled by looking into the terms of the contract of insurance as well as .....

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vals from different authorities and these included approvals from CRZ as well. As per clause 16, the allotment was to be made subject to the approval of Kandla Port Trust Board/ Competent Authority. In view of this material on record and factual position noted in earlier paras we are of the opinion that observations in the case of Dresser Rand S. A. v. M/s. Bindal Agro Chem. Ltd. & Anr.; AIR 2006 SC 871, would be squarely available in the present case, wherein the court held that a letter of intent merely indicates a parties intention to enter into a contract with the other party in future. A letter of intent is not intended to bind either party ultimately to enter into any contract. It is no doubt true that a letter of intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the offer and asking the contractor to start the work with a stipulation that a detailed contract would be drawn up later. If such a letter is issued to the contractor, though it may be termed as a letter of intent it may amou .....

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