1. ' ZAHID HAMID, J.---By this order the instant petition whereby the petitioner has inter alia claimed back the earnest money paid by him in the open auction shall stand disposed of.
2. ' The facts are that the respondents invited bids for collection of royalty rights of surface minerals such as Stone/Gravel, Sand, Limestone, Silica etc. The relevant conditions of the Auction notice appearing in 'Dawn' dated 26-5-2008 inter alia were (i) a reserved price was fixed at Rs,3,00,02,500 (Rupees Three Crore Two Thousand Five Hundred) (ii) earnest money at the rate of 1% of the reserved price amounting to Rs,1565,000 was required to be paid three days before the date of auction. (iii) Collection of royalty rights were to be awarded for one financial year from 1-7-2008 to 30-6-2009, to the successful bidder. (iv) 5% of the contract amount was also to be paid in advance as security deposit (v) 10% of the contract amount was payable in advance by the successful bidder and the entire contract amount was to be advanced in nine equal monthly instalments by 7th of each month from the first to the last month of the contract. Finally the contract amount could be proportionately raised in case royalty rate was increased by the Government of Sindh.
3. ' Responding to the above invitation after obtaining the tender documents and fulfilling the formalities the petitioners participated in the auction held on 5-6-2008 and submitted their bid in the sum of Rs,4,56,00,000 (Rupees Four Crore Fifty Six Lac) as against the reserved price of Rs,3,12,45,500 (Rupees Three Crore Twelve Lac Forty Five Thousand Five Hundred) and also made payment of the earnest money of Rs,15,65,000 (Rupees Fifteen Lac Sixty Five Thousand) vide pay order No, HMP/PO 2725276 dated 30-6-2008 drawn on Messrs Habib Metropolitan Bank Ltd. The petitioner was the second highest bidder and the offer to award the contract for collection of Royalty on Surface minerals for the year, 2008-2009 was finally made by the respondent No,2 in its favour vide letter No, MD/CDN-4(674)/08/7194 dated 11-7-2007 subject to rise in rates. In the meantime enhancement in the existing rate of royalty which was Rs,4 per ton was increased to Rs,6 per ton w,e,f, 1-7-2008 by the Government of Sindh Mines and Mineral Development Department Notification dated 12-6-2008 after tender notice dated 26-5-2009 was published in 'Dawn'. By a subsequent notification dated 28-6-2008 Government of Sindh Mines and Mineral Department made such revised rate operational w. e. f. 1-7-2008.
4. ' The offer to award the contract on the rate advertised for collection of royalty on surface minerals was communicated to the petitioner on behalf of the respondent vide letter dated 11-7-2008 whereby as stated 50% increase in the rate was formally brought to the notice of the petitioner in writing for the first time and extra amounts beyond the ostensible scope of Tender Notice, which was quiet on the revised rate inter alia under the heads of 'Security Deposit' at the rate of 50% of the Contract amount being Rs,3450,000 'Advance Payment' at the rate of 10% of the Contract amount were demanded from the petitioner. The petitioner was also asked to provide judicial stamp paper at Rs,20 per 100 ton up to the contract value for concluding the agreement. The petitioner in reply to this letter called upon the respondent through legal notice dated 14-7-2008 to accept its offer -at the rate of Rs,4 and not at the rate of Rs,6 per ton which increase was stated to be illegal and unjustified. Followed by this legal notice h letter dated 20-7-2008 was sent to the Director-General Mines and Mineral Development Department, Government of Sindh to refund the "security" deposit for the price being claimed from the petitioner was suddenly enhanced to Rs,6,84,00,000. Finally on 7-1-2009 another letter was addressed by the petitioner to the respondent No,2 insisting upon him that the "security" of Rs,15,65,000 (Fifteen Lac Sixty Five Thousand) be released.
5. ' Under the circumstances the petitioner has now inter alia claimed refund of the earnest money on the ground that the revision in the rate of royalty from Rs,4 per ton to Rs,6 per ton was arbitrary, unilateral and mala fide. Another ground which was agitated was that soon after the transaction another public notice for auction of the rights to collect royalty on surface minerals was published and after re-auction allegedly ridden with favoritism and nepotism the contract was awarded to another contractor for just Rs,4,72,00,000 (Rupees Four Crore Seventy Two Lac) i,e, much below the revised reserved price.
6. ' We have heard the learned counsel for the petitioner and learned Additional Advocate-General on behalf of the respondents.
7. ' The learned counsel for the petitioner has argued that contract could not be conceived to have been made absolute in facts and circumstances stated above and that at any rate the "security" was liable to be refunded as increase was unjustified and unilateral.
8. ' The learned counsel for the petitioner has relied on the case of Pakistan Industrial Development of Pakistan v. Aziz Qureshi (PLD 1965 (W.P.) Karachi 202) wherein it was held with reference to section 7 of the Contract Act that acceptance of proposal must be absolute and certain and when the acceptance was qualified with material variation the same would amount to making a counter proposal. It was further held that where there was contemplation of execution of further contract must would depend upon construction of the terms.
9. ' Learned counsel for the petitioner has further placed reliance on the case of City School (Pvt.) Ltd.
10. Lahore Cantt v. Privatization Commission Government of Pakistan and others (2002 SCM R 1150) in which it was held that tender notice did not amount to an offer or proposal but could at best an invitation for making an offer and that the advertisement of the notice could not constitute a proposal and it could become promise or agreement only by acceptance of offer or proposal by the person calling the tender and that for deciding whether a valid contract was made between the parties or not was to be ascertained from the fact if the parties were of one mind on all the material terms at the time it was finalized and further whether the parties intended that the matter was closed and concluded between them.
11. ' The learned Additional A.-G. On the other hand has emphasized that as the petitioner backed out it was liable to forfeiture of the earnest money for it was one of the terms of the invitation that the contract amount could be increased proportionately in case the Government of Sindh at any time increased the rate of royalty on surface minerals and as such the earnest money could be forfeited under Clause VII-a of the terms and conditions of auction. He submitted that the forced re-auction entailed in loss to the Government of Sindh which was recoverable.
12. ' Having considered the arguments in the light of the record and the relevant provisions of law we may advert to the merits of the claim after discussing underlying issues.
13. ' The first question that may arise is whether the parties had properly consented to reach an agreement emanating from the tender notice. In this context the meaning of the word "Consent" may need to be examined as well. Section 13 of the Contract Act defines the term "Consent" to mean an agreement between two or more persons upon the same thing in the same sense. A mere offer is therefore not binding unless it has been absolutely perfected by acceptance. Even if in response to a tender notice lowest quotation is made the same could not create an obligation on the person issuing the tender notice to accept the same and no contract would come into existence by such act alone.
14. ' In the case of Malik Muhammad Nawaz v. Municipal Committee Patoki and others (2003 SCM R 1191) referred to by the learned Additional Advocate-General to support his plea for forfeiture of earnest money, it was held that when the highest bidder had deposited the security amount and instead of depositing the balance amount requested for cancellation of his bid and return of his security deposit the authority declined to return the security amount and the same was forfeited and the High Court in exercise of Constitutional Jurisdiction declined to interfere with the forfeiture as the highest bidder acted as a dummy bidder at the instance of the authority itself to attract highest bid and it was held that petitioner was not entitled to discretionary relief in getting the illegally manipulated order implemented to perpetuate a wrong and by acting in aid to injustice.
15. The facts of this case are not on all fours.
16. ' It appears that until the offer to award the Contract was made at a substantially enhanced rate under letter dated 11-7-2007 the uncertainty of the rate was all pervading and could be found floating on the surface. Thus in the case of East Asiatic Co. (India) Ltd. Bombay v. Messrs Rugnath Tricumdas AIR 1953 Saurashtra 122, it was observed:- "Although an agreement may otherwise be definite if an essential element is reserved for future agreement of both parties, the promise can raise no legal obligation until such future agreement.
17. Thus if a party agrees to pay a sum of money," after deductions as may be agreed upon" the essential element of the agreement viz., the determination of the amount to be deducted is left to future agreement. An agreement of this nature has been described as an agreement to enter into an agreement and declared to be too vague to create legal obligations."
18. ' Excerpts from reports decisions having additional relevance may also be referred to as follows:--
(i) In case of City School (Pvt.) Ltd. Lahore Cantt. v. Privatization Commission, Government of Pakistan and others (2002 SCM R 1150) it was observed that the advertisement does not constitute a proposal and that only by acceptance of offer or proposal by the person calling for the tender it becomes a promise and agreement and that the true test for deciding whether a valid contract is made between the parties or not is to ascertain if the parties were of one mind on all the material terms at the time it is said to have been finalized and whether, they intended that the matter was closed and concluded between them and further correspondence exchanged between the parties is also to be looked into.
(ii) In another case of Messrs Shams and brothers v. Government of Pakistan and others reported as (2007 CLD 125 Karachi) the conduct of the tendering authority was deprecated when it cancelled the offer on the ground that on assessment and verification of business profile and experience of the bidders it was found to be unsatisfactory. Fresh offers were invited and the same bidder gave the highest bid which was not accepted and the authority contemplated to award the contract to another party. The bidder termed the process as being the result of nepotism, favoritism and underhand dealing as in the second invitation of tender certain uncalled for and unreasonable conditions were incorporated to ensure that the same bidder was kept out of the process. It was ruled under the circumstances that the courts had power to judicially review administrative action to ensure fairness, reasonableness and transparency of the transaction as unreasonable conditions have their impact on the performance of work sought to be performed by the contractor,
(iii) In another case reported as S.M. Saleem v. Province of Sindh and others (2007 YLR 2001) a Division Bench of this court held that holding of amount of the bidder by the Government Department could not be approved and as such its refund was ordered along with mark-up at the rate of 6% from the date of deposit till payment.
(iv) In the case of Pakistan Industrial Development Corporation v. Aziz Qureshi (PLD 1965 (W.P.)
19. Kar.202) it was adjudged that acceptance of proposal must be absolute and certain and where there were material variation no acceptance would be said to have been made.
(v) In the case of Pakistan Steel Products v. Messrs Indus Steel Pipes Ltd. (1996 CLC 118) it was held that deposit of earnest money by the bidder before concluded and binding contract would be refundable and the bidder was allowed to withdraw the earnest money deposited with the Nazir of the High Court along with profit if any.
20. Close scrutiny of the facts involved in the present case in the light of law laid down would reveal that tender notice was virtually a liquid, partly concealed and inchoate invitation to offer and acceptance on part of petitioners would amount to an offer which was responded to by variation of the proposal by specifying and almost doubling the liabilities. The increase in rate demanded subsequently was substantially raised by 50% above the existing rate and such rate was introduced immediately within a few days of tender, under the notification. The question which arises is that if increase in the royalty rate could be conceived by the parties publishing the tender notice as the process in all probabilities was in offing why the same information was not spelt out.
21. The respondents might know that the increase in the royalty rate was going to rise by 50% above the stipulated rate specified in the public notice but such information was withheld by not mentioning that the rise could go up to 50% of the given rate. The respondents therefore secured an advantage to twist the transaction in their favour if they so liked at a later stage. Thus procedural fairness of the transaction appears to be completely lacking which has betrayed the outcome of the transaction itself. The courts under like circumstances have the power to ensure substantive fairness of transaction as held in the case of Abdul Rahim and 2 others v. UBL (PLD 1997 Kar.62).
22. ' For the foregoing reasons we allow the petition to the extent of claim of earnest money.
23. Consequently petitioner shall be entitled to refund of the earnest money of Rs,15,65,000 wrongly stated to be the security deposit and we order accordingly. However, if the respondents have suffered any loss as emphasized by the learned Additional A.-G. Then they shall be at liberty to claim the damages, if any sustained, by filing appropriate proceedings in a competent Court of Law, if so advised.