' MUHAMMAD JUNAID GHAFFAR, J.--- This is a Suit for Declaration, Mandatory Injunction, and Damages against defendants, wherein, the plaintiff alleges that the defendants have awarded the rights for coal mining royalty to defendant No.5 without conducting the open auction pursuant to advertisement in Daily "DAWN" on 3.9.2016. Along with this Suit listed application has been filed on behalf of the plaintiff whereby, as an interim measure restraining order has been sought against the defendants from proceeding further for awarding of contract and handing over possession of the site to defendant No. 5.
2. Precisely the facts as stated on behalf of the plaintiff are that pursuant to the advertisement in newspaper on 3.9.2016 the plaintiff intended to participate in the auction proceedings which provided that open auction for collection of royalty on Coals in District Thatta and Jamshoro for the year 2016-17 would be held on 19.9.2016 at 12.00 noon and in case no bidder participates then auction will again be held on 21.9.2016 at 12.00 noon and 23.9.2016 at 3.00 pm, and for such purposes prepared a Pay Order for Rs.35,92,703/- being 1% earnest money and on 19.9.2016 at 12 noon the auction was not conducted and was postponed to 21.9.2016 and again on 21.9.2016 it was postponed to 23.9.2016 at 3 PM. However, it is the case of the plaintiff that around 4 PM he was informed by the authorities that the auction has been cancelled and a fresh notice in respect of the said auction will be published in the newspaper, whereas, his Pay Order was returned.
Thereafter, it transpired to the plaintiff that the contract has been awarded to defendant No.5 hence, instant Suit, wherein, on 26.9.2016 an order was passed, whereby, defendant No.1 was directed to maintain status quo till the next date.
3. Learned Counsel for the plaintiff has contended that the official defendants in connivance and collusion with defendant No.5, have deprived the plaintiff from participating in the open auction and have awarded the contract for Rs.360,000,000/- as against the plaintiff who was interested in offering Rs.380,000,000/-. He has further contended that in terms of the tender notice the auction could have only be postposed on 19.9.2016 when there were no bidders, however, as per the written statement of official defendants the auction was postponed on two dates for the reason that the concerned members were not available. Per learned Counsel the said ground for postponing the auction is against the tender conditions, and therefore, it reflects mala fides and collusion on the part of the official defendants. Learned Counsel has further contended that on 26.9.2016 a restraining order was passed by this Court, however, to frustrate the said order, the entire exercise of awarding the contract and handing over of the possession has been shown to have been completed within three days out of which there was only one working day available. He submits that this reflects collusion amongst the official defendants and defendant No.5. He has also referred to the annexures and letters filed along with written statements of the defendants as well as defendant No.5, and has contended that insofar as the letters produced by official defendants are concerned, they reflect a diary number, whereas, the one which have been filed by defendant No.5, there is no diary number on such letters. Per learned Counsel since the exercise has been completed in haste in back date to frustrate the order of 26.9.2016, therefore, this difference is reflected. He has however, contended that none of the letters in respect of the award of the contract and handing over of the possession have any acknowledgement date, nor any time is mentioned, as apparently the exercise has been carried out to frustrate the order of this Court. Per learned Counsel no work was awarded as the status quo order was duly stood served on 27.9.2015 at 9:45 AM and the plaintiff reserves its right to initiate contempt proceedings against the defendants.
4. On the other hand, learned AAG appearing on behalf of the defendants Nos.1, 2 and 3 has contended that the plaintiff never participated in the auction process and therefore, no legal right has accrued; hence no relief can be granted in view of Section 56 of the Specific Relief Act, 1877.
Learned AAG has contended that instant Suit has been instituted to harass and blackmail the official defendants, whereas, the relief as is being sought cannot be granted as the contract has already been awarded. Learned AAG has referred to Paras 7 and 18 of the plaint and has contended that misstatement has been made whereas, no bona fide claim exists in favour of the plaintiff.
5. Similarly, learned Counsel for defendant No.5 has also contended that the plaintiff has made misstatement in the plaint, whereas, the plaintiff does not qualify to participate in the auction proceedings as neither he had funds nor he had fulfilled the requirements as mentioned in the auction notice. He has further contended that defendant No.5 has no relation with defendant No.7, whereas, defendant No.6 did not participate in the auction proceedings. Learned Counsel has further contended that according to the documents annexed with the plaint the plaintiff is a partnership concern, whereas, he has filed instant Suit as a sole proprietor, hence the Suit is not maintainable. In rebuttal the learned Counsel for plaintiff has conceded that insofar as the status of the firm is concerned, this appears to be a bona fide mistake and necessary application for rectifying such mistake would be filed within due course.
6. I have heard all the learned Counsel and perused the record. The facts as stated reflect that the plaintiff pursuant to the tender notice in newspaper prepared a pay order equivalent to 1% of the auction amount as earnest money and according to the plaintiff's version, he attended the auction proceedings which was required to be conducted on 19.9.2016 and then on 21.9.2016 and finally on 23.9.2016. It is the case of the plaintiff that no auction took place on these three dates and once he left the office of the defendants, the purported auction proceedings were carried out around 4 PM and the tender has been awarded to defendant No.5. On 26.9.2016 the defendant No.1 was directed to maintain status quo and bailiff report reflects that they were duly served on 27.9.2016 at 9:45 AM.
However, it is the case of official defendants as well as defendant No.5 that pursuant to the auction conducted on 23.9.2016 the highest bid of defendant No.5 was accepted and he has been handed over the possession of the site to collect royalty on coal mines in question. To substantiate this the official defendants have placed on record letter dated 23.9.2016, whereby, it is stated that on the recommendations of the auction committee the contract is being offered to you for collection of royalty for coal in District Thatta and Jamshoro. It is further stated that the offer of Rs.362,000,000/- has been accepted and within three days you are directed to deposit Rs.I8,100,000/ - as security deposit and Rs.18,100,000/, as advance with further directions that you are liable to pay stamp duty on the contract amount for collection of royalty on coal as required under the Stamp Act, 1899 on stamp paper on execution of agreement. Then there is another letter dated 26.9.2016 whereby the contract has been awarded to defendant No.5 with certain terms and conditions as detailed therein. Insofar as the question that whether the plaintiff participated and made an attempt to enter into the auction proceedings and was denied the same, it is only the averments in the plaint which are before this Court and it is not possible at this stage of the proceedings to give any concrete finding in this regard. The plaintiff's intention to participate is though supported by the fact that he prepared a pay order of 1% earnest money and made an attempt thereto, but whether he was denied or he did not participate is a question which cannot be decided while hearing the injunction application. However, it is also of utmost importance to note that on 26.9.2016 status quo order was passed and the said order stood served on 27.9.2016 at 9:45 AM. The correspondence which has been placed on record on behalf of the official defendants apparently reflects, haste and rushing up the matter on their behalf, inasmuch as the auction according to them was conducted on 23.9.2016 which was a Friday, whereas, the Sindh Government offices are closed on Saturday and Sunday i.e. 24th and 25th September and on the very next working day i.e. 26.9.2016 the contract has been awarded around midnight according to the defendants and the possession of the site has also been handed over. This does not appear to be an exercise which could have been completed in such short span of time as is being contended on behalf of the official defendants as well as defendant No.5. It further appears that neither the official defendants nor the defendant No.5 who has been awarded the contract, have annexed any supporting documents, whereby, it could be seen that the three conditions as stated in letter dated 23.9.2016, including making payment of 5% security deposit of Rs.18,100,000/- and 5% as advance payment of Rs.18,100,000/- have been fulfilled. Similarly, no agreement has been placed on record which was required to be duly stamped as directed in the said offer letter. This raises suspicion as the entire exercise has been completed in one working day after passing of status quo order on 26.9.2016 by the Court. If the award was made before the order could be served, then perhaps the defendant would have definitely annexed pay orders prior to the date of award of contract to substantiate that the same was done before the order could be served on them. It further appears that the open auction advertisement published in the Newspapers provide in Clause 7 that the successful bidder will have to pay advance Income Tax on the contractual amount at the time of award of contract at the prevailing rates. Fulfillment of this condition has not been catered to or replied in the written statement as well as counter affidavit filed on behalf of the defendants; as no supporting documents have been placed on record in this regard. If this condition would have been fulfilled at the time of awarding the contract then a duly paid challan from the Income Tax authorities would have been placed on record.
7. Wikipedia defines that auction is a process of buying and selling goods or services by differing them up for bid, taking bids, and then selling the item to the highest bidder. The open ascending price auction is arguably the most common form of auction in use today. Participants bid openly against one another, with each subsequent bid required to be higher than the previous bid. As per businessdictionary.Com an auction is a Common name for several types of sales where the price is neither set nor arrived at by negotiation, but is discovered through the process of competitive and open bidding. The Hon'ble Supreme Court in the case of Lanvin Traders v. Deputy Administrator Evacuee Trust Property and others (1993 SCM R 1707) has been pleased to observe that; ' Auction is a recognized mode of sale of property originated with the Romans "in the disposition of military spoils" conducted "under the spear" which was stuck in the ground on such occasions. With the passage of time all such practices became obsolete but auction continued to be an accepted mode of sale. It attained statutory recognition as provided in section 64 of the Sale of Goods Act, Order XXI, rule 65, C.P.C. And many other statutes. Section 58(2) of the U.K.'s Sale of Goods Act, 1893 provides for sale by auction. An open auction means a public sale where bidders have the opportunity to compete with each other and raise their bid before acceptance. In such auction there is an element of open competition between the bidders where one knows the bid offered by the other and has the opportunity to raise it and succeed to purchase as a highest bidder on acceptance.
' A bid is an offer to purchase the property put to auction. It can be made in any manner which signifies the intention to purchase at a particular price. As written in Corpus Juris Secundum "it may be made orally, as by words uttered aloud in the hearing of the bystanders or spoken privately to the auctioneer, or by a wink or a nod or by writing in words or figures or by letters. Secret signs between the bidder and the auctioneer should not be allowed .... In open public auction the bid may be in any recognized or permitted manner in the presence and knowledge of all present at the auction.
' In an auction as distinguished from open auction bids can be invited in writing or in sealed cover to be opened on a fixed date. This would be a restricted auction. Such mode of auction unless prohibited by law can be adopted by the owner of the property. Mere fact that holding of such auction or inviting bids in cover has been publicised will not make it an open auction.
' It must also be kept in mind that the purpose of open auction is to fetch the best and the highest bid, whereas, in this matter in the Auction Notice published in the Newspapers 3 dates have been given for conducting the auction and provides that if no bidders participate on the 1st date, the same would be held on the 2nd date and then similarly on the 3rd date. However, in the written statement of official defendants the reason for postponing the open auction on the first two dates i.e. 19.9.2016 and 21.9.2016 has been stated as non-availability of the members of the auction committee. The reason assigned appears to be against the notified procedure keeping in mind that it was supposed to be an open auction and could have only been postponed if no bidders participated. This approach on the part of official defendants cannot be appreciated by this Court in the given facts and circumstances for the reason that on the one hand it indirectly allows participation to an interested party who had failed to be present on the 1st date, and on the other, deprives one who was present on that date with the possibility of being exposed to another highest bidder. This appears to be against the norms of public auction and the mode and manner the defendants have proceeded with, smacks a non-transparent and callous attitude on the part of official defendants. This is a bewildering scheduler of events and must be avoided in case of open auctions so as to uphold transparency. The discretion of the state in selling and or auctioning its wealth in any shape is not unlimited and the state cannot give largess in its arbitrary discretion or at its sweet will or in such terms as it chooses in its absolute discretion. In the case of Kasturi Lal Lakshmi Reddy v The State of Jammu and Kashmir and another (AIR 1980 SC 1992), the Indian Supreme Court has been pleased to hold as under;
11. So far as the first limitation is concerned, it flows directly from the thesis that, unlike a private individual, the State cannot act as it pleases in the matter of giving largess. Though ordinarily a private individual would be guided by economic considerations of self-gain in any action taken by him, it is always open to him under the law to act contrary to his self-interest or to oblige another in entering into a contract or dealing with his property. But the Government is not free to act as it likes in granting largess such as awarding a contract or selling or leasing out its property. Whatever be its activity, the Government is still the Government and is, subject to restraints inherent in its position in a democratic society. The constitutional power conferred on the Government cannot be exercised by it arbitrarily or capriciously or in and unprincipled manner; it has to be exercised for the public good. Every activity of the Government has a public element in it and it must therefore, be informed with reason and guided by public interest. Every action taken by the Government must be in public interest; the Government cannot act arbitrarily and without reason and if it does, its action would be liable to be invalidated. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if it fails to satisfy either best, it would be unconstitutional and invalid.
14. Where any governmental action fails to satisfy the test of reasonableness and public interest discussed above and is found to be wanting in the quality of reasonableness or lacking in the element of public interest, it would be liable to be struck down as invalid. It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost, of the State; such an action would be both unreasonable and contrary to public interest. The Government, therefore, cannot, for example, give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations which render it reasonable and in public interest to do so ... "
8. The activities of the State and or the Government always have a public element or its interest in it, and therefore, it ought to have fairness and equality in its conduct, specially while awarding contracts or lease hold rights in respect of royalty collection. When it enters into a contract it must do so with fairness and without discrimination and the procedure followed in awarding such contract must also be fair. This in my view is lacking in this case. The Indian Supreme Court in the case of Ramana Dayaram Shetty v. The International Airport Authority of India and others (AIR 1979 SC 1628) has been pleased to observe as under;
11. .... "Licences are required before one can engage in many kinds of business or work. The power of giving licences means power to withhold them and this gives control to the Government or to the agents of Government on the lives of many people. Many individuals and many more businesses enjoy largess in the form of Government contracts. These contracts often resemble subsidies. It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Government. Government owns and controls hundreds of acres of public land valuable for mining and other purposes. These resources are available for utilization by private corporations and individuals by way of lease or licence. All these mean growth in the Government largess and with the increasing magnitude and range of governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. But on that account, can it be said that they do not enjoy any legal protection? Can they be regarded as gratuity furnished by the State so that the State may withhold, grant or revoke it at its pleasure? Is the position of the Government in this respect the same .As that of a private giver? We do not think so. The law has not been slow to recognize the importance of this new kind of wealth and the need to protect individual interest in it and with that end in view, it has developed new forms of protection. Some interests in Government largess, formerly regarded as privileges, have been recognized as rights while others have been given legal protection not only by forging procedural safeguards but also by confining/structuring and checking Government discretion in the matter of grant of such largess. The discretion of the Government has been held to be not unlimited in that the Government cannot give or withhold largess in its arbitrary discretion or at its sweet will. It is insisted, as pointed out by Prof. Reich in an especially stimulating article on "The New Property" in 73 Yale Law Journal 733, "that Government action be based on standards that are not arbitrary or unauthorized." "The Government cannot be permitted to say that it will give jobs or enter into contracts or issue quotas or licences only in favour of those having grey hair or belonging to a particular political party or professing a particular religious faith. The Government is still the Government when it acts in the matter of granting largess and it cannot act arbitrarily. It does not stand in the same position as a private individual.
12. .... "It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largess, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largess including award of jobs, contracts, quotas, licences etc., must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.
' This judgment of the Indian Supreme Court has been cited with approval by our Supreme Court in the case of Javaid Iqbal Abbasi & Company v. Province of Punjab and 6 others (1996 SCMR 1433).
9. Though it is a settled proposition that it is not incumbent upon the Government to always accept the highest bid, but then again it is also the responsibility of the Government to come and satisfy that the award to person other than the highest bidder has been done in a fair and diaphanous manner. In the absence of such satisfaction acceptance of such an offer and sought to be substantiated (as attempted in this case through letters dated 23.9.16 and 26.9.16) could certainly amount to arbitrariness and exercise of discretion unfairly.
10. In view of hereinabove facts and circumstances of the case, I am of the view that firstly the act of fixing three different dates for the open auction in question being bewildering in nature, ought not to have been done as it goes against the very mandate of an open auction; secondly, the reason assigned for its postponement for two dates does not find any mention in the auction notice and could not have been done; and thirdly and more importantly, the alleged award of the contract to defendant No.5 appears to be an attempt to frustrate the status quo order of this Court passed on 26.9.2016 as the record does not justify that any award was made in reality. In such circumstances it would be in all fairness and in the fitness of things to set aside the auction as well as the award of the contract allegedly given to defendant No.5. It is so ordered and the official defendants are directed to re-auction the rights for collection of royalty on Coals in the districts of Thatta and Jamshoro, within 30 days from today, whereas, possession, if it has been handed over, be taken back from defendant No. 5 forthwith. Application stands disposed of.