The facts leading to this petition, as stated at the Bar, are that for the year 1996-97 (1-7-1996--to 30-6-1997), respondent No.3 auctioned the lease rights for collecting of Octroi Tax on 5-5-1996 and the highest bid of one Akbar & Company in the sum of Rs.12,75,000.00 was accepted. However, since the bidder did not deposit 1/10th of the bid amount and 2% of the security within stipulated time, his advance amount was forfeited and reauction ordered. On 14-7-1996, reauction took place and this time the petitioner's bid in the sum of Rs.10,01,000.00 was found the highest. This was however, not accepted possibly for the reason that the difference between the highest bid for the last year and this amount' was less than 10 % . On 22-7-1996, a proclamation was published inviting fresh bids for 30-7-1996. It is the petitioner's version that at the appointed time the petitioner and other bidders were told that the auction was not taking place and that fresh schedule will be announced later on. However, according to the version of respondents Nos.3 4and 4, as reflected in the document described as " Ferde Nelam" and-appearing at page 102 of the written statement of respondent No.4, only one party namely, Allahwala Corporation, deposited the call deposit for participating in the auction and in spite of calls no other party came forward to make the deposit, According to the document, M/s. Allahwala Corporation and other contractors demanded that the condition of deposit in income-tax amount in one go be cancelled and the old practice of receiving income-tax alongwith the instalments be restored. This demand was not accepted.
Thereafter no other party deposited the security amount nor M/s. Allahwala Corporation made any offer/bid. In the circumstances, the Auction Sub-Committee recommended that a fresh auction be arranged in accordance with law. This " Ferde Nelam " is signed/initialled by the members of the Auction. Sub-Committee and bears the date 30-7-1996.
2. On 31-7-1996, instead of arranging reauction, as recommended by the Auction Sub-Committee, respondent No.3, the Administrator wrote Letter No.MOS/TO/Octroi-333, to respondent No.2, Secretary Punjab, Local Government Board, wherein after containing the necessary details and facts and figures, it was suggested that offer of respondent No.4 for Rs.9,50,00,000 for the period of eleven months, i.e. 1-8-1996 to 30-6-1997, was reasonable and the case was, therefore, being forwarded for necessary approval. On 5-8-1996, respondent No.2 approved the grant of contract to respondent No.4 for the amount suggested. Thereafter on 7-8-1996, a formal agreement is claimed to have been executed between the parties and it is the case of respondent No.4 that since then this respondent is operating the contract and fulfilling his obligations. It is the order dated 5-8-1996 and the resultant agreement between respondents Nos.3 and 4 which are being called in question by way of this Constitutional petition.
3. The case was taken up in motion on 4-9-1996 when this Court directed the Administrator to enter appearance and to show under what circumstances the lease rights were given to respondent No.4 by private negotiations despite the fact that the petitioner was the highest bidder and had offered Rs.50,00,000 more than the amount for which the contract has been awarded to respondent No.4. On 10-9-1996 the Additional Advocate-General entered appearance on Court call and the petitioner repeatedly offered in Court that he was prepared to take this contract for eleven months for the sum of Rs.10,00,00,000 half crore more than the amount for which the contract has been awarded to respondent No.4, The learned Additional Advocate-General, under instructions from the learned Advocate-General accepted the offer and parties agreed that, to prove the bona fide, the petitioner will deposit Rs.50,00,000 with the Municipal Corporation, Sialkot and that collection rights shall he reauctioned with Rs.10,,00,00.000 being the minimum reserved price. It was also agreed that in case the petitioner did not take the contract on this amount the sum of Rs.50,00,000 will be forfeited. On this Court admitted this petition to regular hearing and directed - issue of notice to respondents Nos. 3 and 4 for 18-9-1996. Service was directed to be effected telegraphically as also through Special Messenger.
4. Written statement has been filed by respondent No.4. Respondent No.3 has also filed his parwaise comments. Respondents Nos. l and 2 have not filed any separate reply and in fact is not needed in view of the proceedings held on 10-9-1996, as reproduced above. The case of these respondents ( 1 and 2) is that they do not support the impugned order and that they are for reauction. Respondent No.3 is also represented during the hearing and his learned counsel, Mr. Nasrullah Awan, did neither oppose the reauction nor defended the impugned order. In fact this counsel left the matter to be decided by the Court. The case has been exclusively contested by respondent No.4.
5. Normally when the authority passing the impugned order itself does not chose to defend it in a Court of law, order should go out of the field, but in this case respondent No.4, the lessee, through private negotiations has forcefully defended the correctness and legality of the order. Therefore, the exercise to examine the relevant law to see whether the lease rights in this case have been validly awarded.
6. Apart from the allegations of favouritism etc. It is contended by Dr. M.Mohy-ud-din Qazi, Advocate, learned counsel for the petitioner that the relevant law on the subject is section 39 of the erstwhile Punjab Local Government Ordinance, 1979 (hereinafter referred to as the Ordinance), Punjab Local Government Lease Rules, 1990, framed under the Ordinance (hereinafter referred to as the Lease Rules), and West Pakistan Municipal Committees Octroi Rules, 1964 (hereinafter referred to as the Octroi Rules), which are kept alive under the Ordinance. It is contended by Mr. Qazi that while the Lease Rules are general in nature, the Octroi Rules being special will cover the field and, according to him, there is no provisions whatsoever in the Octroi Rules for grant of leasehold rights through private negotiations. According to him rule 225 of the Octroi Rules lays down that when and if the lease rights are to be transferred, it shall be done through public auction and that also with the prior approval of the Government. According to him even if the Lease Rules, 1990, are to be applied then the impugned order suffers from serious illegalities because the preconditions of rule 4(3) as laid down in the Lease Rules is not fulfilled and since the contract has been awarded in breach of the Rules, the same is void under section 39 (2) of the Ordinance.
7. On the other hand, Malik Saeed Hassan, Advocate, learned counsel for respondent No.4 with equal vehemence has defended the impugned order and the contract by saying that rule 225 of the Octroi Rules and rule 4(3) of the Lease Rules, if read together, can sustain the grant of contract through private negotiations in this case. He has also highlighted that if worked out, his client has in fact offered 10,37,00,000 for the whole year as against 10,01,00,000 the highest bid of the petitioner.
He has also contended that once a regular lease deed is executed and the same is not challenged then the petitioner cannot be granted this relief in these proceedings. He has also raised preliminary objection that the petitioner in this case has alternative remedy of appeal which is adequate and, therefore, on this ground this petition should be dismissed. He has generally denied the allegations of favouritism and surreptitiousness and, according to him, his client has obtained this contract in a fair and transparent manner. He has also tried to show that in fact the petitioner was not present at the time of auction on 30-7-1996 and his assertion in this petition to the contrary is incorrect.
8. The core issue in this case is whether respondent No.3 or for that matter respondents Nos. l and 2 have the authority to grant lease rights by negotiations and, if so, under what conditions. In order to determine this question, it is relevant to reproduce the applicable provisions. Section 39 of the Ordinance reads as follows:-- "39. Contracts.--(I) All contracts made by or on behalf of a local council shall be--
(a) in writing and expressed to be made in the name of the local council;
(b) executed in such manner as may be prescribed; and
(c) reported to the local council by the Chairman at the meeting, next following the execution of the contract.
(2) No contract executed otherwise than in conformity with the provision of this section shall be binding on the local council.
Rules 225 of the Octroi Rules, 1964, is reproduced as under:-- "225.--(1) Notwithstanding anything contained in these rules, Municipal Committee may, with the prior approval of Government lease out by public auction for a period not exceeding one year, the collection of Octroi on such terms and conditions, not inconsistent with the provisions of this Chapter, - as may be specified by Government.
(2) The acceptance of any bid at an auction conducted under the provisions of sub-rule (1) shall be subject to confirmation by the Controlling Authority.
(3) The Municipal Committee shall, within seven days of the date of auction, submit the bid accepted at the auction to the Controlling Authority for its confirmation.
(4) The Controlling Authority shall within thirty days after the bid has been submitted to it by the Municipal Committee for confirmation, either confirm the bid or declare that it withholds its confirmation to the bid, provided that if within the aforesaid period of thirty days the, Controlling Authority fails to do either of there things, it shall be ' deemed to have confirmed the bid.
(5) Where the Controlling Authority within the period specified in sub-rule (4) declares that it withholds its confirmation to that bid, the lease of the collection of Octroi shall subject to any direction that may be given by the Government in this behalf under sub-rule (1) be again put to auction and the provisions of sub-rules (2), (3) and (4) shall apply to such reauction.
(6) The person whose bid has been accepted at the auction shall forthwith deposit with the officer conducting the auction a sum equal to one percentum of the amount of his bid, as security for the performance of his obligations in regard to the collection of octroi and payment of lease money to the Municipal Committee. The security deposit shall be forthwith refunded to the person making it if the Controlling Authority does not confirm his bid, and where it confirms the bid, the deposit shall be refunded to him after the period of which the collection of Octroi was leased to him is over and he has paid up all the dues of the Municipal Committee and has duly performed all his obligations in regard to the collection of Octroi.
(7) In addition to the security deposit referred to in sub-rule (6), the persons whose bid has been accepted and confirmed by the Controlling Authority (hereinafter referred to as the lessee) shall, within seven days of the such confirmation deposit with the Municipal Committee, one--tenth of the amount of his bid, and the balance of the amount of his bid shall be paid by him to the Municipal Committee in equal monthly instalments at the close of the month for which the instalment is due.
(8) If the lessee fails to pay the ten percentum deposit or any instalment within the time specified in sub-rule (7), or charges Octroi at a higher rate than that prescribed in the Octroi Schedule for the Municipal Committee, or commits any breach of the provisions of these rules or any terms or conditions of the agreement which may .Be entered into by, him with the Municipal Committee in regard to the lease of Octroi, the Municipal Committee may, without prejudice to any other action which it may be entitled to "take against the lessee under the law or these rules forfeit his security' deposit and forthwith cancel his lease."
Rule 2 of the Lease Rules, 1990, reads as follows:-- "2. Lease of collection rights.--A Local Council may lease out by public auction for a period not exceeding one year, the collection rights of tax, fee, rate, toll, cess or other charges levied by a Local Council.''
Similarly rule 4 of Lease Rules is reproduced in full.-- "4. Procedure of auction.--(1) For the conduct of an auction a public notice in not less than one daily newspaper and at least seven days before the date fixed for auction shall by given by the Local Council. '
(2) The notice shall contain the date of the meeting of the Local Council to be held for considering the acceptance of bids made in an auction: '
Provided that if the said meeting is not held for any reason then the meeting shall be held within seven days of the date of the auction: Provided further that the first auction for the relevant year shall be held at least two months before the start of the financial year and no subsequent attempts, if any, shall be made after fifteen days from the first attempt.
(3) No lease shall be granted through negotiation, persuasion or any method other than open auction unless two attempts of auction have been made.
(4) In the- meeting of the house, the Local Council may either accept a bid or reject the same.
(5) Where the Local Council rejects a bid the lease shall again be put to auction and the provisions of these Rules shall apply to such re--auction."
9. The controversy whether this matter should be determined on the touchstone of the Octroi Rules only because they being special, will override the Lease Rules; 1990, does not present much difficulty, inasmuch as, on the touchstone of both these rules the impugned order cannot be sustained. The scheme of the Octroi Rules is that the Local Councils and the committees/corporations will, themselves collect the Octroi Tax. The only exception is created in rule 225 of the Octroi Rules` and this enables the Local Council to grant lease rights through public auction and only after prior approval from the Government. If, therefore, the impugned order is tested on the touchstone of the Octroi Rules, the same has to be declared as completely without any backing in law. .
10. Coming to the Lease Rules, it will be seen that rule 2 permits a Local Council to lease out the collection rights by public auction for a period not exceeding one year. Rule 4(3) of the same is most relevant and also important.. It opens with a prohibition and says that no lease shall be granted through negotiation, persuasion or any other method other than open auction unless two attempts of auction have been made: Apart from the fact that in its memo of proceedings described as " Ferde Nelam" noted above, the Auction Sub---Committee recommended reauction on 30-7-1996, if it is found that two attempts of auction have not been made, then the grant .Of the contract on the letter of the Administrator by the Government will have to be declared as illegal. As noted, the first auction was held on 5-5-1996, but the contractor ran away, leaving the Corporation enriched by a few million of forfeited amount. Auction was then held on 14-7-1996 in which petitioner's bid of 10,01,00,000 was the highest. Somehow this was not approved and thereafter auction was scheduled on 30-7-1996. In my opinion; the auction held on 5-5-1996 and 14-7-1996 cannot be said to be "attempts of auction". Instead these are completed auctions although in pursuance thereto a formal agreement could not be entered into by the highest bidder and the Corporation, for one reason or the other. The attempt to auction on 30-7-1996 is the first one because according to the respondents' own version, nobody except M/s. Allahwala Corporation, appeared to deposit the security amount or to participate in the bidding and even M/s. Allahwala Corporation refused to give an offer. This will, therefore, have to be described as the attempt to auction which in any case did not mature. That is why the auction Sub-Committee recommended fresh auction.
11. It has not been disclosed as to why the Administrator chose to disregard the recommendation of the Auction Sub-Committee and what compelled him to make out a case of award of contract in favour of respondent No.4 and forward it to the Government. It is at this juncture that the doubts and surreptitiousness starts creeping in. This is the petitioner's claim that the petitioner and other bidders were informed on 30-7-1996 that auction will not take place and will be rescheduled and duly notified. According to the petitioner, it was a mere cover to ward off other bidders and to make out a case for grant of contract to respondent No.4 at a lower amount. On the present record, while it is difficult to give a positive finding in favour of the petitioner on this issue, it is equally difficult to give a clean chit to respondents Nos.3 and 4. As noted above, there is not a word in the letter of Administrator dated 31-7-1996 forwarding the case of respondent No.4 to the Government as to why the recommendation of Sub-Committee for fresh auction is not accepted. In fact it seems it has not been noted in the letter that the Auction Sub---Committee has made any such recommendation. This ought to have been brought to the notice. Of the Government when the case for grant of contract through private negotiations was being forwarded to the Government. To my mind this deliberate omission adversely reflects upon the bona fides, of respondents Nos.3 and
4. However, since the fate of this case can be decided on other grounds, no further comments need be made on this aspect of the case.
12. It is, therefore, held that before grant of contract to respondent No.4, the mandate/pre-condition laid down in rule 4(3) of the Lease Rules regarding making of two attempts at auction has not been fulfilled and in terms of section 39(2) of the Ordinance, this contract is not binding on the Local Council. The language of rule 4(3) shows that the command is mandatory.
13. Mr. M. Mohy-ud-Din Qazi has heavily relied on a reported judgnient in Javaid Iqbal Abbasi & Company v. Province of Punjab and 6 others (1.996 SCMR 1433), and according to the learned counsel, the Supreme Court of Pakistan approved the judgment of this Court in almost similar situation and have made observations which are helpful in protecting the public interest in such a situation. The judgment in fact is highly illuminating and apart from the questions of law it does show the extent to which this Court can go for protecting the interest of the public exchequer and for examining the vires of the impugned action on the touchstone of reasonableness, fairness and public interest. I respectfully bow to the ratio of the judgment as well as the observations made therein.
14. Malik Saeed Hassan, Advocate, failed to substantiate the plea of non---maintainability of the petition on the ground of availability of alternative remedy. Since the order dated 5-8-1996 in this case has been passed by respondents Nos. l and 2, Malik Saeed Hassan has failed to show as to whom the appeal against the order of the Secretary, Local Government Board, lies under the Punjab Local Councils (Appeals) Rules, 1980. In the circumstances, there is no merit in the preliminary objection and the same was disallowed during the course of hearing and is hereby repelled.
15. For the reasons noted above, I accept this petition with costs to be paid by respondents Nos.3 and 4 and declare that the impugned order/approval dated 5-8-1996 and the consequential agreement dated 7-8-1996 is without lawful authority and as such of no legal effect: Respondent No.5 is hereby directed to hold the fresh auction in accordance with law wherein the reserved price will be Rs.10,00,00.000 (ten crores) for eleven months and, if no better offer is received, to award the contract to the petitioner and, in case the petitioner does not take the contract, the amount of Rs.50,00,000 already deposited by him will be forfeited. The three call deposits in favour of the Administrator, Municipal Corporation, Sialkot, for the total amount of rupees fifty lacs have been received in Court from the learned counsel for the petitioner and after retaining photocopies of the same on record, the originals have been delivered to Mr. Yawar A.I Khan, the learned Additional Advocate-General, Punjab, for' onward transmission to respondent No.3.