# M/s Harihar Contractors v. State of U.P. and others

- **Citation:** (2003) 2 ILRA 485
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2003-02-19
- **Case number:** Civil Misc. Writ Petition No. 12599 of 2003
- **Bench:** Tarun Chatterjee, Cj Vineet Saran
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-harihar-contractors-v-state-of-u-p-and-others-40129
- **Pages:** 8

## Headnote

Sri C.S. Singh
Sri Rajiv Dhawan
Sri Prashant Kumar
Sri Akhilesh Kalre
Sri Somesh Khare
S.C.

Auction proceeding- highest bidder not
reached
the
fixed
reserved
Price-
recommendation not accepted by the
authorities-highest
bid
can
not
be
accepted- direction for re auction held
proper.

Para- 15
In such circumstances we can not let the
State exchequer be put to such a huge
loss by permitting the auction to become
final,
which
was
apparently
done
surreptitiously. In our view, if the
reserve price fixed by the respondents
was not being reached at the auction
dated 19.2.2003, and re-auction had
already been held on 27.2.2003 and
28.2.2003,
and
there
was
no
recommendation for acceptance of the
highest bid made at the auction held on
19.2.2003, which in any case had not
become final because of the order of reauction, such bid should not have been
accepted. In such a situation, the only
option left for the State-respondents was
to re-advertise the area for re-auction
after determining afresh the reserve
price for the area.

## Text

2 All] M/s Harihar Contractors V. State of U.P. and others
485
The question whether the misconduct has
been committed by the petitioner or not
can not be decided in this contempt
proceedings. The petitioner may file fresh
writ petition challenging the removal on
the ground of alleged fresh misconduct.

9. I do not find any ground to
proceed against the opposite parties for
contempt. The petition for contempt is
dismissed.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD MAY 23, 2003

BEFORE
THE HON'BLE TARUN CHATTERJEE, CJ
THE HON'BLE VINEET SARAN, J.

Civil Misc. Writ Petition No. 12599 of 2003

M/s Harihar Contractors
...Petitioner
Versus
State of U.P. and others ...Respondents

Counsel for the Petitioner:
Sri Madhur Prasad
Sri Yogeshwar Prasad
Sri V.C. Misra
Sri Hari Om Tiwari

Counsel for the Respondents:
Sri C.S. Singh
Sri Rajiv Dhawan
Sri Prashant Kumar
Sri Akhilesh Kalre
Sri Somesh Khare
S.C.

Auction proceeding- highest bidder not
reached
the
fixed
reserved
Price-
recommendation not accepted by the
authorities-highest
bid
can
not
be
accepted- direction for re auction held
proper.

Para- 15
In such circumstances we can not let the
State exchequer be put to such a huge
loss by permitting the auction to become
final,
which
was
apparently
done
surreptitiously. In our view, if the
reserve price fixed by the respondents
was not being reached at the auction
dated 19.2.2003, and re-auction had
already been held on 27.2.2003 and
28.2.2003,
and
there
was
no
recommendation for acceptance of the
highest bid made at the auction held on
19.2.2003, which in any case had not
become final because of the order of reauction, such bid should not have been
accepted. In such a situation, the only
option left for the State-respondents was
to re-advertise the area for re-auction
after determining afresh the reserve
price for the area.

(Delivered by Hon'ble Vineet Saran, J.)

The moot question in this writ
petition is whether it is the sanctity of the
auction proceeding which is to be
preserved or the revenue of the State
which is to be of prime consideration.

1. In an auction held on 19.2.2003
for the grant of mining rights of minor
minerals
of
Tehsil
Sarila,
District
Hamirpur, the respondent no.4, M/s
Chaudhary Associates Co. was the highest
bidder. Their bid of Rs. 1.51 Crores was
forwarded by the District Magistrate to
the State Government for its approval.
After the State Government accorded its
approval, the lease deed for the said area
was
executed
in
their
favour
on
15.3.2003. By means of this writ petition
the petitioner M/s Harihar Contractors
have challenged the grant of the lease in
favour of respondent no.4, and have also
prayed that the offer of the petitioner of
2% above the reserved price (fixed by the
State at Rs. 2,21,19,485/-) be accepted,
and the lease for a period of three years
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INDIAN LAW REPORTS ALLAHABAD SERIES [2003
486
for excavation of minerals from the area
in question be executed in their favour.

2. The facts in brief, relevant for the
adjudication of this petition are that on
7.2.2003 a notice was issued by the
respondent no.2, District Magistrate,
Hamirpur fixing 19.2.2003 as the date for
auction for grant of mining rights for 3
years of certain areas, including the area
in question i.e. Tehsil Sarila, District
Hamirpur. The auction was to be
conducted
and
lease
granted
in
accordance with Rule 27 of the U.P.
Minor Mineral (Concession) Rules, 1963
(hereinafter referred to as the Rules). It
was also specified in the notice that in
case if the auction for the entire area was
not completed on the said date, then the
remaining areas would be auctioned on
27.2.2003. The reserve price for the area
in question was fixed at Rs.2.21 crores
and odd. At the auction held on
19.2.2003, the respondent no.4 was the
highest bidder. Their bid of Rs. 1.51
crores, though about Rs. 70 lacs below the
reserve price, was provisionally accepted
by the respondent no.2. As per Rule 27 of
the Rules read with the G.O. dated
2.11.2002, the papers were sent to the
State
Government
for
its
approval/acceptance.
The
State
Government accepted the said bid on
7.3.2003 and thereafter the lease deed for
a period of three years was executed in
favour of respondent no.4 on 15.3.2003.

3. The main grounds of challenge of
the said auction are that the bid of
respondent no.4 could not have been
accepted as it was much below the reserve
price; that the auction was not conducted
in a free and fair manner; and that the
offer of the petitioner of 2% above the
reserve price ought to have been accepted
which would be in the interest of the State
revenue as well. Malafides on the part of
the respondents were also alleged by the
petitioner.

4. At the time of filing of the writ
petition, the petitioner had made an offer
of 2% above the reserve price, which
comes to about Rs. 2.25 crores. In order
to prove their bonafide, this Court vide
order
dated
27.3.2003
directed
the
petitioner to deposit a sum of Rs. 1.12
Crores with the District Magistrate,
Hamirpur.
The
said
amount
has
admittedly been deposited on 31.3.2003
and an affidavit to this effect has also
been filed by the petitioner.

5. We have heard Sri Yogeshwar
Prasad, learned Senior Counsel assisted
by Sri Madhur Prasad on behalf of the
petitioner; as well as Sri C.S. Singh,
learned Standing Counsel for respondent
nos. 1, 2 and 3 and Sri Rajiv Dhawan
learned Senior Counsel assisted by Sri
Prashant Kumar and Akhilesh Kalra for
respondent no.4.

6. Sri Yogeshwar Prasad, learned
Senior Counsel, has submitted that the
petitioner, through its various partners,
participated in the auction proceedings on
19.2.2003 but their offer was not recorded
and the State-respondents, ignoring the
bid of the petitioner, accepted the bid of
Respondent no.4 which was much below
the reserve price. It was thus contended
that by having done so, substantial loss
had been caused to the State exchequer.
He further submitted that the petitioner
had sent its offer by Fax as well as by
registered post to the State Government
on the very next day i.e. 20.2.2003 stating
that at the time of auction, the petitioner
was not aware of the reserve price and
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2 All] M/s Harihar Contractors V. State of U.P. and others
487
was now offering an amount 2% above
the reserve price for the area in question.
A copy of the said communication dated
20.2.2003 has been filed as Annexure-2 to
the
writ
petition.
Sri
Prasad
also
submitted that the auction was not
conducted in a free and fair manner. That
the malafides of the respondents were
clear as the bid of Respondent no.4 was
accepted for an amount substantially
below the reserve price and also that the
entire acceptance and the execution of the
lease deed were clearly rushed through.

7. Sri C.S. Singh, learned Standing
Counsel, has in reply submitted that even
prior to 19.2.2003 the auction for the said
area had been held on several dates but no
bid equaling the reserve price was made
and ultimately in the absence of any
higher bid coming forth, the highest bid of
Rs. 1.51 crores made by respondent no.4
was accepted. It was further submitted
that even after 19.2.2003, the auction for
the said area was again held on 27.2.2003
in
which
no
bidder
participated.
Thereafter the area was re-auctioned on
28.2.2003 and again none came forward
with
any
bids.
Thus,
the
District
Magistrate was left with no option but to
forward the papers of the highest bid of
respondent no.4 made in auction dated
19.2.2003 to the State Government for its
approval.

8. We had called for the original
record of the State Government relating to
the auction proceedings which was placed
before us and we have examined the
same. However, we may state that for
reasons
best
known
to
the
Staterespondents, the papers relating to the
grant of the final approval by the State
Government were not placed for our
consideration.
9. Sri Rajiv Dhawan, learned Senior
Counsel appearing for respondent No. 4
M/s Chaudhary Associates Co. submitted
that the filing of the petition was
motivated and intentional as admittedly
the
petitioner-firm
could
not
have
participated in the auction held on
19.2.2003 as the firm itself was not in
existence on the said date. Undisputedly
the
firm
was
registered
only
on
25.02.2003. He also submitted that the
petitioner had not completed the requisite
formality for participating in the auction
and that the partners of the firm
participated in the auction proceedings in
their individual capacity and had also
made bid against each other. That the
filing of the writ petition was only an after
thought and no bid had been made on
behalf of the firm. He submitted that after
the auction was held on 19.2.2003, the
petitioner firm merely send their offer on
20.2.2003, which may have been for 2%
above the reserve price, but the State
Government was not under any obligation
to accept the same. On a request made by
Sri Dhawan, we had summoned the
original record of the State Government
pertaining to the auction proceedings. Sri
Dhawan further contended that despite the
auction having been held on several
occasions, since there was no higher bid
than the one made by the respondent no.
4, the State Government was justified in
accepting their bid, as otherwise daily loss
was being caused to the State exchequer
as they were losing royalty on the
minerals everyday. He also submitted that
it would be inequitable to interfere with or
set aside a contract already concluded in
favour of his client, as they had deposited
over Rs. 75 lakhs as half of the bid
amount initially, and besides that they had
invested about Rs. 50 lakhs on stamp duty
and over Rs. 40 lakhs on structures, etc.
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INDIAN LAW REPORTS ALLAHABAD SERIES [2003
488
constructed for the purpose of excavating
the
minerals. Learned counsel also
submitted
that
malafide
should
be
specifically pleaded and in the absence of
the same, the argument based on malafide
could not be looked into.

10. Having heard the learned
counsel for the parties at length as well as
on perusal of the record of the case, and
also the record of the State Government
relating to the said auction as placed
before us by the learned Standing
Counsel, we are of the view that although
the petitioner firm may not have been able
to establish their right for the contract
being awarded in their favour, but once
from the record of the State Government
and otherwise also, it has been established
before us that the auction proceedings had
neither been conducted fairly nor strictly
in compliance with the Rules, the
acceptance of the bid of respondent No. 4,
which was much below the reserve price
fixed by the State Government, as well as
the finalisation of the contract in favour of
respondent No. 4, are liable to be set
aside. The Courts cannot be expected to
shut their eyes to the irregularities and
illegalities of the respondents, even
though the same may not have been
specifically pleaded but are otherwise
clear from the perusal of the original
record of the auction proceedings.

11. From the record it is clear that
the auction was postponed on several
occasions earlier. After it was held on
19.2.2003, the office of the District
Magistrate, Hamirpur in its memorandum
dated 20.2.2003 clearly stated that in the
said auction held on 19.2.2003, the bid
offered was less than the minimum
official bid for Tehsil Sarila. As a result,
the auction was to take place again on the
already determined date i.e. 27.2.2003
and if the same could not be held on the
said date, then it was to be held on
28.2.2003.
This
notice/memorandum
makes it clear that the bids offered on
19.2.2003 had not become final. It is not
clear that in what circumstances, when the
bid at the auction dated 19.2.2003 had
neither been accepted nor had become
final, the District Magistrate accepted the
deposit of 25% of the bid towards security
amount plus another sum of 25% towards
first
installment
of
royalty
from
respondent no. 4 under Rule 27 (e) (i) of
the
Rules.
However,
thereafter
on
27.2.2003 and 28.2.2003 no bidder came
forward for the area in question. Then on
1.3.2003
the
District
Magistrate
forwarded the minutes/report of the
Auction
Committee
relating
to
the
auctions dated 19.2.2003, 27.2.2003 and
28.2.2003 to the State Government
without making its recommendation for
acceptance of the said bids as was
required under Rule 27 read with the
Government
Order
dated
2.11.2002,
which
was
further
clarified
by
Government Order dated 28.11.2002.
Para 3 of the latter Government Order
required that just after receiving the bids
in the auction proceedings, the details
thereof, alongwith the recommendations,
were to be forwarded to the State
Government for its approval. A perusal of
the communication dated 1st March, 2003
shows
that
on
the
basis
of
the
recommendation
of
the
Auction
Committee, the final bid at the auction
held on 19.2.2003 for Tehsil Sarila was
not accepted, as the same was lower than
the minimum prescribed Government bid.
However, still without there being any
recommendation for its acceptance, the
said bid of the respondent No. 4 was
accepted by the State Government on
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2 All] M/s Harihar Contractors V. State of U.P. and others
489
7.3.2003, in pursuance of which the lease
deed was executed in their favour on
15.3.2003. The papers relating to the
acceptance of the bid by the State
Government have not been placed before
us. It is not known to us that under what
circumstances the bid of respondent No.4,
which was substantially lower than the
reserve
price
fixed
by
the
State
Government, was accepted by them, in
spite of the fact that the offer made by the
petitioner vide communication dated
20.2.2003 was on record of the file of the
State Government, on such offer an
endorsement had been made on 25.2.2003
by an officer of the State Government that
an enquiry be conducted through a
Committee. The outcome of such enquiry
which was directed to be conducted on
the offer made by the petitioner, is not on
the record of the file of the State
Government placed before us, and the
learned Standing Counsel has also not
been able to apprise us of such decision.
It has not been explained by the learned
Standing Counsel as to why the bid of
respondent No. 4 had been accepted
before the conclusion of the said enquiry,
specially when the bid of respondent No.
4 was substantially lower then the reserve
price, and also when a positive offer of
2% above the reserve price, which comes
to about Rs. 2.25 crores, had been made,
which would be about 50% over the bid
amount of respondent No. 4, which was
only for Rs. 1.51 crores. Why the same
was
not
considered
by
the
State
Government before the finalisation of the
auction, or why they did not await the
outcome of the enquiry as had been
directed on such offer, are questions
which raise serious doubts on the fairness
and the intention of the State Government
in hurriedly finalising the contract.

12. As has already been noted
above, the petitioner-firm has already
deposited an amount of Rs. 1.12 crore to
show their bonafide and seriousness of the
offer made by them, which was for 2%
above the reserve price of about Rs. 2.21
crores and amounts to about Rs. 2.25
crores. During the course of hearing, the
learned counsel for the petitioner also
stated that the petitioner would be
prepared to deposit any further amount as
may be directed by this Court.

13. At the time of arguments Sri
Yogeshwar Prasad had also stated that in
case if the area is put to re-auction, the
offer of Rs. 2.25 crore of the petitioner
may be taken as its reserve price for
which the amount of Rs. 1.12 crore
already deposited by the petitioner may be
kept as security, and in case if the
petitioner does not make a bid of at least
Rs. 2.25 crores, the security amount
deposited under orders of this Court may
be forfeited. At this stage, Sri Rajiv
Dhawan appearing for respondent No. 4,
also made a conditional offer, that in case
if the present dispute could be put to rest
and the parties, which include the
petitioner as well as State Government,
would not raise any further dispute, his
client was also prepared to enhance the
amount of his bid to Rs. 2.25 crores.

14. Be that as it may, on considering
the totality of the circumstances as well as
the fact that both the contesting parties i.e.
the petitioner and respondent No. 4 are
now prepared to pay a minimum amount
of Rs. 2.25 crores for getting the mining
rights in their favour, and also considering
the fact that the records of the State
Government pertaining to the auction
proceedings placed before us clearly
disclose that the auction dated 19.2.2003
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INDIAN LAW REPORTS ALLAHABAD SERIES [2003
490
had actually not become final, and the
State Government did re-auction the said
area again on 27.2.2003 as well as on
28.2.2003, which virtually amounted to
washing off the earlier auction, we cannot
accept the submission of the respondents
that the auction proceedings had been
conducted in a fair manner so as to get the
best price. In fact, on the contrary, the
record speaks otherwise.

15. Although the Courts normally do
not interfere in matters where a contract
has been concluded, and also even though
the petitioner may not have made out a
case entitling them to the relief of grant of
contract in their favour, but still in a
matter like this, the conscience of the
Court is pricked, as we find from the
record that the finalisation of the contract
was done in a hurry, and at a price much
below than the one which could have
been procured by the State Government or
that which had been fixed by them as its
reserve price. The minimum amount
which has now actually been offered by
both the contesting parties is nearly 50%
more than the amount on which the
contract has been awarded. Learned
counsel for the petitioner made a
statement that his client was prepared to
raise the amount further in case if this
Court permitted the bidding between the
contesting parties at the time of hearing
itself. We, however, are not inclined to
permit bidding in Court as there could be
other
parties
also
interested
in
participating, who would not have notice
of such process having been undertaken
by this Court. However, the loss to the
State exchequer if calculated on the
minimum offer now made by the
contesting parties, would come to about
Rs. 75 lakhs per annum. Since the
contract is for a period of three years, the
cumulative loss comes to about Rs. 2.25
crores. We have no reason to believe that
in case if the area in question is put to reauction, and if the same is held in a free
and fair manner, the bid amount could go
well over Rs. 2.25 crores per annum. Thus
it is obvious from the facts of the case and
the record, that the true potential of the
mining price of the area has not been
exploited
by
the
State-respondents,
thereby causing immense loss to the State
exchequer. Even though the sanctity and
finality of the contract is normally
required to be preserved but since in the
present case, the difference between the
accepted bid of Rs. 1.51 crores and the
reserve
price
fixed
by
the
State
Government of over Rs. 2.21 crores is
reasonably high. Further the offer of
about Rs.2.25 crores made by the
petitioner on 20.2.2003 is even more than
the reserve price, and the respondent no. 4
as also agreed to enhance the amount of
his bid matching the said offer. In such
circumstances we can not let the State
exchequer be put to such a huge loss by
permitting the auction to become final,
which
was
apparently
done
surreptitiously. In our view, if the reserve
price fixed by the respondents was not
being reached at the auction dated
19.2.2003, and re-auction had already
been held on 27.2.2003 and 28.2.2003,
and there was no recommendation for
acceptance of the highest bid made at the
auction held on 19.2.2003, which in any
case had not become final because of the
order of re-auction, such bid should not
have been accepted. In such a situation,
the only option left for the Staterespondents was to re-advertise the area
for re-auction after determining afresh the
reserve price for the area.

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2 All] M/s Harihar Contractors V. State of U.P. and others
491
16. In view of the aforesaid positive
conclusion that we have arrived at on the
basis of the examination of the original
record relating to the auction proceedings,
we do not consider it necessary to go into
the other questions raised by respondent
No. 4 relating to the petitioner firm not
being in existence on the date of auction
or that the partners of the petitioner firm
were bidding against each other in the
auctions held for the other blocks. We are
also not inclined to consider the various
case laws cited by the respondents in
support of their contention that judicial
review in cases of tender or auction is
very limited, since there is no quarrel with
the said proposition. The same however
does not mean that the Court should not
interfere even where it is found that the
State Government has not acted fairly.
The Apex Court in the case of Monarch
Infrastructure
(P)
Ltd.
V.
Commissioner, Ulhasnagar Municipal
Corporation and others (2000) 5 S.C.C.
287 has laid down the principles on which
the Courts may interfere and one of such
principle is when the Government acts
arbitrarily or contrary to public interest. In
the facts of the present case we have no
doubt that the State Government has
finalized the auction in an arbitrary
manner
which
is
indefensibly
unreasonable and is also against the
public interest, as a huge loss to the State
exchequer has been caused by such action
of the State Government.

17. In the aforesaid circumstances
and in the light of the discussion made
above, we direct that the auction dated
19.2.2003, on the basis of which the
contract had been awarded in favour of
respondent No. 4, be set aside and the
mining rights of the area i.e. Tehsil Sarila,
District Hamirpur be put to re-auction, in
accordance with the Rules and the
Government Orders, on the condition that
the petitioner deposits a further amount of
Rs. 1.13 crores by 31st May, 2003, besides
the sum of Rs. 1.12 crores which has
already been deposited by them on
31.3.2002 as directed by this Court vide
order dated 27.3.2003. The said reauction should take place within a period
of six weeks from the date of deposit of
the further amount of Rs. 1.13 crores by
the petitioner i.e. when the total sum
deposited by the petitioner comes to Rs.
2.25 crores. The reserve price for the said
re-auction shall be fixed at Rs. 2.25 crores
which is the minimum amount offered by
both the contesting parties and also the
amount which the petitioner would thus
have deposited as security. It is made
clear that in case if the petitioner does not
deposit the further sum of Rs. 1.13 crores
within the time granted, which would
mean that they do not wish to participate
in the re-auction, the sum of Rs. 1.12
crores already deposited by them under
orders of this Court shall stand forfeited.

18. It is further provided that under
the
contract
dated
15.3.2003,
the
respondent no.4 shall be permitted to
excavate the minerals from the area in
question only upto 31st May, 2003. Out of
the amount deposited by them under the
contract, the State Government shall
charge only for the proportionate period
during which they have carried on the
excavation, and refund the balance
amount to the said respondent No. 4. In
case if respondent No. 4 is inclined to
participate in the re-auction proceedings,
the amount to which they may be entitled
to refund, may be kept as security on their
behalf till the finalisation of the reauction. It is also made clear that in case
if the bid of either the petitioner or
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INDIAN LAW REPORTS ALLAHABAD SERIES [2003
492
respondent No. 4 is not accepted in the reauction, they shall be refunded their
respective security amounts forthwith.

19. In the result, subject to the
directions issued above, the writ petition
is partly allowed, without there being any
order as to costs. The auction dated
19.2.2003, in pursuance of which the
contract has been granted in favour of
respondent No. 4, is set aside. The other
prayer for the acceptance of the offer of
the petitioner at 2% above the reserved
price is however refused.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 04.07.2003

BEFORE
THE HON'BLE DR. B.S. CHAUHAN, J.
THE HON'BLE D.P. GUPTA, J.

Civil Misc. Writ Petition No. 27686 of 2003

Raj Kumar and others ...Petitioners
Versus
Public
Service
Commission
Uttar
Pradesh, Allahabad
 ...Respondent

Counsel for the Petitioner:
Sri R.S. Chaudhary

Counsel for the Respondent:
Sri Neeraj Tiwari
S.C.

Constitution of India Article 226-Service
Law
Selection-eligibility-criterion
forsettled
law-candidate
must
possess
requisite qualifications/illegibility on the
last
date
of
submission
of
the
application.

1993 (2) SCC 429. Dr. M.V. Nair Vs. U.O.I and
1995 (Suppl) 4 SCC 706 Harpal Kaur Chahal
Vs. Director Punjab Instructions, relied upon
Case laws discussed:
AIR 1983 SC 852
AIR 1983 SC 1143
AIR 1988 SC 1143
AIR 1988 SC 2068
AIR 1990 SC 405
1994 (2) SCC 723
1994 (6) SCC 151
1997 (10) SCC 419
1997 (4) SCC 18
1997 SC 1803
AIR 1999 SC 2093

Held- Para 15

In view of the above, as it is settled legal
proposition that the candidate must
possess requisite qualification/eligibility
on the last date of submission of the
Application Form, we see no ground to
interfere. The petition is, accordingly,
dismissed.

(Delivered by Hon'ble Dr. B.S.Chauhan, J.)

1. This writ petition has been filed
seeking direction to the respondent to
consider the candidature of the petitioners
in
pursuance
of
the
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No.1/2003-2004, issued by the U.P.
Public Service Commission.

2. Facts and circumstances giving
rise to this case are that on 21/27th June,
2003
Public
Service
Commission
advertised the vacancies of Medical
Officers, prescribing the eligibility that
the person applying must have the
internship completed by the last date of
submitting the Application Form, for
what, petitioners had not completed their
internship till the last date of submitting
the
Application
Forms.
Hence
this
petition.

3. Learned counsel for the petitioner
has submitted that as there has been
irregularities in holding the examination
and completing the internship by the
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