# PURXOMOMA RAMANATA QUENIN v. MAKAN KALYAN TANDEL & ORS

- **Citation:** [1974] 3 S.C.R. 64
- **Court:** Supreme Court of India
- **Decided:** 1974-01-09
- **Case number:** Special Civil Application Writ Petitions Nos. 8 and 9 of 1973
- **Bench:** H. R. Khanna, V. R. Krishna !Yer, R. S. Sar.Karia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/purxomoma-ramanata-quenin-v-makan-kalyan-tandel-ors-6051
- **Pages:** 10

## Headnote

Constiturio11 of India, Art. 14-Contracts with' the Government-Uast of distillery owned by the State to. members of public by tenckr-Government reser;ingright to select any tender or re,,1ect a/I te11ders without assigning any reason-No vlolaJiolt
of Art. 14.
A
B
Words and phrases-" Auction" and "Jnvliation to tender"-Distinction betweinLegislative dip/01na No. 1761, Art. 9 para 2 frame~ by Portuguese Govern~nt. ·
C
The Union territory of (Joa; Daman and Diu invited tenders on behalf of the
President of India from the public for the lease pf the Daman distillery for a period
of three years. Clause 7 of the tenns and conditions of the tender appended to
the notice provided that the highest iender shall ordinarily ~ accepted but the
Government reserved the right to select any tender or reject all tenders without
assigning any reason therefor. The appellant tendered Rs.
3,25,000/· while respondent No. I offered Rs. 3,51,545/· The le1s: of th~ distillery was granted to
appellant for Rs. 3,52,545/· Rs. 1000/- more than th~ amount mentioned. in the
~
tender of respondent No. I, .On challenge to the legality of the grant of lease by
Respondent No. 1 thourgh a writ petition, the Judicial Commissioner of Goa set
aside the lease in favour of appellant No. 1 and directed the Government tc~ deal
with the tender of respondent No. I according to law. The main reason which
weighed with the learned Judicial Commissioner was the su~on made on behalf
of the State that it was prepared, without accepting the correctness of the con.
tention5 of Respondent No. I, to set aside the lease, if the Court So desired. The
Judicial Cornmissioner also held !hat clause·? of the notice wa~ ultra v~. that givi:ng
E.
lease to the appellant by accepttng more money than the highest bid by a private
deal was contrary to law and not assigning reasons for the rejection of the tender
of 1espondent No. 1 was illegal. (680}
A.llo..ylng the appeal b)' special leave,
HELD: (1) The Judicial Corr'unissioner should not have, without giving some
cogent reason set aside the lease of the distillery in favour of the appellant. The
main reason v.'.·hich weighed with the learned Judki~l Commissioner in setting aside
the lease in fa~our of the appellant was the submi~ion made on behalf of_thc State
that it was prepared. without accepting the correctness of the contentions of respondent No. 1, to set aside the lease if the Court so desired. This circun15tance
was hardly sufficient to warrant the setting aside of the lease in favour of the appcl.
]ant. The person who was primarily affected by the setting aside of the lease was
the appellant to whon1. the lease had been granted. Io the absence of any con·
currence of the appellant, the fact that the Government was prepared, if the Court
so desired. to set aside the lease, could hardly provide valid basis for tlie seltif'lg:
aside of the lea~c. [ 680}
01) Regarding the question of the validity of clause 7 and the grant of lea_se in
favour of the appellant even though the tender of respondent- No. 1 was for the
highest amount, the matter is not res integta and is more or less concluded by the
pronouncements of this court. The view taken by this-Court is that a condition
like that contained in clause 7 produced above is not violative of Article 14 of the
Constitution and that in matters relating to contracts with the Government, the
latter is not bound to accept the tender of the person who offers the highest amount.
The circumstance that those cases were decided in the context of certain statutory
~ provisions would not detract from the bindina effect of the general principles eoun-
,. c.lated in those i;ases. [68F; 71HJ
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...,,
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.P. R.
0QUENIN v. M. K. TANDEL (Khanna, J.).
6 s;
C. K. Achuthan v. The-State of Kera/a and others [1959] Suppl. 1 S.C.R; 7_87, .
Trilochan Afishra etc. v. State o/Orissa and Ors. [1971]3 S.C.C. 153.State o/f:?nssa
and Ors. v. Harinarayan Jaiswal and others, [1972] 2 S.C.C.
36.

## Text

64
PURXOMOMA
RAMANATA
QUENIN
v.
MAKAN KALYAN TANDEL & ORS.
January 9, 1974
[H. R. KHANNA, V. R. KRISHNA !YER AND R. S. SAR.KARIA, JJ.]
Constiturio11 of India, Art. 14-Contracts with' the Government-Uast of distillery owned by the State to. members of public by tenckr-Government reser;ingright to select any tender or re,,1ect a/I te11ders without assigning any reason-No vlolaJiolt
of Art. 14.
A
B
Words and phrases-" Auction" and "Jnvliation to tender"-Distinction betweinLegislative dip/01na No. 1761, Art. 9 para 2 frame~ by Portuguese Govern~nt. ·
C
The Union territory of (Joa; Daman and Diu invited tenders on behalf of the
President of India from the public for the lease pf the Daman distillery for a period
of three years. Clause 7 of the tenns and conditions of the tender appended to
the notice provided that the highest iender shall ordinarily ~ accepted but the
Government reserved the right to select any tender or reject all tenders without
assigning any reason therefor. The appellant tendered Rs.
3,25,000/· while respondent No. I offered Rs. 3,51,545/· The le1s: of th~ distillery was granted to
appellant for Rs. 3,52,545/· Rs. 1000/- more than th~ amount mentioned. in the
~
tender of respondent No. I, .On challenge to the legality of the grant of lease by
Respondent No. 1 thourgh a writ petition, the Judicial Commissioner of Goa set
aside the lease in favour of appellant No. 1 and directed the Government tc~ deal
with the tender of respondent No. I according to law. The main reason which
weighed with the learned Judicial Commissioner was the su~on made on behalf
of the State that it was prepared, without accepting the correctness of the con.
tention5 of Respondent No. I, to set aside the lease, if the Court So desired. The
Judicial Cornmissioner also held !hat clause·? of the notice wa~ ultra v~. that givi:ng
E.
lease to the appellant by accepttng more money than the highest bid by a private
deal was contrary to law and not assigning reasons for the rejection of the tender
of 1espondent No. 1 was illegal. (680}
A.llo..ylng the appeal b)' special leave,
HELD: (1) The Judicial Corr'unissioner should not have, without giving some
cogent reason set aside the lease of the distillery in favour of the appellant. The
main reason v.'.·hich weighed with the learned Judki~l Commissioner in setting aside
the lease in fa~our of the appellant was the submi~ion made on behalf of_thc State
that it was prepared. without accepting the correctness of the contentions of respondent No. 1, to set aside the lease if the Court so desired. This circun15tance
was hardly sufficient to warrant the setting aside of the lease in favour of the appcl.
]ant. The person who was primarily affected by the setting aside of the lease was
the appellant to whon1. the lease had been granted. Io the absence of any con·
currence of the appellant, the fact that the Government was prepared, if the Court
so desired. to set aside the lease, could hardly provide valid basis for tlie seltif'lg:
aside of the lea~c. [ 680}
01) Regarding the question of the validity of clause 7 and the grant of lea_se in
favour of the appellant even though the tender of respondent- No. 1 was for the
highest amount, the matter is not res integta and is more or less concluded by the
pronouncements of this court. The view taken by this-Court is that a condition
like that contained in clause 7 produced above is not violative of Article 14 of the
Constitution and that in matters relating to contracts with the Government, the
latter is not bound to accept the tender of the person who offers the highest amount.
The circumstance that those cases were decided in the context of certain statutory
~ provisions would not detract from the bindina effect of the general principles eoun-
,. c.lated in those i;ases. [68F; 71HJ
F
G
B
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.P. R.
0QUENIN v. M. K. TANDEL (Khanna, J.).
6 s;
C. K. Achuthan v. The-State of Kera/a and others [1959] Suppl. 1 S.C.R; 7_87, .
Trilochan Afishra etc. v. State o/Orissa and Ors. [1971]3 S.C.C. 153.State o/f:?nssa
and Ors. v. Harinarayan Jaiswal and others, [1972] 2 S.C.C.
36.
Coover1~e· B.
Bharucha's case [1954] S.C.R. 873 and Union af India and Ors. v. M/s Bh1msert
Walaiti Ram, [1970] 2 S.C.R. 594, relied on.
Cehtufy Spinning & Mfg. Co. ~d anr. v. The Ulhas~gar Municipal Council &
Anr. [1970] 3 S.C.R;854, Rashbihar Panda etc. v. StateofOrissa. [196913 S.C.R.
374, Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh & Two Ors.,f1954]
S.C.R. 803, and Guruswamy v. State of Mysore A.l.R. 1954 S.C. 592, distinguished'.
No allegations were made in the writ petition by respondent no. 1 that the act
of the authorities in the grant of lease of the distillery to the appellant was mafa
fide Nor has th' abov~ act been shown to be vitiated by any such arbitrariness as
should call for interference by this Co~. [73E]
(III) It does not appear that tenders were invited in connection w!th th~ lease
of the distillery in pursuance of the provisions of Art. 9 of the Legislative Diploma
No. 1761 framed by the Portuguese Government. According to para 2 of Art. 9
the lease can be put to auction in the stipulated conditions when it is found not
convenient to renew the previous one. The aforesaid paragraph,
it would thus
appear, relates to auction and not to calling of sealed tenders. An auction is a
manner of selling or letting property by bids, and usually to thC highest bidder by
public competition. -An invitation to tender is a mere attempt to ascertain whether
an offer can be obtained within such margin as the building owner or employer is.
"illing to adopt, or, in other words, is an offer to negotiate, an offer to receive
offers, an officer to. chaffer. There is a difference between auction and invitationfor tenders. As there was no auction but only invitation for tenders in the present
case, it cannot be said that the lease was governed by article 9 of the Legislative
Diploma. [72B·E]
.
Halsbury's Laws of England, third Editio·n, Vol 2, pp.· 69, 422, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 844 and 845
(N) of 1973.
Appeals by special leave from the judgment and order dated the
31st March, 1973 of the Court of the Judicial Commissioner Goa, .. ·
Daman and piu at Panaji in_1,Special Civil Application Writ Petitions
Nos. 8 and 9 of 1973.
·
·
.
P. H. Parekh, P. G. Navelkar and Sunanda Bhandare, for the appellant.
. .
. •
,
.
.
B. R. L. Iyengar and P. C. Bhartari, for Respondent No. I.
L. N. Sinha, Solicitor General of India and-M. N. Shroff, for the
Respondent Nos. 2-4. -
The Judgment of the Court was delivered by
KHANNA, J-This judgment would dispose of civil appeals No.
844 and 845 of 1973 which have been filed ·by special leave against
the judgment of learned Judicial Commissioner Goa, Daman and !>ju
whereby he cancelled the leases of the distilleries grant<d in favour of
the appellant and directed the Government to deal with the tender
of respondent No. I according to Jaw in the light of the observations
made by the Judicial Commissioner.· As the question· imolv<d in
the two appeals is identical, we may set out the facts giving rise to civil
appeal No. 844, Learned counsel for the parties are agreed that the
decision in that civil appeal would also govern the other appeal.
0-SS2SCI/74
.
66
SUPREME COURT REPORTS
[ 1974 J 3 S.C.R.
There is a distillery installation owned by the State at Daman.
The Government has been leasing out the said distillery for specified
period to members of the public for manufacture of country liquor.
At the expiry of each lease, the Government used to invite fresh tenders
from the public or :he next lease and granted lease of the distillery
to the person whose tender was accepted.For a number of years before
A
1973 the appellant's tender in respect of the above distillery was accepB
ted by the Government as the amount offered by him was the highest.
The last lease in favour of the appellant expired on January 31, 1973.
Before that by notice dated September 25, 1972 the Finance Secretary
for the Union Territoiy of Goa, Daman and Diu invited tenders on
behalf of the President of India from the public for the lease of the said
distillery for a p~riod of three years commencing from Februa1y I,
1973 for the manufacture of country liquor. The terms and condiC
tions of tender as framed by the Government were appended to the
said notice. Clause 7 of those terms and conditions was as under :
"The highest tender shall ordinarily be accepted but the
Government reserves the right to select any tender or reject all
tenders without assigning any reason therefor."
Pursuant to the notice the appellant and respondent No. 1 submitted
closed tenders to the Government in the prescribed form. The tenders
were opened on December 20, 1972 in the office·of the Commissioner
of Excise in the presense of the tenderers. It was found that the
tender of respondent No. l for an amount of Rs. 3,51,345 was the
highest, while that of the appellant for Rs. 3,25,000was second. There
was a third tenderer also, but his tender was the lowest and we are no
longer concerned with him. As respondent No. 1, whose tender was
for the highest amount, did not receive any communication regarding
the acceptance of his tender, he wrote a Jetter on January 16, 1973
to the Finance Secretary calling upon him to accept the tender of respondent No. 1 within 24 hours and to take necessary steps for the
execution of the lease. On January 18, 1973 the Advocate of respondent No. I sent notice to the Finance Secretary to accept the tender
of respondent No. 1. Respondent No. 1 then learnt that the distillery
in question had been given on lease to the appellant for Rs. 3,52,345,
i.e., Rs. 1,000 more than the amount mentioned in the tender of respondent No. J.
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Respondent No. 1 thereupon filed petition under articles 226 and
G
227 praying for the issuance of a writ to quash and set aside the
grant of lease of the distillery in question in favour of the appellant
and for directing the Government to grant the lease of the distillery in
favour of respondent No. J. According to respondent No. 1, it was
incumbent upon the Government to give reasons for the rejection of
his tender. It was further stated that in case the Government relied
upon clause 7 of the terms and conditions in support of its action,
H
the said clause was void for violation of article 14 of the Constitution
inasmuch as it enabled the Government to reject the highest tender
without assigning any reason therefor.
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P. R. QUENIN v. M. K. TANDEL (K/1(1flna, l.)
67
The petition was resisted by the appellant as well as by the State
Government.
It was stated in the reply filed on behalf of the State
Goverument that the invitation of tenders did not give rise to any rights
Gther than those stipulated in the terms and conditions upon which the
tenders bad been invited. As those rights were purely of a contractual
nature, no relief could be granted by the court under its writ
jurisdiction for alleged breach of .contract. According further to
the affidavit, the acceptance of the tender was solely within the discretion of the Government, uncontrolled by any statutory obligation or
limitation and the rejection of the tender of respondent No. 1 created
no statutory rights in him. Clause 7 of the terms and conditions was
stated to be valid and not violative of article 14. The tender of respondent No. 1 was stated to have been rejected after the appellant
had been informed that his tender could be accepted provided he
raised his offer so as to pay an amount higher than that offered by the
person with the highest tender. The appellant accordingly raised his
ojfer and thereupon his tender was accepted. The grounds for lhe
rejection of the tender of respondent No. I were stated to have 'been
reeorded in the file. It was, according to the affidavit, for the Government to choose the person to whom it would grant the lease and the
party aggrieved could not claim the protection of article 14.
The learned Judicial Commissioner in the course of his judgment
observed that the act of the Government in giving a lease of the distillery to the appellant for Rs. ~,52,345, i.e., Rs. 1,000 more than the
highest bid, by a private deal was not countenanced by law. The
Judicial Commissioner then referred to the submission which was
made during the course of arguments oh behalf of the Government
that the Government was prepared to annul the lease granted in
favour of the appellant if the court were to so direct. The Judicial
Commissioner thereupon directed that the lease in favour of the appellant be set aside. Dealing with the validity of clause 7 reproduced
above the learned Judicial Commissioner observed that, to the extent
it gave power to the Government to reject the highest tender without
assigning any reason, it was ultra vires and should be struck down.
In the opinion of the Judicial Commissioner, it was open to the Government to assign reasons for the rejection of the tender of respondent
No. !. Opportunity was thereafter to be given to respondent No. 1
to show that the reasons assigned by the Government were bad. The
lease of the distillery granted in favour of the appellant was accordingly set aside and the Government was directed to deal with the tender of
respondent No. l according to law in the light of the observations made
by the learned Judicial Commissioner.
It may be stated that after the judgment of the Judicial Commissioner, letter dated April 10, 1973 was addressed on behalf of the
Goverment stating that in pursuance of the decision of the Judicial
Commissioner the Government had decided that the existing contract
with the appellant be set aside and the lease of the distillery be
granted in favour of respondent No. 1.
•
68
SUPREME COURT .REPORTS.
l 1974 l 3 s.c.a.
It has been argued by Mr. Parekh on behalf of the appellant that
the Judicial Commissioner was not justified in setting aside the lease in
favour of the appellant without giving any reason. Clause 7 reproduced above, according to the learned counsel, is valid and does not
contravene .~rticle 14 of the Constitution. Respondent No. 1, it is
further stated, cannot be allowed to take the benefit of one part of
clause 7 without at the same time being bound by the other part of that
clause. Learned Solicitor General on behalf of the Union of India
has contended that clause 7 is valid and binding upon the parties.
As against that, Mr. Iyengar on behalf of respondent No. 1 has con-
!roverted the contentions advanced on behalf of the appe1lant. The
Judgment of the Judicial Commissioner, it is stated, does not suffer
from any infirmity. It has also been argued by the learned counsel
that the grant of lease of the distillery in question is governed by the
provisions of article 9 of Legislative Diploma No. 176l framed by
the Portugese Government.
There is, in our opinion, force in the contention advanced on behalf
of the appellant that the Judicial Commissioner should not have
without giving some cogent reason set aside the lease of the distillery
in favour of the appellant. Perusal of the judgment shows that the
main reason which weighed with the learned Judicial Commissioner in
setting aside the lease in favour of the appellent was the submiss\on
made on behalf of the State that it was prepared without accepting
the correctness of the contentions of respondent No. l to set a•ide
the lease if the court so desired. This circumstance, in our opinio11 1
was hardly sufficient to warrant the setting aside of the lease in
favour of the appellant. The person who was primarily affected by
the setting aside of the lease )Vas the appellant to whom the lease had
been granted. Jn the absence of any concurrence of the appellant,
the fact that the Government was prepared if the court so desired.
to set aside the lease could hardly provide valid basis for the setting
aside of the lease.
So far as the question is concerned about the validity of clause 7
and the grant oflease in favour of the appellant even though the tender
of respondent No. I was for the highest amount, we find that the matter
is not res integra and is more or less concluded by the pronouncements
of this Court. In C.K. Achuthan v. The State of Kera la & Ors.(l)the facts
were as under. The petitioner and the third respondent, Co-operative
Milk Supplies Society Cannanore submitted tenders for the supply of
milk to the Government Hospital at Cannanore for the year 194849. The Superintendent who scrutinised the tenders, accepted that
of the petitioner and communicated the reasons for the decision to the
Director of Public Health. The contract in favour of·the petitioner
was subsequently cancelled in pursuance of the policy of the Government that in the matter of supply to Government medical institutions
the Cc-operative Milk Supplies U~ion was to be given contract 011
the basis of prices fixed by the revenue Department. The petitioner
challenged the decision of {he Government in petition under article 32
U) (1959] Suppl. I S.C.R. 787.
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P. R. QUENIN v. M. K. TANDEL (Kh111111a, !.)
69
of the Constitution on the ground, inter alia, that there had been discrimination against him vis-a-ris the third respondent and, as such,
there was contravention of article 14, 19(\)(g) and 31 of the Constitution. Rejecting the contention the Constitution Bench of \hi> Court
speaking through Hidayatullah J. (as he then was) observed:
"The gist of the present matter is the breach, if any, of
the contract said to have been given to the petitioner which has
been cancelled either for good or for bad reasons. There is no
discrimination, because it is perfectly open to the Government.
even as it is to a private party, to cJ:oose a person to their liking,
to fulfil contracts which they wish to be performed. When one
person is chosen rather than another, the aggrieved party
cannot claim the protection of Art. 14, because the choice of the
person to fulfil a particular contract must be left to the Government. Similarly, a contract which is held from Government
stand on no different footing from a contract held from a private
party. The breach of the contract, if any, may entitle the person aggrieved to sue for damages or in appropriate cases, even
specific performance but he cannot complain that there has
been a deprivation of the right to practise any profession or to
carry on any occupation, trade or business, such as is contemplated by Art. 19(l)(g). Nor has it been shovin how Art. 31
of the Constitution may be invoked to prevent cancellation of a
contract in exercise of powers conferred by one of the tenns of
the contract itself."
In Tri/ochan Mishra, etc. v. State of Orissa & Ors.(') this court
dealt with the validity of section 3(2)(a) and section 8 (1) of the
Orissa Kendu Leaves (Control of Trade) Act, 1961 as amended by the
Orissa Kendu Leaves (Control of Trade) Amendment Act, 1969 as
well as the validity of the rules framed under that Act. The petitioner in that case also sought a declaration that the revised policy
in the matter of the sale of Kendu leaves was arbitrary, dicriminatory
and ma/a fide. One of the grievances of the petitioner in that case
was that the bid of person making the highest tenders were not accepted. Repelling the contention advanced on behalf of the petitioner,
Mitter J. who gave the judgment of the Court on behalf of the Constitution Bench observed :
"With regard to the girevance that in some cases the
bids of persons making the highest tenders were not accepted,
the facts are that persons who bad made lower bids were asked
to raise their bids to the highest offered before the same were
accepted. Thus there was no loss to Government and merely
because the Government preferred one tender to another no
complaint can be entertained( Government certainly has a
right to enter into a contract with a person well known to
it and specially one who has faithfully performed his conttacts in the past in preference to an undesirable or unsuitable
(!) [1971] 3 S.C.R. 153,
70
SUPREME COURT REPORTS
[1974] 3 S.C.R.
or untried person. Moreover, Government is not boi:nd to
accept the highest tender but may accept a lower on~ in case
it thinks that the person offering the lower tender 1s on an
overall consideration to be preferred to the higher tenderer."
In State of Orissa & Ors. v. Hari11araya11 Jaiswal & Ors.(I) .the
respondents were the highest bidders at an auction held by the Onss.a
Government through the Excise Commissioner, for the exclusive pnvilege of selling by retail the country !iquo~ in some shops. The
Government of Orissa had reserved the nght either to accept or reiect
the highest bid and had actually rejected the bids of the respondents
and later on the privilege was sold by negotiation to· some others. One
of the contentions taken on behalfof the writ petitioners in that case
was that the power retained by the Government "to accept or to reject
any bid without assigning any reason therefor" was an arbitrary po'Yer
and therefore, violative of articles 14 and 19(1)(g). Hegde J. speakrng
for this Court rejected that contention in the following words :
"One of the contentions taken on behalf of the writ petitioners was that the power retained by the Government 'to accept or tc:> reject any bid without assigning any reason therefor'
in clause (6) of the order made by the Government on January 6, 1971, in exercise of its powers under section 29(2) of the
Act was an arbiirary power and therefore it is violative of articles
14 and 19(1)(g). This contention has been upheld by the High
Court. It was urged on behalf of the writ petitioners that they
have a fundamental right to carry on trade or business in country
liquor. That right can be regulated only by imposing reasonable restrictions in the interest of the general public. It
was further urged that the power retained by the Government
to accept or to reject the highest bid without assigning any
reason is an unguided power and hence it is violative of article
14. These contentions were accepted by the High Court. To
us, none of these contentions appear to be well founded. As
seen earlier section 22 of the Act confers power on the Government to grant to any person on such conditions and for such
period as it may think fit the exclusive privilege of selling in
retail any country liquor. Section 29 empowers the Government to accept payment of a sum in consideration for the grant
of any exclusive privilege under section 22 either by calling
tenders or by auction or otherwise as it may by general or special
order direct. The powers conferred on the State Government
by section 22 and section 29 are absolute powers. As seen
earlier, the validity of those provisions has not been challenged
before us. Under section 29(2) the Gcvernment had power
to dispose of any of the exclusive privileges mentioned in section
22 either by auction or otherwise as it may by general or special
order direct. Thal being the amplitude of the power of the
Government, we fail to see how the Government can be said
(I) [19721 2 s.c.c. 36,
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P. R. QUENIN v. M. K. TANDEL (KhiflltUI, /,)
to have conferred on itself arbitrary power under clause (6)
of its order made on January 6, 1971, when it provided that :
"No sale shall be deemed to be final unless confirmed
by the State Government who shall be at liberty to accept
or reject any bid without assigning any reason therefor."
71
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Even apart from the provisions of sections 22 and 29, this Court took
the view that the power retained by the Govornment under clause
(6) reproduced above was not unconstitutional. It was observed in
this context :
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"Even apart from the power conferred on the Government
under sections 22 and 29, we fail to see how the power retained
by the Government under clause (6) of its order, dated January 6, 1971, can be considered as unconstitutional. As held
by this Court in Cooverjee B. Bharucha's case(!) one of the important purposes of selling the exclusive right to sell liquor in
wholesale or retail is to raise revenue. Excise revenue forms
an important part of every State's revenue.. The Government
is the pardian of the finances of the State. It is expected to protect the financial interest of the State. Hence quite naturally,
the legislature has empowered the Government to see that there
is no leakage in its revenue. It is for the Government to
decide whether the price offered in an auction sale is adequate.
While accepting or rejecting a bid, it is merely performing an
executive function. The correctness of its conclusion is not
open to judicial review. We fail to see how the plea of contravention of article 19(1)(g) or article 14 can arise in these cases.
The government's power to sell the exclusive privilege set out in
section 22 was not denied. It was also not disputed that those
privileges could be sold by public auction. Public auctions are
held to get the best possible price. Once these aspects are recognised, there appears to· be no basis for contending that the
owner of the privileges in question who had offered to sell them
cannot decline to accept the highest bid if he thinks that the
price offered is inadequate. There is no concluded contract
till the bid is accepted. Before there was a concluded contract,
it was open to the bidders to withdraw their bids-see Union
of India and Ors. v. M/s. Bhimsen Walaiti Ram.(2) By merely
giving bids, the bidders had not acquired any vested rights.
The fact that the Government was the seller does not change
the legal position once its exclusive right to deal with those
privileges is conceded. If the Government is the exclusive
owner of those privileges,reliance on article 19(l)(g) or article
14 becomes irrelevant."
It would appear from the above that the view taken by this Court
is that a condition like that contained in clause 7 reproduced above
is not violative of article 14 of the Constitution and that in matters
relating to contracts with the Government, the latter is not bound
(I) [1954] S.C.R. 873.
(2) [19701 2 S.C.R. 594.
72
SUPREME COURT REPORTS
!1974) 3 S.C.R.
to accept the tender of the person who offers the highest amount. • A
Mr. Iyengar has tried to distinguish the above mentioned cases on the
ground that they were decided in the context of certain statutory provisions. This circumstance, in our opinion, would not detract from the
binding effect of the general principle enunciated in those cases.
We may now deal with the contention of Mr. Iyengar that the
lease of distilleries is governed by para 2 of article 9 of Legislative
B
Diploma No. 1761. In this connection we find that the judgment
of the learned Judicial Commissioner does not show that any such
ground was urged before him. Mr. Parekh on behalf of the appellant submits that the said Legislative Diploma was no longer in force
at the time the distillery was leased in favour of the appellant. It
is, in our opinion, not necessary to go into this aspect because it does
not appoar that tenders were invited in connection with the lease of
c
the distillery in pursuance of the provisions of article 9 of the Legislati.ve Diploma. According to para 2 of article 9 upon which reliance
has been placed by Mr. Iyengar, the lease can be put to auction in the
&tipulated conditions when it is. fou11d not convenient to renew the
previou• one. The aforesaid paragraph, it would thus appear, relates
to auction .and not to calling of sealed tenders. An auction, ,as stated
in Halsbury's Laws of England, Third Edition, Vol. 2, page 69, is a
D
manner of selling or letting property by bids, and usually to the highest
bidder by public competition. An invitation to tender is a mere
attempt to ascertain whether an offer can be obtained within such
margin as the building owner or employer is willing to adopt, or, in
other words, is an offer to negotiate, an offer to receive offers, an offer
to chaffer (see Halsbury's Laws of England, Third Edition, page 422).
There is, in our opinion, difference between auction and invitation
E
for tenders. As there was no auction but only invitation for tenders
in the present case, it cannot be said that the lease o( the distillery was
governed by article 9 of the Legislative Diploma.
It has been argued by Mr. Iyengar that there must have been s.ome •
negotiation between the Government and the appellant as a result
of which the appellant raised his offer to that it might exceed that of
respondent No. I. This may have been so but it was apparently with
F
a view to ensure that the pecuniary interest of the Government did
not suffer as a result of the rejection of the tender of respondent No. 1.
The appollant was consequently made to pay Rs. 1,000 more than what
had been offered by respondent No. I.
Mr. Iyengar has referred to some of the decisions of this Court
but none of them, in our opinion, is of any material assistance t~
G
respondent No. I. In Century Spinning & Manufacturing Company
Ltd. & Anr. v. The U/hasnagar Municipal Council & Anr.(1) this Court
obse!""ed t~at ~ pubic. ?ody is not exempt fr~m the liability to carry
o.u~ 1ts obhgallons ammg out of repres~ntallon made by ;t when a
c11L~en. who rehes upon that rep_resentatton alters his position to his
prejudice. No such question arises m the present case because it is
.not. shown th~t respondent No. I has altered his position to his preH
JUdtce by relymg upon any representation made by the authorities.
(I) [1970) 3 S.C.R. 854.
A
B
c
D
E
F
G
P. R. QUENIN v. M. K. TANDEL (Khanna, /.)
73
In Rashbihar Panda etc. v. State of Orissa(I) this Court dealt with a
Government scheme for sale and disposal of Kendu leaves. It was
found that the right to make tenders for the purchase of Kendu leaves
was restricted to those persons who had obtained contracts in the
previous year. The scheme was held to be violative of articles 14
and 19(1)(g) because it gave rise to monopoly in Kendu leaves to
certain traders. The dictum laid down in the above case cannot be
of much assistanee because there was no such restriction in the present
case with regard to the making of the tenders.
Dwarka Prasad Laxmi Narain v. The State of Uttar Pradesh &
Two Ors.(2) related to the validity of clause 4(3) of the Uttar Pradesh
Coal Control Order, 1953 according to which the licensing authority
was given absolute power in the matter of grant, revocation, cancellation or modification of the licences issued under that Order. No
such questian arises in the present case.
The last case referred to on behalf of respondent No. 1 is Guruswamy v. State of Mysore.(l) In that case a liquor contract was knocked cown in an auction by the Deputy Commissioner in favour of A who
was the highest bidder. B who was present at th~ auction but did not
bid, saw the Excise Commissioner and offered Rs. 5000/- in excess of
A's bid. B's offer was accepted and A's bid was cancelled. It was
held that the cancellation of A's bid though irregular was proper as
A had obtained no right to the licence by the mere fact that the contract had been knocked down in his favour. The action of the Deputy Commissioner in giving contract to B was held to be wro_ng as
it was found to be contrary to the rules framed under the Mysore
Act. No such contravention of a statutory rule has been shown in
the present case because of the lease of the distillery in question to the
appellant:
It may be stated that no allesations were made in the writ petition
by respondent No. I that the act of the authorities in the grant of lease
of the distillery in question to the appellant was mala fide. There
arises consequently no occasion for us to go into that aspect. Nor
has the above act been shown to be vitiated by an such arbitrariness
as should call for interferences by the Court. Indeed, as mentioned
-earlier, the matter is concluded by the decisions of this Court.
As a result of the above, we accept the appeals, set aside the judgment of the learned Judicial Commissioner and dismiss the petitions
under article 226 filed by respondent No. I. Looking to all the circumstances; we leave the parties to bear their own costs throughout.
S.B.W.
(I) [1969) 3 S.C.R. 374.
(2) [19541 S.C.R. 803.
(3) A.T.R. 1954 S.C. 592.
Appeals allowed.