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The Major Port Trusts Act, 1963
Section 61 in The Major Port Trusts Act, 1963
Section 62 in The Major Port Trusts Act, 1963
The Code Of Civil Procedure (Amendment) Act, 1956
S.N. Mukherjee vs Union Of India on 28 August, 1990

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Madras High Court
Visura Trading & Investments vs Board Of Trustees Of The on 22 October, 2009
       

  

  

 
 
 IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED:   22.10.2009

CORAM:

THE HONOURABLE MS.JUSTICE R.MALA

C.S.No. 28 of 1998

Visura Trading & Investments
  (India) Limited
25, Pedariar Koil Street
Ist Floor
Madras-600 001
rep. by its Manager
T.N.Krishna Kumar				...	Plaintiff
					vs.

1. Board of Trustees of the
    Port of Madras
    rep. By its Chairman.

2. The Traffic Manager
    Madras Port Trust
    Sales Ware Houses
    Madras.

3. M/s. Verma & Co.,
    M.P.T. Auctioners
    No.159, Mint Street
    Madras 600 079.

4. M/s. Jampex Trading Pvt. Ltd.
    Rep. by its Managing Director
    D.C.Jain.					...	Defendants
	Suit filed under Order VII Rule 1 CPC read with Original Side Rules, to direct the defendants 1, 2 and 4 severally and jointly to pay to the plaintiff, the sum of Rs.36 lakhs together with interest at 24% p.a. from the date of plaint till the date of payment of the amount and for costs.
		For Plaintiff		... Mr.K.V.Subramanian
					    Senior Counsel
					    for Mr.M.A.Abdul Wahab
	
		For Defendants	... Mr.M.R.Dharanichander
					    for D1 and D2
J U D G M E N T 

This Suit has been filed seeking to direct the defendants 1, 2 and 4 severally and jointly to pay to the plaintiff, the sum of Rs.36 lakhs together with interest at 24% p.a. from the date of plaint till the date of payment of the amount and for costs.

2. The averment in the plaint are as follows:-

(i) The plaintiff in pursuant to the advertisement issued by the second defendant on behalf of the first defendant in the 'Hindu' dated 24.04.1994, intimating the public auction of various items of uncleared and unclaimed goods lying in the Port Trust premises beyond the period of notice as published in the Tamil Nadu Government Gazette, Publication dated 06.04.1994, as required by Sections 61 and 62 of the Major Port Trust Act (38 of 1963), had participated in the said public auction held on 28.04.1994, which was conducted by M.P.T. Auctioneers/third defendant.

(ii) In the list of Cargo coming for public auction, for the list Sl.Nos. 49, 50, 51, 52, 54 and 55 relating to H.D.P.Granuals, the plaintiff was the highest bidder for Rs.52 lakhs for 192 M.T. The bid started from Rs. 48 lakhs and the plaintiff is the highest bidder for Rs.52 lakhs. The third defendant declared that the plaintiff was the highest and successful bidder. After complying with all the other formalities, the plaintiff was directed to pay 25% EMD and on the said day, he paid Rs.13 lakhs towards the 25% of sale amount towards EMD. But, the plaintiff did not receive the letter of confirmation for more than 13 days. On enquiry, the plaintiff came to know that EMD amount for Rs.13 lakhs was duly encashed by the first defendant. But, he received a communication on 13.05.1994 from the third defendant intimating the rejection of auction held in his favour. So, the rejection is arbitrary, opposed to the principles of natural justice and it is a clear violation of the conditions of sale as well as the procedure and condition of Sales Ware House issued by the Madras Port Trust.

(iii) Defendants 1 to 4 by rejecting the bid have only attempted to interfere with the plaintiff's right to get the sale concluded and that too without giving an opportunity whatsoever. The activities of the first respondent have a public element and there should be fairness and equality in all its action. The defendants suddenly and arbitrarily rejected the bid by adopting unfair procedure.

(iv) So, the plaintiff filed W.P.No. 9375 of 1994 before the High Court to quash the Rejection Order passed by the third defendant dated 11.5.1994. The writ petition was dismissed on 26.08.1994. Aggrieved by the said order, the plaintiff filed W.A.No. 1116 of 1994. On 27.08.1994 and 29.08.1994, the fifth defendant was allowed to remove the entire lot of the stock of plastic granuals, which was the subject matter of auction from the Port Trust premises, with the active connivance and co-operation of the defendants 1 and 2. The Division Bench of this Court passed an order on 22.09.1994, in W.A.No.1116 of 1994 setting aside the order under appeal and the Writ Petition was disposed of, without going into the merits, keeping open all the contentions of the plaintiff and reservations of its liberty to file a civil suit. This Court further directed that the plaintiff would be entitled to damages, if any.

(v) After the disposal of the Appeal in W.A.No. 1116 of 1994, the plaintiff filed W.P.No. 20243 of 1994 before this Court to direct the defendants 1 to 3 to return the EMD money deposit of Rs.13 lakhs with interest of Rs.1,76,942/- also the interest from 7.12.1994 till the disposal of the Writ Petition with 24% p.a.

(vi) After notice was ordered in the above writ petition, the defendants have returned only Rs.13 lakhs, but the interest on the said EMD was not paid. Because of the refusal of the plaintiff's bid, the plaintiff is put to more loss and hardship and he has suffered severe damages. The defendants by re-auction sold the above goods for Rs.61 lakhs and thereby made profit of Rs. 9 lakhs illegally, which is unjust, illegal enrichment by the first defendant.

(vii) The plaintiff is entitled to have contract signed in his favour and the plaintiff is entitled to sell the goods. The sum of Rs.9 lakhs received by the Madras Port Trust is illegal. The details of the loss incurred by the plaintiff are given hereunder:

1) Differential amount received by Madras Port Trust:-

(16,00,000.00 - 52,00,000.00) :

9,00,000.00

2) Notioned Profit that we would have obtained in the availing selling price of Rs.61.00 lacs (Say 10%) :

6,10,000.00

3) Loss of opportunity because of market fluctuation Rs.10/- per kg.

:

19,20,000.00 TOTAL 34,30,000.00

(viii) The plaintiff was also put to unnecessary litigation before this Court for safeguarding its interest for which the plaintiff has spent more than Rs.1,70,000/-, which is another damage suffered by this plaintiff. Because of the illegal action of the defendants 1, 2 and 4, now the plaintiff has incurred the total damages of Rs.36 lakhs.

(ix) Defendants 1, 2 and 4 has illegally terminated the auction, which is unjust, illegal and against the principles of natural justice. Defendants 1 and 2 are the statutory authorities and fourth defendant is a Government. Therefore, they have to act, fairly, justly and they cannot violate the civil rights of the plaintiff and violation of civil rights has violated the plaintiff for damages.

(x) The fourth defendant is neither a statutory authority nor proper authority to give any direction to the first defendant regarding acceptance or otherwise of the tender made by the plaintiff in respect of the above goods. So, the fourth defendant is also responsible for the loss of goods to the plaintiff.

(xi) The third defendant is an auctioneer for the first defendant and therefore, he is a necessary party. After the highest bid, the plaintiff was accepted by defendants 1 and 2. At the instigation of fifth defendant who had sent a fax message, the plaintiff's bid was cancelled and in the subsequent auction the fifth defendant was declared as the successful bidder. If the plaintiff was allowed to clear the goods, then he would not have been put to loss of Rs.36 lakhs as stated above. Hence, he was constrained to file the suit for damages of Rs.36 lakhs together with interest at 24 % p.a. from the date of plaint till the date of payment of the amount and for costs and prayed for a decree.

3. The gist and essence of the written statement filed by defendants 1 and 2 are as under:-

(i) A consignment of HDP Granules consisting of six lot Nos. 646/93 to 649/93, 978/93 and 979/93, were sought to be sold by public auction on 28.04.1994 in accordance with Sections 61 and 62 of the Major Port Trusts' Act. The conditions of the sale was published in Tamil Nadu Gazette on 6.4.1994. The third defendant was authorised to conduct the public auction, which was held at South India Chambers of Industry Hall, Esplanade, Madras 600 108.

(ii) The plaintiff was the highest bidder whose offer was Rs.52 lakhs. In accordance with the notified conditions, he paid 25% bid price as EMD viz., Rs.13 lakhs, which was clearly notified that "all the lots sold in the auction are subject to confirmation". The payment of 25% EMD would not confer any right or interest on the plaintiff by being the highest bidder or paying the EMD. By the proceedings 11.5.1994, the Customs had not confirmed the sale of the above lots as the highest bidder in the auction and the third defendant rejected the same on 11.5.1994. Without the approval of the Customs department, the sale cannot be confirmed. The non-confirmation of the bid of the plaintiff and consequent rejection of his bid is bonafide and in accordance with the conditions of auction and in exercise of Board's right and jurisdiction.

(iii) As per the decision of the Apex Court and this Court, the Government was under no obligation to accept the highest bid and that no right accrued to the bidder merely because his bid happened to be the highest. In the instant case, there was no violation of any rule, conditions of auction or established principles of natural justice. Thereafter, the consignment was brought to sale by auction through tender and the highest offer of the fifth defendant in Rs.61 lakhs was approved by the Customs, who had fixed the fair price at Rs.55 lakhs and the sale is in favour of the fifth defendant on 17.05.1994 was confirmed. The sale is also in accordance with the provisions contained in Sections 61 and 62 of the Major Port Trust's Act. While so, the plaintiff filed W.P.No. 9375/94 to quash the proceeding dated 11.05.1994 of the third defendant and other relief. After the sale of the tender offered by the fifth defendant for Rs.61 lakhs on 11.5.1994 was confirmed, the fifth defendant was also impleaded as a respondent in the writ petition. That petition has been dismissed on 26.08.1994. Against that, the plaintiff has filed W.A.No. 1116 of 1994. On 22.09.1994, the Writ Appeal has been disposed of stating that the order under appeal was set aside and the writ petition was disposed of without going into the merits, but keeping open all the contentions and reserving liberty to the petitioner to seek appropriate relief in Civil Court.

(iv) Now the plaintiff filed the suit for Rs.36 lakhs claiming as damages. The allegations or contentions raised by the plaintiff is tenable. The defendants have discharged the statutory functions under the Major Port Trusts Act bonafidely and in good task and strictly followed the procedure for auction and sale as envisaged under Sections 61 and 62 of the Major Port Trusts Act. There is no contract and there is no question of termination much less illegal termination as alleged and there is no cause of action for the suit.

(v) After the disposal of the writ petition, the fifth defendant has removed the cargo. There is no connivance or co-operation by the defendants as alleged. As far as the refund of EMD deposit is concerned, the plaintiff applied by letter dated 7.11.1994 enclosing advance stamped receipt and the same was received by the second defendant's office on 15.11.1994. Immediately, action was taken and payment made on 21.11.1994. Having applied for refund of the EMD deposit and received the same, the plaintiffs are estopped from challenging the public auction notice dated 28.04.1994 and the alleged relief therefrom. The allegation for interest on the EMD deposit is not tenable. It is only a deposit as required by the conditions of the public auction. There is no provision for payment of any interest.

(vi) The claims referred to in the paragraph 13, are not only imaginary, fanciful and remote but grossly exaggerated. The defendants are not liable to the suit claim in any manner or to any extent. The defendants reiterated that the bid of Rs.52 lakhs at the original public auction was not proper as it was less than the fair price of Rs.52 lakhs at the original public auction was not proper as it was less than the fair price of Rs.55 lakhs fixed by the customs and the customs also did not confirm the sale and hence, the bid was rejected. As there was no proper bid, the defendants resorted to sell the consignments through auction by tender. In the said auction by tender the highest offer was Rs.61 lakhs and it was accepted. The suit is barred by limitation and hence, he prays for dismissal of the suit.

4. On a perusal of pleadings in the plaint and written statement and on hearing the arguments of both sides, the following issues are framed for trial:-

2.Whether the plaintiff is entitled for the amount claimed in the plaint ?

3.Whether the plaintiff is entitled for the cost of the suit ?

4.To what relief the plaintiff is entitled to ?

5. Issue No.1:- To prove the case, Manager of plaintiff-Company was examined as PW1 and Exs. P1 to P4, were marked. On the side of defendants, DWs 1 and 2 were examined and Exs. D1 to D13 were marked.

6. The admitted facts are that the second defendant on behalf of the first defendant, made an advertisement in the 'Hindu' dated 24.04.1994 (Ex.P1), intimating the public auction of various items of uncleared and unclaimed goods lying in the Port Trust premises as per Sections 61 and 62 of the Major Port Trust Act (38 of 1963). It is also published in the Tamil Nadu Government Gazette, Publication dated 6.4.1994 and that has been marked as Ex.D2. The third defendant was authorised to conduct the auction. In pursuance of the advertisement, the public auction was held on 28.04.1994. The plaintiff is the highest bidder of list Sl.Nos. 49 to 52 and 54 and 55 relating to HDP Granuals for Rs.52 lakhs for 192 MT. In pursuance of that, he paid 25% EMD viz., Rs.13 lakhs on the same day, but suddenly he received a Rejection Note-Ex.P2, dated 11.05.1994, intimating the rejection of the auction held in his favour. In Ex.P2-Rejection Note issued by third defendant, it was stated as follows:-

"S.Nos. 49, 50, 51, 52, 54 and 56 Your Lot Nos. 646, 647, 648, 649, 677 and 678 of 93 of auction held at Madras Port Trust .. on 28.04.1994 is hereby rejected."

Aggrieved, the plaintiff come forward with the suit for damages.

7. The learned counsel for the plaintiff would contend that the documents relied upon by the defendant-Ex.D4 filed by the Customs Department, which was relied upon by the defendants, is not proved in accordance with law. In Ex.D4, it was stated as folows:-

"Sub:  Confirmation/rejection of lots put up for public auction 	  on 28.04.94.  
	The following lots have been rejected by this office:-
(1)646/93
(2)647/93
(3)648/93
(4)649/93
(5)978/93
(6)979/93
Lot No. 1641/91 has been confirmed.
Ex.D4 was issued on behalf of the Assistant Collector of Customers. Madras Port Trust (Sales Warehouse) also issued a communication to the third defendant/auctioneer. In that also, it was stated as follows:-

"The price offered under mentioned lots sold in the public auction held on 28.4.1994 have been rejected by customs vide their orders cited. Please inform and authorise the respective biddes to receive the Earnest Money deposits directly from the Trust's Senior Deputy Chief Accounts Officer (Revenue)".

In pursuance of that only the third defendant has issued Ex.P2-Rejection Note. The learned counsel for the plaintiff would submit that subsequently, the Madras Port Trust has called for second auction by tender by paper advertisement as per Ex.D6 dated 14.05.1994. In pursuance of that, the fifth defendant has submitted his tender for Rs.61 lakhs and that has been accepted. The tender confirmation is Ex.D7 dated 17.5.1994. The confirmation has been done by Assistant Collector of Customs (Docks). The tender quotation has been marked as Ex.D8. In the mean while, after receipt of Ex.P2-Rejection Note, the plaintiff has come forward with the writ petition in W.P.No. 9375 of 1994 and that has been dismissed. The order has been marked as Ex.P3. Against that, he filed an Appeal in W.A.No. 1116 of 1994 and that order has been marked as Ex.P4.

8. The learned counsel for the plaintiff mainly focussed his argument that without following the principles of natural justice the Rejection Note-Ex.P2 has been passed and subsequently, second auction has been held by way of calling for tender and they sold the property for Rs.61 lakhs. So, he is entitled for claiming damages. The learned counsel has further stated that no confirmation from the Customs Department is necessary. For proving Exs.D4 and D7, no document has been filed. Those documents were concocted for the purpose of the case and there is no file number and seal available. It is only an invalid document. Hence, he prayed that no reliance can be placed on Exs. D4 and D7. He also urged that the Assistant Collector of Customs is A.C.Jetty and not Doct. So, D11 is also a concocted document. So, he prayed to eschew the documents Exs.D4, D7 and D11.

9. In support of his contention, the learned counsel for the plaintiff also relied upon the decision reported in AIR 1990 Supreme Court 1984, S.N.Mukherjee v. Union of India, and urged even in adminstrative action, the principle of natural justice has to be followed. In the said decision, viz., AIR 1990 Supreme Court 1984, S.N.Mukherjee v. Union of India, the Supreme Court has held as under:-

"The recording of reasons by an adminstrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness and assures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. Therefore, the requirement that reasons be recorded should govern the decisions of an adminstrative authority exercising quasi-judicial functions irrespective of the fact whether the decision is subject to appeal, revision or judicial review. It is however not required that the reasons should be as elaborate as in the decision of a Court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge.

10. In the decision relied upon by the learned counsel for the plaintiff reported in AIR 2008 Supreme Court 2513, Dev Dutt v. Union of India, the Supreme Court has held as under:

"The House of Lords and this court have repeatedly emphasized that the ordinary principles of natural justice must be kept flexible and must be adapted to the circumstances prevailing in any particular case".

(Emphasis supplied) Thus, it is well settled that the rules of natural justice are flexible. The question to be asked in every case to determine whether the rules of natural justice have been violated is: have the authorities acted fairly ?

35. In Swadeshi Cotton Mills etc. vs. Union of India etc. AIR 1981 SC 818, this court following the decision in Mohinder Singh Gill and Anr. vs. The Chief Election Commissioner & Ors., AIR 1978 SC 851 held that the soul of the rule (natural justice) is fair play in action.

36. In our opinion, fair play required that the respondent should have communicated the 'good' entry of 1993-94 to the appellant so that he could have an opportunity of making a representation praying for upgrading the same so that he could be eligible for promotion. Non-communication of the said entry, in our opinion, was hence unfair on the part of the respondent and hence violative of natural justice.

37. Originally there were said to be only two principles of natural justice:

(i) the rule against bias and (2) the right to be heard (audi alteram partem).

However, subsequently, as noted in A.K.Kraipak's case (supra) and K.L.Shephard's case (supra), some more rules came to be added to the rules of natural justice, e.g. The requirement to give reasons vide S.N.Mukherjee vs. Union of India, AIR 1990 SC 1984. In Maneka Gandhi vs. Union of India (supra) (vide paragraphs 56 to 61) it was held that natural justice is part of Article 14 of the Constitution.

38. Thus natural justice has an expanding content and is not stagnent. It is therefore open to the Court to develop new principles of natural justice in appropriate cases."

11. In the decision relied upon by the learned counsel for the plaintiff reported in AIR 2007 Supreme Court 181, Rajesh Kumar vs. D.C.I.T., the Supreme Court has held as under:-

"18. Principles of natural justice are based on two basic pillars:

(i) Nobody shall be condemned unheard (audi alteram partem)

(ii) Nobody shall be judge of his own cause (nemo debet esse judex in propria sua causa)

19. Duty to assign reasons is, however, a judge made law. There is dispute as to whether it comprises of a third pillar of natural justice [See S.N.Mukherjee v. Union of India, (1990) 4 SCC 594 and Reliance Industries Ltd. v. Designated Authority and Others, 2006 AIR SCW 4911].

20. However, the other view is that the question as to whether reasons are required to be assigned is a matter of legislative policy which should be left to the decision of Parliament. In Raipur Development Authority and Others v. M/s.Chokhamal Contractors and Others [(1989) 2 SCC 721], a Constitution Bench opined:

"It is no doubt true that in the decisions pertaining to Adminstrative Law, this Court in some cases has observed that the giving of reasons in an adminstrative decision is a rule of natural justice by an extension of the prevailing rule. It would be in the interest of the world of commerce that the said rule is confined to the area of Adminstrative Law..."

12. At this juncture, the learned counsel for the defendants would mainly focus upon the "Conditions of sale" laid down in Publication-Ex.D2, dated 6.4.1994, for the public auction of various items of uncleared and unclaimed goods lying in the Port Trust premises beyond the period of notice, which reads as under:

"Conditions of sale

1.Lots to be examined by the intending purchaser before bidding and to be taken with faults and errors of description.

2.The highest bidder to be the purchaser and in the event of any dispute arising between two or more bidders the lots be disputed should be put up again and resold.

3.The bid amount shall be paid in full immediately after the bid is knocked down. If this is not possible a deposit of 25 per cent of bidded amount should be paid on the spot of the auctioneers. A receipt shall be obtained for the amount paid. In case only a deposit of 25 per cent is paid the balance amount should be paid to the Trusts Financial Advicer and Chief Accounts Officer on or before 4 p.m. On the third day calculating from the dae of confirmation of sale failing which the advance paid will be forfeited and the Trust will resell the lot either in private or by public auction at the risk and responsibility of the defaulters.

4.Goods advertised for sale will not be withdrawn by the Trust except on payment of sufficient deposit to cover the Harbour dues demurrage charges and other charges due thereon.

5.The goods sold in auction will not be delivered to the purchaser thereof or his authorised agent unless the purchaser produces delivery order from the auctioners for having paid the amount in full.

6.Goods sold in auction shall be allowed three free days excluding Sundays and Board's holidays from the date of confirmation of sale and thereafter shall be charged at daily rates as per scale of "B: for goods in the bounded warehouse under Chapter X of Book 1 of the scale of rates up to and including the date of clearance.

7.The lots sold will be lying at the risk of the purchaser and must be removed within the free period of three days from the date of confirmation of sale at the purchaser's expense.

8.The purchasers are distinctly warned that if the goods are not cleared within eight days from the date of expiry of free period they have no claim whatsoever over the material and the same will be sold either privately or by public auction the first purchaser to be held liable for any loss arising from such resale and to forfeit any advances together with auctioneer's commission.

9.The Trust shall reserved the rights to withdraw any of the items notified for sale without assigning any reason for such withdrawal.

10.The bidders shall gain admission into the Harbour on the days of inspection and the passes can be obtained on payment from the Assistant Welfare Officer, Computer Pass Section.The successful bidder should also obtain pass on payment for clearing the goods.

11.Terms cash.

12.All the lots sold in the auction are subject to confirmation."

Relying on "Conditions of sale", the learned counsel argued that all the lots sold in the auction are subject to confirmation by the Customs Department. Here, the Customs Department has not confirmed the sale. Hence, the Rejection Note-Ex.P2 has been issued.

13. The learned counsel for the defendants would contend that the plaintiff has accepted the "Conditions of sale" as published in Tamil Nadu Government Gazette, Publication-Ex.D2, dated 6.4.1994 and then only he participated in the auction and therefore, he must abide by the "Conditions of sale". Since, the confirmation is not granted by the Customs Department, the auction has been rejected. There is no violation of rule.

14. The learned counsel for the plaintiff would contend that the confirmation from the Customs Department is not necessary. At this juncture, the learned counsel for the defendants has culled out Chapter 21 of Customs Manual, which is for Disposal of Unclaimed/Uncleared Cargo, and the relevant portion of which, reads as under:

"3. As per Section 48, if any goods brought into India from a place outside India are not cleared for home consumption or warehoused or transhipped within 30 days from the date of unloading thereof at a port, wuch goods can be disposed of by the custodian. The Act, however, stipulates that the goods can be sold only after a notice is issued to the importer and the permission of the Customs is obtained. The provisions relating to manner of disposal of unclaimed/uncleared goods and apportionment of sale proceeds thereof are contained in sections 8 and 150 of the customs Act, 1962.

Procedure for sale of unclaimed/uncleared goods:

4. For sale of such unclaimed/uncleared goods, the custodian first identifies the goods which are lying uncleared for more than 30 days. He then prepares an inventory of such goods and sends it to the Customs for their 'no objection'. The Customs scrutinizes the list of consignments forwarded by the custodians and withdraws the items which are the subject-matter of any investigation/adjudication or court proceedings. The goods prohibited for import, are also withdrawn from the auction as these are subject to adjudication proceedings and goods may get absolutely confiscated. Once goods are confiscated, the ownership is transferred to the Government and the Customs becomes responsible for disposal of such goods. Disposal of certain items such as drugs/pharmaceuticals, chemicals, foodstuffs, insecticides, fertilizers, etc., also requires clearance from the respective authorities regulating import of these items.

5. Once 'no objection' for disposal is received from the Customs, the custodian gets the fair price of the goods determined by Customs. The price approved by the Customs (inclusive of duty leviable) generally forms the basis of 'reserve price' for the purpose of auction of the goods.

6. After fixation of reserve price, the custodians arrange public auctions which are held in the presence of proper officer of Customs. In the event of the goods not being disposed of at the 'reserve price' (or within the permissible margin) in the first auction, the 'reserve price' is reduced according to prescribed scale in the subsequent auctions. In case, efforts to sell the goods through public auction fail, these are sold through tender.

7. Once the goods are sold, the Customs duty on the goods is calculated. For calculation of Customs duty, the sale proceeds from sale of unclaimed/uncleared goods is taken as cum-duty price (value + duty) and customs duty is calculated working backwards on the price realised."

15. As per the Madras Port Trust Traffic Department Traffic Manual, the relevant portion reads as under:

"3.42. Disposal of unclaimed/uncleared goods:

Sections 61 and 62 of the Major Port Trusts Act provide for the disposal of goods not removed from the Trust premises within the time-limit prescribed and goods on which Trust's dues are not paid or the lien for freight is not discharged.

3.43. The procedure for sale as laid down in the above Sections shall be followed.

...

3.45. Delivery of the goods to the successful bidder shall be done only after the confirmation of sale of the lost concerned by the Customs and Port Trust and after the payment of the balance bid amount to the Trust's Accounts Department.

3.46. Unsold items from one auction are list for the ensuing auction. For every auction which is normally conducted every month, the Trust files Bills of Entry with the Customs to enable them to claim the Customs duties and fine if any on the lot when sold."

The defendants have followed the procedure as per the rules. The Customs has fixed the fair price at Rs.55 lakhs, but, the properties have been auctioned only for Rs.52 lakhs, so the Customs Department has rejected the same. So, there is no irregularity in rejecting the auction.

16. The learned counsel for the plaintiff has urged that Ex.D11 is not true and genuine document and it cannot be looked into. But the above argument does not hold good. Because, in that, it was stated, the fair price fixed is Rs.55 lakhs, but, it was sold only to Rs.52 lakhs. It was rejected and second auction was conducted on 17.05.1994 by calling for tender for Rs.61 lakhs.

17. At this juncture, the learned counsel appearing for the defendants relied upon the decisions reported in AIR 1975 Madras 292, The State of Madras v. R.Ranganatham Chettiar and argued that mere acceptance of the bid by the Sale Officer will not conclude the contract between the parties, which could be legally enforced. In the said decision, it was held as under:

"The plaintiff was declared to be the highest bidder at an auction saole of a lease of the right to cut and remove Casuarine trees in two forest coupes held by the District Forest Officer. The terms and conditions of the sale notification as advertised were to form part and parcel of an agreement to be executed by the purchaser in the sample form attached to the notification. Cl.13 of the Notification inter alia provided that the sale was subject to confirmation by the District Forest Offier or the Conservator of Forests who reserved his right to reject any bid including the highest bid without assigning any reason. Under Cl.19 the successful bidder was bound to deposit in addition to the sale amount, a security deposit and had to execute an agreement in the prescribed form within 10 days of the receipt of the order confirming the sale in his favour. The plaintiff had also deposited the entire sale price together with the security deposit. The District Forest Officer, however, did not confirm the sale in favour of the plaintiff, ordered a refund of the sale amount and the security deposit and a second auction sale through Court Receiver was held and the amount was deposited in Court. The plaintiff brought suit for declaration against the State that he was entitled to the amount in Court deposit on second sale and also to a refund of the security deposit.

Held that according to the terms and conditions of auction sale a "successful bidder" would be one who was not only the highest bidder, but also one who has paid the sale amount and the security deposit and a person to whom anintimation as to confirmation of the sale has been sent and who is ready and willing to execute an agreement as provided in clause 19 within ten days of the receipt of the order of confirmation. In the absence of any evidence to show that the plaintiff had received any communication about the written acceptance of the bid or its confirmation or that he had executed any agreement as required by cl. 19 there was no concluded contract between the parties which could be legally enforced."

The confirmation is necessary. The "Conditions of sale" was incorporated in the Tamil Nadu Government Gazette, Publication dated 6.4.1994 and it contains twelve conditions. The 12th condition is to the effect that "All the lots sold in the auction are subject to confirmation". But, it was not confirmed by the Customs Department. So the sale has not been confirmed and it was rejected.

18. To substantiate his contention, the learned counsel for the defendants also relied upon the decision reported in AIR 1972 Supreme court 1242, Haridwar Singh v. Bagun Sumbrui, wherein the Supreme Court observing that there was no concluded contract between the Government and the highest bidder, has held as under:

"At an auction for settlement of a coup the highest bid of H was accepted by the Divisional Forest Officer subject to confirmation by Government. The D.F.O. Reported about the auction sale to the conservator of forest who forwarded the papers to the State Government for confirmation of the acceptance. During the pendency of the matter before the Government, the highest bidder communicated his willingness to take the settlement at the reserve price which was higher than the bid. Thereafter he applied for the settlement of the coup on the basis of the highest bid. The Government by a telegram to the conservator of forests confirmed the auction sale with H at the reserve price. As no intimation was received by the D.F.O. he did not communicate it to H. Later on the Government cancelled the settlement of the coup with H and settled the same with another person for an amount higher than the reserve price.

Held that there was no concluded contract between the Government and the highest bidder H. There was no confirmation of the acceptance of the bid to take the coup in settlement for the highest amount of bid. What the Government did was not to confirm the acceptance made by the Divisional Forest Officer, but to accept the offer made by H in his communication that he would take the coup for the reserve price. The telegram sent to the conservator of forests could not be considered as a communication of the acceptance of that offer to H..."

19. The learned counsel for the defendants also relied upon the decision reproted in AIR 1990 Orissa 26, Executive Engineer, Sundargarh v. Mohan Prasad Sahu, wherein the Orissa High Court observing that a tender notice does not amount to an offer or proposal but merely an invitation to the contractors for making an offer, has held as under:

"...

A tender notice does not amount to an offer or proposal but merely an invitation to the contractors for making an offer. An advertisement for tenders is not a proposal which would bind the authority to sell to the person who makes the highest tender. It is merely an attempt to ascertain whether an offer can be obtained within such a margin as the seller is willing to adopt. The advertisement calling for tenders, therefore, is not a proposal within the meaning of the Contract Act, but it invites a proposal. The acceptance of a tender may be qualified by several conditions. The submission of tender being in the nature of a proposal or offer unless the highest bid of a tenderer is accepted by the competent authority and the said acceptance is communicated to the tenderer, the contract cannot be said to be concluded between the parties. An advertisement for the sale of goods by auction is a mere declaration and does not amount to a contract with any one who may act upon it. The auctioneer's request for bid is not an offer which can be accepted by the highest bidder. It is the bid that constitutes an offer. Therefore, unless that bid is accepted and acceptance is communicated to the bidder, there is no binding contract between the parties and, therefore, no title to the goods accrues in favour of the highest bidder pursuant to the fact that his bid was the highest one and he had deposited the earnest money in accordance with the conditions laid down in the sale notice."

20. In the decision relied upon by the learned counsel for the defendants reported in AIR 1994 Andhra Pradesh 313, C.Jayasree v. Commissioner, M.C.H., the Andhra Pradesh Court has held as under:

"4. The facts narrated above will indicate that the tender filed by the petitioner has not been accepted by the respondent-Corporation. In the letter, dated 1.4.8.1992, written by the petitioner to the respondent-Corporation indicating her willingness to pay the entire bid amount of 2.91 crores of rupees within sixty days from the date of final acceptance of the tender, it is categorically mentioned by the petitioner as follows:

"We now await acceptance of our tender bid".

The above statement of the petitioner indicates that the respondent has not accepted the tender. It is now well-settled that, unless and until the tender is accepted, no right will accrue to the tenderer regarding the contract covered by the tender. Clause 12 of the "Terms and Conditions of the Tender for Out-right sale of Commercial Complex at Kammarguda, Secunderabad", gives power to the Officer authorised, to receive the tenders, to postpone/cancel the tender without assigning any reasons whatsoever. In the circumstances, no vested-right of the petitioner has been violated by the respondents. On this ground alone, this writ petition can be dismissed"

21. Relying on the following decisions, the learned counsel for the defendants has contended that the tender quoted by the plaintiff has not been accepted by the respondent. So the tender is not a concluding contract. While considering the above citation along with "Conditions of sale", in that in the last condition, viz., Condition No.12, it was stated that, "All the lots sold in the auction are subject to confirmation", since the Customs Department has to give clearance as per Section 48 of Customs Manual, the sale is not confirmed. As per Section 48 of Customs Manual, the Customs Department has to fix the fair price and they have to obtain "No Objection" from the customs Department. Here, the Customs Department has fixed the fair price as Rs. 55 lakhs, but, the plaintiff bid for Rs.52 lakhs. As he was the highest bidder, his bid was accepted and when the papers were sent to Customs Department for confirmation, the Customs Department rejected the same, since the bid amount is far below fair price, so, there is no violation of rules.

22. As per 3.45 of Madras Port Trust Traffic Manual, delivery of goods to the successful bidder shall be done only after the confirmation of the sale of the lots concerned by the Customs and Port Trust after the payment of balance amount determined to the Madras Port Trust. Here, once the bid paper has been sent to Customs for confirmation, the Customs Department has rejected the same. No confirmation has been intimated on 11.05.1994. As per Ex.D6, publication has been made on 14.05.1994 seeking for second auction by tender. The last date for tender has been fixed as 17.05.1994. The fifth defendant has quoted for Rs.61 lakhs. It was confirmed.

23. At this juncture, the learned counsel appearing for the defendants has relied upon the decision reported in AIR 1992 Andhra Pradesh 254, G.Kishore v. Government of Andhra Pradesh, wherein the Andhra Pradesh High Court has held as follows:-

"6. The question for consideration is whether the action on the part of the Executive Engineer in rejecting the highest bid and ordering re-auction is valid or not. As per the terms and conditions of the auction notification, the Executive Engineer is competent either to cancel the auction before it is held, or to reject or accept the highest bid. It is a settled principle of law that a highest bidder has no right to claim that his bid shall be accepted. For valid reasons a highest bid can be rejected and a lower bid can be accepted. If the highest bid is rejected for valid reaons and a re-auction is ordered, question of giving notice before such rejection, to the highest bidder does not arise. Therefore, we have to ascertain in this case what the reason is for not accepting the highet bid and decide whether it is a valid reason or not. The Executive Engineer has categorically stated in his letter dated April 18, 1991 written to the Superintending Engineer that as per the departmental collections of toll-fee from April 1, 1991, the total collection would work out to Rupees 1,10,00,000/- for eleven months. He also pointed out that the lease amount for eleven months during the previous year collected from the contractor, who incidentally happens to be the fourth respondent, was Rs.80,00,000/-. Therefore, he said that the highest bid amount cannot be accepted. These reasons cannot be said to be either unreasonable, or irrelevant, or extraneous. Therefore, the rejection of the highest bid by him was quite justified and proper. Consequently, the re-auction ordered by him becomes valid. In such circumstances, the State Government cannoe enter into negotiation with the highest bidder and accept the negotiated offer made by him over and above the bid amount. This is invalid for more than one reason. In the first instance, when the officer who has been authorised to conduct the auction has for valid reasons, rejected the highest bid, it is not open to the State Government to interfere with the ordering of re-auction. Even otherwise, when a number of persons participated in the public auction and offered their bids, it would be improper on the part of the State Government to enter into negotiation only with one of the participant and grant the lease in his favour."

24. It is a well settled principle of law that the highest bidder has no right to claim that the bid shall be accepted.For valid reason, the highest bid can be rejected and lowest bid can be accepted. So, while considering the sale that even though the plaintiff is the highest and successful bidder, he offered only Rs.52 lakhs, where as the fair price fixed is Rs.55 lakhs and as it is below the fair price fixed by the Customs Department, the Customs Department has rejected the same and inturn, third defendant/auctioneer has issued Ex.P2-Rejection Note and hence, there is no violation of principle of natural justice.

25. As already discussed supra, as per the "Conditions of Sale" incorporated in the Tamil Nadu Government Gazette, Publication, dated 06.04.1994, in that 12th condition clearly stated that, ""All the lots sold in the auction are subject to confirmation". Even if it was to be sold it would be subject to confirmation by Customs Department, but it was not confirmed by Customs Department, so the plaintiff is not entitled to claim any damages.

26. Moreover, it is pertinent to note that the plaintiff has urged tht on the side of defendants the competent persons were not examined before this Court. One Duraisamy (DW1), who is the Junior Assistant in the Madras Port Trust has been examined. In his evidence, he has stated as follows:-

"The Board of Trustees alone are competent to exercise the power under Sections 61 and 62 of the Major Port Trust Act".

27. It is appropriate to incorporate the relevant portion of Sections 61 and 62 of the Major Port Trust Act, which reads as under:-

"61.Sale of goods after two months if rates or rent are not paid or lien for freight is not discharged  (1) A Board may, after the expiry of two months from the time when any goods have passed into its custody, or in the case of animals and perishable or hazardous goods after the expiry of such shorter period not being less than twenty-four hours after the landing of the animals or goods as the Board may think fit, sell by public auction [or in such case as the Board considers it necessary so to do, for reasons to be recorded in writing, sell by tender, private agreement or in any other manner], such goods or so much thereof as, in the opinion of the Board, may be necessary --

(a) if any rates payable to the Board in respect of such goods have not been paid, or

(b) if any rent payable to the Board in respect of any place on or in which such goods have been stored has not been paid, or

(c) if any lien of any ship-owner for freight or other charges of which notice has bttn given has not been discharged and if the person claiming such lien for freight or other charge has made to the Board an application for such sale.

(2) Before making such sale, the Board shall give ten days' notice of the same by publication thereof in [the Port Gazette, or where there is no Port Gazette, in the Official Gazette] and also in at least one of the principal local daily newspapers.

Provided that in the case of animals and perishable or hazardous goods, the Board may give such shorter notice and in such manner as, in the opinion of the Board, the urgency of the case admits of.

(3) If the address of the owner of the goods has been stated on the manifest of the goods in in any of the documents which have come into the hands of the Board, or is otherwise known notice shall also be given to him by letter delivered at such address, or sent by post, but the title of a bona fide purchaser of such goods shall not be invalidated by reason of the omission to send such notice, nor shall any such purchaser be bound to inquire whether such notice has been sent.

(4) Notwithstanding anything contained in this section, arms and ammunition and controlled goods may be sold at such time and in such manner as the Central Government may direct.

Explanation  In this section and section 62 --

(a)"arms and ammunition" have the meanings respectively assigned to them in the Arms Act, 1959 (54 of 1959);

(b)"controlled goods" means goods the price or disposal of which is regulated under any law for the time being in force.

62. Disposal of goods not removed from premises of within time limit  (1) Notwithstanding anything contained in this Act, where any goods placed in the custody of the Board upon the landing thereof are not removed by the owner of other person entitled thereto from the premises of the Board within one month from the date on which such goods were placed in their custody, the Board may, if the address of such owner or person is known, cause a notice to be served upon him by letter delivered at such address or sent by post, or if the notice cannot be so served upon him or his address is not known, cause a notice to be published in [the Port Gazette or where there is no Port Gazette, in the Official Gazette] and also in at least one of the principal local daily newspapers, requiring him to remove the goods forthwith and stating that in default of compliance therewith the goods are liable to be sold by public auction [or by tender, private agreement or in any other manner].

Provided that where all the rates and charges payable under this Act in respect of any such goods have been paid, no notice of removal shall be so served or published under this sub-section unless two months have expired from the date on which the goods were placed in the custody of the Board.

(2) The notice referred to in sub-section (1) may also be served on the agents of the vessel by which such goods were landed.

(3) If such owner or person does not comply with the requisition in the notice served upon him or published under sub-section (1), the Board may, at any time after the expiration of two months from the date on which such goods were placed in its custody, sell the goods by public auction [or in such cases as the Board considers it necessary so to do, for records to be recorded in writing sell by tender, private agreement or in any other manner] after giving notice of the sale in the manner specified in sub-sections (2) and (3) of section 61.

(4) Notwithstanding anything contained in sub-section (1) of sub-section (3) --

(a)the Board may, in the case of animals and perishable or hazardous goods, give notice of removal of such goods although the period of one month or, as the case may be, of two months specified in sub-section (1) has not expired or give such shorter notice of sale and in such manner as, in the opinion of the Board, the urgency of the case requires;

(b)arms and ammunition and controlled goods may be sold in accordance with the provisions of sub-section (4) of section 61.

(5) The Central Government may, if it deems necessary so to do in the public interest, by notification in the Official Gazette, exempt any goods or classes of goods from the operation of this section."

28. In pursuance of that only the diposal of unclaimed and uncleared goods have been ordered. As already stated the auction is conducted by the private auctioneer appointed by the Madras Port Trust viz., Ex.D3. The "Conditions of Sale" has been properly published. After accepting the "Conditions of Sale" only, the plaintiff has bid for Rs.52 lakhs. He is the highest bidder. But, as per the 12th "Conditions of Sale", "All the lots sold in the auction are subject to confirmation" . But here, it was not confirmed by the Customs Department. Hence, the non-examination of the Official is not fatal. As the plaintiff, he must prove his case. If really, he is interested in the purchase of property, he might have very well participated in the second auction called for by tender in paper advertisement and quoted his bid. Even though, he has filed a suit, he has not participated in the tender. The Rules of Customs Manual as well as Port Trust Manual has clearly provided that the public auction of uncleared and unclaimed goods disposal is as per Sections 61 and 62 of Port Trust Act and the lots sold in auction are subject to confirmation of Customs department. The fair price has to be fixed by the Customs Department and it was fixed as Rs.55 lakhs. The plaintiff quoted Rs.52 lakhs, which is below the price fixed by the Customs Department. So, the Customs Department has rejected the tender.

29. At this juncture, it is appropriate to consider the decision relied upon by both counsel reported in 1987 WLR 529, Chokhani International Limited v. Board of Trustees of the Port of Madras, wherein this Court observing that when the tender is given, it is merely an offer and unless accepted, no contract can come into force; no rights flow from such offer unless, of course, it is held out at the time of inviting the offers, that the highest or the lowest offer would be accepted, has held as under:-

"45. Thus, when a tender is given, it is merely an offer and unless accepted, no contract can come into force; no rights flow from such offer unless, of course, it is held out at the time of inviting the offers, that the highest or the lowest offer would be accepted.

46. In Trilochan Mishra v. State of Orissa, AIR 1971 SC 733, the Supreme Court, in paragraph 15 of the judgment, observed that the Government is not bound to accept the highest tender but may accept a lower one in case it thinks that the person offering the lower tender is on an over all consideration to be preferred to the higher tenderer. We have already referred to the decision in Vijay Bahadur Singh's case, AIR 1982 SC 1234, in which the principle that the Government has right for good and sufficient reasons not to accept the highest bid but even to prefer a tenderer other than the highest bidder, was accepted."

30. While considering the above citation, it is true that the highest tender need not be accepted. Here also, as per the 12th "Conditions of sale", "All the lots sold in the auction are subject to confirmation". As per the Rules of Customs Manual as well as Port Trust Manual, the auction was not confirmed. Hence, Rejection Note-Ex.P2 has been issued.

31. It is pertinent to note that the plaintiff herein has applied for refund of Earnest Money Deposit by letter dated 7.11.1994 and the same was received by the second defendant's office on 15.11.1994. Immediately, action was taken and payment of Earnest Money Deposit was made on 21.11.1994. PW1 in his evidence, he himself has stated that, "The fair price was fixed by the Customs Department only. It may be that only the Customs Department has the powers to cancel the auction. We did not receive any confirmation of the auction...."

So, in the above said circumstances, the Customs Department is a competent person to confirm the same. But, the Customs Department has not confirmed the sale. Hence, the sale has been rejected. There is no violation of any rules. Hence, the plaintiff is not entitled to any relief. So, the plaintiff is not entitled to any claim in the plaint. Since, he has received the EMD, he has not suffered any damages. Hence, the plaintiff is not entitled to any damage as claimed in the plaint. Issue Nos. 1 and 2 are answered accordingly.

32. In view of the answer given to Issue Nos. 1 and 2, the plaintiff is not entitled to any relief. Issue No. 3 is answered accordingly.

33. In fine, the Suit is dismissed, without costs.

paa									.10.2009
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							R.MALA,J

							paa







							C.S.No. 28 of 1998









								.10.2009

PRE-DELIVERY JUDGMENT IN C.S.No. 28 of 1998

			TO
			THE HON'BLE MS.JUSTICE R.MALA
	
Most Respectfully
Submitted.
PA TO RMJ