1990 (4) TMI 231 - SC - Companies Law

Whether when the highest offer in response to an invitation is rejected would not the public authority be required to provide reasons for such action ? Held that - Appeal dismissed. The submission of Mr. Dwivedi therefore commends itself to our acceptance namely that when highest offers of the type in question are rejected reasons sufficient to indicate the stand of the appropriate authority should be made available and ordinarily the same should be communicated to the concerned parties unless there be any specific justification not to do so

Summary

Issues:
Challenge to rejection of highest offers in response to public tender without reason. Constitutionality of respondent's actions under Article 14. Requirement of reasons for rejection of highest offers.

Analysis:
The judgment involves three applications filed under Article 226 challenging the rejection of highest offers in response to a public tender without any reason. The respondent, a Government company, had the power to dispose of land and formulated a code for regulating the disposal of land. The appellants argued that their highest offers were not accepted despite compliance with requirements. The High Court dismissed the writ petitions stating no arbitrariness in the respondent's actions to get a proper price for its plots.

The main contention was whether the respondent, as a "State" under Article 12, could exercise unguided power to reject highest offers without reasons, violating Article 14. The court agreed that the respondent must act within the rule of law and not arbitrarily. The court emphasized that even if engaged in trading activities, a State instrumentality must adhere to the rule of law and be subject to judicial review.

While the State can seek the best deal for its properties, it must act bona fide and in the economic interests of the State. The court highlighted the importance of providing reasons for rejecting highest offers to maintain transparency, protect public interest, and ensure accountability. The court referred to the need for public scrutiny and judicial control in modern times, emphasizing the importance of recording reasons for executive actions, including rejection of highest offers.

The court concluded that reasons for rejecting highest offers should be provided to indicate the appropriate authority's stand, promoting transparency and accountability. The judgment did not apply this test to the present appeals, which failed without costs being awarded.