1987 (11) TMI 372 - SC - Companies Law

Whether on the facts and in the circumstances, the Corporation was not justified in selling the property by private negotiations in favour of M/s. Gumraj Plantations at the instance of P.M. Jacob? Held that - Here is a case where the Corporation invited tenders for the sale of the property under notification dated January 18, 1983. The appellant submitted the highest tender in response to the said notification. He was given all concessions for payment of the tender amount. But he did not. He negotiated with the Managing Director of the Corporation for facilities for payment by instalments. That was also granted to him. There again he failed. If the appellant could not act according to his tender, we fail to see why the property should not be offered to the person who was next in order. The Corporation, in our opinion, did not do anything unfair with P.M.Jacob. The Corporation got the tender amount raised from ₹ 4,16,550 to ₹ 4,50,000. It shows the fairness with which the Corporation dealt with the property. On a consideration of all the facts and circumstances of the case, we are satisfied that the action of the Corporation in offering the property to P.M.Jacob and selling the same at his request to M/s. Gumraj Plantations was perfectly justified and cannot be found fault with In the result the appeal fails and is dismissed.

Issues Involved:
1. Legitimacy of the Corporation's sale of property by private negotiation.
2. Allegations of extraneous considerations influencing the sale.
3. Compliance with principles of fairness and public interest in the sale of public property.

Detailed Analysis:

Legitimacy of the Corporation's Sale of Property by Private Negotiation:
The primary issue was whether the Corporation was justified in selling the property by private negotiations to M/s. Gumraj Plantations at the instance of P.M. Jacob. The appellant contended that the Corporation, being a public authority, was bound to act reasonably and fairly and ought not to have arbitrarily selected the purchaser. The High Court found no substance in these submissions, observing that the appellant had failed to pay the sale amount despite several indulgences shown by the Corporation.

The Supreme Court reiterated that while the general rule is that public property should be sold by public auction or by inviting tenders to ensure the best price and fairness, this is not an invariable rule. There may be situations necessitating departure from the rule, but such instances must be justified by compelling reasons. The Court cited several precedents, including K.N. Guruswamy v. The State of Mysore and others, R.D. Shetty v. The International Airport Authority of India and Ors., and Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir and Anr., which established that public authorities should generally dispose of properties through public auction or tenders to avoid any impression of bias, favouritism, or nepotism.

In this case, the Corporation had initially invited tenders, and the appellant had submitted the highest bid but failed to make the payment despite several extensions and concessions. The Corporation then negotiated with the next highest bidder, P.M. Jacob, who increased his offer from Rs.4,16,550 to Rs.4,50,000. The Court found this action to be fair and justified, noting that the Corporation had acted with fairness and without any undue influence.

Allegations of Extraneous Considerations Influencing the Sale:
The appellant alleged that the sale was influenced by extraneous considerations and that the Corporation had succumbed to pressure from influential persons. However, the appellant failed to substantiate these allegations with any specific names or evidence. The Court deemed these allegations as uncharitable and unfounded, emphasizing that it is improper to make such vague accusations against statutory authorities without proper evidence.

Compliance with Principles of Fairness and Public Interest:
The Court emphasized that government or public authorities must make all attempts to obtain the best available price while disposing of public properties and should generally avoid private arrangements. This principle is rooted in ensuring fairness and preventing any appearance of bias or nepotism. The Court referred to several decisions, including those in R.D. Shetty v. The International Airport Authority of India and Ors. and Fertilizer Corporation Kamagar Union v. Union of India, which underscored the importance of fairness and public interest in state actions.

In this case, the Corporation's actions were found to be in compliance with these principles. The property was initially offered through public tender, and only after the highest bidder (the appellant) failed to make the payment did the Corporation negotiate with the next highest bidder. The Court found that the Corporation's decision to sell the property to M/s. Gumraj Plantations at the request of P.M. Jacob was justified and in line with the principles of fairness and public interest.

Conclusion:
The Supreme Court concluded that the Corporation's action in offering the property to P.M. Jacob and subsequently selling it to M/s. Gumraj Plantations was justified and could not be faulted. The appeal was dismissed, and no order as to costs was made. The judgment reinforced the principle that while public property should generally be sold through public auction or tenders, there can be justified exceptions based on compelling reasons.

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