Holding

A writ petition under Article 226 is maintainable even where an alternative remedy exists if the impugned order is illegal, arbitrary or violates natural‑justice principles; the State must conduct auctions transparently and cannot award contracts by secret deals without giving the highest bidder a fair opportunity.

Summary

The appellant, Ram & Shyam Co., submitted the highest bid for a minor‑mineral quarry in Haryana, but the State Government, invoking Rule 30(4) of the Punjab Minor Mineral Concession Rules, declined to confirm the bid and instead awarded the lease to a fourth respondent who had made a secret higher offer to the Chief Minister. The appellant challenged this order by filing a writ petition under Article 226, alleging denial of equal opportunity, violation of natural‑justice principles and arbitrary exercise of power. The High Court dismissed the petition on the ground that the appellant had an effective alternative remedy, a view the Supreme Court rejected, holding that the exhaustion rule is discretionary and does not oust the Court’s jurisdiction when the order is illegal or arbitrary. The Court emphasized that public (socialist) property must be disposed of in a transparent auction to obtain the best market price and that the State cannot favour a private party without giving the highest bidder a chance to improve his offer. Consequently, the Supreme Court set aside the lease to the fourth respondent, directed a re‑auction, and ordered the contract to be granted to the appellant at Rs 25 lacs per year. The appeal was allowed and the High Court’s decision was quashed.

Issues considered

The applicability of the rule of exhaustion of alternative remedies in writ petitions under Article 226.
Whether the State’s acceptance of a secret higher offer without giving the highest bidder a chance to raise his bid violates principles of natural justice and fairness.
Whether the State’s discretion to reject the highest bid is subject to the requirement of obtaining the best market price for public (socialist) property.
Whether the provisions of the Punjab Minor Mineral Concession Rules permit private negotiations in lieu of a public auction.

Legislation cited

Haryana Minor Minerals (Vesting of Rights) Act, 1973
Mines and Minerals (Regulation and Development) Act, 1957
Punjab Minor Mineral Concession Rules, 1964s. Rule 28, s. Rule 30, s. Rule 58
Transfer of Property Act, 1882s. Section 55(5)(a)

Subjects

Article 226exhaustion of alternative remediesnatural justicepublic propertyauctionminor mineralsarbitrary actionadministrative lawsocialist propertyfair play in actiongovernment discretionpublic largesse

Judgment

541

RAM AND SHYAM COMPANY
A
v.

STATE OF HARYANA AND ORS.

MayB, 1985
B
[D.A. DESAI, J.)

Constitution of India, 1950, Article 226-Jurlsdiction of High Court-
Petitioner to exhau&t normal statutory re~die1-lnslstenc• on-Whtn arises-
1'1llt of exhaustion of alternative remedies-Whether a rul• of /aw or a rule of
conv1nlence and discretion. c
Haryana Minor Minerals (Vesting of Rights) Act, 1973 and Punjab Minor
Mlnoral Concmlon Rules, 1964, Rule 130 (4) (2)-Auctlon of minor mineral
quarry-Chief Minister declining to confirm highest bid-Awarding right to
another person without giving opportunity to the highest bidder in the earlier
auction, Hith Court, whether entitled to interfere in a writ.
D
Administrative Law-Public Property-Norms for dbposal of-Principles
•/Natural justJc~Appllcab//ity of.

The State Oovernment·rcspondeot No. l issued a 11otification for
auctioning a minor mineral quarry situated in the State. The appellant offered
the highest bid in the amount of Rs. 3.87 lakhs per annum as rent/royalty. E
The Presiding Officer accepted the bid of the appellant. The State Govern-
ment however under the belief that the highest bid did not represent the
adequalc lease rent, exercised powers under clause (4) of sub-rule 2 of Rule
t30 of the Punjab Minor Mineral Concession Rules 1964 and declined to con-
firn1 the aame. Respondent No. 4 wrote a letter to the Chief Minister
casting serious aspersions on those who participated in the auction, and made p
an offer that if the contract for a period of 5 years ii given he was willina to
pay Rt. 4.S lakhs per year. The Chief Minister accepted this offer.

Beine aggrieved, tho appellant challenged the order of the Chief
,.. Minister, in a writ petition before the High Court, contending that respondent
No. 4 had participated in the auction and made false alJegations against the
appellant, and without giving him any opportunity, the offer of respondent G
No. 4 was accepted which has denied equality of opportunity to the appellant
in the matter of distribution of the State largesse. The High Court following
the decision of this Court in Assistant Collector of Central Exci" v. Jainson
Hosiery Industries, (1979] 4 SCC 22, dismissed the writ petition on the ground
that tho appellant had an alternative remedy and that he must have exhausted
tho normal statutory remedie~ before invokin' the extraordinary jurisdiction H
under Article 226. ·
S4Z SUPREME COURT REPORTS [1985) SUPPL. s.c.a.

Being aggrieved, the appellant filed an appeal to this Court and during
A its hearing filed an affidavit, that if the Court orders re-auction, and if the
highest bid falls short of Rs. 4.5 lakhs then he would undertake to accept the
contract at the value of Rs. 5,5 lakhs per annum. The Court held a re-
auction and both the appellant and respondent No. 4 participated therein and
the appellant offered the hishest bid at the value of Rs. 25 lakhs.

Allowing the Appeal,
B
HELD : 1. (i) The Court has imposed a restraint in it~ own wisdom
on its exercise of juri!\diction under Article 226 where the party invoking the
jurisdiction has an effective adequate alternative remedy. It has been expressly
atated that the rule which requires the exhaustion of alternative remedies is a
rule of convenience and discretion rather than a rule of law. It does not oust
c the jurisdiction or the Court. It is made specifically clear where the order
complained against is it1leged to be illegal or invalid as being contrary to
law, a petition at the instance of a person adversely affected would lie to the
High Court under Article 226 and such a petition cannot be rejected on the
ground that an appeal lies to the hig1oer officer or the State Government. An
appeal in all cases cannot be said to provide in all situations an alternative
effective remedy. [550 C-F]
D
In the instant case, power was e~ercised by the authority set up under
the rules to grant contract. The High Court did not pose to itself the question
who would grant the relief when the impugned order is passed at the instance
of a Chief Minister of the State. This is therefore a case in which the High
Court was justified in throwing out the petition on the untenable ground that
the appellant had an effective alternative remedy. [550 G-H)
E
Assistant Collector of Central Excise v. Jai11so11 Hosiery lndrutries, [1979)
4 S.C.C. 22 and The State of Uttar Pradesh v. Mohammad Noah, [19'8] S.CR.
595, referred to.

(2) (i) There is a clear distinction between the use and disposal of
F private property and socialist property. Owner of private property may deal
with it in any manner he likes without .causing injury to any one else. But the
socialist or if that word is jarring to some, the community or further the
public oroperty has to be dealt with for public purpose and in public intt'rest.
The marked difference lies in this that while the owner of private property
may have a number of considerations which may permit him to dispose of
his property for a song. On the other hand, disposal of public property
partakes· the character of a trust in that in its disposal their should be nothing
hanky panky and that it must be done at the best price so that large revenue
coming into the coffers of the State administration would serve public purpose
viz. the welfare state may be able to expand its beneficient activities by the
availability of larger funds. This is subject to one important limitation that
H socialist property may be disposed at a price lower than the market price or
even for a token price to achieve some defined constitutionally recognised
public purpo,e, one •uch beina to achieve the aoals set out in Part JV of the
RAM AND SHYAM V. HARYANA 543
Constitution. But where disposal is for augmentation of revenue and nothina
else. the State is under an obligation to secure the best market price available A
in a market economy. (552 G-H; 553 A]

(ii} The Government is not free like an ordinary individual, in selecting
recipient for its largesse and it cannot chose to deal with any person it please1
in its absolute and unfettered discretion. The law is now well-settled that the
Government need not deal with anyone, but if it does so, it must do so
fairly and without discretion and without unfair procedure. Even though the 8
~tate is not bound to accept the highest bid, this proposition of law has to be
read subject to the observation th at it can be rejected on relevant and valid
considerations, one such being that the concession is to be given to a weaker
section .of the society who could not outbid the highest bidder. ln the absence
of it, the approach must be as clearly laid down by the Constitution Bench of
this Court in K.N. Guruswam.v v. The State of Mysore and Ors. [I955J SCR
305. Before giving up the auction process and accepting a private bid secretly
c
offered, the authority must be satisfied that such an offer if given in open would
not be outmatched by the highest hidder. In the absence of such satisfaction,
acceptance of an o!Tcr secretly made and sought to be substantiated on the
allegations without the verification of their truth, which was not undertaken,
would certainty amount to arbitrary action in the matter of distribution of
State largesse which by the decisions of this Court is impermissible. D
[554 G·H; 556 A-B; 555 G-H]

Trilochan Mishra etc. v. Stale of Orissa and Ors. [1971} 3 SCC 153,
State of Uttar Pradeslt and Ors. v. Vijoy Bahatfu,· Singh .,d Ors. [1982) 2 SCC
365 and State o/Orissa and Ors. v. Harinarayan Jaiswal and Ors. {1972] 3 SCR
784 hold inapplicable.
E
Raman Dayaran1 ShtJ/y v. The International Airport Autfiority of India
and Ors. (l •79) 3 SCR 1014 and Kasturi Lal Lakshmi Reddy v. State of Jamm11
and Kashmir and Anr. (1980) 3 SCR 1338 relied upon.

3. Rule 28 of Punjab Minor and Mineral Conco5'ion Rules, 1964 F
pern1its contract for winning mineral to be granted by the Government by
auction or tender. It is open to the State to dispose of the contract by tender.
Even here the expression •tender' does not mean a private secret deal between·
the Chief Minister and the offerer. Tender in the context in which the
expression is used in rule 28, means 'tenders to be invited from intending
contractors.' If it was intended by the use of the expression 'tender' in Rule
28 that contract can be disposed of by private negotiations with select G
individual, its validity will be open to serious question. The language ordinarily
used in such rules is by public auction or private negotiations. The meaning
of the expression 'private negotiations' must take its colour and prescribe its
content by the words which precede them. And at any rate disposal of the
State property in public interest must be by such method as would grant an
opportunity to the public at large to participate in it, the State reserving to H
itself the right to dispose it of as best subserve the public weal.
(559 F-H; 560 A-BJ
544 SUPREME COURT REPORTS (1985] SUPPL. a.c.R.

Nan4 Kishor. Sarafv. State of Rajasthan and Anr. [1965] 3 SCR 173 and
A Ftrtlllztr CorporaJIDn Kamgar Union (&gd). Sindri and Ors. v. Union of India
an4 Ors. [1981) 1sec568 relied upon.

Stale of Uttar Pradesh v. Shiv Charan Sharma and Ors. etc. [1981)
Supp. SCC 85 referred to.

B 4. In the instant case, it ia clear that respondent No. 4 was not selected
for any opocial purpose or to satisfy any Directive Principles of Stale Policy.
He surreptitiously ingratiated himself by a back-door entry giving a minor
raise in the bid and in the process usurped the most undeserved benefit which
was exposed to the hilt in the court. A unilateral offer, secretly made, not
correlated to any reserved price made by the fourth respondent after making
false statement In the letter was accepted without giving any opportunity to
c the appellant either to raise the bid or to point out the falsity of the allegations
made by the fourth respondent in the letter as also the indequacy of his bid.
The appellant suffered an unfair treatment by the State in discharging its
administrative functions thereby violating the fundamental principle of fair-
p!ay in action. When he gave the highest bid, he could not have been
expected to raise his own bid in the absence of a competitor. Any expectation
D to the contrary betrays a woeful lack of knowledge of auction process. And
then some one surreptitiously by a secret offer scored a march over him. No
opportunity was given to him either to raise the bid. Application of the
minimum principles of natural justice in such a situation must be read in the
1t1tute and held to be obligatory. When it h said that even in administrative
action, the authority must act fairly, it ordinarily means in accordance with
the principles of natural justice variously described as fair play in action.
E That having not been done, the grant in favour of the fourth respondent n1ust
be qua•hed. [554 H; 555 A·E; 560 C·EJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3751
of 19~2.
F
From the Judgment and Order dated 15.9.1982 of the Punjab
and Haryana High Court in L.P. A. No. 1232 of 1982.

Soli J. Sorabjee Ram K.B. Rohtagi and H.N. Salve, for the
Appellant.
G
1'.P. Rao, Arun Madon, R. Venkataramani and A Marriarput-
tam for the Respondent No. 4.

H L.N. Sinha, Attorney General and R.N. Poddar for the
Rcapondents.

The Judgment of the Court was delivered by
RAM AND SHYAM co. P. HARYANA (Desai, J.) 545

DESAI, J. As the matter brooked no delay, when the arguments
were concluded, the Court pronounced the order which reads as A
under·

"The appeal is allowed and the decision of the High
Court of Punjab and Haryana at Chandigarh in L.P.A.
No. 1232 of 1982 dated September 15, 1982 as well as the B
decision of the learned Single Judge in Civil Writ Petition
No. 2321 of 1981 dated August 30, 1982 .

• The writ petition filed by the present appellant
succeeds. The order of the Director of Industries dated c
May 25, 1981 granting a quarry lease to M/s Pioneer
Crushing Co. (respondent No. 4) in respect of Serai
Khawaja Plot No. II Quarry (except the area of Green
Field colonies) for the period ending with 3 lst March,
1984 is quashed and set aside.
D
The first respondent the State of Haryana and the
second respondent the Director of Industries are directed
under and subject to the relevant provisions of the Har·
yana Minor Minerals (Vesting of Rights) Act, 1973 read
with Punjab Minor and Mineral Concession Rules, 1964 E
as applicable to the State of Haryana to grant a right
to the appellant in the form of contract usually entered
into in similar cases to extract stones from Serai Khawaja
Plot No. II on compensation howsoever described at the
rate of Rs. 25 lacs per;year for a period of five years com·
mencing from January 1, 1983 and upto and inclusive and F
ending with December 31, 1987.

The appellant herein is directed to appear before the
second respondent within a weak from today to execute
the contract and/or necessary documents, instruments and G
to carry out all formalities including the making of de-
posits and/or payments, if any, required to be made under
the relevant provisions of the Act and Rules. The fourth
respondent is given time upto December 31, 1982 to
clear out from the area and this time is given to him as H
and by way of locus penitentae to wind-up his affairs as
far as the quarry[involved in this appeal.
546 SUPR.EME COURT llBPOllTS (1985] SUPPL. S.C.ll.

In the circumstances of the case, there will be no
A order as to costs.

Reasons will follow."

Here are the reasons.
B
It must be confessed that reasons in support of the decision
are delayed but without offering an alibi for the tardiness, one
aspect which inhibited giving of the reasons may be mentioned. My
learned colleague suddenly left the Court and the doubt nagged me
for some time whether one Judge alone can give the reasons. It was
c an agreed order. Before pronouncing the order broad discussion
took place which showed identity of views on all points involved in
the matter. In this background to give reasons which appealed to
us though drawn up by one of us would any day provide a better
choice than not to give reasons because it would always annoy and
D distress the party who lost the legal battle whether there are legal
or logical reasons in support of the order or it is merely an arbitrary
exercise of power. However, what happened in the Court in the
presence of all parties and the learned counsel is res ipsa loquiter.
What started before the Court as a minor whisper, hardly audible,
ended with the experience in a whispering galary where the whisper
E multiplied at the other end of the galary in volleying thunders. There
would have been no qualms of conscience if the matter was disposed
of sub-silentio as to reasons because of the outcome of the Court's
exercise of jurisdiction under Art. 136. The reasons which dictated
the choice and indicated the path did stand in need of justification
F because the end product justified interference. The very outcome
would provide the raison d'etre for the exercise of power. Yet to
bow to tile tradition to convince the protagenis of reasoned orders,
these are the reasons.

G Factually matrix first. The State of Haryana in e~ercise of the
power conferred upon it by Haryana Mioner Minerals (Vesting of
Rights) Act, 1973 (' 1973 Act' for short) grants lease for winning
minor mineral vestiag in it. The grant of the leose is regulated by
Punjab Minor Mineral Concession Rules, 1964 ('Rules' for short) in
ff their application to the State of Haryana. A notification was issued on
December 26, 1980 specifying that minor mineral quarries at various
places in Faridabad District would be auctioned on Febuary 20, 1981.
At the auction held on that day, appellant-Ram & Shyam Company
RAM ANO SHYAM co. v. HARYANA (Desai, J.) 547

gave the highest bid for Sarai Khawaja Plot No. Hin the amount of
Rs 1,52,000 p.a. The Presiding Officer conducting the auction A
accepted the bid but the State Government did not confirm the same.
A fresh auction was notified to be held on May 4, 1981. The appel-
lant participated and gave the bid for the same plot, his highest bid
rising to Rs 3,87,000 for a period of three years. The same
routine followed. The Presiding Officer accepted the bid and the 8
State Government declined to confirm the same. Then there happe-
ned something which cannot have any parellel or precedent in a
constitutional democracy like ours but one could have profitably
drawn parallel from the administration of old princely States.
Respondent No. 4 wrote a letter dated May 9, 1981 (Anx. R-1
in the High Court) addressed to the Chief Minister, Haryana c
State setting out therein the history of various auctions, and casting
serious aspersions on those who participated in the auction inter alia
saying that the bidders at the auctions have formed a syndicate and
want to monopolise the business by not outbidding each other so
that the State gets uneconomical rent/royalty. It was further alleged
that 'the goondas and anti-social elements are assisting those mono-
D
polists/bidders and successfully pushed out a party like respondent
No. 4. The letter further proceeds to make an offer/that if the
contract for a period of five years is -given to respondent No. 4 in
respect of Sarai Khawaja Plot No. 2, it is willing to pay Rs 4,50,000
per year. There b also an offer for Sarai Khawaja Plot No. I with E
which we arc not concerned. Promptly this offer was accepted by the
Chief Minister. The appellant challenged the action of the Chief

-
Minister in Writ Petition No. ; 3 21 /81 in the Punjab and Haryana
High Court inter alia contending that those who formed the firm
styled as M/s Pioneer Crushing Co.'.respondent No. 4, had participa-
ted in the auction and 1hen made false allegations against the
F
appellant whose bid was the highest and without giving him any
opportunity, the offer of respondent No. 4 was accepted which has
denied equality of opportunity to the appellant in the matter of
distribution of State largesse.
G
A learned Single Judge issued a notice to the respondents
calling upon them to show cause why rule nisi may not be issued. Jn
response to the notice, respondent No. 4 appeared and contended
that the petitioner had an alternative .remedy and on this short ground, H
the learned Single Judge rejected the writ petition. A Division Bench
of the High Court in the Letters Patent Appeal filed by the appellant
548 IUPRl!Mli COUll.T 11.BPOll.11 (1985] SUPPL. s.c.a.

concurred with the learned Single Judge and di1miss1d tbt appeal.
A Hence this appeal by special leavt.

At this stage it would be advantageous to refer in some details
what transpired at the hearing of this appeal in this Court. Let us
at once recapitulate what happend in the court because that by itself
B provides a tell-tale piece of evidence compelling the court to intefere
and set aside the impugned order. Mr.L.N Sinha, learned Attorney
General raised a sort of a preliminary objection that this Court
should not assist the syndicalists to join hands to depnve the State of
its legitimate revenue. Then he made a pertinent observation
interposing an objection when Mr. Sorabjee, learned counsel for the
petitioner was making his submissions. The question posed was : if
the Court interferes and quashes the grant in favour of the fourth
respondent, the only option open to the court would be to direct a
fresh auction. He posed the further question that if at the time of
re-auction, the highest bid does not reach upto Rs 4,50,000 p.a. for
D which the lease is granted to the fourth respondent, would the Court
make good the loss? Apart from the rhetoric of the question, the
issue raised was of primary importance. We, therefore, asked Mr.
Sorabjee whether his client is willing to make an affidavit incorporat-
ing therein that if the highest bid at a reauction, if the court
so directs, falls short of Rs 4,50,000 the appellent would agree and
E undertake to accept the contract at the value of Rs 5,50,000 p.a.
Such an affidavit was immediately filed. In order to give the fourth
respondent to whom contract under the impugned order was given,
an opportunity whether he would like to raise his offer. Mr. P.P.
Rao voiced his apprehension about his contentions. We assured
F him that without prejudice to his contentions, it would he open to
his client to raise his offer. What transpired may be tabulated in a
chart:

Appellant's offer R ..pondent's offer
G !. 5.50 lacs 2. 6 lacs
3. 6.50 lacs 4. 7 lacs

5. 7.53 lacs 6. 8 lacs
H
7. 8.50 lacs 8. 9 lacs

9. to tac~ 10. 10.so laes
RAM AND SilYAM co. '· HARYANA (Desai, J.) 549

Court intervened at this stage and said that the raise must
be minimum at the rate of Rs I lac. A
11. 12 lacs 12. 14 lacs
13. 15 lacs 14. 16 lacs

-· 15. 17 lacs
17. 19 lacs
16. 18 lacs
18. 20 lacs
B

19. 21 lacs 20. 22 lacs
21. 25 lacs.
c
Shock and surprise was visible on the face of each one in the
court. Shock was induced by the fact that public property was
squandered away for a song by persons in power who holds the
position of trust. Surprise was how judicial intervention can serve
larger public interest. One would require multi-layered blind-fold D
to reject the appeal of the appellant or any tenus ground so that the
respondent may enjoy and aagrandize his unjust enrichment. On
this point we say no more.

• Before we deal with the contentions, let us have a look at the
relevant provisions of the Act and the Rules. E

-
Rule 28(1) of the Rules provides that 'contracts for extraction
of minor mineral may be granted by the Government by auctioning
or tendering for a maximum period of five years after which no
extension shall be granted.' Sub-rule (21 provides that 'the amount F
to be paid annually by the contractor to the Government shall
be determined in auction or by tender to be submitted for
acceptance, by the anthority campetent to grant the contract.'
Rule 29 confers power on the Presiding Officer to reject or
accept any bid or tender without assigning any reason to the.
bidders or tenderers. However, where the highest bid or tender is G
rejected, the reason sball however, be reported to the Government.'
Rule 30 provides for notifying of the proposed auction on the notice
board of the Director, Mining Officers and at least in one newspaper
having wide circulation in the locality nearest to the area in question
in the regional language as also in the Government Ga:;:ette. Sub-cl. B
(4) of sub-r. (2) of Rule 30 provides that 'no hid shall be regarded
as accepted unless confirmed by Government.' Rule 58 confers
550 SUPREME COURT REPORTS (1985) SUPPL; S.C.i!.;

power on the Government to relax any of the provisions of the Rules
A in the interest of mineral development or better working of the mine.

l3efore we deal with the larger issue, let me put out of the way
the contention that found favour with the High Court in rejecting
the writ petition. The learned Single Judge as well as the Division
B Bench recalling the observations of this Court in Assistam Collector •
of Central Excise v. Jainson Hosiery lndustries( 1 ) rejected the writ
petition observing that 'the petitioner who invokes the extraordinary
jurisdiction of the court under Art. 226 of the Constitution must
have exhausted the normal statutory remedies available to hirn.'
c We remain unimpressed. Ordinarily it is true that the court has
imposed a restraint iu its own wisdom on its exercise of jurisdiction
under Art. 226 where the party invoking the jurisdiction has an
effective, adequate alternative remedy. More often, it has been
expressly stated that the rule which requires the exhaustion of
alternative remedies is a rule of convenience and discretion rather
D than rule of law. At any rate it does not oust the jurisdiction of the
Court. In fact in the very decision relied upon by the High Court
in The State of Uttar Pradesh v. Mohammad Nooh(') it is observed
that there is no rule, with regard to certiorari as there is with
mandamus, that it will lie only where there is no other equally effec-
tive remedy. It should be made specifically clear that where the
E order complained against is alleged to be illegal or invalid as being
contrary to law, a petition at the instance of person adversely

-
affected by it, would lie to the High Court under Art. 226 and such
a petition cannot be rejected on the ground that an appeal lies to
the higher officer or the State Government. An appeal in all cases
F cannot be said to provide in all situations an alternative effective
remedy keeping aside the nice distinction between jurisdiction and
merits. Look at the fact situation in this case. Power was exercised
formally by the authority set up under the Rules to grant contract

G
but effectively and for all practical purposes by the Chief Minister
of the State. To whom do you appeal in a State administration
against the decision of the Chief Minister? The clitch of appeal from
Ceasar to Ceasar wife can only be bettered by appeal from one's own
-
order to oneself. Therefore this is a case in which the High Court was
not at all justified in throwing out the petition on the untenable ground
B
(I) [197914 S.C.C. 22.
(2) [1958] S.C.R. 595.
RAM AND Si!YAM CO. V. HARYANA (Desai, J,) SSi
that the appellant had an effective alternative remedy. The High
Court did not pose to itself the question, who would grant relief when A
the impugned order is passed at the instance of the Chief Minister
of the State. To whom did the High Court want the appeal to be
filed over the decision of the Chief Minister. There was no answer
and that by itself without anything more would be sufficient to set
aside the judgment of the High Court. B
Turning to the merits of the case, the arguments covered a much
larger canvass than was anticipated when the hearing opened. It
was submitted that India being a Sovereign Socialist Secular Demo-
cratic Republic, the property of the Union or of the State is socialist
property which would imply that it is community property and
every citizen of this country has vital interest in its effective use and
legitimate disposal.

It was never disputed nor could it have been disputed that
minerals vest in the state. The minor minerals vast in the State D
where the land from which they are to be extracted is situated and
minerals other than minor minerals vast in the Union. 'Minor
.minerals' have been defined in The Mines and Minerals (Regulation
and Development). Act, 1957 to mean, 'building stores, gravel,
ordinary clay, ordinary sand other than sand used for prescribed
purposes, and any other mineral which the Central Government E
may, by notification in the Official Gazette, declare to be a minor
mineral.' Minor minerals vest in the state in which the land is
situated. The first respondent State of Haryana notified that an
auction would be held for mineral quarries of Faridabad District.
The appellant gave his bid at the auction so notified. It is an admited
position that his was the highest bid. Anyone conversant with
auction would not be naive enough to believe that one can go on
raising his own bid. His was the highest bid in the amount of Rs.
3,87,000 p.a. Though the Presiding Officer accepted the bid of
the appellant, being the highest bid at the aucfon, yet the State
Government in the exercise of the power conferred by cl. (4) of sub·r. G
(2) of Rule 30 declined to confirm the same presumably under the
belielf that the highest bid did not represent the adequate lease rent
which the State Government was entitled to get. The right of the
State Government not to confirm the bid as also its action of not
confirming the highest bid of the appellant is not questioned. H
Therefore, various decisions laying down that the Government is not
bound to accept the hightest bid, to which our attention was drawn
552 SUPREME COURT REPORTS (1985) SUPPi,, S.C.R,

by Mr. P.P. Rao, learned counsel for the fourth respondent are of no
A relevance in this case. This Court in Tri/ochan Mishra etc. v. State
of Orissa & Ors. (1) State of Uttar Pradesh & Ors. v. Vijay
Bahadur Singh & Ors. (2 ) and Stau of Orissa & Ors. v. Harinarayan
Jaiswal & Ors. (3) held that the Government is under no obligation
to accept the highest bid and that no rights accrue to the bidder
B merely because his bid happened to be the highest. The
Court also observed that the Government had the right, for
good and sufficient reason, not to accept the highest bid but
even to prefer a tenderer other than the highest bidder. In Vijay
Bahadur Singh's case the Court further observed that the power
conferred on the Government by the act to refuse to accept the highes
c bid, cannot be confined to inadequacy of bid only. There may be
variety of other good and sufficient reasons to reject the same. The
appellant has no grievance that even though his was the highest
bid, the same was not accepted nor Mr. Sorabjee on his behalf
contends that the highest bid of the appellant was rejected on
D grounds which are either irrelevant or extraneous. This aspect
therefore need not detain us any more.

Let us put into focus the clearly demarcated approach that
distinguishes the use and disposal of private property and socialist
property. Owner of private property may deal with it in any manner
E he likes without causing i11jury to any one else. But the socialist or
if that word is jarring to some, the community or further the public
property has to be dealt with for public purpose and in public
interest. The marked difference lies in this that while the owner of
private property may have a number of considerations which may
permit him to dispose of his property for a song. On the other hand,
disposal of public property partakes the character of a trust in that
in its disposal there should be nothing hanky panky and that it must
be done at the best price so that larger revenue coming into the
coffers of the State administration would serve public purpose viz. the
welfare State may be able to expand its beneficient activities by the
G availability of larger funds. This is subject to one important limitation
that socialist property may be disposed at a price lower than the
market price or even for a token price to achieve some defind
constitutionally recognised public purpose, one such being to achieve

H
(I) (1971) 3 S.C.C. !53.
(2) (1982) 2 s.c.c. 365.
(3) [1972] 3 S.C.R. 784,
RAM AND SHYAM co. v. lIARYANA (Desai, J.) 553

the goals set out in Part IV of the Constitution. But where disposal
is for augmentation of revenue and nothing else, the State is under an A
obligation to secure the best market price available in a market
economy An owner of private property need not auction it nor is he
bound to dispose it of at a current market price. Factors such as
personal attachment, or affinity. kinship, empathy, religious sertiment
or limiting the choice to whom he may be willing to sell, may permit
him to sell the property at a song and without demur. A welfare
B
State as the owner of the public property has no such freedom
while disposing of the public property. A welfare State exists for the
largest good of the largest number more so when it proclaims to be
a socialist State dedicated to eradication of poverty. All its attempt
must be to obtain the best available price while disposing of its c
prsperty because the greater the revenue, the welfare activities will
get a fillip and shot in the arm. Financial constraint may weaken the
tempo of activities. Such an approach serves the larger public pur-
pose of expanding welfare activities primarily for which the Constitu·
tion envisages the setting up of a welfare State. In this connection
we may profitably refer to Ramano Dayaram Shelly v. The D
lnternctional Airport Authority of India and Ors.(') in which
Bhagwati, J. speaking for the Court observed :

"It must, therefore, be taken to be the law that where
the Government is dealing with the public, whether by
way of giving jobs or entering into contracts or issuing
E
quotas or licences or granting other forms of largesse, the
Government cannot act arbitrarily at its sweet will and,
like a private individual, deal with any person it pleases,
but its action must be in conformity with standard or
norms which is not arbitrary, irrational or irrelevant. The F
power or discretion of the Government in the matter of
grant of largesse including award to jobs, contracts,
quotas, licences etc., must be confined and structured by
rational, relevant and non-discriminatory standard or
norm and if the Government departs from such standard
or norm in any particular case or cases, the action of the G
Government would be liable to be struck down, unless it
can be shown by the Government that the departure was
not arbitrary, but was based on some vaild principle
which in itself was not irrational, unreasonable or
discriminatory." H

(I) (1979] 3 S.C.R. 1014.
5S4 SUPREME COURT REPORTS [198~) SUPPL. s.c.R.

At another place it was :observed that the Government must
A act in public interest, it cannot act arbitrarily or without reason and
if it does so, its action would be liable to be invalidated. It was
further observed that the object of holding the auction is generally to
raise the highest revenue. The Government is entitled to reject the
highest bid if it thought that the price offered was inadequate. But
B after rejecting the offer, it is obligatory upon the Government to act
fairly and at any rate it cannot act arbitrarily. Following this line of
thought, in Kasturi Lal Lakshmi Reddy v. State of Jammu & Kashmir
and Anr.(1) while upholding the order of the Government of Jammu
& Kashmir dated April 27, 1979 allotting to the second respondent
10 to 12 lacs blazes annually for extraction of resin from the
c inaccessible chir forests in Poonch, Reasi and Ramban Divisions of
the State for a period of 10 years on the terms and conditions set out
in the order, observed as under·:

"Where any governmental action fails to satisfy the
D test of reasonableness and public interest discussed above
and is found to be wanting in the quality of reasonable·
ness or lacking in the element of public interest, it would
be liable to be struck down as invalid. It mu;t follow as
a necessary corollary from this proposition that the
Government cannot act in a manner which would benefit
E a private party at the cost of the State; such an action
wonld be both unreasonable and contrary to public
interest. The Government, therefore, cannot for example
give a contract or sell or lease out its property for a
consideration less than the highest that can be obtained for
F it, unless of course there are other considerations which
render it reasonable and in public interest to do so."
(emphasis supplied)

At one stage, it was observed that 1he Govornment is not free like an
ordinary individual, in selecting recipient for its largesse and it cannot
G choose to deal with any person it pleases in its absolute and unfettered
discretion. The law is now well-settled that the Government need
not/ deal with anyone, but if it does so, it must do so fairly and
without discretion and without unfair procedure. Let it be made
distinctly clear that respondent No. 4 was not selected for any special
H purpose or to satisfy any Directive Principles of State Policy. He

(I) (19801 3 S.C.R. 1338.
RAM AND SHYAM CO. V. ilARYANA (Desai, J,) SSS
surreptitiously ingratiated himself by a back-door entry g1vmg a
minor raise in the bid and in the process usurped the most undeserved A
benefit which was exposed to the hilt in the court. Only a blind can
refuse to perceive it.

Approaching the matter from this angle, can there be any doubt
that the appellant whose highest bid was rejected by the Government
should have no opportunity to improve upon his bid more so when B
his bid was rejected on the ground that it did not respresent adequate
market consideration for the concession to extract minor mineral.
A unilateral offer, secretly made, not correlated to any reserved price
made by the fourth respondent after making false statement in the
letter was accepted without giving any opportunity to the appellant
either to raise the bid or to point out the falsity of the allegations
c
made by the fourth respondent in the letter as also the inadequacy
of his bid. The appellant suffered an unfair treatment by the State
in discharging its administrative functions thereby violating the funda·
mental principle of fairplay in action. When he gave the highest bid,
he could not have been expected to raise his own bid in the absence D
of a competitor. Any expectation to the contrary betrays a woeful
lack of knowledge of auction process. And then some one
surreptitiously by a secret offer scored a march over him. No
opportunity was given to him either to raise the bid or to controvert
and correct the erroneous statement. E
What happened in this case must open the eyes both of the
Government as well as the people at large. How an uncontrolled
exercise of executive power to deal with socialist property in which
entire community's interest was sacrificed so as to cause huge loss to
the public exchequer would have gone unnoticed but for the vigilance F
of the appellant who no doubt is not altruistic in its approach but
its business interests goaded it to expose the unsavoury deal.
Concedin.g that on weighty and valid con~iderations, the highest bid
can to rejected by the State, one such which can be foreseen is that
the highest bid does not represent the adequate market price of the
co~cessio~, yet before giving up the auction process and accepting a G
private bid secretly offered, the authority must be satisfied that such
an offer if given in open would not be outmatched by the highest
bidder. In the absence of such satisfaction, acceptance of an offer
secretly made and sought to be substantiated on the allegations with-
out the verification of their the• truth, which was not undertaken, H
·
wouId certam1Y amount to arbitrary action in the matter of distribu·
tion of State largesse which by the decisions of this Court is
556 SUPRllMB COURT RBPORTS [1985] SUPPL. s.c.a.

impermissible. Even though repeatedly, this Court has said that the
A State is not bound to accept the highest bid, this proposition of law
has to be read subject to the observation that it can be rejected on
relevant and valid considerations, one such being that the concession
is to be given to a weaker section of the society who could not outbid
the highest bidder. In the absence of it, the approach must be as
B clearly laid down by the Constitution Bench of this Court in
K.N. Guruswamy v. The State of Mysore & Ors.( 1 ) In that case, the
appellant and the fourth respondent were rival liquor contractors for
the sale of the liquor contract for the year 1953-54 in the State of
Mysore. The contract was auctioned by the Deputy Commissioner
under the authority conferred upon him by the Mysore Excise Act,
c 1901. The appellant's bid was the highest and the contract was
knocked down in his favour subject to formal confirmation by the
Deputy Commissioner. The fourth respondent was present at the
auction but did not bid. Instead of that he went direct to the
Excise Commissioner and made a higher offer. The Excise Commis-
sioner cancelled the sale of favour of the appellant and directed the
D
Deputy Commissioner to take action under the relevant rule. The
latter accepted the tender of the respondent. The appellant moved
the High Court for a writ of mandamus which was dismissed. In
appeal by the certificate, it was urged on behalf of the State that the
Deputy Commissioner acted within the ambit of his powers under
E the relevant rule which gave him an absolute discretion either to
re-auction or to act otherwise and no fetters are placed upon the
'otherwise' method. The court negatived this contention observing
that arbitrary improvisation of an ad hoc procedure to meet the
exigencies of a particular case is ruled out. Therefore, the grant of
the contract to the fourth respondent was wrong. Repelling the
F contention that a writ petition at the instance of the appellant would
not be maintainable, the Constitution Bench observed as under :

"The next question is whether the appellant can
complain of this by way of a writ. Jn our opinion, he
G conld have done so in an ordinary case. The appellant
is interested in these contracts and has a right under the
laws of the State to receive the same treatment and be
given the same chance as anybody else. Here we have
Thimmappa who was present at the auction and who did
H not bid-not that it would make any difference if he had,

(I) [1955) S.C.R. 305.
RAM AND SHYAM co. v. HARYANA (Desai, J.) 557

for the fact remains that he made no attempt to outbid
the appellant. If he had done so it is evident that the A
appellant would have raised his own bid. The procedure
of tender was not open here because there was no noti·
fication and the furtive method adopted of setting a matter
of this moment behind the backs of those interested and
anxious to compete is unjustified. Apart from all else, B
that in itself would in this case have resulted in a loss to
the State because, as we have said, the mere fact that the
appellant bas pursued this writ with such vigour shows
that he would have bid higher. But deeper considerations
are also at stake, namely, the elimination of favouritism
and nepotism and corruption : not that we suggest that c
that occurred here, but to permit what has occurred in
this case would leave the door wide open to the very evils
which the Legislature in its wisdom has endeavoured to
avoid. All that is part and parcel of the policy of the
Legislature. None of it can be ignored. We would there·
fore in the ordinary course have given the appellant
D
the writ he seeks. But, owing to the time which this
matter has taken to reach us (a consequence for which
the appellant is in no way to blame, for he has done all
he could to have an early hearing), there is barely a fort·
night of the contract left to go. We were told that the E
excise year for this contract (1953·54) expires early in
June. A writ would therefore be ineffective and as it is
not our practice to issue meaningless writs we must dis·
miss this appeal and leave the appellant content with an
enunciation of the law."
F
Fact of no two cases are alike, hut if one attempts to compare
the situation, the conclusion is inescapable. Appellant's bid was
the highest bid. It was in the amount of Rs. 3,87,000 p.a.
Respondent No. 4 approached the Chief Minister with a slightly
higher bid of Rs. 4,50,000 per year. This was granted without G
any reference to the appellant to raise his bid. Such a thing, if
allowed to pass once is bound to be repeated because this method
is open to the abuse of favouritism and nepotism and the loss of
revenue in this case to the State is enormous. What happened in
the court staggered everyone. Learned Attorney General Shri L.N H
Sinha, who questi?ned the com?etence of the court to deal with th;
matter when he witnessed the ming crescendo of the auction in the
558 SUPREME COURT RBPORTS [1985) SUPPL. s.c.R.

court and the bid reached Rs. 12 lacs per year, he quietly left the
A court frankly stating that be does not wish any contention to be
raised on behalf of the State of Haryana. Apprehension voiced by
the Constitution Bench bas literally come true in this case. This
view of the Constitution Bench was reaffirmed in Nand Kishore
Sarafv. State of Rajasthan & Anr., the only distinguishing feature
B of the case being that the highest bid of the appellant was rejected
and the contract was given to Dharti Dan Shramik Theka Sahkari
Samiti Ltd., a cooperative Society of the workmen. Though the
court did not so specifically state, it upheld the rejection of the
highest bid of the appellant on the ground that the benefit of the
concession was given to a cooperative society formed by the weaker
c section of the society and thereby it serves the public purpose as set
out in Art. 41 of the Directive Principles of the State Policy.
In Fertilizer Corporation Kamgar Union (Regd), Sindri and Ors. v.
Union of India & Ors.,(') Krishna Iyer, J. speaking for himself and
Bhagwati, J. observe as under:
D
"A pragmatic approach to social justice compel us
to interpret constitutional provisions, including those like
Articles 32 and 226, with a view to see that effective
policing of the corridors of power is carried out by the
court until other ombudsman arrangements,-a problem
E with which Parliament has been wrestling for too long -
emerges. I have dwelt at a little length on this policy
aspect and the court process because the learned Attorney-
General challenged the petitioner's locus standi either
qua worker or qua citizen to question in court the wrong
F doings of the public sector although he maintained that
what had been done by the Corporation was both bona
fiide and correct. We certainly agree that judicial inter•
ference with the administration cannot be meticulous in
our Montesquieu System of separation of powers. The
court cannot usurp or abdicate, and the parameters of
G judicial review must be clearly defined and never exceeded.
If the Directorate of a Government company has acted
fairly, even if it has faltered in its wisdom, the court
cannot, as a superauditor, take the Board of Directors to
task. The function is limited to testing whether the
H
(I) [1965]3 S.C.R. 173.
(2) (1981] 1 S.C.C. 568.
RAM AND SHYAM co. v. HARYANA (Desai, J.) 559

administrative action has been fair and free from the taint
of unreasonableness and has substantially complied with A
the norms of procedure set for it by rules of public
administration."

Jn a· concurring op1mon, Chandrachud, CJ. observed that sales
of public poperty, when the intention is to get the best price, ought B
to take place publicly.

In State of Uttar Pradesh v. Shiv Charan Sharma & Ors. etc. (1 ),
this court observed that public auction with open participation
and a reserved price guarantees public interest being fully subserved.
c
Even though later on, learned Attorney General did not
invite us to examine any specific contention on behalf of the
State of Harayana, it may in pass.ing be stated that with regard
to transactions with the State, the principle enunciated in
Sec. 55(5) (a) of the Tran~fer of Property AcL would apply with D
greater vigour. Proceeding along it was submitted that if that is
accepted and if it appears to the court that the State of Haryana
did not appear to have full appreciation of the value of the property
and the other party i.e. respondent No. 4 by reason of its profession
was aware of the same and the resulting transaction is materially
unfair, then such a case falls outside the principle enunciated by the E
decision of this court, on which reliance was placed on behalf of
the respondent No. 4. We consider it unnecessary in the facts of
this case to examine this aspect.

The position that emerges is this. Undoubtedly rule 28 permits
contracts for winning mineral to be granted by the Government by F
auction or tendor. It is true that auction was held. It is equally
true that according to the State Government, the highest bid did not
represent the market price of the concession. It is open to the State

- to dispose of the contract by tender. Even here the expression
'tender' does not mean private secret deal between the Chief Minister
and the offerer. Tender in the context in which the expression is
G

used in rule 28, mean, tenders to be invited from intending contrac·
tors.' If it was intended by the use of the expression 'tender' in
rule 28 that contract can be disposed of by private negotiations with
select individual, its validity will be open to serious question. Th~ H

(I) [1981] Supp. S.C,C. 85,
560 SUPREME COURT REPORTS [1985) SUPPL. s.c.R.

Jang uages ordinarily used in such rules is by public auction or private
•
A negotiations. The meaning of the expression 'private negoiations'
must take its colour and prescribe its content by the words which
precede them. And at any rate disposal of the state property in
public interest must be by such method as would grant an opportu-
nity to the public at large to participate in it, the State reserving to
itself the right to dispose it of as best subserve the public weal.
B
Viewed from this angle, the disdosal of the contract pursuant to the
letter by the fourth respondent to the Chief Minister is objectionable
for more than one reason. The writer has indulged into allegations,
the truth of which was not verified or asserted. The highest bidder
whose bid was rejected on the ground that the bid did not represent
c the market price, was not given an opportunity to raise his own bid
when privately a higher offer was received. If the allegations made r
1...
in the letter influenced the decision of the Chief Minister, fair.plan
in action demands that the appellant should have been given an
opportunity to counter and correct the same. Application of the
minimum principles of natural justice in such a situation must be
D read in the statute and held to b~ obligatory. When it is said that
even in administrative action, the authority must act fairly, it
ordinarily means in accordance with the principles of natural justice
variously described as fair play in action That having not been
done, the grant in favour of the fourth respondent must be quashed.
E
Apart from various considerations herein examiner, if any
other view is taken in the facts and circumstances of this case, it may
provide a classic example of ostrich burying its face in sand and
declining to see the reality. .
F
M.L.A. Appeal aI/owed.

-