STATE OF PUNJABversusM/S. YOGINDER SHARMA ONKAR RAI & CO. AND ORS.

                                 STATE OF PUNJAB                                       A
                                            v.
           M/S. YOGINDER SHARMA ONKAR RAI & CO. AND ORS.

                                 SEPTEMBER 17, 1996

                 [S.P. BHARUCHA AND K. VENKATASWAMI, JJ.)                              B

              Constitution of India, 1950: Article 226-Administrative Law-Auction
       of liquor vends-High Court reversing order of Financial Commissioner reject-
       ing the allegedly unsuccessful bidder's representation-Held, Financial
       Commissioner's conclusion were reasonable and he was not biased; the High       C
       Court was in e1ror and its judgment was based on conjectures impennissib/e
       where the fact-finding auth01ity's conclusion is neither perverse nor w1-
       reaso11ab/~Administrative Law-Constitution of India, Article 14.


              Practice and Procedur~Writ petition challenging public auction of
       liquor vends-Held, petitioner must prove bonafides by depositing a substan- D
       tial portion of what he says he will bid; only if such deposit is made should
       the auction be set side and re-auction ordered-Constitution of India, A1ticle
       226.

""            On March 11, 1996 a public auction of liquor vends of Group Nos.         E
       108 to 111 in Khanna Circle, District Ludhiana, Punjab for the year
       1996-?7 took place. The respondent challenged the auction in a_ writ
       petition which was disposed of by the High Court with a direction to the
       Financial Commissioner to treat the writ petition as a representation and
       give the respondent an opportunity of being heard before passing ap-
       propriate orders.                                                               F

             The Financial Commissioner while rejecting the representation of the
       respondent concluded that the respondent had not given a bid of Rs. 4.21
       crores for Group No. 108 or a bid of Rs. 3.50 crores for Group No. 111 as
       alleged by him; that it was next to impossible that 34 bank drafts could have   G
       been prepared on the day of the auction in banks at Khanna and Mandi
       Gobind Garb situated 40-50 kms. away from the site of the auction; that bid
       of the respondent for Group No. 108 being Rs. 50 lakhs more than the
     ' successful bid and that for Group No. 111 being Rs. 45 lakhs more than the
       successful bid, it was hard to believe that the Collector who was present at
       the site did not intervene; that the independent observers had in their         H
                                            375
    376                   SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A   reports made no mention of the alleged higher bids and had stated that the
    auctions were fair and without favouritism; that there. was no evidence that
    the auction had been stage-managed.

          While the writ petition by another petitioner challenging the Finan-
    cial Commissioner's order was dismissed by one Division bench stating
B   that there was no infirmity the~n, the respondent's writ petition challeng-
    ing the same order was allowed by another Division Bench of the High
    Court. The Division Bench here held that the respondent being the highest
    bidder was wrongly shown to have not participated in the bid. It held that
    the Financial Commissioner's conclusions were based on conjectures and
C   it passed strictures on his conduct. All the four groups were directed to be
    re-auctioned. In case the writ petitioner did not participate in the re-auc-
    tion and there was no other bidder making the same offer as that of the
    successful bidders, the writ petitions would be deemed to be dismissed.

          The State of Punjab and the successful bidders appeal to this Court.
D
          Allowing the appeals, this Court

          HELD : 1.1 .. The Division Bench of the High Court was in error in
    reaching the conclusion that the auction was not properly and fairly held.
    The Financial Commissioner's conciusion in his report were reasonable.
E   The remarks made by the Division Bench about him are not justified. There
    was nothing in his order to indicate that he was in any way biased.
                                                                [389-H; 390-A]
           1.2. The judgment of the Division Bench was based upon conjectures
    and surmises and inferences more tenuous than those it found the Finan-
F   cial. Commissioner guilty of. Such conjectures and surmises were imper-
    missible in a judgment upon a writ petition under· Article 226 where the
    fact-finding authority had arrived at a conclusion which was not perverse
    or so unreasonable that, upon the record, it could not have been reached.
                                                               [388-H; 389-A]
G         2.t. The respondent's story did not ring true. or the twelve to thirteen
    hundred persons present in the pandal, not one independent observer had
    stated on affidavit that the respondent had made bids far larger than the
    successful bids but they had been ignored. [389-F]

          2.2. The order of the High Court was not a workable or well thought
H   out one. The finality of auctions must also be recognised to be in the interest
      STA1Ev. YOGINDERSHARMAONKARRAI(BHARUCHA,J.)                        377

of the exchequer. If auctions are set aside and re-auctions ordered on Jess     A
than satisfactory material, the loss of the exchequer would be far greater.
[390-B]

      Mis. Rajshila v.State of U.P., [1993) Supp 1 SCC 477, referred to.

      2.3. In cases where there was real need to set aside an auction, he       B
who challenged it must be required to prove his bonafides before the
auction is set aside by depositing a substantial portion of what he said he
would bid. It was only if the deposit was made that the auction should be
set aside and a re-auction ordered. [390-G]

     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7992 of                     C
1996 Etc.

     From the Judgment and Order dated 8.5.96 of the Punjab &
Haryana High Court in C.W.P. No. 5007of1996.

      M.L. Sarin, Advocate General, Punjab, Soli J. Sorabjee, Dushyant D
D. Dave, D.P .. Gupta, S. BhoUmik, Atul Sharma, Manoj Swarup, P.H ..
Parekh, Amit Dhingra, E.R. Kumar, G.K. Benerji, Mohan Jain, Ms. Nan-
dini Gore, Pradeep Mishra, V.C. Rishi, Ms. Mukta Sharma and Goodwill
Indeevar for the appearing parties.
                                                                                E
      The Judgment of the Court was delivered by

       BHARUCHA, J. These are appeals against the judgment and order
dated 8th May, 1996, of a Division Bench of the High Court of Punjab &
Haryana, passed upon a writ petition filed by the first respondent, M/s.
Yoginder Sharma Onkar Rai & Co. The subject matter of the writ petition         F
was the auction of liquor vends of Group Nos. 108 to 111 in Khanna Circle,
District Ludhiana, State of Punjab for the year 1996-97. The First appeal
is by the State of Punjab. The other appeals are by the successful bidders.

      The auction took place on 11th March, 1996. On 18th March, 1996,
the first respondent filed an earlier writ petition (Writ Petition no. G
4047/1996) before the High Court challenging the auction. Thereon the
Division bench ordered :

          "After hearing the learned counsel for the parties and perusing the
          record we are of the opinion that the points raised by the
          petitioners do require a consideration by the competent authority     H
    378                   SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A           authorised a reject the higher bid offered and the auction held.
            The disputed questions of facts raised in this litigation can also
            better be appreciated by such authority.

                xxx                       xxx                          xxx

B                In view of the facts and circumstances of the case, this petition
             is disposed of with the following directions:

             {i) That Shri Y.S. Ratra, Financial Commissioner, Taxation shall
             treat this writ petition as representation/revision in terms of Rule
             36(18) of the Rules filed before him to determine the legality of
c            the bids in auction held in favour of the private respondents.

             (ii) The parties shall be given an opportunity of being heard before
             passing the appropriate orders."

          Consequential directions were also given.
D
          The Financial Commissioner heard the parties as directed by the
    High Court and rejected the representation/revision filed by the first
    respondent. He noted various circumstances on the basis of which he came
    to the conclusion that the first respondent had not given a bid of Rs. 4.21
E   crores for Group no. 108 or a bid of Rs. 3.50 crores for Group no.111. The
    Financial Commissioner found that the possession of a receipt for entry
    into the auction pandal did not mean that the first respondent had made
    a bid unless it was shown from the bid sheet that its name was recorded
    thereo~. Being a sitting licensee for the last 4 or 5 years did not give the
F   licensee any right to get the vend again unless he bid for it in open auction.
    Not much reliance could be placed on newspaper report, as the Supreme
    Court had held that newspaper reports had no evidentiary value but were
    only hearsay evidence. That a bank counter had been opened in the pandal
    did not bar the successful bidders from depositing the requisite amount of
    15% of the bid money in the Government Treasury at Khanna in the stated
G   time. In the pandal there was 1200-1300 persons. They were not all bidders.
    Being the first auction of liquor vends in the State for the given year,
    licensees from other districts had come to see the trends and make a
    market survey. That only 2 or 3 bidders had given bids for a particular vend
    was, therefore, not noteworthy. Though the partners of S.P. Kalia and Co.
H   and Puneet Kalia and Co. were relations there was no reason why they
      STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.]                        379

should not bid against each other. It was next to impossible that 34 drafts A
could have been prepared on the day of the auction in banks at Khanna
and Mandi Gobind Garh which would reach the pandal by 11 a.m. con-
sidering the fact that the banks opened at 10 a.m. at Khanna and Mandi
Gobid Garh, which was approximately 40-50 kms. from the site of the
auction at Ludhiana. It was more likely that all this would take 2 hours. B
This indicated that the first respondent did not have adequate funds to
deposit 15% of the bid money at the fall of the hammer and, therefore,
did not bid at all. Note was taken of the pattern of bidding. For Group no.
108 the initial bid was for Rs. 3.55 crores, the next was Rs. 3.65 crores, then
3.68 crores, then Rs. 3.70 and the successful bid was of Rs. 3.71 crores.
Thus the tend of the rise was Rs. 10 lacs in the first instance, then Rs. 3 c
lacs, then Rs. 2 lacs and, lastly, Rs. 1 lac. The case of the first respondent
was that it bid Rs. 4.21 crores, that is to say, there was a rise of Rs. 50 lacs
over the last bid. Substantially similar was the position in regard to Group
No. 111 where there was allegedly a rise of Rs. 45 lacs. It was hard to
believe that the Collector, who was present at the auction, would not have D
intervened in these circumstances. No evidence was forthcoming that any- ,
thing spectacular had happened in the pandal. The first respondent had
not approached any of the senior officers who were in the city in connec-
tion with the auction. The mere mention during the argument that it had
approached the Excise and Taxation Commissioner and told him its case E
and that he said he would look into the matter was an after -thought. If
the difference between the successful bids and the allegedly higher bids
was really of Rs. 50 lacs and Rs. ·45 lacs respectively, the first respondent
should have put it in writing and the Excise and Taxation Commissioner
would have taken cognizance. The telegram sent by the first respondent
was 4 days after the auction. There were telegrams under different names
                                                                                 F
but they were all similarly worded and no mention was made therein of the
amounts of the allegedly higher bids, but merely that a lower bid had been
accepted despite a higher bid. Due credence had to be given to the reports
of the two independent observers nominated by the Excise and Taxation
Commissioner and the Deputy Commissioner of the District who were . G
present at the pandal. No mention had been made of the alleged higher
bids in the observers' reports, which stated that the auctions were fair and
there was no favouritism. The decision of the State Government not to
allow S.K. Ralhan, Deputy Excise and Taxation Commissioner, Patiala
Division, to conduct auctions in other districts of Patiala Division was H
    380                   SUPREME COURT REPORTS (1996] SUPP. 6 S.C.R.

A based on administrative grounds and the matter was under consideration.
    There was· no evidence that the auction had been stage-managed. The
    claim of the first respondent was, therefore, without any basis, an after-
    thought and not based on any concrete evidence.

          The order of the Financial Commissioner was passed consequent
B upon three writ petitions. The petitioner in one of three writ petitions did
    not carry the matter to the H~gh Court. The writ petitioner in another writ
    petition filed a second writ petition challenging the order; it came up
    before another Division Bench which, on 9th April, 1996, passed the
    following order :
c            "We find no infirmity in the detailed order, Annexure P-9, passed
             by the Financial Commissioner, (Taxation), Punjab. All the points
             raised before us have been dealt with in detail by the Financial
             Commissioner and we concur with the findings recorded by him.

D               Dismissed."

    The writ. petitioner in the third writ petition was the first respondent and
    it filed the present writ petition (No. 5007/96) impugning the Financial
    ComQJ.issioner's order on 6th April, 1996. This writ petition was disposed
E   of by the judgment and order under appeal.

           The Division Bench noted therein the case of the first respondent
  that it had offered Rs. 4.21 crores for Group no. · 108 as against the
  successful bid of Rs. 3.71 crores which had been wrongly accepted, thereby
   putting the public exchequer to loss of Rs. 50 lacs. Similarly, for Group
F no. 111, the first respondent had Qffered Rs. 3.5 crores but the bid of Rs.
   3.!}5 crores was accepted, thus putting the exchequer to a loss of Rs. 45
   lacs. Though the representatives of the first respondent were present at the
   time of the auction, their presence and the bids offered by them were not
   recorded. It was the said S.K. Ralhan who had not accepted the higher
   l:>ids offered by the firs respondent without any basis or assigning any valid
G reason. The first respondent had raised a hue and cry, which met with deaf
   ears. The first respondent, through its partner, Yoginder Sharma, had
   approached the Excise and Taxation Commissioner. and brought to his
   notice the arbitrary, capricious, illegal and unconstitutional auction on the
  ·part of the said S.K Ralhan, but no action was taken. The denials of the
H respondents before the High Court were noted, including those of the said
      STATEv. YOGINDERSHARMAONKARRAI(BHARUCHA,J.)                       381

SK Ralhan. The order on the earlier writ petition (No. 4872/96) was set A
out in extenso. The Division Bench then enumerated the circumstances
which had led the Financial Commissioner to reject the representation or
revision of the first respondent (as set out above). The validity of the
auction was challenged by the first respondent on three grounds. The first
and. second grounds related to the provisions of the Punjab Excise Act and
the Punjab Liquor Licence Rules and the term and conditions of the
                                                                           B
Auction notice. (These grounds were rejected and need not detain us.) The
third ground, which was accepted; was set out thus :

        "(iii) The petitioner, despite being the highest bidder, was wrongly
        shown to have not participated in the bid. The learned counsel has     c
        referred to various circumstances, which, according to him, show
        the bonafides of the petitioner in bidding in the auction and having
        been present on the spot".

The Division Bench stated that, in support of his submission that the first    D
respondent had offered a higher bid, its counsel had referred to various
circumstances and submitted .that the cumulative effect thereof proved the
presence and participation of the first respondent in th~ auction, which had
not been taken note of. The ci.rcumstances enumerated by the first respon-
dent and "probabilised to have been proved" were set out by the Division
Bench. The first circumstance was the receipt for entry into the auction       E
panda!; this, according to the Division Bench, established that the first
respondent had decided to participate in the auction. The second cir-
cumstances was that the representatives of the first respondent were in
possession of bank drafts worth Rs. 1.90 crores besides cash in the sum of
Rs'. 10 lacs on the date of the auction "for the purpose of bidding in the     p
auction". The factum of bank drafts was not disputed. The Financial
Commissioner' observations in regard to the bank drafts were then set out
and the Division Bench observe :

        "The .conclusions arrived at by the Financial Commissioner, Taxa-      G
        tion, are based upon conjecturers nd apparently observed with pale
        eyes. It is not improbable to obtain 34 drafts prepared from a banlc
        at Khanna and Mandi Govindgarh on the same day and before the
        time of auction. It is not uncommon that the banks have been
        providing special services to their customers particularly having
        huge monetary dealings. The Financial Commissioner, Taxation,          H
    382                   SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A            has not referred to any special knowledge of banking system and ·
             has arrived at the aforesaid conclusion without ascertaining the
             true position from the concerned bank."

    According to the Division Bench, if drafts for such a huge amount had
B been issued, the same demonstrated the bona fide intention of the first
  respondent to participate in the auction. Again, it was "fully established"
  that the first respondents' representatives were in possession of the bank
  drafts on the relevant date, which showed their intention to participate in
  the auction. The provisions of Rule 36 (17), though they could not be made
  the basis for quashing the auction proceedings, were relevant to show the
C biased treatment given to the first respondent. Whether the first respon-
  dent had raised the ple'1. or not, it was for the authorities to explain the
  omission in not ·mentioning the pre-determined license fee, which might
  have become the basis for accepting or rejecting the bid offered by a
  particular bidder. It was intrigliing and not explained as to why such an
D omission was allowed in the case of Group No. 108 and 11 only and not
  in the case of any other group auctioned on 'the same day or thereafter.
  The first respondent had taken steps for participation in the auction by
  obtaining an entry slip and by procuring bank drafts, which led to the
  irresistible conclusion that it was not only a spectator. The affidavits of the
  partners of the first respondent showed that they were present at the time
E of the auction and had participated in it, but their presence was not taken
  note of. Press report also suggested that the auction was not free from
  suspicion. Some extracts of these press reports were set out. It was then
  said by the Division Bench that it was true that press reports could not be
  made the basis for holding the auction illegal or contrary to the law;
F however, "in drawing inferences, the circumstances of the press reports
  cannot be completely ignored, .........".The telegrams aforementioned also
  could not be completely ignored. The mere omission of details therein
  could not be made the basis for rejecting them. It was not a coincidence
  that immediately after the auction was concluded on 11th March, 1996, the
  said S.K. Ralhan had been transferred. His transfer suggested, prima facie,
G the satisfaction of the authorities that he had not been fair in holding the
  auction. It was worth mentioning that the successful bidders had not denied
  the allegations made against them and it was, therefore, proved that the
  persons participating in the auction were hand in glove with each other
  with the object of putting the State exchequer to loss. "The cumulative
H effect", the High Court held, "of the aforesaid discussion clearly and
        STAIB v. YOGINDER SHARMA ONKAR RAI (BHARUCHA, J.)                 383

unequivocally leads to the conclusion that the auction with respect to A
groups No. 108 and 11 held on 11th March, 1996, was neither fair, nor
proper. The petitioners were wrongly deprived of their right of participa-
tion in the bid and the State exchequer was subjected to huge loss, which
in no case is lesser then Rs. 95 lacs."

        As far as the Financial Commissioner was concerned, the High Court       E
said:

          "Least we say about Shri Ratra, better it would be. We were
          interested in the job of adjudication of the rival claims of the
          parties, presuming him to be an independent and impartial person,      C
          keeping in view the status of the post he is holding. During
          arguments, a· reference has been made to Annexure PS2, a press
          report dated 12th March, 1996, which shows that Shri Ratra had
          gone to· the press with the claim that outcome of the auction had
          allegedly been better than the expected rise of 12 to 13 per cent.     D.
          At that time, it was not brought to our notice that Shri Ratra had
          already taken a stand with respect to the matter in dispute and,
          presumably, could not have given any other finding than the one,
          which is incorporated in Annexure P 66. Omission on the part of
          the parties to bring to our notice the commitments made by Shri
          Ratra has resulted in the reference being made to him."                E

       Ultimately, in the High Court's view, the substance of the circumstan-
ces in the context of the allegations made, clearly suggested that the auction
was not fairly and properly held, with the result that the State exchequer
had been subjected to a huge loss. The High Court thereupon passed the           p
following order, which must be quoted in extenso :

          "Under the circumstances, the writ petition is allowed and the
          auction held on March 11, 1996, with respect to group Nos. 108
          and 111 vide annexures _P 44 and P 47 is quashed. Consequently,
          the auction of group Nos. 109, 110 and protection vend of Kotla        G
          Azner {Fatehgarh Sahib) in favour of the successful bidders of
          group Nos. 108 and 111 shall also stand quashed. This judgment
          would become effective from May 16, 1996, and the private respon-
          dents are allowed to continue their business until the mid-night of
          May 15, 1996.                                                          H
    384                SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A             In view of the detailed discussion made above, the order of the
          Financial· Commissioner, Taxation, Punjab (Annexure P.66) is
          quashed for the remaining period of 10 and a· half month com-
          mencing with effect from 16.5.1996 to 31.3.1977. All the four
          groups, i.e., Nos. 108 to Ul and protection vend of Kotla Azner
          (Fatehgarh Sahib), are directed to ·be re-auctioned positively
B         before May 15, 1996, at the cost of the petitioners, after due
          publicity and advertisement. The petitioners, private respondents .·
          and all other shall be permitted to participate in the bid, which
          shall be strictly held in accordance with the provisions of Rules 36
          of the Punjab Liquor Licence Rules. All snch persons, who enter
c         the venue for the purpose of bid, shall be directed to sign a
          separate paper sheet, recording the.if attendance and the bid shall
          be supervised by an officer, not below the rank of Financial
          Commissioner.

             After pre-determining the licence-fee, first bid for group No.
D         108 shall be deemed to be Rs. 4.21 crores offered by the petitioners
          and for group No. 111, the first bid shall be deemed. to be of Rs.
          3.50 crores, offered by the petitioners.

              After deducting the proportionate fee for the period commenc-
E         ing from l.4;1996 to 15.5.1996, the balance amount of fee, if
          deposited by the respondent/successful bidders, shall be refunded
          to them after May 15, 1996.

             The petitioners shall deposit a sum of Rs. one lac within two
          days, out of which the expenditure for re-holding of the auction
F         shall be adjusted aud the balance amount paid back to them after
          completion of the process of auction.

              In the new auction, Shri S.K. Ralhan Deputy Excise and Taxa-
          tion Commissioner and Shri Y.S. Ratra, Financial Commissioner,
          Taxation shall not be associated in any manner.
G
              In case, the petitioners, opt not to participate in the new auction
          bid and no other bidder offers ·the bid for the amount already
          offered by the private resp<!mdents-successful bidders, this petition
          shall be deemed to have been dismissed with costs of rupees one
H         lac to be paid to the privat,e respondents. However, on the com-
           STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.)                       385

             pletion of the fresh process of auction, the private respondents A
             shall be liable to pay a sum of Rs. 10,000 as costs which shall be
             deposited in the State Treasury."

           Learned counsel for the appellants submitted that questions of fact
     were involved. At the hearing of the earlier writ petition this had been       B
     recognised by the Division Bench and the first respondent had been
     reference to the Financial Commissioner treating the writ petition as a
     representation or revision under the statutory provision. The order of the
•'
     Financial Commissioner was reasonable in its appreciation of the facts.
     The Division Bench had not found it to be perverse. The Division Bench,
     therefore, was not entitled to reverse it. In any event, the judgment of the   C
     Division Bench was based upon conjectures and the order that was passed
     by it was erroneous and unworkable.

             Learned counsel for the first respondents drew our attention to its
     case that in the auction pandal itself its partners had met the Excise and D
     Taxation Commissioner and told him their grievance and the Excise and
     Taxation Commissioner had assured them that the matter would be looked
     into. Learned counsel referred to the press reports which stated that the
     Excise and Taxation Minister of Punjab had said that while there was no
     report with the State Government on the alleged irregularities during the
     auction of liquor vends, it had come to the notice of the State Government E
     that the auction of some liquor vends in Ludhiana were conducted in a
     manner contrary to the interests of the revenue and that, on the basis of a
     representation, the State Government had relieved the Deputy Excise and
     Taxation Commissioner in charge of the Patiala Division of the respon-
     sibility of conducting auctions for the remaining districts of the Division. F
     A copy of the order relieving the said S.K. Ralhan was pointed out.
      Learned counsel submitted that, even so, the Financial Commis$ioner in
      his report had stated that the decision of the State Government not to allow
      the said S.K. Ralhan to conduct auctions in the remaining districts of
     Patiala Division was based on administrative grounds. Learned counsel G
     submitted that there was, thus evidence to show that the auction had not
     been conducted fairly and in the prescribed manner. The Financial Com-
     missioner in his report had stated that it was hard to believe that the
     Collector would not have intervened when bids of R. 50 and 45 lacs
     respectively over the next highest bids had been made. Learned counsel
     submitted that the Financial Commissioner himself should have accepted H
    386                   SUPREME COURT REPORTS [1996) SUPP. 6 S.C.R.

A the higher bids of the first respondent. The first respondent was even now
  prepared to deposit 15% of the required deposit for the remaining hall of
  the term and secure the balance. Learned counsel relied upon the judg- .
  ment of this Court in M/s. Rajshila v. State of U.P. and Ors., [1993] Supp.
  1 S.C.C. 477. This was a case where the appellant oould not participa:te in
  the auction of the exclusive right to collect tolls on a bridge owing to a
B
  strike in Government offices. The appellant had to run from pillar to post
  to fulfil the precondition of a security deposit which, in view of the involved
  procedure, was rendered impossible of fulfilment. The appellant had                ~,




  tendered cash security of Rs. 7 lacs on the date of the auction and sought
  permission to participate, but the request had been turned down. Upon
C this, the appellant had given an application signifying its willingness to offer
  Rs. 86 lakhs per year as against the accepted bid of Rs. 75 lacs per year.
  After hearing counsel, this Court was persuaded to take the view that the
  ends of justice would be met by an order directing a re-auction subject to
  certain conditions, the first being that the appellant should, with a view to
D establishing its readiness and willingness to stand by the offer of Rs. 86 lacs
  per year, deposit a sum of Rs. 25 lacs on or before the stated date. If the
  sum of Rs. 25 lacs was deposited, the contract in favour of the successful
  bidder would stand set aside. Learned counsel submitted that the present
  was a case where the ends of justice required that the judgment and order
  under appeal be maintained subject to such conditions as this Court might
E deem fit to impose.
          The question that goes to the root of these appeals is : did the first
    respondent make bids at the auction of Rs. 50 and Rs. 45 lacs respectively
    over the successful bids for Group nos. 108 and 111?
F
        This is a question of fact: It was rightly referred to the Financial
  Commissioner under the statutory provision by the Division Bench in its
  order on the earlier writ petition. On the order passed by the Financial
  Commissioner the High Court could interfere in a writ petition under
  Article 226 only if it found it to be perverse, that is to say, if it found its
G conclusions such as could not reasonably have been arrived at upon tlie
  record. The Division Bench in the order under appeal has not so held,
  specifically or impliedly.

          The order of the Financial Commissioner is not perverse or un-
H reasonable. He was right in concluding that the fact that the first respon-

                                                                                      '
                                                                                     IV-

                                                                                     )•
      STATEv. YOGINDERSHARMAONKARRAI[BHARUCH.A,J.]                    387

dent had entered the auction pandal did not established that it had made A
a bid. His views about the drafts procured by the first respondent from the
banks at Khanna and Mandi Gobindgarh ar not unreasonable, for, or-
dinarily, a prospective bidder would not cut it so fine. He would ordinarily
obtain the required bank drafts before the auction date and not wait to do
so with only an hour or so to spare. No extraordinary circumstances have B
been adverted to by the first resf ondent which required it to obtain the
drafts only on the morning of the auction from banks which were a sizeable
distance from its site. The pattern of bidding referred to by the Financial
Commissioner is very telling. It is unlikely that when the bid is rising by Rs.
10 lacs, Rs. 3 lacs, Rs. 2 lacs and Rs. 1 lac, it should suddenly rise by Rs.
50 lacs and Rs. 45 lacs respectively. The Financial Commissioner was         c
justified in rejecting the case of the first respondent that it had approached
the Excise and Taxation Commissioner and spoken to him about what had
happened for this was mentioned only in the course of the argument before
him. It also germane for the Financial Commissioner to observe that no
higher revenue officials had been approached by the first respondent, as D
also to point out that the observers' reports did not speak of any ir-
regularity. They would certainly have done so had a bid which was Rs. 50
lacs more than the successful bid been ignored; there would have been a
 conmotion in the auction_ pandal and this would have been mentioned in
 the reports. The Financial Commissioner pointed out, and rightly, that the
 telegram sent by the first respondent was four days after the auction. There E
 were other telegrams, similarly worded but under different names. In all
 the telegrams no mention had been made of the quantum of the higher bid
but merely that a lower bid had been accepted against a higher bid. The
 Financial Commissioner noted that two partnerships had bid against each
 other but commented, with some justification, that the mere fact that their F
 partners were relations did not make for a rigged auction.

      The Division Bench castigated the Financial Commissioner for his
report and stated that his conclusions were "based upon conjectures and
apparently observed with pale eyes". It said that "it is not improbable" to G
obtain 34 drafts prepared from a bank at Khanna and Mandi Gobindgarh
on the same day and before the time of auction. It is "not uncommon" that
banks provide special services to their customers, particularly if they have
huge monetary dealings. The Financial Commissioner had not referred to
any special knowledge of the banking system and had arrived at his
conclusions without ascertaining the true position from the concerned H
     388                   SUPREME QOURT REPORTS (1996) SUPP. 6 S.C.R.

 A bank The Division Bench did not state its authority for its statements about
      banking practice.

           The Division Bench found that "it was fully established" that first
    respondent's representatives were in possession of the bank drafts, "which
    showed petitioners' intention of participation in the auction". The Division
 B Bench took the view that the revenue authorities were obliged to explain
   -why the pre-determined license fee had not been mentioned and that it was
    intriguing "why such an omission was allowed in case of Group No. 108
    and 111 only and not with respect to any other group auction on the same
    day or thereafter". In fact, it appears that this omission took place not only
 C with regard to Group nos. 108 and 111 but with regard to all auctions in
    Ludhiana-I. The fact that first respondent had taken steps for participation
    the auction by obtaining an entry slip and by procuring bank drafts led
    the Division Bench "to the irresistible conclusion that they were not only
    spectators". The affidavits of the partners of the first respondent also
 D showed that they were present at the time of the ·auction and had par-
    tic~pated in it but their presence had not been taken note of. Extracts of
    press reports were set out in the judgment and the Division Bench noted
    that while they could not be made a basis for holding an auction illegal or
    contrary to the law, "in drawing inferences" the press reports could not be
    ignored. The mere omission of giving details in the telegrams was not a
 E reason to reject them. It was not a coincidence that the said S.K Ralhan
    had been transferred, after the auction on 11th March, 1996, was concluded
    and it suggested, prima facie, that the authorities had been satisfied that he
    had not been fair in holding auction. The Division Bench found that the
    successful bidders had not specifically denied the allegations of relation-
 F ship between their partners and their inter-action in the auction; it was,
    therefore, proved that they "were hands in glove with each other with the
    object of putting the State exchequer to loss". As a matter of fact, the
    allegations are denied by the successful bidders in their affidavits. The
    cumulative effect clearly and unequivocally led the Division Bench to the
    conclusion that the auction with respect to Group nos. 108 and 111 was
.G neither fair nor proper, the first respondent had been wrongly deprived or
    its right of participation therein and the State exchequer had been sub-
    jected to a loss of not less than Rs. 95 lacs.

            We are constrained to observe that the judgment of the Division
 H Bench is based upon conjectures and inferences more tenuous than those
      STATEv. YOGINDERSHARMAONKARRAl[BHARUCHA,J.)                         389

it found the Financial Commissioner guilty of. Such conjectures and in-          A
ferences are impermissible in a judgment upon a writ petition under Article
226 where the fact-finding authority has arrived at a conclusion which is
not perverse or so unreasonable that, upon the record, it could not have
been reached.

        The basic question which cannot be lost sight of is : did the first
                                                                                 B
respondent make bids.at the auction of Rs. 50 and Rs. 45 lacs respectively
over the successful bids for Group nos. 108 and 111? Securing Group no.
108 and 111 was so important for the first respondent, it would have us
be\ieve, that it raised the bids by the staggering sums of Rs. 50 and -Rs. 45
lakhs respectively. If it did, the previous rises having been of the order of    C
Rs. 10 lacs, Rs. 3 lacs, Rs. 2 lacs and Rs. 1 lac, it would have attracted
the attent~on of some, if not most, of the twelve to thirteen hundred persons
in the auction pandal. It would be a brave auctioneer indeed who would,
in J.b.e circumstances, ignore such bids. The partners of the first respondent
would not in the ordinary course of human conduct have let it pass without       D
stout, long and loud protests. They would have attracted notice, and
support. But, according to the oral submissions of the first respondent's
counsel before the Financial Commissioner, the first respondent's partners
were satisfied with an oral complaint to the Excise and Taxation Commis-
sioner and his assurance that he would look into the matter. In the ordinary
course of events, one would have expected a bidder making such large bids        E
which are ignored to shoot off notices in all directions. All we have are
telegrams sent four days after the auction which do not mention the
enormous difference between the bids. Of the twelve to thirteen hundred
persons present in the pandal, not one independent observer has stated on
affidavit that the first respondent had made bids far larger than the            F
successful bids but they had been ignored. To our ears the first
respondent's story does not ring true.

      As we have already held, the Financial Commissioner's conclusions
in his report were reasonable. The remarks made by the Division Bench
about him were not justified. As Financial Commissioner, he spoke to the         G
Press about the outcome of the auctions generally. This was in the perfor-
mance of his duties. In any event, we do not see in his orders anything.that
indicates that he was in any way biased.


      The Division Bench was, in the circumstances, in error in reaching         H
    390                   SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R.

A the conclusion that the auction was not fairly and properly held with the
    result that the State exchequer had been subjected to a huge loss. In any
    event, loss to the exchequer is a factor which may be taken into account in
    genuine cases, as it was in the case of M/s. Rajshila cited by learned counsel
    for the first respondent. At the same time, the finality of auctions must also
B   be recognised to be in the interests of the exchequer. If auctions are set
    aside and re-auctions ordered on less than satisfactory material, the loss of
    the exchequer would be far greater.

           This brings us to the form of the order that the Division Bench
    passed. We have quoted it above in extenso. It quashes the auction. It
C   directs re-auction for the balance of the term. It directs that for Group no.
    108 the first bid "shall be deemed to be Rs. 4.21 crores" as offered by the
    first respondent, and for Group no. 111 the first bid "shall be deemed to
    be of Rs. 3.50 crores" as offered by it. Th.e order then directs that in case
    the first respondent opts not to participate in the fresh auction and no
    other bidder offers a bid of the amount equivalent to the earlier successful
D   bid, "this petition shall be deemed to have been dismissed".

           It is a very difficult order to appreciate. If at the fresh auc~ion the
    first respondent does not bid and no other bidder offers a bid equivalent
    to the earlier successful bid and the writ petition is to stand dismissed, what
E   is the State Government's authority for holding the fresh auction? Whether
    or not the first respondent bids or somebody else bids an amount
    equivalent to the earlier succe~sful bid can be known only after the fresh
    auction is held. If at that stage the petition is to stand dismissed, there is
    no authority for holding the fresh auction. Secondly, if at the fresh auction
    the first respondent does not bid and no other bidder offers 3; bid
F   equivalent to the earlier successful bid, it must mean that the earlier
    successful bidder is no longer interested; but, by reason of the dismissal of
    the writ petition, he remains bound by his earlier bid. This is not a workable
    or well thought out order.

G          In cases were there is real need to set aside an auction, he who
    challenges it must be required to prove his bona Ji.des before the auction
    is set aside by depositing a substantial portion of what he says he will bid.
    It is only if the deposit is made that the auction should be set aside and a
    re-auction ordered.

H         The Division Bench would have done well to follow the order
        STATEv. YOGINDERSHARMAONKARRAI[BHARUCHA,J.]                     391

(quoted above) already passed by another Division Bench upon a writ A
petition impugning the same order of the Financial Commissioner.

       The appeals are allowed. The judgment and order under appeal is
set aside. The writ petition filed by the first respondent is dismissed. The
first respondent shall pay to the appellant in each of the three appeals the
costs of the appeal, quantified in .the sum of Rs. 25,000.                     B
.S.M.                                                     Appeals allowed.