Case Note & Summary
The Supreme Court of India considered an appeal by Nand Kishore Saraf against the dismissal of his writ petition by the Rajasthan High Court. The appellant was the highest bidder at an auction held on January 21, 1964, for a royalty collection contract on building stones, with a bid of Rs.42,200. Respondent no.2, Dharti Dan Shramik Theka Sahkari Samiti Ltd., a cooperative society of labourers, had also bid but stopped at Rs.33,000. The terms required the provisionally selected bidder to deposit 25% of the bid amount as security immediately after the auction under Rule 36(7) of the Rajasthan Minor Mineral Concession Rules, 1959. The appellant failed to deposit this security. He later, on February 12, 1964, wrote to the Mining Engineer depositing Rs.1,300 and seeking adjustment of Rs.9,250 from security held for the previous year's contract, which was to continue until March 31, 1964. The respondent society applied to the State Government on March 5, 1964, pointing out the appellant's default and offering to take the contract at the highest bid. The State Government, by order dated April 1, 1964, granted the contract to the cooperative society, noting its suitability and the policy of encouraging cooperative societies. The appellant filed a writ petition under Article 226 of the Constitution seeking certiorari to quash that order. The High Court dismissed the petition but granted a certificate of fitness, leading to the present appeal. The core legal issues were whether the Government was obligated to confirm the highest bid as a mere formality, whether it could prefer a cooperative society over the highest bidder, and whether the appellant's failure to deposit security disentitled him to relief. The appellant argued that confirmation of the highest bid was a formality and that the Government had no power to give the contract to a non-highest bidder. He also claimed a practice of adjusting previous security deposits. The respondents contended that the appellant's default under Rule 36(7) was fatal, that no binding practice existed, and that the Government had discretion not to confirm the bid and could relax rules under Rule 59 in the interest of mineral development. The Court held that under Rule 36(5), a bid is not accepted unless confirmed by Government, and the Government has discretion to confirm or not confirm. Rule 36(7) required immediate deposit of 25% security, which the appellant admittedly did not comply with; the request for adjustment was not permissible because the earlier contract's security had to remain until its termination. The alleged practice could not override statutory rules. The Court further held that Rule 59 empowers the Government to relax any provision in the interest of mineral development or better working of mines, and preferring a workers' cooperative society whose members would benefit was neither arbitrary nor unjustified. Additionally, since the contract period was shortly to expire, the Court declined to interfere, following K.N. Guruswamy v. State of Mysore, [1955] 1 S.C.R. 305. The appeal was dismissed, and the parties were ordered to bear their own costs.
Headnote
A) Administrative Law - Government Contracts - Discretion to Accept Highest Bid - Rajasthan Minor Mineral Concession Rules, 1959, Rules 36(5), 36(7), 59 - The Government is not bound to accept the highest bid at an auction for royalty collection contracts; a bid is not regarded as accepted unless confirmed by Government under Rule 36(5); the Government has discretion to confirm or not to confirm the bid; therefore it can grant the contract to a person other than the highest bidder, especially when the highest bidder failed to deposit the mandatory 25% security under Rule 36(7). Held that the appellant had no claim to final acceptance and could not question grant to respondent no.2. (Paras not mentioned) B) Mineral Concessions - Security Deposit - Rule 36(7) Rajasthan Minor Mineral Concession Rules, 1959 - A provisionally selected bidder must immediately deposit 25% of bid amount as security; failure to comply forfeits any claim to acceptance; request for adjustment of previous year's security not permissible as prior contract had not expired and security was to remain with Government; practice of adjustment cannot override rules. Held the appellant lost his claim. (Paras not mentioned) C) Administrative Law - Relaxation of Rules - Rule 59 Rajasthan Minor Mineral Concession Rules, 1959 - The Government may relax any provision of the rules in the interest of mineral development or better working of mines; preferring a workers' cooperative society over an individual bidder is justified because benefits go to labourers; such preference is not arbitrary. Held the Government was competent to grant contract to respondent no.2. (Paras not mentioned) D) Writ Jurisdiction - Discretionary Relief - Constitution of India, 1950, Article 226 - Even if the appellant's contentions were acceptable, the court would not interfere because the contract period was shortly to come to an end; a writ would be ineffective; following K.N. Guruswamy v. State of Mysore, [1955] 1 S.C.R. 305. Held appeal dismissed. (Paras not mentioned)
Issue of Consideration
Whether the Government was obligated to accept the highest bid at an auction for royalty collection contracts under the Rajasthan Minor Mineral Concession Rules, 1959; Whether the Government could prefer a workers' cooperative society over the highest bidder by relaxing rules under Rule 59; Whether the appellant's failure to deposit 25% security under Rule 36(7) disentitled him to challenge the grant; Whether the court should grant relief when the contract period was shortly to end.
Final Decision
The Supreme Court dismissed the appeal, holding that the Government was not bound to accept the highest bid and had discretion to confirm or not confirm a bid; the appellant's failure to deposit the required security forfeited any claim; the Government's preference for the cooperative society was justified under Rule 59 in the interest of mineral development; and no interference was warranted as the contract period was about to expire. Parties were ordered to bear their own costs.
Law Points
- Government not obligated to accept highest bid at auction
- bid not accepted unless confirmed
- discretion to confirm or reject bid
- non-compliance with Rule 36(7) security deposit forfeits claim
- Rule 59 allows relaxation in interest of mineral development
- cooperative society preference justified
- writ may be refused if contract period ending
