WP/8266/2004 of M/s. Vijayanagar Hatcher (Pvt) Limited Vs A P Industrial Infrastructure on 31 December 2009

ORDER:

This Writ Petition is filed for a Mandamus to declare the action ofrespondent Nos.1 and 2 in not permitting the petitioner to participate inthe open auction held on 15.4.2004, for sale of industrial shed bearingNo.D6 situated at Industrial Development Area, Nellimarla,Vizianagaram District, as illegal, arbitrary and unconstitutional. Thepetitioner sought for setting aside the auction held on 15.4.2004 inrespect of the said shed.

Heard Sri N. Sridhar Reddy, learned Counsel for the petitioner,and Sri P. Roy Reddy, learned Standing Counsel for respondent Nos.1and 2. There is no appearance for respondent No.3, though notice wasserved on him.

An auction notification was issued on behalf of respondent No.1,which was published in the newspapers, wherein one of the items forsale by auction was notified as structure bearing No.D-6 situated atIndustrial Development Area, Nellimarla, Vizianagaram District. A sumof Rs.3,15,475/- was shown as upset price and Rs.15,780/- wasprescribed as earnest money deposit (EMD) payable for participating inthe auction. The petitioner, through the Branch Manager ofVizianagaram Branch, approached respondent No.2, who conductedauction, with an application form for participation in auction along withthe demand draft for payment of EMD. Evidently, the Branch Managerof the petitioner also filed a copy of authorization, authorizing him torepresent the petitioner company in the auction. Respondent No.2while permitting respondent No.3 to participate in the auction, refusedthe petitioner’s application with an endorsement made thereon that as the proper person on behalf of the petitioner company has not furnishedauthorization letter in favour of the Branch Manager, the said applicationwas rejected.

In the counter affidavit filed on behalf of respondent Nos.1 and 2it is stated inter alia that on behalf of the petitioner and respondent No.3,applications were filed before respondent No.2 for participating in theauction, and that on behalf of the petitioner, Sri V. Durga Prasad hasfurnished an authorization letter, wherein the said Durga Prasad himselfhas signed “for Managing Director” of the petitioner company. It isfurther stated that as the Managing Director or any other authorizedDirector of the company had not signed the letter authorizing Sri V.Durga Prasad to participate in the auction, the petitioner’s applicationwas rejected. It is further stated that as respondent No.3 alone hasparticipated in the auction and offered Rs.3,17,000/-, his bid wasaccepted.

This Court by order dt.30.4.2004 granted stay of all furtherproceedings in pursuance of acceptance of the bid of respondent No.3. The said order was made absolute on 07.07.2005. W.V.M.P. No.190 of2007, filed on behalf of respondent Nos.1 and 2, was dismissed by thisCourt by order dt.22.6.2007. In pursuance of these orders, evidently, theacceptance of bid of respondent No.3, by respondent Nos.1 and 2, hasnot been given effect to.

The contention that has been advanced by Sri N. Sridhar Reddy,learned Counsel for the petitioner, is that respondent No.2 has actedarbitrarily in rejecting the petitioner’s application for participation in theauction on a totally unsustainable ground that there was no properauthorization. He has submitted that the auction notification does notstipulate any requirement of furnishing such authorizations.

Sri P. Roy Reddy, learned Standing Counsel for respondentNos.1 and 2, submitted that as the authorization submitted on behalf ofthe petitioner was not signed by the authorized representative of thepetitioner, which happens to be a company, the petitioner was rightly not permitted to participate in the auction.

A perusal of the auction notice published on behalf of respondentNo.1 – Corporation does not show that in cases of applicants, who arenot natural persons, such as companies and firms, authorizations arerequired to be filed on their behalf. It is not the case of respondentNos.1 and 2 that any objection was raised either by respondent No.3 orany other person, as to the entitlement of Sri V. Durga Prasad torepresent the petitioner’s company. The said Durga Prasad being theBranch Manager, appeared to have produced the authorization signedby himself obviously thinking that without such authorization he may notbe permitted to represent the petitioner’s company. In the absence ofany specific stipulation that the petitioner should send authorizationletter through its Managing Director or any other Director, I do not findany rationale in the action of respondent No.2 in rejecting thepetitioner’s application on the purported ground of absence ofauthorization from proper person. The very purpose of putting theproperty to public auction is to ensure that the property fetches themaximum price. This object is frustrated by preventing one of thecompetitors from participating in the auction on the wholly unsustainableground of absence of proper authorization. As rightly pointed out by thelearned Counsel for the petitioner that while upset price was fixed atRs.3,15,475/-, respondent No.3 has offered only a sum of Rs.3,17,000/-,which is marginally above the upset price. Had the petitioner beenallowed to participate in the auction, respondent Nos.1 and 2 wouldhave obviously got higher price on account of the competition. Asrespondent No.3 was left in the field as the sole participant, respondents1 and 2 left themselves with no option, other than to accept whateveroffer that was made by respondent No.3. These facts clearly indicatethat on account of undue rejection of the petitioner’s application,respondent Nos.1 and 2 failed to ensure that they would get the bestmarket price, which was detrimental to the interests of respondent No.1– Corporation. Having considered the facts in their entirety, I am of the view that rejection of the petitioner’s application for participation in thepublic auction was wholly illegal and arbitrary and the said action hasaffected the interests of respondent No.1 – Corporation, which in turnaffected public interest.

For the above mentioned reasons, the Writ Petition is allowedand the action of respondent Nos.1 and 2, in confirming the auction infavour of respondent No.3, is declared as illegal. The auction sale isaccordingly set aside. Respondent Nos.1 and 2 are directed to initiatefresh proceedings for conducting public auction by fixing revised upsetprice reflecting the current market price of the property. They shallcomplete the whole process within a period of three months from today.

31.12.2009

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Conclusion

C.V. NAGARJUNA REDDY, J

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