2009 (9) TMI 1094 - HC - Companies Law

Court Overturns Previous Ruling, Orders New Transparent Tender with Base Price for Public Property Management.

Karthik Service Station Versus Official Liquidator, A.P.S.S. Industrial Development Corpn. Ltd.

Karthik Service Station Versus Official Liquidator, A.P.S.S. Industrial Development Corpn. Ltd. - TMI Issues Involved:1. Compliance with Section 512 of the Companies Act, 1956.2. Fairness and transparency in the disposal of public property by the Official Liquidator.3. Validity of the tender process and the treatment of the appellant's tender.4. Judicial review of the decision-making process in the award of contracts or sale of public property.Issue-wise Detailed Analysis:1. Compliance with Section 512 of the Companies Act, 1956:Initially, the appellant raised an objection regarding non-compliance with Section 512 of the Companies Act, 1956. However, during the hearing of the Writ Appeal, the appellant's counsel did not press this issue, recognizing that in a case of voluntary winding up, the permission of the Company Court is not mandatory as per Section 457 of the Act. Thus, this issue was not pursued further in the appeal.2. Fairness and Transparency in the Disposal of Public Property:The core issue revolved around whether the Official Liquidator, respondent No. 1, acted in a fair and transparent manner while disposing of the property held by the State undertaking, APSSIDC. The chronology of events indicated that the appellant, an IOC dealer, was interested in purchasing the land adjacent to its retail outlet. The appellant initially offered Rs. 3,230 per square meter, which was treated as the base price. Respondent No. 1 stipulated conditions for considering the appellant's offer, including participation in a tender-cum-auction process. Despite the appellant's initial reluctance to engage in counter offers, it submitted a tender along with the EMD, indicating its continued interest. The court found that respondent No. 1 failed to maintain transparency and fairness by ignoring the appellant's tender and not conducting an open auction, thereby causing potential loss to the public exchequer.3. Validity of the Tender Process and Treatment of the Appellant's Tender:The appellant's tender submission on 15-1-2003, prior to the publication of the tender notice, was a focal point. The Official Liquidator's failure to acknowledge or consider this tender, despite having received it along with the EMD, was deemed arbitrary and lacking transparency. The court noted that respondent No. 1 did not provide any explanation for ignoring the appellant's tender, which was a valid submission. The learned Single Judge's interpretation of the appellant's letter dated 5-11-2002 was found to be erroneous, as the appellant had reserved its right to participate in an open tender. The court concluded that the Official Liquidator's actions were not in accordance with a fair and transparent procedure.4. Judicial Review of the Decision-Making Process:The court emphasized the limited scope of judicial review under Article 226 of the Constitution of India, which focuses on examining the decision-making process rather than the merits of the decision itself. Citing precedents, the court reiterated that the disposal of public property must adhere to principles of fairness and transparency. The Official Liquidator's failure to conduct an open auction and consider the appellant's tender was found to contravene these principles, warranting judicial intervention. The court referenced the Supreme Court's doctrine of trust, underscoring the necessity for fair and transparent methods in disposing of public property.Conclusion:The court set aside the order of the learned Single Judge, allowed the Writ Petition, and quashed the proceedings impugned in the Writ Petition. It directed the Official Liquidator to issue a fresh tender notification with a base price of Rs. 7,500 per square meter, ensuring wide publicity and transparency in the process. The court also ordered the return of the amounts received from the appellant and respondent No. 4 towards the EMD and deposit, respectively. The judgment underscored the imperative for public authorities to act as trustees of public property, ensuring the highest possible returns in the public interest.