w w w . L a w y e r S e r v i c e s . i n

Indian Hair Industries (P) Ltd, Tanuku v/s Sri Lakshmi Narasimha Swamy Vari Devasthanam, Yadagirigutta & Others

    Writ Petition No.25438 of 2008

    Decided On, 10 December 2008

    At, High Court of Andhra Pradesh


    For the Petitioner: N. Subba Reddy, Advocate. For the Respondents: R1, Ch. Satish Kumar, Standing Counsel, R2 & R3, G.P. for Endowments.

Judgment Text

The relief sought for in this writ petition is to declare the action of the respondents in inviting fresh bids, for license rights for a period of one year to collect human hair offered by the devotees at the Kalyana Katta of Sri Yadagirigutta, vide notification dated 16.11.2008, without cancelling or refunding the petitioner's highest bid, as arbitrary and illegal and in violation of the rules in G.O.Ms.No.866 dated 8.8.2003. Petitioner seeks a consequential direction to set aside the notification issued by the respondents dated 16.11.2008 by continuing the petitioner's license till 5.11.2009.

Facts, in brief, are that the 1st respondent had earlier issued notification dated 22.9.2008, (tender cum public auction), for granting license rights to collect human hair at the Kalyana Katta in Sri Yadagiri Gutta temple for a period of one year from 6.11.2008 to 5.11.2009. Six persons participated in the tender cum public auction wherein the petitioner was found to be the highest bidder having submitted his bid for Rs.1,31,00,000/-.Ultimately the bid was knocked down in the petitioner's favour for Rs.1,31,03,000/-. In addition to the E.M.D. of Rs.10,00,000/-, the petitioner deposited Rs.40.00 lakhs on 6.10.2008. The balance Rs.82,03,000/- was paid, by way of demand drafts drawn in favour of the 1st respondent, on 7.11.2008. While matters stood thus, the 1st respondent issued notification dated 16.11.2008 for conducting tender cum public auction for the very same license rights on 3.12.2008. Aggrieved thereby, the present writ petition.

The petitioner would contend that neither was an order of rejection communicated nor was the amount paid by them refunded till the date of filing of the writ petition, though the rules notified in G.O.Ms.No.866 dated 8.8.2003 obligated the 2nd respondent to record reasons for rejecting the lease/license and communicate the said decision to the highest bidder.

In his counter affidavit, the Commissioner of Endowments would state that the Executive Officer of the temple had sought approval of the auction, for license for human hair collection for the period 6.11.2008 to 5.11.2009, vide his letter dated 9.10.2008, that the said proposal was examined in comparison with the bid amount received in Durga Malleswara Swamy Vari Devasthanam, Vijayawada and other temples, that in the recent past there was heavy demand and competition among bidders participating in the public auction conducted in various temples for license for human hair collection, that the bid amount had been increasing as human hair was much sought for in the international market and that it was also observed that the bidders were forming into rings and were restricting the bids. The 2nd respondent would state that, since the bid was found to be less, a decision was taken by the Additional Commissioner on 4.11.2008, on the basis of the bids for the past 3 years at Yadagiri Gutta and Durga Malleswara Swamy Vari Devasthanam, not to approve the proposal in the interest of the institution since the bid was not reasonable and, if it was put for further public auction, it may fetch a much better price. A statement is furnished comparing the bid for license of human hair at Durga Malleswara Swamy Vari Devasthanam, Vijayawada and Sri Lakshmi Narasimha Swamy Devasthanam, Yadagirigutta which is as under:

It is further stated that a decision was taken by the Commissioner on 10.11.2008 in the best interest of the institution, that the order of the Commissioner was communicated to the Executive Officer vide proceedings dated 14.11.2008, that the staff of the temple had been collecting human hair from 6.11.2008 storing it in the drums of the temple, that a fresh notification inviting bids was issued on 16.11.2008, and that, unless the petitioner's bid was confirmed by the Commissioner, they could not claim any right. It is also stated that with a view to augment the income in major temples, especially human hair license, the 2nd respondent has taken steps to constitute a committee for the purpose of fixing reasonable upset prices so as to have a uniform policy for fixing the minimum bid and to take further suitable steps.

In his counter affidavit, the 1st respondent - Executive Officer would state that, as compared to the previous year's bid of Rs.1,30,00,000/-, though six persons including the petitioner had participated, the increase in the bid was only of Rs.2,03,000/-, that, since no orders were received from the office of the 2nd respondent, and as the petitioner's lease for the earlier year expired by 5.11.2008, the 1st respondent, by order dated 5.11.2008, had appointed two attenders to collect human hair from 6.11.2008 and keep it in safe custody. It is stated that, while the petitioner had paid Rs.82,03,000/- through eight demand drafts, vide letter dated 7.11.2008 which was received by the 1st respondent on 14.11.2008, the 1st respondent had returned the D.Ds for Rs.82,03,000/- along with his letter dated 15.11.2008 as confirmation orders had not been received, that in the evening of 15.11.2008 he had received the 2nd respondent's letter dated 14.11.2008 wherein approval for the leasehold rights for collection of human hair was deferred on the ground that the bid amount was not reasonable, that he had telephonically contacted the office of the 2nd respondent immediately after receipt of the communication dated 14.11.2008 for taking further steps in the matter and that he had, vide letter dated 16.11.2008, while informing that the auction conducted on 6.10.2008 was deferred by the 2nd respondent, requested the petitioner to accept the cheque for Rs.50,00,000/- representing the amount deposited by him earlier. It is also stated that he had simultaneously issued notification dated 16.11.2008 fixing the date of auction as 3.12.2008 and, as no reasons were communicated to the petitioner while intimating the decision of the 2nd respondent, another letter dated 16.11.2008 was sent to the petitioner by registered post on 17.11.2008 much prior to the filing of the writ petition. The 1st respondent would state that he had ascertained the income fetched in the auction of human hair in institutions like Srisailam, Vemulavada etc., that unless an agreement is entered into the petitioner cannot commence his license rights as stipulated under condition No.12 and, therefore, they were not allowed to commence activities from 6.11.2008 and interim departmental arrangements were made for collection of human hair and for its safe custody.

In his reply affidavit the petitioner would state that auction of human hair in other temples cannot form the basis of comparison with that of the temple at Yadagiri Gutta, that there was no allegation of irregularities in the course of auction, that as many as six persons participated both in the tender process, and in the auction conducted by the department, that the decision of the Additional Commissioner dated 4.11.2008, not to approve the bid, was in violation of Rule 12(2) as the competent authority was the Commissioner and not the Additional Commissioner, that it was evident that the Commissioner had approved the decision of the Additional Commissioner without application of mind, that, under Rule 12(1), if the Commissioner wanted to reject the bid he was bound to record reasons and inform the petitioner of the rejection order. Reliance is placed in this regard on Dampanaboina Raghu v. The Commissioner of Endowments (Judgment in W.P.No.5884 of 2006 dated 28.3.2006). Petitioner would reiterate that, except for filing of a copy of the rejection order, none of the respondents had chosen to communicate the said order to them, that the 1st respondent had falsely stated that the letter dated 16.11.2008 was sent by registered post on 17.11.2008 whereas the said letter was posted on 21.11.2008 after filing of the writ petition and that the letter was evidently ante-dated.

Before examining the rival contentions, it is necessary to take note of the statutory rules to the extent relevant. The Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Immovable Properties and Other Rights (other than Agricultural Lands) Lease and License Rules, 2003 (hereinafter referred to as 'the Rules') were notified in G.O.Ms.No.866 dated 8.8.2003. Rule 2(b) defines 'competent authority' to mean the competent authorities specified in sub-rule(2) of Rule 12. Rule 2(c) defines 'executive authority' to include an Executive Officer. Under Rule 3(1), all leases or licenses shall be made by way of public auction. Rule 5 enables the Executive Authority of the institution, subject to the provisions of the rules and instructions issued by the Commissioner from time to time, to decide the terms and conditions of the lease or license. Rule 6 specifies the particulars, which the auction notice should contain. Rule 7(1) requires a copy of the auction notice to be published in the language of the locality at least ten days prior to the date fixed for auction by affixture. Rule 8 (1) enables the Executive Officer to conduct auction. Rule 10 and Rules 12(1), (2) and (3) read thus:

"10. Lease or license shall ordinarily be given to the highest bidder. Where it is proposed to accept a bid other than the highest bid, the reasons for not accepting the highest or other bids higher than the accepted bid shall be recorded in writing by the Executive Authority.

12(1). All lease or license shall immediately after auction is conducted be reported to the competent authority, who may either confirm, or for the reasons to be recorded in writing, reject the lease or license.

12(2). The authorities competent to confirm or reject the lease or license and the annual rentals thereon shall be as specified in the table below:

............... .................. ..................

Provided that the Commissioner shall only be the Competent Authority for approval of the leases or licenses otherwise than by way of public auction in all cases irrespective of the category of the institution and the value of the lease.

12(3). No lease or license shall be valid unless and until it is approved by the competent authority."

Since the temple at Yadagirigutta is a Section 6-A institution, and the value of the bid exceeds Rs.1.00 lakh, it is the Commissioner who is specified to be the competent authority. The requirement of reasons being recorded by the Executive Authority, under Rule 10, would arise only where the Executive Authority, (Executive Officer), proposes to accept a bid other than the highest bid and, in such an event, the reasons for not accepting the highest bid, or any other bid higher than the accepted bid, are required to be recorded in writing. In the case on hand, the petitioner's bid is the highest bid and it is not as if any bid, other than the petitioner's bid has been accepted. Rule 10, therefore, has no application. The mere fact that the Executive Officer had, in his letter dated 16.11.2008, assigned reasons is of little consequence.

As noted hereinabove, the power to confirm a lease or license, after an auction is conducted, is conferred on the competent authority, in the present case, the Commissioner of Endowments, who, under Rule 12(1), is required to record reasons in writing whenever he rejects the lease or license. It is also evident from sub-rule(3) of Rule 12 that no lease or license shall be valid unless and until it is approved by the competent authority i.e., the Commissioner. As such, in the absence of the Commissioner having approved the lease, the mere fact that the petitioner's bid was found to be the highest did no confer on them any right to commence collection of human hair on expiry of their earlier lease on 5.11.2008. The 1st respondent was, therefore, justified in collecting the same departmentally pending receipt of orders from the Commissioner.

While Section 12(1) requires reasons to be recorded in writing, Sri N. Subba Reddy, Learned Senior Counsel appearing on behalf of the petitioner, would contend that reasons must also be communicated to the petitioner. On the other hand, Learned G.P. for Endowment would submit that a literal reading of the rule merely required the Commissioner to record reasons and, as it is evident from a perusal of the note file that reasons were, indeed, recorded for rejection of the petitioner's bid, failure to communicate those reasons to the petitioner is of no consequence. Both the Learned Government Pleader for Endowments and Sri Ch.Satish Kumar, Learned Standing Counsel for the 1st respondent, would further contend that, in any event, the proceedings of the Commissioner dated 14.11.2008 as communicated to the 1st respondent has been enclosed along with the counter affidavit, a copy of which was made available to the counsel for the petitioner and, in effect, amounts to communication of the decision of the Commissioner to the petitioner. Sri Ch.Satish Kumar, Learned Standing Counsel for the 1st respondent, would also contend that, in the proceedings of the Executive Officer dated 16.11.2008, the decision of the Commissioner, in his proceedings dated 14.11.2008, was communicated.

Even administrative decisions must bear reasons for some of them may have more vital consequences on the rights of the parties than even judicial decisions. (Modi Industries Ltd. v. State of U.P (1994) 1 SCC 159). When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in court, it ceases to be a mere administrative order and the vice of violation of principles of natural justice, on account of omission to communicate the reasons, is not expiated. (Ajantha Industries v. Central Board of Direct Taxes (1976) 1 SCC 1001). An order involving civil consequences must be made consistently with the rules of natural justice. 'Civil consequences' covers infraction of not merely property or personal right but of civil liberties, material deprivations and non-pecuniary damages. In its comprehensive connotation every thing that affects a citizen in his civil life inflicts a civil consequence. Black's Law Dictionary, 4th edn., defines civil rights to mean such rights as belong to every citizen of the state or country they include rights capable of being enforced or redressed in a civil action. (D.K. Yadav v. J.M.A. Industries Ltd. (1993) 3 SCC 259); Mohinder Singh Gill v. Chief Election Commr. (1978) 1 SCC 405); Canara Bank v. Debasis Das (2003) 4 SCC 557). Whenever a statute confers power on a statutory authority, howsoever wide the discretion may be, such exercise of power must stand the test of judicial scrutiny. The reasons recorded truly disclose the justifiability of the exercise of such power. Application of mind of such authority at that point of time can only be revealed when the order records its reasons. (Consumer Action Group v. State of T.N. (2000) 7 SCC 425).

The beneficial effects of a duty to give reasons are many. To have to provide an explanation of the basis for their decision is a salutary discipline for those who have to decide anything that adversely affects others. The giving of reasons is widely regarded as one of the principles of good administration in that it encourages a careful examination of the relevant issues, the elimination of extraneous considerations, and consistency in decision-making. Further, the giving of reasons may protect the authority from unjustified challenges, as those adversely affected are more likely to accept a decision if they know why it has been taken. In addition, basic fairness and respect for the individual often requires that those in authority over others should tell them why they are subject to some liability or have been refused some benefit (de Smith, Woolf & Jowell. Judicial Review of Administrative Action).

A right to reason is, therefore, an indispensable part of a sound system of judicial review. Giving of reasons is required by the ordinary man's sense of justice. It is also a healthy discipline for all who exercise power over others (Administrative Law by H.W.R.Wade (9th edition). Where a statute confers a power to make decisions affecting individuals, the Court will readily apply necessary additional procedural safeguards so as to ensure the attainment of fairness. A factor in favour of the giving of reasons is that such a duty concentrates the mind of the decision-maker and shows that the issues have been conscientiously addressed so as to demonstrate how the result has been reached or-if it be so-that there is a justiciable flaw in the process. (Administrative Law by Peter Leyland & Terry Woods (4th edition).

The very same rules, as noted hereinabove, fell for consideration in Dampanaboina Raghu (supra) wherein this court observed:

"......The invitation to bid is not a ritual or empty formality to be eschewed at the drop of hat. In certain situations frequent cancellation of bids might result in total apathy or even lead to formation of cartels and would eventually defeat the purposes for which power and discretion is conferred on the Commissioner for Endowments. The power conferred on the Commissioner under Rule 12 is a public power and invites public accountability. The statute specifically requires recording of reasons for cancellation of a lease or license. Even otherwise, on established principles of administrative law, reasons are required to be recorded by any authority even for an administrative decision having adverse legal consequences either on the rights or even on the legitimate expectations of a citizen.

By the earlier invitation to public auction notified by the 2nd respondent, citizens are invited to participate in the bids. In fact, the petitioner has deposited Rs.5,00,000/- towards earnest money deposit; Rs.4,00,000/- towards security and Rs.7,80,000-00 towards three months' deposit pursuant to his highest bid. To that extent he has altered his situation to his financial detriment. No doubt, a power and concomitant discretion is conferred on the 1st respondent to reject the bid, if it is so required in public interest or in the interests of the 2nd respondent - temple. But having regard to the fact that the bids were invited and people have put themselves at a disadvantage by responding, bidding and depositing large amounts, fair procedure mandated by administrative law principles require that the 1st respondent should not only record reasons, but communicate the decision along with the reasons to the highest bidder while cancelling the lease. If this is done, the bidders or at least the highest bidder would know the reasons why the earlier auction process was cancelled and thus arrange his affairs and his future strategies accordingly. Such fair procedure also ensures transparency in conduct of public authorities and would act as a check on possible abuse of the statutory powers conferred on the Commissioner of Endowments. Such practice conduces a healthy and transparent administrative accountability to the Statutory regime. The clandestine process adopted by the 1st respondent in passing order and communicating it selectively only to the 2nd respondent without communicating the decision to the petitioner, who was indisputable the highest bidder, has subverted not only the statutory mandate, but also the well established principles of administrative law which ought to have governed the decision making process of the 1st respondent......"

(emphasis supplied)

While it is true that Rule 12(1) enables the competent authority, (in the present case the Commissioner), to reject a lease or licence for reasons to be recorded in writing, and does not specifically mandate such reasons to be communicated to the highest bidder, the very purpose of recording reasons would be a mere ritual, and a needless formality, if it were to be held that such reasons need not be communicated, for it is the bid of the highest bidder which is being rejected by the competent authority, and he would be entitled to know the reasons for such rejection. The recording of reasons which lead to the passing of the order, is basically intended to serve a two-fold purpose that the "party aggrieved" in the proceeding before the appropriate authority acquires knowledge of the reasons and, in a proceeding before the High Court or the Supreme Court, (since there is no right of appeal or revision), it has an opportunity to demonstrate that the reasons which persuaded the authority to pass an order adverse to his interest were irrational or irrelevant, and that the obligation to record reasons and convey the same to the party concerned operates as a deterrent against possible arbitrary action (C.B. Gautam v. Union of India (1993) 1 SCC 78). An important consideration underlying the extension of the duty to give reasons, is that in the absence of reasons the person affected may be unable to judge whether there has been 'a justiciable flaw in the decision making process'. Unless the citizen can discover the reasoning behind the decision, he may be unable to tell whether it is reviewable or not, and so he may be deprived of the protection of the law. (Administrative Law by H.W.R. Wade (9th Edition). It is only if reasons are communicated to the person aggrieved would he be in a position to exercise his right of judicial remedies and claim protection of the law. The need for reasons to be communicated must, necessarily, be read as a concomitant of the requirement of recording reasons, more so, where civil consequences would ensue. Rule 12(1) has been construed by this Court, in Dampanaboina Raghu (supra), as requiring the reasons recorded to be communicated to the highest bidder. The contention that it would suffice if reasons were recorded in the note file, and that such reasons need not be communicated to the highest bidder, does not, therefore, merit acceptance.

The proceedings of the Commissioner dated 14.11.2008, a copy of which is filed along with the counter-affidavit of the 1st respondent, reads as under:-

"The proposal of the Executive Officer, Sri Lakshmi Narasimha Swamy Devasthanam, Yadagirigutta, Nalgonda District for approval of the license rights for collection of Human Hair held in public auction on 06.10.2008 received in the reference cited, is hereby deferred as the bid amount is not reasonable.

The Executive Officer of the subject temple is requested to collect the Human Hair departmentally."

The conclusion of the Commissioner, for deferring confirmation, is that the bid amount was not reasonable. The above referred proceedings do not reflect the reasons based on which such a conclusion has been arrived at. It should have contained the reasons why the Commissioner found the petitioner's bid not to be reasonable. The said proceedings dated 14.11.2008 is, evidently, not a reasoned order.

While it is true that the notice dated 16.11.2008, issued by the 1st respondent - Executive Officer to the petitioner, refers to the proceedings of the Commi

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ssioner dated 14.11.2008, the said notice merely records that the bid amount fetched in the public auction was meagre and not economic and that the higher authorities of the Endowments Department, while processing the file for approval of the Commissioner, felt that at least a 30% increase over the last year's bid amount of Rs.1,30,00,000/- should have been received. The opinion of the higher authorities of the Endowment Department, while processing the file for approval, is not the conclusion, let alone constituting the reasons for the Commissioner deferring confirmation of the bid. The 1st respondent, in the latter part of his notice dated 16.11.2008, notes that the Commissioner of Endowments, (in his order dated 14.11.2008), had not approved the lease as required under the provisions of the Endowments Act. He concludes that, as per Condition No.7 of the Auction Conditions, the auction which was not confirmed by the Commissioner amounted to its cancellation. The notice of the 1st respondent dated 16.11.2008 does not reflect the reasons for either deferment or cancellation of the bid by the Commissioner. Since neither the proceedings of the Commissioner dated 14.11.2008, nor the notice of the 1st respondent dated 16.11.2008, make any reference to the reasons for deferment/rejection of the petitioner's bid, it is wholly unnecessary for this Court to examine whether enclosing such proceedings to the counter affidavit would amount to communication of the reasons, for such a decision being taken by the Commissioner, to the petitioner herein. Suffice to hold that the proceedings of the Commissioner dated 14.11.2008 is not a reasoned order and, as the respondents have chosen to proceed to conduct an auction afresh consequent to such a non-speaking order, the impugned tender notice dated 16.11.2008 inviting bids afresh must, necessarily, be and is, accordingly, quashed. Needless to state that quashing of the tender notification dated 16.11.2008 would not preclude the 2nd respondent from passing a reasoned order afresh, communicating it to the petitioner and, thereafter, take further action in accordance with law. It is also made clear that, since human hair at the Kalyana Katta at Yadagirigutta temple is being collected by the officials departmentally, consequent upon the expiry of the petitioner's earlier lease on 5.11.2008, the said interim measures taken in this regard shall continue pending a reasoned order being passed afresh by the 2nd respondent - Commissioner of Endowments. The writ petition is allowed. However, in the circumstances, without costs.